Amerigo Resources Ltd. (TSX: ARG) (OTCQX: ARREF) announced strong financial performance for the three months ended September 30, 2024 (“Q3-2024”). Dollar amounts in this news release are in U.S. dollars unless indicated otherwise.
Earnings Highlights
- $13.3 million of EBITDA, up 316% year over year
- Production of 16.3 million tonnes, up 46% year over year
- 7% current dividend yield, 9.2% annual payout yield.
- Cash costs of $1.93/lb down 21% year over year.
Amerigo reported net income of $2.8 million in Q3-2024, a significant turnaround from the $5.8 million net loss in the three months ended September 30, 2023 (“Q3-2023”), which was generated by lower copper prices and the impact on production of last year’s flooding throughout Chile. Amerigo’s copper production from Minera Valle Central (“MVC”) reached 16.3 million pounds (“M lbs”) in Q3-2024, a 46% increase compared to Q3-2023 (11.1 M lbs).
EBITDA1 for the quarter was $13.3 million, with free cash flow to equity1 of $5.9 million.
In Q3-2024, Amerigo returned $8.5 million to shareholders through its quarterly dividend of Cdn$0.03 per share and its initial performance dividend of Cdn$0.04 per share.
“We are pleased to report strong quarterly financial performance once again. Our three key performance drivers, production, copper prices, and cost management, were robust in the third quarter. Of particular significance, in Q3-2024, Amerigo paid its first performance dividend. This additional payment illustrated the ability of our Capital Return Strategy2 to share the benefits of strong copper prices with shareholders quickly,” said Aurora Davidson, Amerigo’s President and CEO.
“As we approach the end of 2024, our operations at MVC continue to outperform internal guidance. The United States and China have recently initiated economic stimulus measures, and global electrification continues. These factors will continue to increase the strain on the copper industry, whose output is vital to achieving these economic and social goals. We believe the positive effect on copper prices is just starting to be seen, so we maintain a positive outlook for copper prices and remain committed to Amerigo’s successful Capital Return Strategy2,” she added.
On October 28, 2024, Amerigo’s Board of Directors declared its thirteenth quarterly dividend. The dividend will be in the amount of Cdn$0.03 per share, payable on December 20, 2024, to shareholders of record as of November 29, 20243. Amerigo designates the entire amount of this taxable dividend to be an “eligible dividend” for purposes of the Income Tax Act (Canada), as amended from time to time.
Based on Amerigo’s September 30, 2024, share closing price of Cdn$1.74, the Cdn$0.03 quarterly dividends, and the Performance Dividend of Cdn$0.04 per share declared on July 8, 2024, represent an annual dividend yield of 9.2%4.
1 This is a non-IFRS measure. See “Non-IFRS Measures” for further information.
Highlights and Significant Items
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Amerigo achieved a solid financial performance in Q3-2024, posting a net income of $2.8 million (Q3-2023: net loss of $5.8 million), driven by increased copper production from MVC of 16.3 M lbs (Q3-2023: 11.1 M lbs) and an average MVC copper price of $4.22 per pound (/lb”) (Q3-2023: $3.76/lb).
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Earnings per share in Q3-2024 was $0.02 (Cdn$0.02), compared to a loss per share of $0.04 (Cdn$0.05) in Q3-2023.
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The Company generated operating cash flow before changes in non-cash working capital1 of $8.9 million in Q3-2024 (Q3-2023: $2.6 million). Quarterly net operating cash flow was $10.5 million (Q3-2023: cash used of $7.5 million). Free cash flow to equity1 was $5.9 million in Q3-2024 (Q3-2023: negative free cash flow to equity1 of $2.6 million).
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Q3-2024 cash cost1 was $1.93/lb (Q3-2023: $2.44/lb). The $0.51/lb reduction in cash cost was caused predominantly by a 46% increase in production during Q3-2024, compared to flooding-impacted production in Q3-2023. This resulted in decreased unit costs overall, including reductions in power costs ($0.22/lb), maintenance ($0.08/lb), other direct costs ($0.08/lb), direct labour ($0.06/lb), historic tailings extraction ($0.05/lb), grinding media ($0.05/lb) and administration ($0.04/lb). These lower costs were offset by a $0.09/lb decrease in by-product credits.
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On September 30, 2024, the Company held cash and cash equivalents of $25.1 million (December 31, 2023: $16.2 million), restricted cash of $6.7 million (December 31, 2023: $6.3 million), and had a working capital deficiency of $4.9 million (December 31, 2023: $12.3 million)
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In Q3-2024, Amerigo returned $8.5 million to shareholders (Q3-2023: $3.7 million) through the payment of Amerigo’s quarterly dividend of Cdn$0.03 per share and a performance dividend of Cdn$0.04 per share.
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The Company’s financial performance is sensitive to changes in copper prices. MVC’s Q3-2024 provisional copper price was $4.24/lb. The final prices for July, August and September 2024 sales will be the average London Metal Exchange (“LME”) prices for October, November and December 2024, respectively. A 10% increase or decrease from the $4.24/lb provisional price used on September 30, 2024, would result in a $7.0 million change in revenue in Q4-2024 regarding Q3-2024 production.
1 Non-IFRS Measures
This news release includes five non-IFRS measures: (i) EBITDA, (ii) operating cash flow before changes in non-cash working capital, (iii) free cash flow to equity (“FCFE”), (iv) free cash flow (“FCF”) and (v) cash cost.
These non-IFRS performance measures are included in this news release because they provide key performance measures used by management to monitor operating performance, assess corporate performance, and plan and assess the overall effectiveness and efficiency of Amerigo’s operations. These performance measures are not standardized financial measures under International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS Accounting Standards”), and, therefore, amounts presented may not be comparable to similar financial measures disclosed by other companies. These performance measures should not be considered in isolation as a substitute for performance measures in accordance with IFRS Accounting Standards.
(i) EBITDA refers to earnings before interest, taxes, depreciation, and administration and is calculated by adding depreciation expense to the Company’s gross profit.
(ii) Operating cash flow before changes in non-cash working capital is calculated by adding back the decrease or subtracting the increase in changes in non-cash working capital to or from cash provided by operating activities.
Free cash flow to equity (“FCFE”) refers to operating cash flow before changes in non-cash working capital, less capital expenditures plus new debt issued less debt and lease repayments. FCFE represents the amount of cash generated by the Company in a reporting period that can be used to pay for the following:
a) potential distributions to the Company’s shareholders and
b) any additional taxes triggered by the repatriation of funds from Chile to Canada to fund these distributions.
Free cash flow (“FCF”) refers to FCFE plus repayments of borrowings and lease repayments.
(iii) Cash cost is a performance measure commonly used in the mining industry that is not defined under IFRS. Cash cost is the aggregate of smelting and refining charges, tolling/production costs net of inventory adjustments and administration costs, net of by-product credits. Cash cost per pound produced is based on pounds of copper produced and is calculated by dividing cash cost by the number of pounds of copper produced.
2 Capital returned to shareholders
The table below summarizes the capital returned to shareholders since Amerigo’s Capital Return Strategy was implemented in October 2021.
3 Dividend dates
A dividend of Cdn$0.03 per share will be paid on December 20, 2024, to shareholders of record as of November 29, 2024. Under the “T+1 settlement cycle”, the Company’s shares will commence trading on an ex-dividend basis at the opening of trading on November 29, 2024. Shareholders purchasing Amerigo shares on the ex-dividend date or after will not receive this dividend, as it will be paid to selling shareholders. Shareholders purchasing Amerigo shares before the ex-dividend date will receive the dividend.
4 Dividend yield
The disclosed annual yield of 9.2% is based on four quarterly dividends of Cdn$0.03 per share each and the July 8, 2024, Performance Dividend of Cdn$0.04, divided over Amerigo’s September 30, 2024 closing share price of Cdn$1.74.
5 MVC’s copper price
MVC’s copper price is the average notional copper price for the period before smelting and refining, DET notional copper royalties, transportation costs and excluding settlement adjustments to prior period sales.
MVC’s pricing terms are based on the average LME copper price of the third month following the delivery of copper concentrates produced under the DET tolling agreement (“M+3”). This means that when final copper prices are not yet known, they are provisionally marked to market at the end of each month based on the progression of the LME-published average monthly M and M+3 prices. Provisional prices are adjusted monthly using this consistent methodology until they are settled.
Q2-2024 copper deliveries were marked to market on June 30, 2024, at $4.41/lb and were settled in Q3-2024 as follows:
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April 2024 sales settled at the July 2024 LME average price of $4.26/lb
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May 2024 sales settled at the August 2024 LME average price of $4.07/lb
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June 2024 sales settled at the September 2024 LME average price of $4.20//lb
Q3-2024 copper deliveries were marked to market on September 30, 2024, at $4.24/lb and will be settled at the LME average prices for October, November and December 2024.
Amerigo Resources is a market awareness client of Capital 10X. For more information, including potential conflicts of interest please see our Content Disclaimer.
