Vancouver, British Columbia--(Newsfile Corp. - November 8, 2017) - Amerigo Resources Ltd. (TSX: ARG) ("Amerigo" or the "Company") reported today financial results for the three months ended September 30, 2017 ("Q3-2017"). Cash of $11.0 million was generated from operations before working capital changes. The Company posted revenue of $37.4 million and net income of $7.9 million. Debt proceeds for the second phase of the Cauquenes expansion ("Phase Two") were $4.8 million, and debt repayments on existing loans were $3.0 million. At September 30, 2017, cash balance was $22.7 million.
The improvement of $10.4 million in the Company's financial results and $9.4 million in operating cash flow generated in the quarter compared to Q3-2016 was the result of stronger copper prices, which positively impacted quarterly revenue on a provisional price basis, and resulted in $4.5 million in positive settlement adjustments to prior quarter sales.
Rob Henderson, Amerigo's President and CEO, stated "The price of copper has increased substantially over the last year in response to continued strong demand from China and an expectation of global supply shortfalls in the future. The Company is now starting to reap the benefits of the investment in Cauquenes. MVC's focus is to safely sustain the level of copper production, control costs and complete the Phase Two expansion project on time and on budget."
Financial Results
- Gross tolling copper revenue was $50.3 million (Q3-2016: $32.5 million), due to stronger copper prices. The Company's recorded copper tolling price was $3.00/lb (Q3-2016: $2.13/lb).
- Revenue from molybdenum was $2.5 million (Q3-2016: $2.1 million combined from molybdenum and the Maricunga tolling contract).
- Revenue after notional items was $37.4 million (Q3-2016: $23.4 million).
- Tolling and production costs were $25.5 million (Q3-2016: $24.3 million), driven by higher power and lime costs. Unit tolling and production costs were $1.67/lb (Q3-2016: $1.56/lb).
- 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) before notional copper royalties and molybdenum royalties to Codelco's Division El Teniente ("DET") was $1.69/lb (Q3-2016: $1.60/lb) due to higher power and lime costs.
- Total cost (a non-GAAP measure equal to the aggregate of cash cost, DET notional copper royalties and DET molybdenum royalties of $0.63/lb and depreciation of $0.23/lb) increased to $2.55/lb (Q3-2016: $2.18/lb), due to higher DET royalties from higher metal prices and higher cash cost.
- Gross profit was $11.9 million (Q3-2016: gross loss of $0.9 million). Net income was $7.9 million (Q3-2016: net loss of $2.5 million), as a result of stronger copper prices, including $4.5 million in positive settlement adjustments for prior quarter copper deliveries to DET.
- In Q3-2017 the Company generated cash flow from operations before working capital changes of $11.0 million (Q3-2016 $1.7 million). Including changes in working capital, cash flow from operations was $5.3 million (Q3-2016: $10.2 million).
Production
- Q3-2017 production was 15.5 million pounds of copper, 3% lower than the 16.0 million pounds produced in Q3-2016 due to lower recovery from the high-oxide tailings in the historical areas mined in Q3-2017.
- Q3-2017 copper production includes 9.8 million pounds from Cauquenes and 5.7 million pounds from fresh tailings.
- Molybdenum production was 0.4 million pounds (Q3-2016: 0.1 million pounds).
- At September 30, 2017, the Phase Two expansion project was on time, on budget and 19% complete. Purchase orders for all major equipment had been placed and earthworks construction had commenced.
Cash and Working Capital
- The Company's cash balance was $22.7 million (December 31, 2016: $15.9 million), including $16.0 million in operating accounts and $6.7 million in a debt service reserve account.
- At September 30, 2017, the Company had a working capital deficiency of $5.1 million (December 31, 2016: working capital of $0.6 million). The working capital deficiency was caused by the Company's current estimated schedule of repayment of the balance of the DET Price Support Facility from October 2017 to September 2018, which may change depending on MVC's actual cash flows. The Company 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 Company 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
- 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.
- MVC also maintains its guidance in respect of production of 1.5 million pounds of molybdenum.
- Construction of Phase Two is underway and on track for completion in Q3-2018, with full production expected in Q4-2018. The project will improve flotation recovery efficiency and is expected to increase MVC's production to 85.0 to 90.0 million pounds of copper per year, at an estimated cash cost of $1.40 to $1.60 per pound.
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 Interim Consolidated Financial Statements (Unaudited) and Management's Discussion and Analysis ("MD&A) for the three and nine months ended September 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 Corporación Nacional del Cobre de Chile ("Codelco"), the world's largest copper producer. Amerigo produces copper concentrate at its 100% owned 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: ARG:TSX.
Comparative Overview:
| Q3-2017 | Q3-2016 | Change | ||
| $ | % | |||
| Copper produced1 million pounds | 15.5 | 16.0 | (0.5) | (3%) |
| Copper delivered1 million pounds | 15.3 | 15.6 | (0.3) | (2%) |
| Percentage of production from historic tailings | 63% | 61% | ||
| Revenue ($ thousands) 2 | 37,421 | 23,383 | 14,038 | 60% |
| DET notional copper royalties ($ thousands) | 9,365 | 5,495 | 3,870 | 70% |
| Tolling and production costs ($ thousands) | 25,519 | 24,300 | 1,219 | 5% |
| Gross profit (loss) ($ thousands) | 11,902 | (917) | 12,819 | - |
| Net income (loss) ($ thousands) | 7,854 | (2,545) | 10,399 | - |
| Operating cash flow ($ thousands) 3 | 11,021 | 1,656 | 9,365 | 566% |
| Cash flow paid for purchase of plant | ||||
| and equipment ($thousands) | (5,291) | (1,341) | (3,950) | 295% |
| Cash and cash equivalents ($ thousands)4 | 22,702 | 21,056 | 1,646 | 8% |
| Borrowings ($ thousands)5 | 66,170 | 74,458 | (8,288) | (11%) |
| Gross copper tolling price ($/lb) | 3.00 | 2.13 | 0.87 | 41% |
| 1 | Copper production is conducted under tolling agreements with DET and Maricunga. |
| 2 | Revenue is reported net of notional items (smelting and refining charges, DET royalties and transportation costs). |
| 3 | Operating cash flow before changes in non-cash working capital. |
| 4 | Includes $13.4 million held in operating accounts and $6.7 million held in a debt service reserve account. |
| 5 | Total borrowings at September 30, 2017 include short and long-term portions of $24.4 and $41.8 million, respectively. |
| Summary Consolidated Statements of Financial Position | ||
| September 30, | December 31, | |
| 2017 | 2016 | |
| $ | $ | |
| Cash and cash equivalents | 22,702 | 15,921 |
| Property plant and equipment | 172,075 | 174,222 |
| Other assets | 33,542 | 31,543 |
| Total assets | 228,319 | 221,686 |
| Total liabilities | 133,385 | 133,809 |
| Shareholders' equity | 94,934 | 87,877 |
| Total liabilities and shareholders' equity | 228,319 | 221,686 |
| Summary Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) | ||
| Q3-2017 | Q3-2016 | |
| $ | $ | |
| Revenue | 37,421 | 23,383 |
| Tolling and production costs | (25,519) | (24,300) |
| Other expenses | (539) | (415) |
| Finance expense | (854) | (973) |
| Income tax expense | (2,655) | (240) |
| Net income (loss) | 7,854 | (2,545) |
| Other comprehensive income | 779 | 149 |
| Comprehensive income (loss) | 8,633 | (2,396) |
| Earnings (loss) per share - basic and diluted | 0.04 | (0.01) |
| Summary Consolidated Statements of Cash Flows | ||
| Q3-2017 | Q3-2016 | |
| $ | $ | |
| Cash flows from operating acitivities | 11,021 | 1,656 |
| Changes in non-cash working capital | (5,705) | 8,532 |
| Net cash from operating activities | 5,316 | 10,188 |
| Net cash used in investing acitivities | (5,291) | (1,341) |
| Net cash provided by financing acitivites | 2,074 | 3,000 |
| Net increase in cash | 2,099 | 11,847 |
| Effect of foreign exchange rates on cash | 459 | 166 |
| Cash and cash equivalents, beginning of period | 20,144 | 9,043 |
| Cash and cash equivalents, end of period | 22,702 | 21,056 |
