Equinox Gold Corp. (TSX: EQX) (NYSE American: EQX) has released its audited consolidated financial and operating results and related management’s discussion and analysis for the fourth quarter and fiscal year ended December 31, 2022.
Greg Smith, President and CEO of Equinox Gold, commented: “Equinox Gold finished 2022 with its strongest quarter of production at the lowest costs for the year, bringing full-year production to 532,319 ounces of gold at all-in sustaining costs of $1,622 per ounce. We made significant progress at our assets in 2022, achieving commercial production at Santa Luz, advancing permitting for expansions at both Aurizona and Castle Mountain, completing the Los Filos expansion study and advancing the Greenstone project to 65% complete at year end and over 70% complete today.
“Looking forward, we expect to produce between 555,000 to 625,000 ounces of gold in 2023 at all-in sustaining costs of $1,575 to $1,695 per ounce. Growth capital of $324 million in 2023 is directed primarily to Greenstone construction. We entered 2023 with $327 million in total liquidity which, along with cash flow from our operating mines and marketable investments currently worth about $220 million, leaves us well funded to complete construction at Greenstone and pour gold in the first half of 2024.”
HIGHLIGHTS FOR THE THREE MONTHS ENDED DECEMBER 31, 2022
Construction, development and exploration
FULL-YEAR 2022 HIGHLIGHTS
Construction, development and exploration
|(1)||Cash costs per oz sold, AISC per oz sold, adjusted net income (loss), adjusted EBITDA, adjusted EPS, sustaining capital and net debt are non-IFRS measures. See Non-IFRS Measures and Cautionary Notes.|
|(2)||Primary adjustments for the three months ended December 31, 2022 were $2.9 million unrealized gain on change in fair value of warrants, $3.1 million unrealized foreign exchange loss, and $7.7 million unrealized gain on change in fair value of foreign exchange contracts.|
|(3)||Total recordable injury frequency rate and significant environmental incident frequency rate are both reported per million hours worked. Total recordable injury frequency rate is the total number of injuries excluding those requiring simple first aid treatment.|
|(4)||Primary adjustments for the year ended December 31, 2022 were $69.9 million unrealized loss on change in fair value of warrants, $33.3 million gain on change in fair value of gold contracts, and $16.8 million unrealized gain on change in fair value of foreign exchange contracts.|
CONSOLIDATED OPERATIONAL AND FINANCIAL HIGHLIGHTS
|Three months ended||Year ended|
|Operating data||Unit||December 31,
|Average realized gold price||$/oz||1,733||1,711||1,792||1,784||1,791|
|Cash costs per oz sold(3)(4)||$/oz||1,223||1,400||1,032||1,328||1,084|
|AISC per oz sold(2)(3)(4)||$/oz||1,523||1,749||1,258||1,622||1,347|
|Earnings from mine operations||M$||32.0||7.4||99.4||85.0||230.6|
|Net income (loss)||M$||22.6||(30.1)||109.0||(106.0)||554.9|
|Earnings (loss) per share||$/share||0.07||(0.10)||0.37||(0.35)||1.95|
|Adjusted net income (loss)(3)||M$||7.5||(27.6)||68.3||(90.8)||62.0|
|Balance sheet and cash flow data|
|Cash and cash equivalents (unrestricted)||M$||200.8||141.9||305.5||200.8||305.5|
|Operating cash flow before changes in non-cash working capital||M$||80.0||14.5||122.2||144.3||264.1|
|(1)||Operational and financial results of the assets acquired as part of the Premier Acquisition are included from April 7, 2021, onward, except for the results of Mercedes, which were included for the period from April 7, 2021 through to April 21, 2022, when Mercedes was sold.|
|(2)||Consolidated AISC per oz sold excludes corporate general and administration expenses.|
|(3)||Cash costs per oz sold, AISC per oz sold, adjusted EBITDA, adjusted net income, adjusted EPS and net debt are non-IFRS measures. See Non-IFRS Measures and Cautionary Notes.|
|(4)||Consolidated cash cost per oz sold and AISC per oz sold for the year ended December 31, 2022 excludes Santa Luz results while the mine was in pre-commercial production up until the achievement of commercial production at the end of Q3 2022.|
|(5)||Numbers in tables throughout this news release may not sum due to rounding.|
In Q4 2022, the Company sold 30% fewer gold ounces compared to Q4 2021 primarily due to lower production at Mesquite, Los Filos and Aurizona, offset partially by higher production at Fazenda and the contribution of production at Santa Luz, which achieved commercial production at the end of Q3 2022. Lower production at Mesquite was mainly due to mine sequencing, with fewer ounces added to the leach pad during the Quarter. Lower production at Los Filos was mainly due to a shortage of explosives due to union strikes at a supplier, which reduced the amount of open pit and underground material moved and delayed ounces being delivered to the leach pad, and by slower recovery curves for a portion of the ore that has a higher copper content. Lower production at Aurizona was mainly due to ore access issues caused by an abnormally long rainy season in 2022 and by lower-than-expected levels of waste movement, both of which impacted access to higher-grade ore in the lower benches of the Piaba open pit. Higher production at Fazenda was mainly due to higher grades and larger volumes mined from the open pit, offsetting lower volumes and grades mined from underground ore sources.
For the year ended December 31, 2022, the Company sold 12% fewer gold ounces compared to the year ended December 31, 2021. The decrease was mainly due to lower production at Aurizona, RDM, Mesquite and Los Filos. Aurizona experienced a longer rainy season in 2022 and lack of productivity in waste movement, both of which affected ore access during the year. As a result, throughout most of the year Aurizona relied on processing ore that was lower grade than expected. RDM was impacted by a temporary suspension of mining and plant operations in mid-May due to a delay in receiving permits for the scheduled tailings storage facility raise. RDM transitioned in Q3 2022 to processing low-grade stockpile material rather than mining in-situ ore. RDM production was also impacted by a temporary stoppage of mining operations for most of December while the Company applied for a license to process low grade ore from additional stockpiles. Mesquite production was lower driven by a longer leach cycle for ore tonnes stacked in 2022 compared to 2021. Los Filos production was lower impacted primarily by a shortage of explosives due to union strikes at a supplier, which reduced the amount of open pit and underground material moved and delayed ounces being delivered to the leach pad, and by slower recovery curves for a portion of the ore that has a higher copper content.
The decreases were partially offset by increased production at Fazenda, attributable to higher grades and volumes mined from the open pit, and the contribution of production at Santa Luz, which commenced production at the end of Q1 2022 and achieved commercial production at the end of Q3 2022.
In Q4 2022, earnings from mine operations were $32.0 million (Q4 2021 – $99.4 million) and for the year ended December 31, 2022 were $85.0 million (year ended December 31, 2021 – $230.6 million). Earnings from mine operations were lower in Q4 2022 compared to Q4 2021 mainly due to lower gold production and higher operating costs resulting from inflationary pressures, particularly from increased prices of oil and key consumables such as cyanide, lime and explosives.
Earnings from mine operations were lower for the year ended December 31, 2022 compared to the comparative period of 2021 primarily due to lower earnings from mine operations at Aurizona and Los Filos. Aurizona’s earnings from mine operations decreased by $60.9 million due to selling 24% fewer ounces of gold and incurring higher processing costs, including power, cyanide and grinding media costs, as well as increased maintenance costs. Los Filos’ earnings from mine operations decreased by $57.6 million primarily due to selling 8% fewer ounces of gold, as well as an increase in open pit and underground mining costs.
Net income in Q4 2022 decreased to $22.6 million compared to net income of $109.0 million in Q4 2021. For the year ended December 31, 2022, the Company had a net loss of $106.0 million compared to net income of $554.9 million for the comparative period in 2021. The lower net income in Q4 2022 and net loss for the year ended December 31, 2022 were impacted by lower earnings from mine operations. Results for the year ended December 31, 2022 were also impacted by a loss on the change in fair value of share purchase warrants of $69.9 million and a foreign exchange loss of $7.8 million, compared to gains of $85.8 million and $0.2 million, respectively, during the comparative periods in 2021. Results for the year ended December 31, 2021 also included a $186.1 million gain on reclassification of investment in Solaris, a $81.4 million gain on bargain purchase price of Premier, and a $95.7 million gain on the sale of the Pilar mine and sale of a partial interest in Solaris.
In Q4 2022, adjusted EBITDA was $74.7 million (Q4 2021 – $130.4 million) and for the year ended December 31, 2022 was $168.7 million (year ended December 31, 2021 – $305.0 million). In Q4 2022, adjusted net income was $7.5 million (Q4 2021 – adjusted net income of $68.3 million) and for the year ended December 31, 2022 was a net loss of $90.8 million (year ended December 31, 2021 – adjusted net income of $62.0 million). Adjusted EBITDA and adjusted net income were impacted by lower earnings from mine operations compared to the comparative periods in 2021.
2023 GUIDANCE AND OUTLOOK
For 2023, the Company expects to produce 555,000 to 625,000 ounces of gold. The midpoint of 2023 guidance of 590,000 ounces represents an increase of more than 71,000 ounces compared to normalized 2022 gold production of 519,000 ounces (calculated by deducting 13,631 ounces of production from Mercedes, which the Company no longer owns). Cash costs for 2023 are estimated at $1,355 to $1,460 per oz, with AISC of $1,575 to $1,695 per oz.
Cash costs for 2023 are forecast to be similar to 2022 and reflect management’s expectation that inflation has largely plateaued, but input costs are expected to remain high throughout 2023. In addition, management expects relative stability in the Brazilian and Mexican currency exchange rates against the US dollar. Relative to many other countries’ currencies, the Brazilian Réal and Mexican Peso were top performers against the USD in 2021 and 2022.
Sustaining expenditures in 2023 of $137 million includes investing: (i) $38 million in capitalized stripping programs, with the largest investments at Los Filos and Aurizona, (ii) $25 million in refurbishing equipment, most of which relates to the Los Filos open pit and underground fleets and processing equipment, and (iii) $37 million for TSF lifts at all four Brazilian operations.
Production is expected to grow each quarter through 2023 and costs are expected to decrease accordingly. Approximately 55% of gold production and 85% of operating cash flow is weighted into the second half of the year. Assuming the Company achieves the mid-points of cost guidance, cash costs per oz in the first half of 2023 are expected to be $1,460 per oz, decreasing to $1,360 per oz in the second half of the year. Likewise, AISC in the first half of 2023 are expected to be $1,755 per oz, decreasing to $1,530 per oz in the second half of the year.
The Company’s primary development focus for 2023 continues to be construction at Greenstone, with Equinox Gold’s 60% share of construction capital in 2023 forecast at $277 million. In addition, the Company expects to spend $8 million on Castle Mountain phase two optimization, engineering and permitting, and $8 million on Fazenda underground development and exploration.
|Production (oz)||Cash Costs
|Mesquite||80,000 – 90,000||$1,345 – $1,410||$1,415 – $1,480||$5||$16|
|Castle Mountain||25,000 – 30,000||$1,765 – $1,850||$1,865 – $1,950||$2||$11|
|Los Filos||160,000 – 180,000||$1,460 – $1,620||$1,680 – $1,865||$40||$—|
|Aurizona||120,000 – 130,000||$1,065 – $1,130||$1,410 – $1,500||$45||$6|
|Fazenda||60,000 – 65,000||$1,170 – $1,210||$1,390 – $1,430||$14||$12|
|Santa Luz||60,000 – 70,000||$1,535 – $1,695||$1,775 – $1,950||$17||$2|
|RDM||50,000 – 60,000||$1,460 – $1,620||$1,685 – $1,870||$13||$—|
|Total(5)||555,000 – 625,000||$1,355 – $1,460||$1,575 – $1,695||$137||$324|
|(1)||Cash costs per oz sold and AISC per oz sold are non-IFRS measures. See Non-IFRS Measures and Cautionary Notes.|
|(2)||Exchange rates used to forecast 2023 cash cost and AISC per oz include a rate of BRL 5:00 to USD 1 and MXN 19.0 to USD 1.|
|(3)||Sustaining expenditures include asset retirement obligation, amortization, accretion, sustaining exploration expense and sustaining capital expenditures. Sustaining expenditures includes $127 million of sustaining capital expenditures. Sustaining capital expenditure is a non-IFRS measure. See Non-IFRS Measures and Cautionary Notes.|
|(4)||Non-sustaining expenditures include non-sustaining exploration expense and non-sustaining capital expenditures. Non-sustaining expenditures includes $300 million of non-sustaining capital expenditures.|
|(5)||Total is the sum or average of the individual mine-level amounts. Numbers may not sum due to rounding.|
The Company may revise guidance during the year to reflect changes to expected results.
SELECTED FINANCIAL RESULTS FOR THE THREE MONTHS AND YEAR ENDED DECEMBER 31, 2022 AND 2021
|$ amounts in millions, except per share amounts||Three months ended||Year ended|
|Revenue||$ 259.3||$ 381.2||$ 952.2||$ 1,082.3|
|Cost of sales|
|Depreciation and depletion||(59.0)||(66.4)||(187.2)||(196.9)|
|Earnings from mine operations||32.0||99.4||85.0||230.6|
|Care and maintenance expense||(1.4)||(0.1)||(9.5)||(15.3)|
|General and administration expense||(12.8)||(17.3)||(46.7)||(52.6)|
|Income from operations||13.3||79.0||10.4||146.5|
|Share of net income (loss) in associate||(3.6)||8.3||(6.2)||0.7|
|Other (expense) income||(4.9)||10.1||(67.9)||426.6|
|Net (loss) income before taxes||(5.0)||88.2||(98.4)||535.0|
|Income tax recovery (expense)||27.6||20.8||(7.6)||19.9|
|Net income||$ 22.6||$ 109.0||$ (106.0)||$ 554.9|
|Net income per share attributable
to Equinox Gold shareholders
|Basic||$ 0.07||$ 0.37||$ (0.35)||$ 1.95|
|Diluted||$ 0.07||$ 0.32||$ (0.35)||$ 1.69|
|(1)||Financial results of the assets acquired as part of the Premier Acquisition are included from April 7, 2021, onward, except for the results of Mercedes, which were included for the period from April 7, 2021 through to April 21, 2022, when Mercedes was sold.|
Additional information regarding the Company’s financial results and the Company’s business strategy are available in the Company’s 2022 audited consolidated Financial Statements and accompanying MD&A for the three months and year ended December 31, 2022, which will be available for download on the Company’s website at www.equinoxgold.com, on SEDAR at www.sedar.com and on EDGAR at www.sec.gov.
ABOUT EQUINOX GOLD
Equinox Gold is a growth-focused Canadian mining company with seven operating gold mines, construction underway at a new project, and a clear plan to achieve more than one million ounces of annual gold production from a pipeline of development and expansion projects.
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