Vancouver, British Columbia--(Newsfile Corp. - August 10, 2017) - Amerigo Resources Ltd. (TSX: ARG) ("Amerigo" or the "Company") reported today financial results for the three months ended June 30, 2017. Cash of $4.5 million was generated from operations before working capital changes ($6.4 million operating cash flow after working capital changes). The Company posted revenue of $29.9 million and a net loss of $1.7 million. Debt repayments in Q2-2017 were $7.4 million. At June 30, 2017, cash balance was $20.1 million.
Rob Henderson, Amerigo's President and CEO, stated "We continue to benefit from record production and stronger copper prices. The Cauquenes phase two expansion is now underway and expected to be completed in Q3-2018. This expansion will substantially increase production and reduce the Company's cash cost."
Financial Results
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Gross tolling revenue was $39.3 million (Q2-2016: $19.3 million), due to a 13% increase in copper production and stronger copper prices. The Group's recorded copper tolling price was $2.59/lb (Q2-2016: $2.10/lb).
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Revenue from molybdenum and the Maricunga tolling contract was $4.4 million (Q2-2016: $1.1 million).
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Revenue after notional items was $29.9 million (Q2-2016: $19.3 million).
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Tolling and production costs were $26.2 million (Q2-2016: $22.4 million), a 17% increase driven by higher copper production and an increase of $1.5 million in molybdenum production costs and Maricunga tolling costs (offset by stronger revenue). Unit tolling and production costs were $1.62/lb (Q2-2016: $1.55/lb).
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Cash cost (a non-GAAP measure equal to the aggregate of smelting and refining charges, tolling/production costs net of inventory adjustments and administration costs, net of by-product credits, page 11) before DET notional copper royalties and DET molybdenum royalties decreased to $1.53/lb (Q2-2016: $1.65/lb) due to higher production and stronger by-product credits.
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Total cost (a non-GAAP measure equal to the aggregate of cash cost, DET notional copper royalties and DET molybdenum royalties of $0.52/lb and depreciation of $0.23/lb, increased to $2.28/lb (Q2-2016: $2.25/lb), due to higher DET notional royalties/royalties from higher metal prices.
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Gross profit was $3.7 million (Q2-2016: gross loss of $3.2 million). Net loss was $1.7 million (Q2-2016: net loss of $3.6 million), after a non-cash, fair market value expense adjustment to a royalty derivative to related parties of $2.5 million (Q2-2016: derivative gain adjustment of $0.4 million).
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In Q2-2017 the Group generated cash flow from operations before working capital changes of $4.5 million (Q2-2016: used cash of $0.6 million in operations).
Production
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Q2-2017 production was 16.3 million pounds of copper, 13% higher than the 14.4 million pounds produced in Q2-2016.
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Q2-2017 copper production includes 10.3 million pounds from Cauquenes, 5.4 million pounds from fresh tailings and 0.6 million pounds from Maricunga.
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Molybdenum production was 0.4 million pounds. There was no molybdenum production in Q2-2016.
Cash and Working Capital
- The Group's cash balance was $20.1 million (December 31, 2016: $15.9 million), including $14.4 million in operating accounts and $6.7 million in a debt service reserve account "(DSRA") as required under the terms and provisions of MVC's finance agreement for the Cauquenes expansion. Funds in the DSRA must be used to: /i/ pay the principal and interest of the bank loan and the amounts owing under a related interest rate swap if MVC has insufficient funds to make these payments and /ii/ fund MVC's operating expenses. If it becomes necessary to fund MVC's operations with funds from the DSRA, MVC must replenish the DSRA at each month end with funds necessary to maintain a balance equal to one hundred percent of the sum of the principal and interest pursuant to the bank loan and the interest rate swap that are payable in respect of the following six months.
- At June 30, 2017, the Group had a working capital deficiency of $12.7 million (December 31, 2016: working capital of $0.6 million). The working capital deficiency was caused by the Group's current estimated schedule of repayment of the balance of the DET Price Support Facility from July 2017 to September 2018, which may change depending on MVC's actual cash flows. The Group does not consider its working capital deficiency as a liquidity risk, as it is only required to repay the DET Price Support Facility by December 2019 and at a rate of $1.0 million per month, and the Group anticipates generating sufficient operating cash flow to meet current liabilities as they come due. Working capital deficiencies are not uncommon in companies with short-term portions of debt.
Outlook
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MVC maintains its 2017 production guidance of 60.0 to 65.0 million pounds of copper at an annual cash cost of $1.60 to $1.75/lb.
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MVC also maintains its guidance in respect of production of 1.5 million pounds of molybdenum.
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Subsequent to June 30, 2017, the Group secured debt financing to complete the construction of phase two of the Cauquenes expansion in the second half of 2018. The project has an estimated cost of $30.0 to $35.0 million and is planned to increase production to 85.0 to 90.0 million pounds of copper per year, at an estimated cash cost of $1.40 to $1.60/lb.
Amounts in this news release are reported in U.S. dollars except where indicated otherwise. The information and data contained in this news release should be read in conjunction with the Company's Condensed Consolidated Interim Financial Statements (Unaudited) and Management's Discussion and Analysis ("MD&A) for the period ended June 30, 2017 and the Audited Consolidated Financial Statements and MD&A for the year ended December 31, 2016, available at the Company's website at www.amerigoresources.com and at www.sedar.com.
About the Company:
Amerigo Resources Ltd. is an innovative copper producer with a long-term relationship with Codelco, the world's largest copper producer. Amerigo produces copper concentrate at the MVC operation in Chile by processing fresh and historic tailings from Codelco's El Teniente mine, the world's largest underground copper mine. Tel: (604) 681-2802; Fax: (604) 682-2802; Web: www.amerigoresources.com; Listing: (TSX: ARG)
