Amerigo Announces Q1-2017 Financial Results
May 3, 2017
N.R. 2017- 07
Amerigo Announces Q1-2017 Financial Results
$4.3 million generated from operations, cash balance of $23.1 million
Phase two financing due diligence nears completion
VANCOUVER, BRITISH COLUMBIA – May 3, 2017/Amerigo Resources Ltd. (TSX: ARG)
(“Amerigo” or the “Company”) reported today financial results for the three months ended March
31, 2017. The Company posted revenue of $29.7 million and a net loss of $1.3 million. Cash of
$4.3 million was generated from operations before working capital changes ($7.4 million operating
cash flow after working capital changes). At March 31, 2017, cash balance was $23.1 million. The
detailed engineering for MVC’s Cauquenes phase two expansion project has started and the due
diligence process for project debt financing nears completion.
Rob Henderson, Amerigo’s President and CEO, stated “As MVC continues to generate positive
cash flow, Amerigo is preparing to invest in the second phase of the Cauquenes expansion in
order to benefit from future higher copper prices.”
Financial Results
Gross tolling revenue was $38.7 million (Q1-2016: $27.0 million), due to a 17% increase in
copper production and stronger copper prices. The Group’s recorded copper tolling price was
$2.65/lb (Q1-2016: $2.24/lb).
Revenue from molybdenum and the Maricunga tolling contract was $4.4 million (Q1-2016: $1.6
million) due to the sale of 0.3 million pounds of molybdenum (Q1-2016: nil) and higher copper
prices, respectively.
Revenue after notional items was $29.7 million (Q1-2016: $19.3 million).
Tolling and production costs were $27.8 million (Q1-2016: $21.7 million), a 28% increase
driven by higher copper production and an inc rease of $1.9 million in molybdenum production
costs and Maricunga tolling costs (offset by stronger revenue). Unit tolling and production costs
were $1.83/lb (Q1-2016: $1.70/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
$1.71/lb (Q1-2016: $1.81/lb) due to higher production and stronger by-product credits.
Total cost (a non-GAAP measure equal to the aggregate of cash cost, DET notional copper
royalties and DET molybdenum royalties of $0. 55/lb and depreciation of $0.25/lb) increased to
$2.52/lb (Q1-2016: $2.45/lb), due to higher DET not ional royalties/royalties from higher metal
prices.
Gross profit was $2.0 million (Q1-2016: gross loss of $2.4 million) and net loss was $1.3 million
(Q1-2016: $4.4 million).
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In Q1-2017 the Group generated cash flow from operations before changes in non-cash
working capital of $4.3 million (Q1-2016: $1.4 million).
Production
Q1-2017 production was 15.1 million pounds of copper, 17% higher than the 12.9 million
pounds produced in Q1-2016.
Q1-2017 copper production includes 9.6 million pounds from Cauquenes, 4.7 million pounds
from fresh tailings and 0.9 million pounds from Minera Maricunga.
Molybdenum production was 0.3 million pounds. There was no molybdenum production in Q1-
2016.
Cash and Working Capital
The Group’s cash balance was $23.1 million (December 31, 2016: $15.9 million), with working
capital of $4.2 million (December 31, 2016: $0.6 million).
Cash at March 31, 2017 includes $16.4 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 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.
Amerigo is advancing debt financing discussions 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 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.
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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 March 31, 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: ARG:TSX.
For further information, please contact:
Rob Henderson, President and CEO (604) 697-6203
Aurora Davidson, Executive Vice-President and CFO (604) 697-6207
______________________________________________________________________________
Comparative Overview:
Q1-2017 Q1-2016
$%
Copper produced 1 million pounds 15.1 12.9 2.2 17%
Copper delivered 1 million pounds 15.2 12.7 2.5 20%
Percentage of production from historic tailings 63% 53% 19%
Revenue ($ thousands) 2 29,744 19,255 10,489 54%
DET notional copper royalties ($ thousands) 7,715 4,435 3,280 74%
Tolling and production costs ($ thousands) 27,761 21,657 6,104 28%
Gross profit (loss) ($ thousands) 1,983 (2,402) 4,385 183%
Net loss ($ thousands) (1,310) (4,357) 3,047 (70%)
Operating cash flow ($ thousands) 3 4,255 1,443 2,812 195%
Cash flow paid for plant expansion ($ thousands) 451 3,714 (3,263) (88%)
Cash and cash equivalents ($ thousands) 23,097 11,757 11,340 96%
Borrowings ($ thousands) 4 70,942 78,327 (7,385) (9%)
Gross copper tolling price ($/lb) 2.65 2.24 0.41 18%
Change
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 Total borrowings at March 31, 2017 include short and long -term potions of $11.4 and $59.6 million, respectively.
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March 31, December 31,
2017 2016
$$
Cash and cash equiv alents 23,097 15,921
Property plant and equipment 171,304 174,222
Other assets 30,381 31,543
Total assets 224,782 221,686
Total liabilities 137,483 133,809
Shareholders' equity 87,299 87,877
Total liabilities and shareholders' equity 224,782 221,686
Q1-2017 Q1-2016
$$
Revenue 29,744 19,255
Tolling and production costs (27,761) (21,657)
Other expenses (2,013) (1,170)
Finance expense (1,353) (1,488)
Income tax recov ery 73 703
Net loss (1,310) (4,357)
Other comprehensive income (loss) 238 (112)
Comprehensive loss (1,072) (4,469)
Loss per share - Basic and Diluted (0.01) (0.03)
Q1-2017 Q1-2016
$$
Net cash provided by operations 7,438 1,513
Net cash used in investing acitivities (451) (3,714)
Net cash provided by financing acitivites 57 4,380
Net cash inflow 7,044 2,179
Summary Consolidated Statements of Financial Position
Summary Consolidated Statements of Comprehensive Loss
Summary Consolidated Statements of Cash Flows
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Cautionary Note Regarding Forward-Looking Information
This news release contains certain forward-looking information and statements as defined in applicable securities laws (collectively
referred to as "forward-looking statements"). These statements rela te to future events or the Company’s future performance. All
statements 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", "pr edict", "potential", "should", "believe" and similar expressions is intended to
identify forward-looking statements. Although the Company believe s that these assumptions were reasonable when made, because
these assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to pr edict and
are beyond the Company’s control, the Company cannot assure that it will achieve or accomplish the expectations, beliefs or projections
described in the forward-looking statements. These forward-look ing statements involve known and unknown risks, uncertainties an d
other factors that may cause actual results or events to differ materially from those anticipated in such statements. These for ward-
looking statements include but are not limited to, statements concerning:
• a forecasted increase in production and a reduction in operating costs;
• our strategies and objectives;
• our estimates of the availability and quantity of tailings, and the quality of our mine plan estimates;
• 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 and our expected ability to meet our obligations for the next 12 months;
• 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 of, and the issuance and maintenance of the necessary permits
and other authorizations required for, our expansion projects, including the exp ansion for the Cauquenes deposit and the
timing of ramp-up to full production from Cauquenes;
• our ability to procure or have access to fi nancing 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 (includi ng our plan to upgrade our existing plant and operations) including the timing and
cost of completion of our capital projects;
• estimates of asset retirement obligations and other costs related to environmental protection;
• 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 meta l sales, treatment charges and royalties;
• disruptions to the Company's information technology systems, including those related to cybersecurity;
• 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 miner al 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 cont rol problems, adverse weathe r 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 created thr ough
competition for mining projects and properti es; risks associated with lack of access to markets; risks associated with availabi lity of and
our ability to obtain both tailings from DET’s current production and historic tailings from tailings deposit; risks with respect to completion
of all phases of the Cauquenes expansion, the ability of the Company to draw down funds from the Bank Facility and the Standby LOC,
the availability of and ability of the Company to obtain adequate funding on reasonable terms for expansions and acquisitions, including
all phases of the Cauquenes expansion; mine pl an estimates; risks posed by fluctuations in exchange rates and interest rates, a s well
as general economic conditions; risks asso ciated with environmental compliance and changes in environmental legislation and
regulation; risks associated with our dependence on third parties fo r the provision of critical services; risks associated with non-
performance by contractual counterparties; ti tle risks; social and political risks asso ciated with operations in foreign countr ies; risks of
changes in laws affecting our operations or their interpre tation, including foreign exchange controls; and risks associated wit h tax
reassessments and legal proceedings. Many of these risks and uncertainties apply not only to the Company and its operations, but also
to Codelco and its operations. Codelco’s ongoing mining operations provi de a significant portion of the materials the Company
processes and its resulting metals production, therefore these risks and uncertainties may also affect their operations and in turn have a
material effect on the Company.
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:
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• general business and economic conditions;
• interest rates;
• 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 vola tility of prices of copper and other commodities and products
used in our operations;
• the ongoing supply of material for processi ng from Codelco’s current mining operations;
• the ability of the Company to profitably extract and process material from the Cauquenes tailings deposit;
• the timing of the receipt of and retention of per mits and other regulatory and governmental approvals;
• the availability of and ability of the Company to obtain adequate funding on reasonable terms for expansions and acquisitions,
Including all phases of the Cauquenes expansion;
• the ability of the Company to draw down funds from the Bank Facility and the Standby LOC;
• our costs of production 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;
• 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 preliminary economic assessment (incl uding 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 and 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 and renew permits and licenses in a timely manner; 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 levels.
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. Except as required by law, we undertake no obligat ion 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.