
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
Table 1: Operating and Financial Highlights
Three Months Ended | Nine Months Ended | ||||||||||
Sep 30, | Jun 30, | Sep 30, | Sep 30, | Sep 30, | |||||||
In millions of U.S. dollars, unless otherwise noted | 2022 | 2022 | 2021 | 2022 | 2021 | ||||||
Operating Results | |||||||||||
Lost-time injury frequency1 | /million hours | 0.10 | 0.00 | 0.26 | 0.10 | 0.26 | |||||
Total recordable injury frequency1 | /million hours | 1.69 | 1.32 | 2.44 | 1.69 | 2.44 | |||||
Gold produced | oz | 122,208 | 123,185 | 111,229 | 357,839 | 358,792 | |||||
Gold sold | oz | 119,834 | 123,363 | 118,989 | 351,209 | 359,432 | |||||
Total cash costs2 | $/oz | 760 | 703 | 727 | 736 | 646 | |||||
Total cash costs margin2 | $/oz | 955 | 1,162 | 0 | 1,059 | 1,081 | 1,146 | ||||
All-in sustaining costs2 | $/oz | 1,059 | 911 | 900 | 999 | 883 | |||||
All-in sustaining costs margin2 | $/oz | 656 | 954 | 886 | 818 | 909 | |||||
Average realized gold price2 | $/oz | 1,715 | 1,865 | 1,786 | 1,817 | 1,792 | |||||
Financial Results | |||||||||||
Revenue | $ | 209.3 | 235.0 | 216.7 | 652.0 | 653.8 | |||||
Cost of sales | $ | 146.2 | 139.6 | 142.6 | 418.0 | 394.2 | |||||
Earnings from mine operations | $ | 63.1 | 95.4 | 74.1 | 234.0 | 259.6 | |||||
Net income | $ | 43.9 | 70.3 | 36.5 | 154.2 | 152.2 | |||||
Per share – Basic | $/share | 0.51 | 0.82 | 0.43 | 1.80 | 1.78 | |||||
Per share – Diluted | $/share | 0.51 | 0.80 | 0.41 | 1.77 | 1.72 | |||||
Adjusted net earnings2 | $ | 34.6 | 57.0 | 42.9 | 128.8 | 147.6 | |||||
Per share – Basic2 | $/share | 0.40 | 0.66 | 0.50 | 1.50 | 1.72 | |||||
Per share – Diluted2 | $/share | 0.40 | 0.66 | 0.50 | 1.50 | 1.72 | |||||
EBITDA2 | $ | 127.8 | 155.9 | 119.7 | 386.8 | 399.3 | |||||
Adjusted EBITDA2 | $ | 107.8 | 137.1 | 119.3 | 355.6 | 386.3 | |||||
Cost of sales | $/oz | 1,220 | 1,132 | 1,198 | 1,190 | 1,097 | |||||
Net cash generated from operating activities | $ | 102.4 | 126.9 | 87.8 | 276.0 | 235.4 | |||||
Net cash generated from operating activities before changes in non-cash operating working capital | $ | 91.3 | 120.6 | 100.2 | 271.5 | 277.8 | |||||
Free cash flow2 | $ | 33.5 | 74.0 | 29.4 | 88.4 | 60.6 | |||||
Cash and cash equivalents | $ | 339.2 | 310.7 | 221.6 | 339.2 | 221.6 | |||||
Net cash2 | $ | 336.1 | 306.3 | 217.8 | 336.1 | 217.8 | |||||
Table 2: Reconciliation of Total Cash Costs and All-in Sustaining Costs to Cost of Sales
Three Months Ended | Nine Months Ended | |||||||||||||||
Sep 30, | Jun 30, | Sep 30, | Sep 30, | Sep 30, | ||||||||||||
In millions of U.S. dollars, unless otherwise noted | 2022 | 2022 | 2021 | 2022 | 2021 | |||||||||||
Gold sold | oz | 119,834 | 123,363 | 118,989 | 351,209 | 359,432 | ||||||||||
Total cash costs per oz sold | ||||||||||||||||
Production costs and royalties | $ | 94.9 | 91.6 | 90.7 | 272.3 | 241.7 | ||||||||||
Less: Silver sales | $ | (0.6 | ) | (0.7 | ) | (0.6 | ) | (2.0 | ) | (1.7 | ) | |||||
Less: Copper sales | $ | (3.2 | ) | (4.2 | ) | (3.6 | ) | (11.7 | ) | (7.7 | ) | |||||
Total cash costs | $ | 91.1 | 86.7 | 86.5 | 258.6 | 232.3 | ||||||||||
Total cash costs per oz sold | $/oz | 760 | 703 | 727 | 736 | 646 | ||||||||||
All-in sustaining costs per oz sold | ||||||||||||||||
Total cash costs | $ | 91.1 | 86.7 | 86.5 | 258.6 | 232.3 | ||||||||||
General and administrative costs1 | $ | 5.0 | 5.0 | 4.9 | 17.8 | 19.4 | ||||||||||
Reclamation and remediation costs | $ | 1.4 | 1.2 | 1.1 | 4.0 | 3.4 | ||||||||||
Sustaining exploration costs expensed | $ | – | – | 0.9 | – | 2.9 | ||||||||||
Sustaining capital expenditure2 | $ | 29.4 | 19.5 | 13.7 | 70.6 | 59.2 | ||||||||||
Total all-in sustaining costs | $ | 126.9 | 112.4 | 107.1 | 351.0 | 317.2 | ||||||||||
Total all-in sustaining costs per oz sold | $/oz | 1,059 | 911 | 900 | 999 | 883 | ||||||||||
Table 3: Reconciliation of Sustaining and Non-Sustaining Costs to Capital Expenditures
Three Months Ended | Nine Months Ended | ||||||||||||
Sep 30, | Jun 30, | Sep 30, | Sep 30, | Sep 30, | |||||||||
In millions of U.S. dollars | 2022 | 2022 | 2021 | 2022 | 2021 | ||||||||
Sustaining | $ | 12.8 | 11.6 | 10.3 | 30.0 | 25.3 | |||||||
Capitalized Stripping | $ | 16.6 | 7.9 | 3.4 | 40.6 | 33.9 | |||||||
Non-sustaining | $ | 4.3 | 5.0 | 15.8 | 15.0 | 31.1 | |||||||
Total ELG | $ | 33.7 | 24.5 | 29.5 | 85.6 | 90.3 | |||||||
Media Luna Project | $ | 32.5 | 29.6 | 25.3 | 80.6 | 61.3 | |||||||
Media Luna Infill Drilling/Other | $ | 5.4 | 5.9 | 6.8 | 17.2 | 19.1 | |||||||
Other & Working Capital Changes | $ | (3.0 | ) | (7.5 | ) | (3.6 | ) | 3.0 | 2.8 | ||||
Capital expenditures1 | $ | 68.6 | 52.5 | 58.0 | 186.4 | 173.5 | |||||||
Table 4: Reconciliation of Average Realized Gold Price and Total Cash Costs Margin to Revenue
Three Months Ended | Nine Months Ended | |||||||||||||||
Sep 30, | Jun 30, | Sep 30, | Sep 30, | Sep 30, | ||||||||||||
In millions of U.S. dollars, unless otherwise noted | 2022 | 2022 | 2021 | 2022 | 2021 | |||||||||||
Gold sold | oz | 119,834 | 123,363 | 118,989 | 351,209 | 359,432 | ||||||||||
Revenue | $ | 209.3 | 235.0 | 216.7 | 652.0 | 653.8 | ||||||||||
Less: Silver sales | $ | (0.6 | ) | (0.7 | ) | (0.6 | ) | (2.0 | ) | (1.7 | ) | |||||
Less: Copper sales | $ | (3.2 | ) | (4.2 | ) | (3.6 | ) | (11.7 | ) | (7.7 | ) | |||||
Less: Realized loss on Gold Contracts | $ | – | – | – | – | (0.2 | ) | |||||||||
Total proceeds | $ | 205.5 | 230.1 | 212.5 | 638.3 | 644.2 | ||||||||||
Total average realized gold price | $/oz | 1,715 | 1,865 | 1,786 | 1,817 | 1,792 | ||||||||||
Less: Total cash costs | $/oz | 760 | 703 | 727 | 736 | 646 | ||||||||||
Total cash costs margin | $/oz | 955 | 1,162 | 1,059 | 1,081 | 1,146 | ||||||||||
Total cash costs margin | % | 56 | 62 | 59 | 59 | 64 | ||||||||||
Table 5: Reconciliation of All-in Sustaining Costs Margin to Revenue
Three Months Ended | Nine Months Ended | |||||||||||||||
Sep 30, | Jun 30, | Sep 30, | Sep 30, | Sep 30, | ||||||||||||
In millions of U.S. dollars, unless otherwise noted | 2022 | 2022 | 2021 | 2022 | 2021 | |||||||||||
Gold sold | oz | 119,834 | 123,363 | 118,989 | 351,209 | 359,432 | ||||||||||
Revenue | $ | 209.3 | 235.0 | 216.7 | 652.0 | 653.8 | ||||||||||
Less: Silver sales | $ | (0.6 | ) | (0.7 | ) | (0.6 | ) | (2.0 | ) | (1.7 | ) | |||||
Less: Copper sales | $ | (3.2 | ) | (4.2 | ) | (3.6 | ) | (11.7 | ) | (7.7 | ) | |||||
Less: Realized loss on Gold Contracts | $ | – | – | – | – | (0.2 | ) | |||||||||
Less: All-in sustaining costs | $ | (126.9 | ) | (112.4 | ) | (107.1 | ) | (351.0 | ) | (317.2 | ) | |||||
All-in sustaining costs margin | $ | 78.6 | 117.7 | 105.4 | 287.3 | 327.0 | ||||||||||
Total all-in sustaining costs margin | $/oz | 656 | 954 | 886 | 818 | 909 | ||||||||||
Total all-in sustaining costs margin | % | 38 | 50 | 49 | 44 | 50 | ||||||||||
Table 6: Reconciliation of Adjusted Net Earnings to Net Income
Three Months Ended | Nine Months Ended | |||||||||||||||
Sep 30, | Jun 30, | Sep 30, | Sep 30, | Sep 30, | ||||||||||||
In millions of U.S. dollars, unless otherwise noted | 2022 | 2022 | 2021 | 2022 | 2021 | |||||||||||
Basic weighted average shares outstanding | shares | 85,843,808 | 85,840,954 | 85,748,013 | 85,827,656 | 85,703,270 | ||||||||||
Diluted weighted average shares outstanding | shares | 86,039,606 | 86,115,071 | 86,020,975 | 86,059,576 | 86,034,295 | ||||||||||
Net income | $ | 43.9 | 70.3 | 36.5 | 154.2 | 152.2 | ||||||||||
Adjustments: | ||||||||||||||||
Unrealized foreign exchange loss (gain) | $ | 0.3 | 0.4 | 1.3 | (0.3 | ) | (1.6 | ) | ||||||||
Change in unrealized gains and losses on derivative contracts | $ | (20.0 | ) | (17.0 | ) | – | (28.8 | ) | (5.4 | ) | ||||||
Remeasurement of share-based payments | $ | (0.3 | ) | (2.2 | ) | (1.7 | ) | (2.1 | ) | (6.0 | ) | |||||
Tax effect of above adjustments | $ | 6.0 | 5.7 | 0.1 | 9.4 | 3.9 | ||||||||||
Tax effect of currency translation on tax base | $ | 4.7 | (0.2 | ) | 6.7 | (3.6 | ) | 4.5 | ||||||||
Adjusted net earnings | $ | 34.6 | 57.0 | 42.9 | 128.8 | 147.6 | ||||||||||
Per share – Basic | $/share | 0.40 | 0.66 | 0.50 | 1.50 | 1.72 | ||||||||||
Per share – Diluted | $/share | 0.40 | 0.66 | 0.50 | 1.50 | 1.72 | ||||||||||
Table 7: Reconciliation of EBITDA and Adjusted EBITDA to Net Income
Three Months Ended | Nine Months Ended | ||||||||||||||
Sep 30, | Jun 30, | Sep 30, | Sep 30, | Sep 30, | |||||||||||
In millions of U.S. dollars | 2022 | 2022 | 2021 | 2022 | 2021 | ||||||||||
Net income | $ | 43.9 | 70.3 | 36.5 | 154.2 | 152.2 | |||||||||
Finance (income) costs, net | $ | (0.8 | ) | (0.3 | ) | 0.3 | (0.7 | ) | 0.1 | ||||||
Depreciation and amortization1 | $ | 51.4 | 48.1 | 52.1 | 145.9 | 153.1 | |||||||||
Current income tax expense | $ | 32.3 | 37.0 | 34.6 | 93.9 | 102.6 | |||||||||
Deferred income tax expense (recovery) | $ | 1.0 | 0.8 | (3.8 | ) | (6.5 | ) | (8.7 | ) | ||||||
EBITDA | $ | 127.8 | 155.9 | 119.7 | 386.8 | 399.3 | |||||||||
Adjustments: | |||||||||||||||
Change in unrealized gains and losses on derivative contracts | $ | (20.0 | ) | (17.0 | ) | – | (28.8 | ) | (5.4 | ) | |||||
Unrealized foreign exchange loss (gain) | $ | 0.3 | 0.4 | 1.3 | (0.3 | ) | (1.6 | ) | |||||||
Remeasurement of share-based payments | $ | (0.3 | ) | (2.2 | ) | (1.7 | ) | (2.1 | ) | (6.0 | ) | ||||
Adjusted EBITDA | $ | 107.8 | 137.1 | 119.3 | 355.6 | 386.3 | |||||||||
Table 8: Free Cash Flow
Three Months Ended | Nine Months Ended | ||||||||||||||
Sep 30, | Jun 30, | Sep 30, | Sep 30, | Sep 30, | |||||||||||
In millions of U.S. dollars | 2022 | 2022 | 2021 | 2022 | 2021 | ||||||||||
Net cash generated from operating activities | $ | 102.4 | 126.9 | 87.8 | 276.0 | 235.4 | |||||||||
Less: | |||||||||||||||
Additions to property, plant and equipment1 | $ | (68.6 | ) | (52.5 | ) | (58.0 | ) | (186.4 | ) | (173.5 | ) | ||||
Interest paid | $ | (0.3 | ) | (0.4 | ) | (0.4 | ) | (1.2 | ) | (1.3 | ) | ||||
Free cash flow | $ | 33.5 | 74.0 | 29.4 | 88.4 | 60.6 | |||||||||
Table 9: Net Cash
Sep 30, | Jun 30, | Sep 30, | |||||||
In millions of U.S. dollars | 2022 | 2022 | 2021 | ||||||
Cash and cash equivalents | $ | 339.2 | 310.7 | 221.6 | |||||
Less: Lease obligations | $ | (3.1 | ) | (4.4 | ) | (3.8 | ) | ||
Net cash | $ | 336.1 | 306.3 | 217.8 | |||||
Table 10: Unit Cost Measures
Three Months Ended | Nine Months Ended | ||||||||||||||||||
Sep 30, | Jun 30, | Sep 30, | Sep 30, | Sep 30, | |||||||||||||||
In millions of U.S. dollars, unless otherwise noted | 2022 | 2022 | 2021 | 2022 | 2021 | ||||||||||||||
Gold sold (oz) | 119,834 | 123,363 | 118,989 | 351,209 | 359,432 | ||||||||||||||
Tonnes mined – open pit (kt) | 9,980 | 8,947 | 8,882 | 28,946 | 29,847 | ||||||||||||||
Tonnes mined – underground (kt) | 143 | 144 | 113 | 401 | 366 | ||||||||||||||
Tonnes processed (kt) | 1,199 | 1,124 | 1,150 | 3,457 | 3,352 | ||||||||||||||
Total cash costs: | |||||||||||||||||||
Total cash costs ($) | 91.1 | 86.7 | 86.5 | 258.6 | 232.3 | ||||||||||||||
Total cash costs per oz sold ($) | 760 | 703 | 727 | 736 | 646 | ||||||||||||||
Breakdown of production costs | $ | $/t | $ | $/t | $ | $/t | $ | $/t | $ | $/t | |||||||||
Mining – open pit | 28.6 | 2.87 | 27.4 | 3.06 | 26.1 | 2.94 | 81.8 | 2.82 | 76.9 | 2.58 | |||||||||
Mining – underground | 13.2 | 91.89 | 12.0 | 83.64 | 9.7 | 86.24 | 35.0 | 87.30 | 29.6 | 80.75 | |||||||||
Plant | 38.2 | 31.82 | 38.2 | 33.95 | 40.7 | 35.41 | 113.5 | 32.82 | 117.8 | 35.14 | |||||||||
Site support | 12.8 | 10.64 | 12.4 | 11.02 | 11.4 | 9.88 | 36.1 | 10.44 | 33.8 | 10.09 | |||||||||
Mexican profit sharing (PTU) | 5.9 | 4.96 | 5.7 | 5.08 | 4.0 | 3.48 | 19.8 | 5.72 | 11.7 | 3.50 | |||||||||
Capitalized stripping | (16.6 | ) | (7.9 | ) | (3.4 | ) | (40.6 | ) | (33.9 | ) | |||||||||
Inventory movement | 5.2 | (4.6 | ) | (4.9 | ) | 3.3 | (15.3 | ) | |||||||||||
Other | 1.4 | 1.3 | 0.6 | 3.9 | 1.5 | ||||||||||||||
Production costs | 88.7 | 84.5 | 84.3 | 252.8 | 222.1 | ||||||||||||||
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.
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