Torex Gold Resources Inc.  (TSX: TXG) reports the Company’s financial and operational results for the three and nine months ended September 30, 2022.

Jody Kuzenko, President & CEO of Torex, stated:

“Our well-established track record of delivering safe and reliable production at El Limón Guajes continues, with 122,208 ounces produced this quarter. With a sharp focus on cost management, we also generated healthy margins this quarter, resulting in adjusted EBITDA of $107.8 million and free cash flow of $33.5 million, including $68.6 million of capital expenditures. Given the year-to-date production and cost performance, we are well positioned to deliver on operational guidance for the fourth straight year.

“De-risking our Media Luna Project continues to be central to our strategy. During the quarter, a major permitting milestone was achieved with the granting of the MIA Integral from the environmental regulator, which is the permit that will allow for operations to begin at Media Luna. Additionally, we secured approval from the utility authorities to increase our power draw to 45 megawatts, to accommodate activities on both the north and south sides of the Balsas River.

“Procurement on the project continues to ramp up responsibly, with a focus on key, long-lead packages that are schedule critical – including the Guajes conveyor, flotation circuits, re-grind mills, mine ventilation fans and the battery electric vehicle fleet. On the high volume, non-schedule critical procurement packages, we are seeing a rescheduling of cost flow estimates assumed in the 2022 Technical Report for several reasons, including extra time to expand the pool of vendors, extra time for the vendors to provide bids, as well as timing and quantum of staged payments that vary from the allocations initially assumed. Although timing of non-schedule critical procurement and cost flow estimates differ from those originally assumed, the overall lead times and upfront costs of purchase orders executed to date are substantially in line with the Technical Report.

“As a result of the lower procurement spend to date, there will be an underrun in capital expenditures on the project for 2022, and guided annual spend is now in the range of $120 to $150 million. While these spend patterns have impacted the level invested to date, the pace of investment is expected to accelerate over the coming quarters, and the overall project schedule remains on track at this early stage.

“Beyond procurement, we continued to make steady progress on project engineering and construction in Q3. At quarter end, total physical completion stood at 9%, with steady momentum on engineering, surface construction and underground development activities. At the end of October, the Guajes Tunnel had advanced approximately 2,835 metres and South Portal Lower had advanced approximately 1,175 metres, meaning that projected breakthrough continues to track well for Q1 2024.

“Our strategy at Morelos continues to be executed per plan – with $339 million of cash on hand at quarter end, $250 million of available credit, and strong and consistent forecast cash flow from ELG, we are well positioned to fund the development of Media Luna, continue to invest in value enhancing exploration and drilling, and maintain minimum balance sheet liquidity of $100 million.”

THIRD QUARTER 2022 HIGHLIGHTS

• Strong safety performance continues: One lost-time injury in the quarter related to a finger pinch sustained by a contractor working on the Media Luna Project. The Company exited the quarter with a lost-time injury frequency rate of 0.10 per million hours worked on a rolling 12-month basis.
• Gold production: Produced 122,208 ounces of gold during the quarter. Gold production is tracking towards the upper end of the full year guided range of 430,000 to 470,000 ounces.
• Gold sold: Sold 119,834 ounces of gold at an average realized gold price¹ of $1,715 per ounce, contributing to revenue of $209.3 million. The realized gold price was slightly lower than the benchmark price for the quarter given a higher portion of gold produced and sold in September.
• Total cash costs¹ and all-in sustaining costs¹: Total cash costs of $760 per ounce sold and all-in sustaining costs of $1,059 per ounce sold. The Company anticipates exiting the year at the high end of the guided range for total cash costs ($695 to $735 per ounce) and towards the mid-point of the guided range for all-in sustaining costs ($980 to $1,030 per ounce).
• Net income and adjusted net earnings¹: Reported net income of $43.9 million or earnings of $0.51 per share on a basic and diluted basis. Adjusted net earnings of $34.6 million or $0.40 per share on a basic and diluted basis. Net income includes an unrealized derivative gain of $20.0 million related to gold forward contracts entered into during Q1 2022 to reduce downside price risk during the construction of the Media Luna Project.
• EBITDA¹ and adjusted EBITDA¹: Generated EBITDA of $127.8 million and adjusted EBITDA of $107.8 million.
• Cash flow from operations: Cash flow from operations totalled $102.4 million and $91.3 million prior to changes in non-cash operating working capital. Cash flow from operations includes $19.2 million of income taxes paid.
• Free cash flow¹: Free cash flow of $33.5 million including total capital expenditures of $68.6 million.
• Net cash¹ and financial liquidity: Net cash of $336.1 million, including $339.2 million in cash and $3.1 million of lease obligations, with no debt and $250.0 million of credit available on undrawn facilities, providing $589 million in available liquidity.
• Media Luna Project: Media Luna Project expenditures totalled $32.5 million during the quarter, with a remaining project spend of $812.4 million. Expenditures in the quarter were primarily focused on continued development of the Guajes Tunnel and South Portals, with development of the Guajes Tunnel reaching 2,659 metres and the South Portal Lower reaching 1,056 metres by the end of September. At the end of the quarter, physical progress on the Project was approximately 9%, with engineering, surface construction and underground development steadily progressing. Procurement activities are ramping up responsibly, with the focus being on key, long lead packages that are schedule critical. To date, lead times and costs of executed purchase orders are substantially in line with the assumptions made in the 2022 Technical Report. As a result of the lower procurement spend to date, there will be an underrun in capital expenditures on the Project for 2022, and full-year non-sustaining capital expenditure guidance for the Media Luna Project has been lowered to $120 million to $150 million.
• Receipt of Key Media Luna Environmental Permit: Late in the third quarter, the Company received approval from Mexico’s Secretariat of Environmental and Natural Resources on the key, culminating environmental permit for the Project, which allows for operations to begin at Media Luna.

1. These measures are Non-GAAP Financial Performance Measures or Non-GAAP ratios (collectively, “Non-GAAP Measures”). For a detailed reconciliation of each Non-GAAP Measure to its most directly comparable IFRS financial measure see Tables 2 to 10 of this press release. For additional information on these Non-GAAP Measures, please refer to the Company’s management’s discussion and analysis (“MD&A”) for the quarter ended September 30, 2022, dated November 8, 2022. The MD&A, and the Company’s unaudited condensed consolidated interim financial statements for the quarter ended September 30, 2022, are available on Torex’s website (www.torexgold.com) and under the Company’s SEDAR profile (www.sedar.com).

Table 1: Operating and Financial Highlights

1. On a 12-month rolling basis, per million hours worked
2. Total cash costs, total cash costs margin, all-in sustaining costs, all-in sustaining costs margin, average realized gold price, adjusted net earnings, EBITDA, adjusted EBITDA, free cash flow and net cash are non-GAAP financial measures with no standard meaning under International Financial Reporting Standards (“IFRS”). Refer to “Non-GAAP Financial Performance Measures” for further information and a detailed reconciliation to the comparable IFRS measures in the Company’s MD&A for the quarter ended September 30, 2022, dated November 8, 2022, available on Torex Gold’s website (www.torexgold.com) and under the Company’s SEDAR profile (www.sedar.com).

Table 2: Reconciliation of Total Cash Costs and All-in Sustaining Costs to Cost of Sales

1. This amount excludes a gain of $0.3 million, $2.2 million and $1.7 million for the three months ended September 30, 2022, June 30, 2022, and September 30, 2021, respectively, and a gain of $2.1 million and gain of $6.0 million for the nine months ended September 30, 2022 and September 30, 2021, respectively, in relation to the remeasurement of share-based payments. This amount also excludes corporate depreciation and amortization expenses totalling $0.1, nil and $0.2 million for the three months ended September 30, 2022, June 30, 2022, and September 30, 2021, respectively, $0.2 million and $0.5 million for the nine months ended September 30, 2022 and September 30, 2021, respectively, recorded within general and administrative costs. Included in general and administrative costs is share-based compensation expense in the amount of $0.8 million or $7/oz for the three months ended September 30, 2022, $0.8 million or $6/oz for the three months ended June 30, 2022, $0.9 million or $8/oz for the three months ended September 30, 2021, $3.4 million or $10/oz for the nine months ended September 30, 2022 and $4.5 million or $13/oz for the nine months ended September 30, 2021.
2. Before changes in net working capital and other, capital expenditures for the three and nine months ended September 30, 2022 totalled $71.6 million and $183.4 million, respectively, excluding lease payments of $1.5 million and $3.0 million, respectively. Sustaining capital expenditures of $29.4 million and $70.6 million in the three and nine months ended September 30, 2022, respectively, are related to $16.6 million and $40.6 million, respectively, for the cash component of capitalized stripping activities, and $12.8 million and $30.0 million, respectively, for sustaining equipment and infrastructure expenditures. Non-sustaining capital expenditures of $42.2 million and $112.8 million for the three and nine months ended September 30, 2022, respectively, relating to ELG Underground and the Media Luna Project, have been excluded from AISC.

Table 3: Reconciliation of Sustaining and Non-Sustaining Costs to Capital Expenditures

1. The amount of cash expended on additions to property, plant and equipment in the period as reported in the consolidated statements of cash flows.

Table 4: Reconciliation of Average Realized Gold Price and Total Cash Costs Margin to Revenue

Table 5: Reconciliation of All-in Sustaining Costs Margin to Revenue

Table 6: Reconciliation of Adjusted Net Earnings to Net Income

Table 7: Reconciliation of EBITDA and Adjusted EBITDA to Net Income

1. Includes depreciation and amortization included in cost of sales, general and administrative expenses and exploration and evaluation expenses.

Table 8: Free Cash Flow

1. The amount of cash expended on additions to property, plant and equipment in the year as reported on the consolidated statements of cash flows.

Table 9: Net Cash

Table 10: Unit Cost Measures

ABOUT TOREX GOLD RESOURCES INC.

Torex is an intermediate gold producer based in Canada, engaged in the exploration, development, and operation of its 100% owned Morelos Property, an area of 29,000 hectares in the highly prospective Guerrero Gold Belt located 180 kilometres southwest of Mexico City. The Company’s principal asset is the Morelos Complex, which includes the El Limón Guajes Mining Complex, the Media Luna Project, and the processing plant and related infrastructure. Commercial production from the Morelos Complex commenced on April 1, 2016 and an updated Technical Report for the Morelos Complex was released in March 2022. Torex’s key strategic objectives are to extend and optimize production from the ELG Mining Complex, de-risk and advance Media Luna to commercial production, build on ESG excellence, and to grow through ongoing exploration across the entire Morelos Property.