Equinox Gold Reports Q4 and Fiscal 2022 Financial and Operating Results Provides 2023 Production Guidance of 555,000 to 625,000 Ounces of Gold
TSX: EQX NYSE-A: EQX
NEWS RELEASE
Equinox Gold Reports Q4 and Fiscal 2022 Financial and Operating Results Provides 2023 Production Guidance of 555,000 to 625,000 Ounces of Gold
All financial figures are in US dollars, unless otherwise indicated.
February 21, 2023 – Vancouver, BC – Equinox Gold Corp. (TSX: EQX, NYSE American: EQX) (“Equinox Gold” or the “Company”) has released its audited consolidated financial and operating results and related management’s discussion and analysis for the fourth quarter and fiscal year ended December 31, 2022. The Company will host a conference call and live webcast to discuss the results at 7:30am PT (10:30am ET) on Wednesday, February 22, 2023. Dial-in and login details are provided later in this news release.
Greg Smith, President and CEO of Equinox Gold, commented: “Equinox Gold finished 2022 with its strongest quarter of production at the lowest costs for the year, bringing full-year production to 532,319 ounces of gold at all-in sustaining costs of $1,622 per ounce. We made significant progress at our assets in 2022, achieving commercial production at Santa Luz, advancing permitting for expansions at both Aurizona and Castle Mountain, completing the Los Filos expansion study and advancing the Greenstone project to 65% complete at year end and over 70% complete today.
“Looking forward, we expect to produce between 555,000 to 625,000 ounces of gold in 2023 at all-in sustaining costs of $1,575 to $1,695 per ounce. Growth capital of $324 million in 2023 is directed primarily to Greenstone construction. We entered 2023 with $327 million in total liquidity which, along with cash flow from our operating mines and marketable investments currently worth about $220 million, leaves us well funded to complete construction at Greenstone and pour gold in the first half of 2024.”
HIGHLIGHTS FOR THE THREE MONTHS ENDED DECEMBER 31, 2022
Operational
- Produced 150,439 ounces of gold
- Sold 149,386 ounces of gold at an average realized gold price of $1,733 per oz
- Total cash costs of $1,223 per oz and AISC of $1,523 per oz(1)
- No lost-time injuries
Earnings
- Earnings from mine operations of $32.0 million
- Net income of $22.6 million or $0.07 per share
- Adjusted net income of $7.5 million or $0.02 per share(1)(2)
Financial
- Cash flow from operations before changes in non-cash working capital of $80.0 million ($45.5 million after changes in non-cash working capital)
- Adjusted EBITDA of $74.7 million(1)(2)
- Expenditures of $43.1 million in sustaining capital(1) and $108.7 million in non-sustaining capital
- Filed a base shelf prospectus on November 21, 2022 that allows the Company to make offerings of up to $500 million of common shares, debt securities, subscription receipts, share purchase contracts, units, warrants, or any combination thereof, over a 25-month period
Suite 1501 - 700 West Pender St., Vancouver, BC Canada V6C 1G8 [email protected] +1 604.558.0560 www.equinoxgold.com
- Entered into an equity distribution agreement dated November 21, 2022 providing for an at-the-market equity offering program (“ATM Program”) for up to $100 million effective until December 21, 2024, unless terminated earlier
- Sold 11 million common shares of Solaris Resources Inc. (TSX: SLS) (“Solaris”) for aggregate gross proceeds of $51.9 million
Construction, development and exploration
- Advanced Greenstone construction to 65% complete at December 31, 2022, while remaining on budget and on track to achieve first gold pour in the first half of 2024
- Spent $97.9 million of non-sustaining capital in Q4 2022 (Equinox Gold’s 60% share)
- Building enclosure and heating completed for the process plant west end, power plant, truck shop, ore bin tower of the high-pressure grinding rolls building and site mixed emulsion plant, with the rest of the buildings on track for enclosure in Q1 2023 as planned
- Completed the Ministry of Transportation Patrol Yard, the Goldfield Creek diversion, and the permanent effluent water treatment plant
- First four bays of the truck shop are complete and in use
- The 14-km natural gas pipeline is complete and ready for commissioning in Q2 2023
- Achieved commercial production at Santa Luz effective October 1, 2022
- Increased Los Filos Mineral Reserves by 44% and completed a feasibility study for construction of a carbonin-leach plant to process higher-grade ore concurrent with existing heap leach processing, which would extend the mine life and increase production to on average 280,000 ounces per year, with peak production of 360,000 ounces per year
RECENT DEVELOPMENTS
- Provided 2023 production and cost guidance of 555,000 to 625,000 ounces of gold at cash costs of $1,355 to $1,460 per oz and AISC of $1,575 to $1,695 per oz(1)
- Provided 2023 sustaining and non-sustaining expenditure guidance of $460 million
- $137 million of sustaining expenditures, of which $127 million is sustaining capital(1)
- $324 million of non-sustaining expenditures, of which $300 million is non-sustaining capital. Nonsustaining capital includes $277 million to advance Greenstone construction
- At the date of this news release, the Company has issued 6,651,017 common shares under the ATM Program at an average share price of $3.75 per common share for total gross proceeds of $24.9 million
- In February 2023, published the Company’s inaugural Climate Action Report in alignment with the Task Force on Climate Related Financial Disclosures (TCFD)
- In January 2023, sold 4.5 million common shares of the Company’s investment in Solaris for proceeds of $20.0 million
- In January 2023, entered into gold collar contracts with a put strike price of $1,900 per ounce and an average call strike price of $2,065 per ounce, for 10,644 ounces of gold per month beginning February 2023 through to March 2024
FULL-YEAR 2022 HIGHLIGHTS
Operational
- Produced 532,319 ounces of gold
- Sold 532,137 ounces of gold at an average realized gold price of $1,784 per oz
- Total cash costs of $1,328 per oz and AISC of $1,622 per oz(1)
- Achieved a total recordable injury frequency rate(3) of 2.12, a 30% improvement compared to 2021
- Achieved a significant environmental incident frequency rate(3) of 0.63, a 7% improvement compared to 2021
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Earnings
- Earnings from mine operations of $85.0 million
- Net loss of $106.0 million or $0.35 per share
- Adjusted net loss of $90.8 million(1) or $0.30 per share(1)(4)
Financial
- Cash flow from operations before changes in non-cash working capital of $144.3 million ($56.5 million after changes in non-cash working capital)
- Adjusted EBITDA of $168.7 million(1)(4)
- Expenditures of $139.2 million in sustaining capital(1) and $457.7 million in non-sustaining capital
- Cash and cash equivalents (unrestricted) of $200.8 million at December 31, 2022
- Net debt(1) of $627.3 million at December 31, 2022
Corporate
- Strengthened capital flexibility
- Expanded the corporate revolving credit facility to $700 million with an additional $100 million accordion feature, and extended the maturity date to July 2026 with the option for a one-year extension
- Sold a portion of the Company’s shares in Solaris for proceeds of $51.9 million and received $40.1 million from the sale of Solaris shares on the exercise of warrants the Company granted in 2021
- Closed the sale of the Mercedes mine (“Mercedes”) for $75 million cash, a $25 million note receivable, a 2% net smelter return and 24.73 million shares of Bear Creek Mining Corporation (TSXV: BCM)
- Improved financial resilience by filing a $500 million base shelf prospectus and implementing a $100 million ATM Program
- Launched Sandbox Royalties Corp., a new diversified metal royalties company in which Equinox Gold holds a 34% interest
- Greg Smith, President of Equinox Gold, succeeded Christian Milau as Chief Executive Officer and a Director of Equinox Gold on September 1, 2022
Construction, development and exploration
- Greenstone 65% complete at December 31, 2022
- More than 2 million work hours complete project to date with no lost-time injuries
- 71% of total capital costs contracted
- 54% of the $1.23 billion construction budget (100% basis) spent
- Inflationary pressures to date have been mitigated through offsetting savings opportunities or absorbed through the contingency included in the construction budget
- Completed construction and achieved commercial production at Santa Luz
- Commenced permitting for the Castle Mountain Phase 2 expansion, which would extend the mine life to 21 years and increase production to on average more than 200,000 ounces per year
- Completed feasibility study for construction of a carbon-in-leach plant at Los Filos
- Received permits for three portal locations for an exploration ramp in anticipation of underground development at Aurizona, continued to drill the underground Mineral Resource and advanced the expansion feasibility study
- Drilled 187,000 metres across the portfolio with a focus on Mineral Reserve growth and mine life extension
- Exploration confirmed district potential from multiple near-mine and regional mineral discoveries in the Bahia Belt between Fazenda and Santa Luz
Responsible mining
- Entered into wind and solar power arrangements for select Brazil operations, which will result in reduced greenhouse gas emissions and are expected to achieve approximately $70 million in cost savings over the 10-year contract periods
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- Approved a greenhouse gas emissions reduction target of 25% by 2030 compared to the "business-as-usual" emissions forecast if no intervention measures were taken
- Submitted second year of data to the Carbon Disclosure Project and updated the Company’s Tailings Management Report
- Expanded environment, social and governance (“ESG”) reporting disclosure to include Global Reporting Initiative (GRI) and Sustainability Accounting Standards Board (SASB) metrics
_______________________________
(1) Cash costs per oz sold, AISC per oz sold, adjusted net income (loss), adjusted EBITDA, adjusted EPS, sustaining capital and net debt are non-IFRS measures. See Non-IFRS Measures and Cautionary Notes.
(2) Primary adjustments for the three months ended December 31, 2022 were $2.9 million unrealized gain on change in fair value of warrants, $3.1 million unrealized foreign exchange loss, and $7.7 million unrealized gain on change in fair value of foreign exchange contracts.
(3) Total recordable injury frequency rate and significant environmental incident frequency rate are both reported per million hours worked. Total recordable injury frequency rate is the total number of injuries excluding those requiring simple first aid treatment.
(4) Primary adjustments for the year ended December 31, 2022 were $69.9 million unrealized loss on change in fair value of warrants, $33.3 million gain on change in fair value of gold contracts, and $16.8 million unrealized gain on change in fair value of foreign exchange contracts.
CONSOLIDATED OPERATIONAL AND FINANCIAL HIGHLIGHTS
Three months ended Year ended
| Operating data Unit | December 31, | September 30, December 31, 2022 2021 | December 31, | December 31, 2021(1) |
|---|---|---|---|---|
| 2022 | 2022(1) | |||
| Gold produced oz Gold sold oz Average realized gold price $/oz Cash costs per oz sold(3)(4) $/oz AISC per oz sold(2)(3)(4) $/oz Financial data | 150,439 | 143,615 210,432 143,032 212,255 1,711 1,792 1,400 1,032 1,749 1,258 | 532,319 | 602,110 602,668 1,791 1,084 1,347 |
| 149,386 | 532,137 | |||
| 1,733 | 1,784 | |||
| 1,223 | 1,328 | |||
| 1,523 | 1,622 | |||
| Revenue M$ Earnings from mine operations M$ Net income (loss) M$ Earnings (loss) per share $/share Adjusted EBITDA(3) M$ Adjusted net income (loss)(3) M$ Adjusted EPS(3) $/share Balance sheet and cash flow data | 259.3 | 245.1 381.2 7.4 99.4 (30.1) 109.0 (0.10) 0.37 25.7 130.4 (27.6) 68.3 (0.09) 0.23 | 952.2 | 1,082.3 230.6 554.9 1.95 305.0 62.0 0.22 |
| 32.0 | 85.0 | |||
| 22.6 | (106.0) | |||
| 0.07 | (0.35) | |||
| 74.7 | 168.7 | |||
| 7.5 | (90.8) | |||
| 0.02 | (0.30) | |||
| Cash and cash equivalents (unrestricted) M$ Net debt(3) M$ Operating cash flow before changes in non-cash working capital M$ | 141.9 305.5 583.8 235.2 14.5 122.2 | 305.5 235.2 264.1 | ||
| 200.8 | 200.8 | |||
| 627.3 | 627.3 | |||
| 80.0 | 144.3 |
(1) Operational and financial results of the assets acquired as part of the Premier Acquisition are included from April 7, 2021, onward, except for the results of Mercedes, which were included for the period from April 7, 2021 through to April 21, 2022, when Mercedes was sold.
(2) Consolidated AISC per oz sold excludes corporate general and administration expenses.
(3) Cash costs per oz sold, AISC per oz sold, adjusted EBITDA, adjusted net income, adjusted EPS and net debt are non-IFRS measures. See Non-IFRS Measures and Cautionary Notes.
(4) Consolidated cash cost per oz sold and AISC per oz sold for the year ended December 31, 2022 excludes Santa Luz results while the mine was in pre-commercial production up until the achievement of commercial production at the end of Q3 2022.
(5) Numbers in tables throughout this news release may not sum due to rounding.
In Q4 2022, the Company sold 30% fewer gold ounces compared to Q4 2021 primarily due to lower production at Mesquite, Los Filos and Aurizona, offset partially by higher production at Fazenda and the contribution of production at Santa Luz, which achieved commercial production at the end of Q3 2022. Lower production at Mesquite was mainly due to mine sequencing, with fewer ounces added to the leach pad during the Quarter. Lower production at Los Filos was mainly due to a shortage of explosives due to union strikes at a supplier, which reduced the amount of open pit and underground material moved and delayed ounces being delivered to the leach pad, and by slower recovery curves for a portion of the ore that has a higher copper content. Lower production at Aurizona was mainly due to ore access issues caused by an abnormally long rainy season in 2022
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and by lower-than-expected levels of waste movement, both of which impacted access to higher-grade ore in the lower benches of the Piaba open pit. Higher production at Fazenda was mainly due to higher grades and larger volumes mined from the open pit, offsetting lower volumes and grades mined from underground ore sources.
For the year ended December 31, 2022, the Company sold 12% fewer gold ounces compared to the year ended December 31, 2021. The decrease was mainly due to lower production at Aurizona, RDM, Mesquite and Los Filos. Aurizona experienced a longer rainy season in 2022 and lack of productivity in waste movement, both of which affected ore access during the year. As a result, throughout most of the year Aurizona relied on processing ore that was lower grade than expected. RDM was impacted by a temporary suspension of mining and plant operations in mid-May due to a delay in receiving permits for the scheduled tailings storage facility (“TSF”) raise. RDM transitioned in Q3 2022 to processing low-grade stockpile material rather than mining in-situ ore. RDM production was also impacted by a temporary stoppage of mining operations for most of December while the Company applied for a license to process low grade ore from additional stockpiles. Mesquite production was lower driven by a longer leach cycle for ore tonnes stacked in 2022 compared to 2021. Los Filos production was lower impacted primarily by a shortage of explosives due to union strikes at a supplier, which reduced the amount of open pit and underground material moved and delayed ounces being delivered to the leach pad, and by slower recovery curves for a portion of the ore that has a higher copper content.
The decreases were partially offset by increased production at Fazenda, attributable to higher grades and volumes mined from the open pit, and the contribution of production at Santa Luz, which commenced production at the end of Q1 2022 and achieved commercial production at the end of Q3 2022.
In Q4 2022, earnings from mine operations were $32.0 million (Q4 2021 - $99.4 million) and for the year ended December 31, 2022 were $85.0 million (year ended December 31, 2021 - $230.6 million). Earnings from mine operations were lower in Q4 2022 compared to Q4 2021 mainly due to lower gold production and higher operating costs resulting from inflationary pressures, particularly from increased prices of oil and key consumables such as cyanide, lime and explosives.
Earnings from mine operations were lower for the year ended December 31, 2022 compared to the comparative period of 2021 primarily due to lower earnings from mine operations at Aurizona and Los Filos. Aurizona’s earnings from mine operations decreased by $60.9 million due to selling 24% fewer ounces of gold and incurring higher processing costs, including power, cyanide and grinding media costs, as well as increased maintenance costs. Los Filos’ earnings from mine operations decreased by $57.6 million primarily due to selling 8% fewer ounces of gold, as well as an increase in open pit and underground mining costs.
Net income in Q4 2022 decreased to $22.6 million compared to net income of $109.0 million in Q4 2021. For the year ended December 31, 2022, the Company had a net loss of $106.0 million compared to net income of $554.9 million for the comparative period in 2021. The lower net income in Q4 2022 and net loss for the year ended December 31, 2022 were impacted by lower earnings from mine operations. Results for the year ended December 31, 2022 were also impacted by a loss on the change in fair value of share purchase warrants of $69.9 million and a foreign exchange loss of $7.8 million, compared to gains of $85.8 million and $0.2 million, respectively, during the comparative periods in 2021. Results for the year ended December 31, 2021 also included a $186.1 million gain on reclassification of investment in Solaris, a $81.4 million gain on bargain purchase price of Premier, and a $95.7 million gain on the sale of the Pilar mine (“Pilar”) and sale of a partial interest in Solaris.
In Q4 2022, adjusted EBITDA was $74.7 million (Q4 2021 - $130.4 million) and for the year ended December 31, 2022 was $168.7 million (year ended December 31, 2021 - $305.0 million). In Q4 2022, adjusted net income was $7.5 million (Q4 2021 - adjusted net income of $68.3 million) and for the year ended December 31, 2022 was a net loss of $90.8 million (year ended December 31, 2021 - adjusted net income of $62.0 million). Adjusted EBITDA and adjusted net income were impacted by lower earnings from mine operations compared to the comparative periods in 2021.
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2023 GUIDANCE AND OUTLOOK
For 2023, the Company expects to produce 555,000 to 625,000 ounces of gold. The midpoint of 2023 guidance of 590,000 ounces represents an increase of more than 71,000 ounces compared to normalized 2022 gold production of 519,000 ounces (calculated by deducting 13,631 ounces of production from Mercedes, which the Company no longer owns). Cash costs for 2023 are estimated at $1,355 to $1,460 per oz, with AISC of $1,575 to $1,695 per oz.
Cash costs for 2023 are forecast to be similar to 2022 and reflect management’s expectation that inflation has largely plateaued, but input costs are expected to remain high throughout 2023. In addition, management expects relative stability in the Brazilian and Mexican currency exchange rates against the US dollar. Relative to many other countries’ currencies, the Brazilian Réal (“BRL”) and Mexican Peso (“MXN”) were top performers against the USD in 2021 and 2022.
Sustaining expenditures in 2023 of $137 million includes investing: (i) $38 million in capitalized stripping programs, with the largest investments at Los Filos and Aurizona, (ii) $25 million in refurbishing equipment, most of which relates to the Los Filos open pit and underground fleets and processing equipment, and (iii) $37 million for TSF lifts at all four Brazilian operations.
Production is expected to grow each quarter through 2023 and costs are expected to decrease accordingly. Approximately 55% of gold production and 85% of operating cash flow is weighted into the second half of the year. Assuming the Company achieves the mid-points of cost guidance, cash costs per oz in the first half of 2023 are expected to be $1,460 per oz, decreasing to $1,360 per oz in the second half of the year. Likewise, AISC in the first half of 2023 are expected to be $1,755 per oz, decreasing to $1,530 per oz in the second half of the year.
The Company’s primary development focus for 2023 continues to be construction at Greenstone, with Equinox Gold’s 60% share of construction capital in 2023 forecast at $277 million. In addition, the Company expects to spend $8 million on Castle Mountain phase two optimization, engineering and permitting, and $8 million on Fazenda underground development and exploration.
Cash Costs AISC Sustaining Non-sustaining Production (oz) ($/oz)(1)(2) ($/oz)(1)(2) expenditures (M$)(3) expenditures (M$)(4)
USA
Mesquite 80,000 - 90,000 $1,345 - $1,410 $1,415 - $1,480 $5 $16 Castle Mountain 25,000 - 30,000 $1,765 - $1,850 $1,865 - $1,950 $2 $11
Mexico
Los Filos 160,000 - 180,000 $1,460 - $1,620 $1,680 - $1,865 $40 $—
Brazil
| Aurizona | 120,000 - 130,000 | $1,065 - $1,130 | $1,410 - $1,500 | $45 | $6 |
| Fazenda | 60,000 - 65,000 | $1,170 - $1,210 | $1,390 - $1,430 | $14 | $12 |
| Santa Luz | 60,000 - 70,000 | $1,535 - $1,695 | $1,775 - $1,950 | $17 | $2 |
| RDM | 50,000 - 60,000 | $1,460 - $1,620 | $1,685 - $1,870 | $13 | $— |
Canada
Greenstone — — — $— $277
Total(5) 555,000 - 625,000 $1,355 - $1,460 $1,575 - $1,695 $137 $324
(1) Cash costs per oz sold and AISC per oz sold are non-IFRS measures. See Non-IFRS Measures and Cautionary Notes.
(2) Exchange rates used to forecast 2023 cash cost and AISC per oz include a rate of BRL 5:00 to USD 1 and MXN 19.0 to USD 1.
(3) Sustaining expenditures include asset retirement obligation, amortization, accretion, sustaining exploration expense and sustaining capital expenditures. Sustaining expenditures includes $127 million of sustaining capital expenditures. Sustaining capital expenditure is a non- IFRS measure. See Non-IFRS Measures and Cautionary Notes.
(4) Non-sustaining expenditures include non-sustaining exploration expense and non-sustaining capital expenditures. Non-sustaining expenditures includes $300 million of non-sustaining capital expenditures.
(5) Total is the sum or average of the individual mine-level amounts. Numbers may not sum due to rounding.
The Company may revise guidance during the year to reflect changes to expected results.
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SELECTED FINANCIAL RESULTS FOR THE THREE MONTHS AND YEAR ENDED DECEMBER 31, 2022 AND 2021
Three months ended Year ended
| $ amounts in millions, except per share amounts | December 31, | December 31, 2021 | December 31, | December 31, 2021(1) |
|---|---|---|---|---|
| 2022 | 2022(1) | |||
| Revenue Cost of sales Operating expense Depreciation and depletion | $ 259.3 | $ 381.2 (215.5) (66.4) | $ 952.2 | $ 1,082.3 (654.8) (196.9) |
| (168.2) | (680.1) | |||
| (59.0) | (187.2) | |||
| Earnings from mine operations Care and maintenance expense Exploration expense General and administration expense | 32.0 | 99.4 (0.1) (2.9) (17.3) | 85.0 | 230.6 (15.3) (16.3) (52.6) |
| (1.4) | (9.5) | |||
| (4.5) | (18.4) | |||
| (12.8) | (46.7) | |||
| Income from operations Finance expense Finance income Share of net income (loss) in associate Other (expense) income | 13.3 | 79.0 (10.3) 1.1 8.3 10.1 | 10.4 | 146.5 (41.6) 2.8 0.7 426.6 |
| (12.4) | (40.4) | |||
| 2.6 | 5.6 | |||
| (3.6) | (6.2) | |||
| (4.9) | (67.9) | |||
| Net (loss) income before taxes Income tax recovery (expense) | (5.0) | 88.2 20.8 | (98.4) | 535.0 19.9 |
| 27.6 | (7.6) | |||
| Net income Net income per share attributable to Equinox Gold shareholders Basic Diluted | $ 22.6 | $ 109.0 $ 0.37 $ 0.32 | $ (106.0) | $ 554.9 $ 1.95 $ 1.69 |
| $ 0.07 | $ (0.35) | |||
| $ 0.07 | $ (0.35) |
(1) Financial results of the assets acquired as part of the Premier Acquisition are included from April 7, 2021, onward, except for the results of Mercedes, which were included for the period from April 7, 2021 through to April 21, 2022, when Mercedes was sold.
Additional information regarding the Company’s financial results and the Company’s business strategy are available in the Company’s 2022 audited consolidated Financial Statements and accompanying MD&A for the three months and year ended December 31, 2022, which will be available for download on the Company’s website at www.equinoxgold.com, on SEDAR at www.sedar.com and on EDGAR at www.sec.gov.
CONFERENCE CALL AND WEBCAST
Equinox Gold will host a conference call and webcast on Wednesday, February 22, 2023 commencing at 7:30 am Vancouver time to discuss the Company’s fourth quarter results and activities underway at the Company. All participants will have the opportunity to ask questions of Equinox Gold’s CEO and executive team. The webcast will be archived on Equinox Gold’s website until August 22, 2023.
Conference call Toll-free in U.S. and Canada: 1-800-319-4610 International callers: +1 604-638-5340
Webcast www.equinoxgold.com
ABOUT EQUINOX GOLD
Equinox Gold is a growth-focused Canadian mining company with seven operating gold mines, construction underway at a new project, and a clear plan to achieve more than one million ounces of annual gold production from a pipeline of development and expansion projects. Equinox Gold’s common shares are listed on the TSX and the NYSE American under the trading symbol EQX. Further information about Equinox Gold’s portfolio of assets and long-term growth strategy is available at www.equinoxgold.com or by email at [email protected].
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EQUINOX GOLD CONTACTS
Greg Smith, President & Chief Executive Officer Rhylin Bailie, Vice President, Investor Relations Tel: +1 604-558-0560 Email: [email protected]
CAUTIONARY NOTES
Non-IFRS Measures
This news release refers to cash costs, cash costs per oz sold, AISC, AISC per oz sold, AISC contribution margin, adjusted net income, adjusted EPS, mine-site free cash flow, adjusted EBITDA, net debt and sustaining capital expenditures that are measures with no standardized meaning under IFRS, i.e. they are non-IFRS measures, and may not be comparable to similar measures presented by other companies. Their measurement and presentation is consistently prepared and is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. Numbers presented in the tables below may not sum due to rounding.
Cash costs and cash costs per oz sold
Cash costs is a common financial performance measure in the gold mining industry; however, it has no standard meaning under IFRS. The Company reports total cash costs on a per oz sold basis. The Company believes that, in addition to conventional measures prepared in accordance with IFRS, certain investors use this information to evaluate the Company’s performance and ability to generate operating income and cash flow from mining operations. Cash costs include mine site operating costs plus lease principal payments and net of by-product sales and then divided by ounces sold to arrive at cash costs per oz sold. In calculating cash costs, the Company includes silver by-product credits as it considers the cost to produce the gold is reduced as a result of the by-product sales incidental to the gold production process, thereby allowing management and other stakeholders to assess the net costs of gold production. The measure is not necessarily indicative of cash flow from operations under IFRS or operating costs presented under IFRS.
AISC per oz sold
The Company uses AISC per oz of gold sold to measure performance. The methodology for calculating AISC was developed internally and is calculated below. Current IFRS measures used in the gold industry, such as operating expenses, do not capture all of the expenditures incurred to discover, develop and sustain gold production. The Company believes the AISC measure provides further transparency into costs associated with producing gold and will assist analysts, investors and other stakeholders of the Company in assessing its operating performance, its ability to generate free cash flow from current operations and its overall value. AISC includes cash costs (described above) and also includes sustaining capital expenditures, reclamation cost accretion and amortization and exploration and evaluation costs. This measure seeks to reflect the full cost of gold production from current operations; therefore, expansionary capital and non-sustaining expenditures are excluded.
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The following table provides a reconciliation of cash costs per oz of gold sold and AISC per oz of gold sold to the most directly comparable IFRS measure on an aggregate basis.
Three months ended Year ended
| $’s in millions, except ounce and per oz figures | December 31, | September 30, December 31, 2022 2021 | December 31, | December 31, 2021 |
|---|---|---|---|---|
| 2022 | 2022 | |||
| Gold ounces sold Santa Luz gold ounces sold(1) | 149,386 | 143,032 212,255 (17,756) — | 532,137 | 602,668 — |
| — | (22,945) | |||
| Adjusted gold ounces sold | 149,386 | 125,276 212,255 | 509,192 | 602,668 |
| Operating expense Lease payments Silver by-product credits Non-recurring charges recognized in operating expense(2) Fair value adjustment on acquired inventories Santa Luz operating expense(1) | $ 168.2 | $ 188.8 $ 215.5 1.4 4.0 (0.6) (1.4) — (0.4) 8.1 1.4 (22.3) — | $ 680.1 | $ 654.8 9.6 (2.9) (2.1) (5.8) — |
| 2.5 | 6.8 | |||
| (0.2) | (3.0) | |||
| — | — | |||
| 12.2 | 21.9 | |||
| — | (29.3) | |||
| Total cash costs | $ 182.7 | $ 175.4 $ 219.0 | $ 676.5 | $ 653.6 |
| Cash costs per gold oz sold | $ 1,223 | $ 1,400 $ 1,032 | $ 1,328 | $ 1,085 |
| Total cash costs Sustaining capital Reclamation expense Sustaining exploration expense Santa Luz reclamation expense | $ 182.7 | $ 175.4 $ 219.0 41.1 42.4 2.7 5.5 — — (0.1) — | $ 676.5 | $ 653.6 144.7 13.1 0.6 — |
| 43.1 | 139.2 | |||
| 1.8 | 9.2 | |||
| — | 1.1 | |||
| — | (0.2) | |||
| Total AISC | $ 227.6 | $ 219.1 $ 266.9 | $ 825.7 | $ 812.0 |
| AISC per oz sold | $ 1,523 | $ 1,749 $ 1,258 | $ 1,622 | $ 1,347 |
(1) Consolidated cash cost per oz sold and AISC per oz sold for the year ended December 31, 2022 excludes Santa Luz results while the mine was in pre-commercial production up until the achievement of commercial production at the end of Q3 2022.
(2) Non-recurring charges recognized in operating expenses relates to an impairment charge on replacement parts at Mesquite.
Sustaining Capital Expenditures
Sustaining capital expenditures are defined as those expenditures which do not increase annual gold ounce production at a mine site and excludes all expenditures at the Company’s projects and certain expenditures at the Company’s operating sites which are deemed expansionary. Sustaining capital expenditures can include, but are not limited to, capitalized stripping costs at open pit mines, underground mine development, mining and milling equipment and TSF raises.
The following table provides a reconciliation of sustaining capital expenditures to the Company’s total capital expenditures for continuing operations.
Three months ended Year ended
| $’s in millions | December 31, | September 30, December 31, 2022 2021 | December 31, | December 31, 2021 |
|---|---|---|---|---|
| 2022 | 2022 | |||
| Capital additions to mineral properties, plant and equipment(1) Less: Non-sustaining capital at operating sites Less: Non-sustaining capital at development projects Less: Capital expenditures - corporate Less: Other non-cash additions(2) | $ 182.6 $ 135.4 (12.4) (23.4) (119.2) (62.4) — (0.1) (9.9) (7.1) | $ 455.3 (101.3) (137.7) (1.0) (70.6) | ||
| $ 163.2 | $ 642.2 | |||
| (10.8) | (81.2) | |||
| (103.4) | (389.4) | |||
| — | (10.2) | |||
| (5.9) | (22.2) | |||
| Sustaining capital expenditures | $ 43.1 | $ 41.1 $ 42.4 | $ 139.2 | $ 144.7 |
(1) Per note 9 of the consolidated financial statements for the year ended December 31, 2022. Capital additions are exclusive of non-cash changes to reclamation assets arising from changes in discount rate and inflation rate assumptions in the reclamation provision.
(2) Non-cash additions include right-of-use assets associated with leases recognized in the period, capitalized depreciation for deferred stripping activities, and capitalized non-cash share-based compensation.
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Total mine-site free cash flow
Mine-site free cash flow is a non-IFRS financial performance measure. The Company believes this measure is a useful indicator of its ability to operate without reliance on additional borrowing or usage of existing cash. Mine-site free cash flow is intended to provide additional information only and does not have any standardized meaning under IFRS and may not be comparable to similar measures of performance presented by other mining companies. Mine-site free cash flow should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.
The following table provides a reconciliation of mine-site free cash flow to the most directly comparable IFRS measure on an aggregate basis:
Three months ended Year ended
| $’s in millions | December 31, | September 30, December 31, 2022 2021 | December 31, | December 31, 2021 |
|---|---|---|---|---|
| 2022 | 2022 | |||
| Operating cash flow before non-cash changes in working capital Add: Operating cash flow used (generated) by non-mine site activity(1) | $ 14.5 $ 122.2 31.0 34.1 | $ 264.1 130.6 | ||
| $ 80.0 | $ 144.3 | |||
| 7.4 | 100.1 | |||
| Cash flow from operating mine sites | $ 87.4 | $ 45.5 $ 156.3 | $ 244.4 | $ 394.7 |
| Mineral property, plant and equipment additions Less: Capital expenditures relating to development projects and corporate and other non-cash additions | 182.6 135.4 (129.1) (69.6) | 455.3 (209.4) | ||
| $ 163.2 | $ 642.2 | |||
| (109.3) | (421.8) | |||
| Capital expenditure from operating mine sites Lease payments related to non-sustaining capital items Non-sustaining exploration expense | 53.9 | 53.5 65.8 5.8 3.5 5.9 3.0 | 220.4 | 245.9 13.7 9.9 |
| 3.9 | 16.8 | |||
| 5.4 | 17.8 | |||
| Total mine site free cash flow | $ 24.2 | $ (19.7) $ 84.1 | $ (10.6) | $ 125.2 |
(1) Includes taxes paid that are not factored into mine site free cash flow and are included in operating cash flow before non-cash changes in working capital in the statement of cash flows.
AISC contribution margin, EBITDA and adjusted EBITDA
The Company believes that, in addition to conventional measures prepared in accordance with IFRS, certain investors, and other stakeholders use AISC contribution margin, AISC contribution margin per gold ounce sold and adjusted EBITDA to evaluate the Company’s performance and ability to generate cash flows and service debt. AISC contribution margin is defined as revenue less AISC. EBITDA is defined as earnings before interest, tax, depreciation and amortization. Adjusted EBITDA is defined as earnings before interest, tax, depreciation, and amortization, adjusted to exclude specific items that are significant but not reflective of the underlying operating performance of the Company, such as the impact of fair value changes of warrants, foreign exchange contracts and gold contracts; unrealized foreign exchange gains and losses, transaction costs, and share-based compensation expense. It is also adjusted to exclude items whose timing or amount cannot be reasonably estimated in advance or that are not considered representative of core operating performance, such as impairments and gains and losses on disposals of assets.
The following tables provide the calculation of AISC contribution margin, EBITDA and adjusted EBITDA, as calculated by the Company:
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AISC Contribution Margin
Three months ended Year ended
| $’s in millions | December 31, | September 30, December 31, 2022 2021 | December 31, | December 31, 2021 |
|---|---|---|---|---|
| 2022 | 2022 | |||
| Revenue Less: AISC Less: Santa Luz revenue(1) | $ 245.1 $ 381.2 (219.1) (266.9) $ (30.4) $ — | $ 1,082.3 (812.0) $ — | ||
| $ 259.3 | $ 952.2 | |||
| (227.6) | (825.7) | |||
| $ — | $ (40.0) | |||
| AISC contribution margin | $ (4.4) $ 114.3 | $ 270.3 | ||
| $ 31.7 | $ 86.5 | |||
| Gold ounces sold Less: Santa Luz gold ounces sold(1) | 143,032 212,255 (17,756) — | 602,668 — | ||
| 149,386 | 532,137 | |||
| — | (22,945) | |||
| Adjusted gold ounces sold | 125,276 212,255 | 602,668 | ||
| 149,386 | 509,192 | |||
| AISC contribution margin per oz sold | $ (35) $ 539 | $ 449 | ||
| $ 212 | $ 170 |
(1) AISC contribution margin for year ended December 31, 2022 excludes Santa Luz results while the mine was in pre-commercial production up until the achievement of commercial production at the end of Q3 2022.
EBITDA and Adjusted EBITDA
Three months ended Year ended
| $’s in millions | December 31, | September 30, December 31, 2022 2021 | December 31, | December 31, 2021 |
|---|---|---|---|---|
| 2022 | 2022 | |||
| Net income (loss) before tax Depreciation and depletion Finance expense Finance income | (28.0) 88.2 49.1 66.7 10.3 10.3 (1.3) (1.1) | 535.0 198.1 41.6 (2.8) | ||
| $ (5.0) | $ (98.4) | |||
| 59.8 | 188.8 | |||
| 12.4 | 40.4 | |||
| (2.6) | (5.6) | |||
| EBITDA | $ 64.6 | $ 30.2 $ 164.1 | $ 125.2 | $ 771.9 |
| Non-cash share-based compensation expense Unrealized (gain) loss on change in fair value of warrants (Gain) loss on gold contracts Unrealized (gain) loss on foreign exchange contracts Unrealized foreign exchange (gain) loss Non-recurring charges recognized in operating expense(1) Transaction costs Share of net (income) loss on investment in associate Other expense (income)(2) | 0.5 0.8 13.4 (27.5) (10.6) (4.3) 2.8 (1.7) (1.0) (10.8) — 0.4 — 0.5 (4.9) (8.3) (4.6) 16.8 | 6.1 (85.8) (58.1) (0.4) (5.9) 2.1 2.4 (0.7) (328.4) | ||
| 1.5 | 4.5 | |||
| (2.9) | 69.9 | |||
| — | (33.3) | |||
| (7.7) | (16.8) | |||
| 3.1 | 4.7 | |||
| — | — | |||
| — | — | |||
| 3.6 | 6.2 | |||
| 12.5 | 8.4 | |||
| Adjusted EBITDA | $ 25.7 $ 130.0 | $ 303.1 | ||
| $ 74.7 | $ 168.7 |
(1) Non-recurring charges recognized in operating expenses for the three months and year ended December 31, 2021 relate to an impairment charge on replacement parts at Mesquite.
(2) Other expense for the year ended December 31, 2022 primarily includes a $7.0 million loss related to the sale of Mercedes and a $12.9 million loss at Santa Luz related to a write-down of plant and equipment, offset partially by an $8.5 million gain related to the royalty portfolio sale to Sandbox Royalties Corp. Other income for the year ended December 31, 2021 includes a $186.1 million gain on reclassification of investment in Solaris, $81.4 million gain on bargain purchase of Premier, and $95.7 million gain on sale of Pilar and sale of partial interest in Solaris.
Adjusted net income and adjusted EPS
Adjusted net income and adjusted EPS are used by management and investors to measure the underlying operating performance of the Company. Adjusted net income is defined as net income adjusted to exclude specific items that are significant but not reflective of the underlying operating performance of the Company, such as the impact of fair value changes in the value of warrants, foreign exchange contracts and gold contracts, unrealized foreign exchange gains and losses, and non-cash share-based compensation expense. It is also adjusted to exclude items whose timing or amount cannot be reasonably estimated in advance or that are not considered representative of core operating performance, such as impairments and gains and losses on disposals of assets. Adjusted net income per share amounts are calculated using the weighted average number of shares outstanding on a basic and diluted basis as determined by IFRS.
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The following table provides the calculation of adjusted net income and adjusted EPS, as adjusted and calculated by the Company:
Three months ended Year ended
| $’s in millions | December 31, | September 30, December 31, 2022 2021 | December 31, | December 31, 2021 |
|---|---|---|---|---|
| 2022 | 2022 | |||
| Basic weighted average shares outstanding Diluted weighted average shares outstanding | 305,189,956 | 304,979,851 300,790,672 304,979,851 348,996,674 | 304,001,631 | 284,932,357 333,734,701 |
| 351,390,498 | 304,001,631 | |||
| Net income (loss) attributable to Equinox Gold shareholders Add (deduct): Non-cash share-based compensation Unrealized (gain) loss on change in fair value of warrants Unrealized (gain) loss on gold contracts Unrealized (gain) loss on foreign exchange contracts Unrealized foreign exchange (gain) loss Non-recurring charges recognized in operating expense(1) Transaction costs Share of net (income) loss on investment in associate Other expense (income)(2) Income tax impact related to above adjustments Unrealized foreign exchange (gain) loss recognized in deferred tax expense | $ (30.1) $ 109.0 0.5 1.3 13.4 (27.5) (10.6) (4.3) 2.8 (1.7) (1.0) (10.8) — 0.4 — 0.5 (4.9) (8.3) (4.6) 16.8 2.3 (4.3) 4.6 (2.7) | $ 554.9 8.0 (85.8) (58.1) (0.4) (5.9) 2.1 2.4 (0.7) (328.4) (10.2) (15.8) | ||
| $ 22.6 | $ (106.0) | |||
| 1.5 | 4.5 | |||
| (2.9) | 69.9 | |||
| — | (33.3) | |||
| (7.7) | (16.8) | |||
| 3.1 | 4.7 | |||
| — | — | |||
| — | — | |||
| 3.6 | 6.2 | |||
| 12.5 | 8.4 | |||
| (3.0) | (2.5) | |||
| (22.2) | (25.8) | |||
| Adjusted net income (loss) | $ 7.5 | $ (27.6) $ 68.3 | $ (90.8) | $ 62.0 |
| Adjusted income per share - basic ($/share) Adjusted income per share - diluted ($/share) | $(0.09) $0.23 $(0.09) $0.20 | $0.22 $0.19 | ||
| $0.02 | $(0.30) | |||
| $0.02 | $(0.30) |
(1) Non-recurring charges recognized in operating expenses relates to an impairment charge on replacement parts at Mesquite.
(2) Other expense for the year ended December 31, 2022 primarily includes a $7.0 million loss related to the sale of Mercedes and a $12.9 million loss at Santa Luz related to a write-down of plant and equipment, offset partially by an $8.5 million gain related to the royalty portfolio sale to Sandbox Royalties Corp. Other income for the year ended December 31, 2021 includes a $186.1 million gain on reclassification of investment in Solaris, $81.4 million gain on bargain purchase of Premier, and $95.7 million gain on sale of Pilar and sale of partial interest in Solaris.
Net debt
The Company believes that in addition to conventional measures prepared in accordance with IFRS, the Company and certain investors and analysts use net debt to evaluate the Company’s performance. Net debt does not have any standardized meaning prescribed under IFRS, and therefore it may not be comparable to similar measures employed by other companies. This measure is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. Net debt is calculated as the sum of the current and non-current portions of long-term debt, net of the cash and cash equivalent balance as at the balance sheet date. A reconciliation of net debt is provided below.
| December 31, | September 30, December 31, 2022 2021 | |
|---|---|---|
| 2022 | ||
| Current portion of loans and borrowings Non-current portion of loans and borrowings | $ — | $ — $ 26.7 725.8 514.0 |
| 828.0 | ||
| Total debt Less: Cash and cash equivalents (unrestricted) | 828.0 | 725.8 540.7 (141.9) (305.5) |
| (200.8) | ||
| Net debt | $ 627.2 | $ 583.9 $ 235.2 |
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