Equinox Gold Corp. (TSX: EQX) (NYSE American: EQX) is pleased to announce its second quarter 2022 summary financial and operating results. The Company’s unaudited condensed consolidated interim financial statements and related management’s discussion and analysis for the three and six months ended June 30, 2022 will be available for download on SEDAR, on EDGAR and on the Company’s website. The Company will host a conference call and webcast on August 4, 2022 commencing at 7:30 am Vancouver time to discuss the Company’s second quarter results and activities underway at the Company’s projects. Further details are provided at the end of this news release.
Christian Milau, CEO of Equinox Gold, commented: “Although we experienced operational challenges at several of our sites this quarter, we expect improved performance in the second half of the year with increased production and lower costs. Inflation has certainly increased the cost of consumables and our team is working hard to find offsetting savings so we can maintain a strong business during this market downturn. The new resin-in-leach circuit at the Santa Luz plant is performing well. Recoveries are consistently above 70% and as high as 82%. With commercial production anticipated in Q3 2022, Santa Luz will contribute to increased production in the fourth quarter and into 2023.
“During the first half of the year we achieved excellent construction progress at our Greenstone project in Ontario, which is 35% complete and remains on schedule and on budget. The team has done an exceptional job to control costs in this inflationary environment and is on track to have the majority of buildings enclosed by year end, which is key to maintaining productivity during the winter months. We also strengthened our balance sheet, reduced our cost of capital and improved our liquidity by expanding and amending our credit facility. We appreciate the strong support and confidence from our lending syndicate.
“Looking forward, Equinox Gold is on track to deliver significant growth over the next few years. Commercial production at Santa Luz and higher-grade ore at Los Filos should both contribute to increased production and lower costs in 2023. The big jump will come in 2024 when we achieve production at Greenstone, which will contribute more than 200,000 ounces of low-cost production annually once it has ramped up to full capacity. We also continue to advance the Castle Mountain, Los Filos and Aurizona expansions, which could collectively contribute more than 300,000 ounces of annual production. As we plan for Greg Smith to take over as CEO, I am confident that Equinox Gold has the foundational assets, the team and the leadership required to achieve its long-term goals.”
HIGHLIGHTS FOR THE THREE MONTHS ENDED JUNE 30, 2022
Construction, development and exploration
|(1)||Cash costs per oz sold, AISC per oz sold, adjusted net income, adjusted EBITDA, adjusted EPS, sustaining capital, non-sustaining capital and net debt are non-IFRS measures. See Non-IFRS Measures and Cautionary Notes.|
|(2)||Cash cost per oz sold and AISC per oz sold for the three and six months ended June 30, 2022 excludes Santa Luz results as the mine is currently in the pre-commercial production phase and has not yet achieved commercial production.|
|(3)||Primary adjustments for the three months ended June 30, 2022 were $39.6 million loss on change in fair value of share purchase warrants, $17.3 million unrealized gain on gold contracts, $6.2 million unrealized loss on foreign exchange contracts, $7.9 million unrealized foreign exchange gain, and a $5.9 million share of net loss on investment in associate.|
|(1)||Future draws of the Revolving Facility are subject to customary security registration updates that are expected to take approximately 90 days to complete|
CONSOLIDATED OPERATIONAL AND FINANCIAL HIGHLIGHTS
|Three months ended||Six months ended|
|Operating data||Unit||June 30,
|Average realized gold price||$/oz||1,856||1,862||1,806||1,859||1,796|
|Cash costs per oz sold(1)(2)||$/oz||1,482||1,237||1,089||1,358||1,115|
|AISC per oz sold(1)(2)(3)||$/oz||1,657||1,577||1,383||1,616||1,433|
|Earnings from mine operations||M$||17.0||28.5||41.3||45.5||85.5|
|Net (loss) income||M$||(78.7)||(19.8)||403.7||(98.5)||454.0|
|(Loss) earnings per share||$/share||(0.26)||(0.07)||1.37||(0.33)||1.69|
|Adjusted net loss(1)||M$||(47.9)||(23.9)||(0.8)||(72.0)||(4.0)|
|Balance sheet and cash flow data|
|Cash and cash equivalents (unrestricted)||M$||159.7||151.2||333.9||159.7||333.9|
|Operating cash flow before changes in non-cash working capital||M$||16.4||33.5||31.6||49.9||93.6|
|(1)||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.|
|(2)||Consolidated cash cost per oz sold and AISC per oz sold for the three and six months ended June 30, 2022 excludes Santa Luz results as the mine is currently in pre-commercial production and has not yet achieved commercial production.|
|(3)||AISC per oz sold excludes corporate general and administration expenses.|
|(4)||Numbers in tables throughout this MD&A may not sum due to rounding.|
The Company sold fewer gold ounces for the three and six months ended June 30, 2022 compared to the comparative periods of 2021. The decrease was mainly driven by decreased production at Aurizona and RDM and by lower gold sales at Mercedes, as the operation was sold on April 21, 2022. Lower gold production at Aurizona was in part due to processing stockpile ore with lower gold grades as high rainfall impeded access to higher-grade ore from the Piaba open pit. Lower gold production at RDM was mainly due to the temporary suspension of mining and plant operations in mid-May due to a delay in receiving permits for the scheduled TSF raise. These reductions were partially offset by increased production at Mesquite and Los Filos and the contribution of pre-commercial production from Santa Luz. Higher gold production at Mesquite was due to mining the core of the Brownie ore body, resulting in higher grades and a lower strip ratio. Higher gold production at Los Filos was due to more recoverable ounces placed due to better grades from the open pit. Although there was a contribution of gold from pre-commercial production at Santa Luz, the ramp up was slower than anticipated due to modifications required to handle resin-in-leach processing at an industrial scale, rectification of some piping and leach tank issues following construction, and also working to achieve a steady blend of ore feed. Commercial production at Santa Luz is expected in Q3 2022.
In Q2 2022, earnings from mine operations were $17.0 million (Q2 2021 – $41.3 million) and for the six months ended June 30, 2022 were $45.5 million (six months ended June 30, 2021 – $85.5 million). Earnings from mine operations were impacted by lower gold production, higher operating costs due to supply constraints, and inflationary pressures, particularly from increased prices of oil and consumables that impacted input prices. The Company incurred a net loss in Q2 2022 of $78.7 million (Q2 2021 – net income of $403.7 million) and a net loss for the six months ended June 30, 2022 of $98.5 million (six months ended June 30, 2021 – net income of $454.0 million). The net losses were impacted by lower earnings from mine operations and a loss on the change in fair value of share purchase warrants compared to a gain during the comparative periods of 2021. Results for the comparative periods of 2021 were also impacted by a $186.1 million gain on reclassification of investment in Solaris, a $81.4 million gain on bargain purchase of Premier, a $50.3 million gain on sale of partial interest in Solaris and a $45.4 million gain on the sale of the Pilar mine.
In Q2 2022, adjusted EBITDA was $24.1 million (Q2 2021 – $51.9 million) and for the six months ended June 30, 2022 was $67.2 million (six months ended June 30, 2021 – $112.8 million). In Q2 2022, adjusted net loss was $47.9 million (Q2 2021 – adjusted net loss of $0.8 million) and for the six months ended June 30, 2022 was $72.0 million (six months ended June 30, 2021 – adjusted net loss of $4.0 million). Adjusted EBITDA and adjusted net loss were impacted by lower earnings from mine operations compared to the comparative periods of 2021.
|Sustaining(1) and non-sustaining(1) capital expenditures|
|Three months ended June 30,
|Six months ended June 30,
|$ amounts in millions||Sustaining||Non-
|Mesquite(2)||$ 6.8||$ 2.1||8.1||3.7|
|Total sustaining and non-sustaining capital expenditures||$ 18.0||$ 134.2||$ 55.0||$ 224.9|
|(1)||Sustaining capital and non-sustaining capital expenditures are non-IFRS measures. See Non-IFRS Measures and Cautionary Notes.|
|(2)||Non-sustaining capital for Mesquite for the three and six months ended June 30, 2022 excludes $3.0 million and $6.1 million, respectively, for lease payments for haul trucks, which are considered a non-sustaining capital addition. Non-sustaining capital for Santa Luz for the three and six months ended June 30, 2022 excludes $0.7 million and $1.0 million, respectively, for lease payments classified as non-sustaining until commercial production is achieved.|
|(3)||For the three months ended June 30, 2022, non-sustaining capital for Aurizona, Fazenda, RDM, Los Filos and Santa Luz excludes $0.6 million, $0.5 million, $1.2 million, $0.1 million, and $2.1 million, respectively, of exploration costs expensed. For the six months ended June 30, 2022, non-sustaining capital for Aurizona, Fazenda, RDM, Los Filos and Santa Luz excludes $1.0 million, $0.7 million, $2.0 million, $0.2 million, and $2.6 million, respectively, of exploration costs expensed.|
|(4)||Capital expenditures at Greenstone represent the Company’s 60% ownership of the project.|
SELECTED FINANCIAL RESULTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021
|$ amounts in millions, except per share amounts||Three months ended||Six months ended|
|Revenue||$ 224.6||$ 226.2||$ 447.8||$ 455.9|
|Cost of sales|
|Depreciation and depletion||(37.0)||(45.0)||(79.3)||(83.7)|
|Earnings from mine operations||17.0||41.3||45.5||85.5|
|Care and maintenance expense||(4.7)||(7.2)||(5.1)||(9.2)|
|General and administration expense||(11.1)||(15.5)||(22.9)||(22.8)|
|Income from operations||(3.3)||13.9||9.8||45.8|
|Share of net (loss) income in associate||(5.9)||0.4||(7.5)||(2.3)|
|Other (expense) income||(32.7)||385.2||(51.7)||434.5|
|Net (loss) income before taxes||(49.2)||387.9||(65.3)||458.1|
|Income tax (expense) recovery||(29.5)||15.8||(33.2)||(4.1)|
|Net (loss) income||$ (78.7)||$ 403.7||$ (98.5)||$ 454.0|
|Net (loss) income per share attributable to Equinox Gold shareholders|
|Basic||$ (0.26)||$ 1.37||$ (0.33)||$ 1.69|
|Diluted||$ (0.26)||$ 1.19||$ (0.33)||$ 1.44|
Additional information regarding the Company’s financial results and activities underway at the Company is available in the Company’s Q2 2022 Financial Statements and accompanying management’s discussion and analysis for the three and six months ended June 30, 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/edgar.
The Company has updated its 2022 production and cost guidance to reflect the disruption to mining and operations at RDM, a longer-than-expected ramp-up at Santa Luz that has prolonged pre-commercial production and further inflation of approximately 6% on a consolidated basis.
|Production (oz)||Cash Costs ($/oz)(1)||AISC ($/oz)(1)(2)||Sustaining Capital
|Mesquite||120,000 – 130,000||$1,010 – $1,050||$1,270 – $1,310||$38||$23|
|Castle Mountain||25,000 – 35,000||$1,130 – $1,160||$1,550 – $1,620||$14||$9|
|Los Filos||155,000 – 170,000||$1,620 – $1,670||$1,800 – $1,840||$30||$63|
|Aurizona||120,000 – 130,000||$900 – $940||$1,370 – $1,410||$61||$10|
|Fazenda||60,000 – 65,000||$1,050 – $1,080||$1,250 – $1,290||$14||$10|
|RDM||25,000 – 30,000||$1,750 – $1,780||$2,000 – $2,060||$9||$25|
|Santa Luz||45,000 – 55,000||$1,000 – $1,050||$1,120 – $1,190||$5||$52|
|Total(5)||550,000 – 615,000||$1,200 – $1,250||$1,470 – $1,530||$171||$539|
|(1)||Cash costs per oz sold, AISC per oz sold, sustaining capital and non-sustaining capital are non-IFRS measures. See Non-IFRS Measures and Cautionary Notes|
|(2)||Exchange rates used to forecast 2022 AISC include a rate of BRL 5:00 to USD 1 and MXN 19.0 to USD 1|
|(3)||Sustaining capital includes asset retirement obligation, amortization, accretion and sustaining exploration expenditures|
|(4)||Non-sustaining capital includes non-sustaining exploration expenditures|
|(5)||Group total is the sum or average of the individual mine-level amounts. Numbers may not sum due to rounding|
Guidance for RDM was withdrawn on May 16, 2022 to reflect the disruption to operations in both Q1 and Q2 2022, as previously mentioned. RDM guidance has been updated to reflect these disruptions and also to reflect a change to the mine plan to defer waste stripping and instead focus on the processing of low-grade stockpiles while the TSF raise is completed and water in the open pit is pumped out and evaporated. RDM was in the midst of a waste stripping campaign at the time of the suspension of operations in May. The current plan of operations minimizes cash outflow while the TSF raise is completed and during a period in which Greenstone is in a high capital expenditure phase, while maintaining the long-term value of RDM. Low-grade dumps are sufficient to sustain operations for approximately two years, albeit resulting in lower gold production.
The Santa Luz ramp up has been slower than anticipated and resulted in lower gold production during the period than expected. The longer ramp up was due to modifications required to handle resin-in-leach processing at an industrial scale, rectification of some piping and leach tank issues following construction, and also working to achieve a steady blend of ore feed. See Development Projects section for discussion of throughput and recoveries, which are approaching expected levels in Q3 2022. Los Filos production guidance has been lowered slightly to reflect a delay in accessing higher-grade ore zones in the Bermejal underground.
Guidance for the other mines remains as originally disclosed on January 25, 2022. As a result, consolidated production for 2022 is forecast at 550,000 to 615,000 oz of gold (compared to the original forecast of 625,000 to 710,000 oz of gold).
Cost escalation for certain consumables during the first half of 2022, including diesel, cyanide and grinding media, and lower grades processed than projected, has resulted in increased cash costs at several of the Company’s mines. As a result, although production is expected to increase at all of the mines in the second half of the year, guidance for cash costs and AISC per oz has been increased at all of the mines with the exception of Mesquite. Updated consolidated cash costs are estimated at $1,200 to $1,250 per oz with AISC of $1,470 to $1,530 per oz sold (compared to the original forecast of $1,080 to $1,140 per oz cash costs with AISC of $1,330 to $1,415 per oz of gold sold).
Sustaining capital guidance has decreased principally due to the delayed Santa Luz commercial production which has resulted in some sustaining capital being reclassified as non-sustaining capital and an updated mine plan at Mesquite that anticipates less deferred stripping. Despite the reduction to sustaining capital, an increase in cash costs per oz due to cost escalation, and changes to mine sequences driving weaker than expected production, are reflected in a 10% increase to the AISC per oz guidance range. Non-sustaining capital guidance is generally consistent with previous guidance with the exception of Santa Luz, where modifications to the plant have resulted in an additional estimated $20 million of non-sustaining capital. In addition, Greenstone will spend more in 2022 on plant and mill buildings in part due to steel price inflation, although these increases have been offset by cost reductions in other areas and there is no change to the overall construction budget.
The Company may revise guidance during the year to reflect changes to expected results.
ABOUT EQUINOX GOLD
Equinox Gold is a Canadian mining company operating entirely in the Americas, with six operating gold mines, a mine in commissioning, and a clear path to achieve more than one million ounces of annual gold production from a pipeline of development and expansion projects.
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