Amerigo Resources Q1 Results – Rising Shareholder Returns on the Horizon

*All numbers are in US dollars unless indicated otherwise. 

Earnings Highlights

  • EBITDA of $13.6 million and FCF to Equity of $7.3 million comfortably exceeded the quarterly dividend payment of $3.7 million.
  • Dividend yield still an attractive 7.7% even after 21% price return YTD.
  • Earnings were marked at $3.95/lb copper yet Amerigo is paid in Q1 based on prices in April/May/June. Through May 9th copper prices are averaging $4.40/lb, which we estimate would add at least $1.5M or 20% more free cashflow for stockholders once the pricing is settled.
  • Spending $2.6M in CAPEX to generate 760,000lbs a year of additional copper production. We estimate this project would generate an internal rate of return of 35% at $4.40/lb copper. Project will add 5% growth to current production levels of 16 million pounds a year.
  • Well positioned to reinstate special dividends or buybacks at current copper prices.

Amerigo Resources Ltd. (TSX: ARG) (OTCQX: ARREF) announced financial results for the three months ended March 31, 2024 (“Q1-2024”).

Amerigo’s Q1-2024 financial results included net income of $4.3 million, earnings per share (“EPS”) of $0.03, EBITDA1 of $13.6 million and free cash flow to equity of $7.3 million. In Q1-2024, Amerigo returned $3.7 million to shareholders2.

We are pleased to report a strong operational first quarter, with production trending over guidance and excellent cost management at MVC. During the first quarter, our average copper price was $3.95 per pound, and we generated free cash flow to equity of $7.3 million. Since the end of the quarter, copper prices have substantially appreciated, confirming our long-standing view on the strength of copper supply and demand fundamentals.
Amerigo’s Capital Return Policy has the tools to return surplus cash to shareholders in a timely manner. As stated last quarter, we are growing cash balances to our desired target level. This cash rebuild is accelerating under current copper prices, where the latest spot copper prices exceed our Q1-2024 provisional price by $0.50 per pound. With respect to our first quarter results, Amerigo’s Board of Directors declared another quarterly dividend of Cdn$0.03 per share.Aurora Davidson, President & CEO, Amerigo Resources Ltd.

On May 6, 2024, Amerigo’s Board of Directors declared its eleventh consecutive quarterly dividend. The dividend will be in the amount of Cdn$0.03 per share, payable on June 20, 2024, to shareholders of record as of May 30, 20244. 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 March 31, 2024, share closing price of Cdn$1.55, this represents an annual dividend yield of 7.7%.

Q1 2024 Financial Table

Quarterly Financial Review

  • In Q1-2024, operations from Minera Valle Central (“MVC”), the Company’s 100% owned operation near Rancagua, Chile, outperformed copper production and cash cost1 guidance by 2% and 9%, respectively. Copper production in Q1-2024 was 16.0 million pounds (“M lbs”) (Q1-2023: 16.5 M lbs), including 8.5 M lbs from fresh tailings (Q1-2023: 10.1 M lbs) and 7.5 M lbs from Cauquenes historical tailings (Q1-2023: 6.4 M lbs). Molybdenum production in Q1-2024 and Q1-2023 was 0.3 million pounds.
  • Both copper and molybdenum prices were lower in Q1-2024 compared to Q1-2023, which had a negative impact on Q1-2024 revenue. The Company’s Q1-2024 average copper price was $3.95 per pound (“/lb”) compared to $4.02/lb in Q1-2023, and the Company’s molybdenum price was $19.67/lb in Q1-2024, compared to $31.73/lb in Q1-2023.
  • Net income during Q1-2024 was $4.3 million (Q1-2023: $9.1 million) due to lower copper and molybdenum revenue and lower unrealized foreign exchange gains, offset by lower tolling and production costs and lower taxes.
  • EPS during Q1-2024 was $0.03 (Cdn$0.03), compared to $0.05 (Cdn$0.07) in Q1-2023.
  • The Company generated operating cash flow before changes in non-cash working capital1 of $10.2 million in Q1-2024 (Q1-2023: $13.2 million).
  • Quarterly net operating cash flow was $4.5 million (Q1-2023: $18.2 million). Free cash flow to equity1 was $7.3 million in Q1-2024 (Q1-2023: $8.6 million), given significantly lower capital expenditures (“Capex”) in Q1-2024.
  • Q1-2024 cash cost1 was $1.96/lb (Q1-2023: $1.91/lb), including $0.07/lb paid to MVC’s supervisors as the signing bonus of a 3-year collective labour agreement. Normalized cash cost1, excluding the effect of the signing bonus, was $1.89/lb.
  • The Company’s financial performance is sensitive to changes in copper prices. MVC’s Q1-2024 provisional copper price was $3.97/lb. The final prices for January, February, and March 2024 sales will be the average London Metal Exchange (“LME”) prices for April ($4.30/lb), May, and June 2024, respectively. A 10% increase or decrease from the $3.97/lb provisional price used on March 31, 2024, would result in a $6.3 million change in revenue in Q2-2024 regarding Q1-2024 production5.
  • In Q1-2024, Amerigo returned $3.7 million to shareholders through Amerigo’s regular quarterly dividend of Cdn$0.03 per share (Q1-2023: $3.6 million). In Q1-2023, $1.9 million was used to repurchase 1.6 million common shares through a Normal Course Issuer Bid.
  • On March 31, 2024, the Company held cash and cash equivalents of $13.8 million (December 31, 2023: $16.2 million), restricted cash of $6.2 million (December 31, 2023: $6.3 million), and its working capital deficiency was $4.2 million, down from a working capital deficiency of $12.3 million on December 31, 2023.
  • On May 6, 2024, two production optimization Capex projects were approved to be initiated in 2024. The Capex for these projects is expected to be $2.3 million, resulting in an annualized increase of around 345 tonnes or 760,000 lbs of copper when completed.

Investor Conference Call on May 9, 2024

Amerigo’s quarterly investor conference call will occur on Thursday, May 9, 2024, at 11:00 a.m. Pacific Daylight Time/2:00 p.m. Eastern Daylight Time.

Participants can join by visiting https://emportal.ink/3T2LOH1 and entering their name and phone number. The conference system will then call the participants and place them instantly into the call. Alternatively, participants can dial directly to be entered into the call by an Operator. Dial 1-888-664-6392 (Toll-Free North America) and state they wish to participate in the Amerigo Resources Q1-2024 Earnings Call.

Amerigo is a Marketing Awareness Client of Capital 10X. Please see our disclosures for more information.

The opinions provided in this article are those of the author and do not constitute investment advice. Readers should assume that the author and/or employees of Capital 10X hold positions in the company or companies mentioned in the article. For more information, please see our Content Disclaimer.

Duane Hope is a Partner at Capital 10X, he brings over 15 years of communications and research experience to the firm. His research and writing have appeared in publications for North American, European and Asian audiences.

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