Amerigo Announces 2016 and Q4-2016 Financial Results
February 22, 2017
N.R. 2017- 03
Amerigo Announces 2016 and Q4-2016 Financial Results
• Q4-2016: $7.0 million in operating cash flow, net earnings of $3.0 million
• Annual 2016: $9.6 million in operating cash flow, net loss of $7.5 million
• Record annual copper production
VANCOUVER, BRITISH COLUMBIA – February 22, 2017/Amerigo Resources Ltd. (TSX: ARG)
(“Amerigo” or the “Company”) reported today financial results for the year ended December 31,
2016. The Company posted revenue of $91.4 million, operating cash flow before working capital
changes of $9.6 million and a net loss of $7.5 million. In Q4-2016 the Company posted revenue of
$29.5 million, operating cash flow before working capital changes of $7.0 million and net earnings
of $3.0 million. Cash balance was $15.9 million at December 31, 2016.
Rob Henderson, Amerigo’s President and CEO, stated “The increase in copper price and the good
production from the high-grade historic Cauquenes depos it are starting to translate into positive
earnings performance. In 2017, we plan to inves t $30.0 million at MVC to substantially increase
copper production and reduce cash costs. We remain focused on reducing costs, improving
liquidity and delivering against our targets to build value.”
Annual Financial Results
• Gross tolling revenue was $124.4 million (2015: $73. 8 million), mainly due to a 52% increase in
copper production. The Group’s recorded copper tolling price was $2.25/lb (2015: $2.47/lb).
Molybdenum production was restarted in H2-2016. Revenue after notional items was $91.4
million (2015: $52.6 million). In 2015, pre- operating revenue of $5.1 million from Cauquenes
was excluded from revenue.
• Tolling and production costs were $92.0 million (2015: $65.7 million), an increase of 40%
driven by a 52% increase in copper producti on. Pre-operating costs of $5.9 million from
Cauquenes were excluded from 2015 tolling and production costs. Unit tolling and production
costs were $1.64/lb (2015: $1.76/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 DET notional copper royalties and DET molybdenum royalties decreased to
$1.73/lb (2015: $2.18/lb) due to higher production.
• Total cost (a non-GAAP measure equal to the aggregate of cash cost, DET notional copper
royalties and DET molybdenum royalties of $0.38/lb and depreciation of $0.25/lb) decreased to
$2.36/lb (2015: $2.85/lb), due to lower cash cost.
• Gross loss was $0.6 million (2015: $13.0 million) and net loss was $7.5 million (2015: $16.9
million).
• In 2016, the Group generated operating cash before changes in non-cash working capital of
$9.6 million (2015: used cash flow in operations before changes in non-cash working capital of
$5.0 million).
Page 2
Production
• 2016 production was 56.8 million pounds of copper, 52% higher than the 37.3 million pounds
produced in 2015.
• 2016 copper production includes 32.7 million pounds from Cauquenes, 21.1 million pounds
from fresh tailings and 3.0 million pounds from Maricunga.
• The ramp-up in production from Cauquenes in 2016 progressed in line with expectations.
Average tonnes per day of 61,615 exceeded design rates of 60,000 tpd and plant recovery
averaged 31.1% in the year. In Q4-2016 MVC achieved the project completion criteria set by
the lenders who financed phase one of the Cauquenes expansion.
• Molybdenum production restarted in August 2016, with an annual production of 0.5 million
pounds. The operation of the molybdenum plant has been outsourced to a subcontractor who
refurbished the plant with a $1.0 million Capex investment which is being paid by MVC over the
course of three years.
Cash and Working Capital
• The Group’s cash balance was $15.9 million at December 31, 2016 (December 31, 2015: $9.0
million), with working capital of $0.6 million (December 31, 2015: working capital deficiency of
$6.0 million).
• The Group’s cash balance at December 31, 2016 includes $9.2 million in operating accounts
and $6.7 million in a debt service reserve account “(DSRA”), required under the terms and
provisions of MVC’s finance agreement with the lenders who financed the first phase of 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 into the
DSRA at each month end the 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.
Outlook
• MVC estimates 2017 production of 60.0 to 65.0 million pounds of copper at an annual cash cost
of $1.60 to $1.75/lb.
• MVC expects to produce 1.5 million pounds of molybdenum.
• Amerigo is advancing debt financing discussions to complete the construction of phase two of
the Cauquenes expansion project in the second half of 2018. The project has an estimated cost
of $30.0 million and is planned to increase production to 87.0 million pounds of copper per year,
at an estimated cash cost of $1.40/lb.
Page 3
The information in this news release and the Selected Financial Information contained in the
following page should be read in conjunction with the Audited Consolidated Financial Statements
and Management’s Discussion and Analysis for the years ended December 31, 2016 and 2015,
which will be available at the Company’s w ebsite at www.amerigoresources.com and at
www.sedar.com.
______________________________________________________________________________
About the Company:
Amerigo Resources Ltd. is an innovative copper producer with a long-term relationship with
Codelco, the world’s largest copper producer. Amerigo produces copper concentrate at the MVC
operation in Chile by processing fresh and historic tailings from Codelco’s El Teniente mine, the
world's largest underground copper mine. Tel: (604) 681-2802; Fax: (604) 682-2802; Web:
www.amerigoresources.com; Listing: ARG:TSX.
For further information, please contact:
Rob Henderson, President and CEO (604) 697-6203
Aurora Davidson, Executive Vice-President and CFO (604) 218-7013
______________________________________________________________________________
Comparative Annual Overview:
2016 2015
%
Copper produced 1,2, million pounds 56.8 37.3 19.5 52%
Copper delivered 1,2, million pounds 56.3 37.2 19.1 51%
Percentage of production from historic tailings 58% 29% 29% 100%
Revenue ($ thousands) 3 91,388 52,623 38,765 74%
DET notional copper royalties ( $ thousands) 20,646 13,674 6,972 51%
Tolling and production costs ($ thousands) 92,011 65,656 26,355 40%
Gross loss ($ thousands) 5 (623) (13,033) (12,410) (95%)
Net loss ($ thousands) (7,531) (16,933) (9,402) (56%)
Operating cash flow ($ thousands) 4 9,555 (4,998) 14,553 291%
Cash flow paid for plant expansion ($ thousands) (8,339) (52,391) (44,052) (84%)
Cash and cash equivalents ($ thousands) 15,921 9,032 6,889 76%
Borrowings ($ thousands) 69,847 72,645 (2,798) (4%)
Gross copper tolling price ($/lb) 2.25 2.47 (0.22) (9%)
Change
Years ended December 31,
1 Copper production is conducted under tolling agreements with DET and Maricunga.
2 Includes 4.3 million pounds produced from Cauquenes in 2015. For accounting purposes revenue of $5.1 million and
costs of $5.9 million associated with the Cauquenes production were excluded from operating results, cash cost and
total cost calculations and accounted for as a $0.8 million pre-operating charge to capital expenditures.
3 Revenue is reported net of notional items (smelting and refining charges, DET notional copper royalties and
transportation costs).
4 Operating cash flow before changes in non-cash working capital.
5 Total borrowings at December 31, 2016 include short and long term portions of $10.7 and $59.1 million respectively.
Page 4
2016 2015
$$
Cash and cash equivalents 15,921 9,032
Property plant and equipment 174,222 181,494
Other assets 31,543 29,684
Total assets 221,686 220,210
Total liabilities 133,809 125,316
Shareholders' equity 87,877 94,894
Total liabilities and shareholders' equity 221,686 220,210
2016 2015
$$
Revenue 91,388 52,623
Tolling and production costs (92,011) (65,656)
Other expenses (2,626) (4,836)
Finance expense (4,955) (1,023)
Income tax recovery 673 1,959
Net loss (7,531) (16,933)
Other comprehensive income 245 133
Comprehensive loss (7,286) (16,800)
Loss per share - Basic and Diluted (0.04) (0.10)
2016 2015
$$
Net cash provided by (used in) operations 19,406 (26,464)
Net cash used in investing acitivities (8,339) (54,082)
Net cash (used in) provided by financing acitivites (4,659) 72,904
Net cash flow 6,408 (7,642)
Year ended
December 31,
Summary Consolidated Statements of Financial Position
Summary Consolidated Statements of Comprehensive Loss
Summary Consolidated Statements of Cash Flows
December 31,
Year ended
December 31,
Page 5
Cautionary Note Regarding Forward-Looking Information
This news release contains certain forwar d-looking information and statements as defi ned in applicable securities laws (collect ively
referred to as "forward-looking statements"). These statements rela te to future events or our future performance. All statement s other
than statements of historical fact are forward-looking statements. The use of any of the words "anticipate", "plan", "continue" , "estimate",
"expect", "may", "will", "project", "predict", "potential", "s hould", "believe" and similar expressions is intended to identify forward-looking
statements. Although the Company believes that these assumpti ons were reasonable when made, because these assumptions are
inherently subject to significant uncertain ties and contingencies which are difficult or impossible to predict and are beyond t he
Company’s control, the Company cannot assure that it will achi eve or accomplish the expectations , beliefs or projections descri bed in
the forward-looking statements. These stat ements involve known and unknown risks, uncer tainties and other factors that may caus e
actual results or events to differ materially from those antic ipated in such forward-looking statements. These statements speak only as
of the date of this news release. These forward-looking statements include but are not limited to, statements concerning:
• forecast production and operating costs;
• our strategies and objectives;
• our estimates of the availability and quantity of tailings, and the quality of our mine plan estimates;
• the extension of El Teniente’s useful life and the extent of its remaining ore reserves;
• prices and price volatility for copper and other co mmodities and of materials we use in our operations;
• the demand for and supply of copper and other commodi ties and materials that we produce, sell and use;
• sensitivity of our financial results and s hare price to changes in commodity prices;
• our financial resources;
• interest and other expenses;
• domestic and foreign laws affecting our operations;
• our tax position and the tax rates applicable to us;
• the timing and costs of construction and tolling/production, and the issuance and main tenance of the necessary permits and
other authorizations required for, our expansion projects, including the expansion for the Cauquenes deposit and the timing of
ramp up to full production from Cauquenes;
• our ability to procure or have access to financing (including funding of the remaining phases of the Cauquenes project) and to
comply with our loan covenants;
• the production capacity of our operations, our planned production levels and future production;
• potential impact of production and transportation disruptions;
• hazards inherent in the mining industry c ausing personal injury or loss of life, severe damage to or destruction of property and
equipment, pollution or environmental damage, claims by third parties and suspension of operations
• our planned capital expenditures (incl uding our plan to upgrade our existing plant and operations after phase one of
Cauquenes is complete) and estimates of asset retirement, royalty, severance and other obligations;
• our future capital and production costs, including the co sts and potential impact of complying with existing and proposed
environmental laws and regulations in the operation and closure of our operations;
• repudiation, nullification, modification or renegotiation of contracts;
• our financial and operating objectives;
• our environmental, health and safety initiatives;
• the outcome of legal proceedings and other disputes in which we may be involved;
• the outcome of negotiations concerning metal sales, treatment charges and notional royalties/royalties;
• our capital expenditures, including the timing and cost of completion of capital projects;
• disruptions to the information technology systems of the Compan y and its subsidiaries (collect ively, the “Group”), including
those related to cyber-security;
• our dividend policy; and
• general business and economic conditions.
Inherent in forward-looking statements are risks and uncertainties beyond our ability to predict or control, including risks th at may affect
our operating or capital plans; risks generally encountered in the permitting and development of mi neral projects such as unusu al or
unexpected geological formations, negotiations with government and other third parties, unanticipated metallurgical difficultie s, delays
associated with permits, approvals and permit appeals, ground contro l problems, adverse weather conditions, process upsets and
equipment malfunctions; risks associated wi th labour disturbances and av ailability of skilled labour and management; fluctuatio ns in the
market prices of our principal commodities , which are cyclical and subject to subst antial price fluctuations; risks associated with the
availability and pricing of materials us ed in our operations; risks created through co mpetition for mining projects and propert ies; risks
associated with lack of access to markets; risks associated with availability of tailings and mine plan estimates; risks posed by
fluctuations in exchange rates and interest rates, as well as general economic conditions; risks associated with environmental
compliance and changes in environmental legi slation and regulation; risks associated with our dependence on third parties for t he
provision of critical services; risks a ssociated with non-performance by contractual counterparties; title risks; social and po litical risks
associated with operations in foreign count ries; risks of changes in laws affecting our operations or their interpretation, inc luding foreign
exchange controls; and risks associated with tax reassessments a nd legal proceedings. All of these risks and uncertainties app ly not
only the Group and its operations, but also to Codelco and its operations. Codelco’s ongoing mining operations provide a signi ficant
portion of the materials the Group processes and its resulti ng production and therefore these risks and uncertainties may also affect
their operations and in turn have a material effect on the Group.
Page 6
Actual results and developments are likely to differ, and may differ materially, from those expressed or implied by the forward -looking
statements contained in this news release. Such statements are based on a number of assumptions which may prove to be incorrect ,
including, but not limited to, assumptions about:
• general business and economic conditions;
• interest rates;
• levels of and changes in commodity and power prices;
• acts of foreign governments and the outcome of legal proceedings;
• the supply and demand for, deliveries of, and the level and volat ility of prices of copper and other commodities and of the
products used in our operations;
• the ongoing supply of material for processi ng from Codelco’s current mining operations;
• MVC’s ability to profitably extract and process mate rial from the Colihues and Cauquenes tailings deposits;
• the timing of the receipt and ongoing retention of permits and other regulatory and governmental approvals;
• the availability of and ability of the Company to obtain adequate financing for expansions and acquisitions, including the
Cauquenes expansion;
• our tolling/production costs and our production and productivi ty levels, as well as those of our competitors;
• changes in credit market conditions and conditions in financial markets generally;
• the availability of funding on reasonable terms, includi ng financing for the Group’s expansions and acquisitions;
• our ability to procure equipment and operating supp lies in sufficient quantities and on a timely basis;
• the availability of qualified employ ees and contractors for our operations;
• our ability to attract and retain skilled staff;
• the satisfactory negotiation of colle ctive agreements with unionized employees;
• the impact of changes in foreign exchange rates an d capital repatriation on our costs and results;
• engineering and construction ti metables and capital costs for our expansion projects;
• costs of closure of various operations;
• market competition;
• the accuracy of our mine plan estimates (including, with respect to size, grade and recoverability) and the geological,
operational and price assumptions on which these are based;
• tax benefits and tax rates;
• the outcome of our copper concentrate sale s, treatment and refining charge negotiations;
• the resolution of environmental an d other proceedings or disputes;
• the future supply of reasonably priced power;
• our ability to obtain, comply with a nd renew permits in a timely manner;
• our ability to meet production and cost budgets and plans; and
• our ongoing relations with our employees and entities with which we do business.
Future production levels and cost estimates assume there are no adverse mining or other events which significantly affect budge ted
production.
We caution you that the foregoing list of important factors and assumptions is not exhaustive. Ot her events or circumstances co uld
cause our actual results to differ material ly from those estimated or projected and expressed in, or implied by, our forward-lo oking
statements. You should also carefully consider the matters discu ssed under "Risk Factors" in our Annual Information Form. Excep t as
required by law, we undertake no obligation to update publicly or otherwise revise any forward-looking statements or the foregoing list of
factors, whether as a result of new information or future events or otherwise.