Amerigo Reports Annual 2018 and Q4-2018 Financial Results
February 21, 2019
N.R. 2019- 4
Amerigo Reports Annual 2018 and Q4-2018 Financial Results
Cash of $27.8 million generated from operations
Net income of $10.5 million ($0.06 EPS)
Record annual copper production of 65 million pounds copper
Annual cash cost reduced to $1.56 per pound
VANCOUVER, BRITISH COLUMBIA – February 21, 2019/Amerigo Resourc es Ltd. (TSX: ARG)
(“Amerigo” or the “Company”) is pleased to announce financial r esults for the year 2018. The Company’s
100% owned operation, Minera Valle Central ("MVC") located near Rancagua, Chile met annual copper
production guidance of 65.0 million pounds at an annual cash cost of $1.56 per pound (“/lb”). Molybdenum
production of 1.9 million pounds was stronger than guidance.
Amerigo’s annual net income was $10.5 million or $0.06 earnings per share (“EPS”). Cash generated from
operations was $27.8 million and $27.2 million before and after changes in working capital, respectively.
The Company’s cash position at year end was $21.3 million.
“MVC had an outstanding year. They reduced cash cost, increased profits and cash flows, and most
importantly completed the installation of the new plant enablin g significantly higher copper production. The
fundamentals for the copper market remain strong with demand ex ceeding supply, and I believe that once
trade tensions between the United States and China are resolved, the copper price will increase.”, said Rob
Henderson, Amerigo’s President and CEO.
In Q4-2018, the Company produced 18.5 million pounds of copper and 0.6 million pounds of molybdenum,
at a cash cost of $1.45/lb. Net income in the quarter was $5.1 million ($0.03 EPS). Cash generated from
operations was $9.2 million and $7.8 million before and after changes in working capital, respectively.
Amounts in this news release are reported in U.S. dollars except where indicated otherwise.
Amerigo reported stronger annual net income and cash flow
Net income was $10.5 million (2017: $8.0 million).
EPS were $0.06 basic and diluted (2017: $0.05 basic and $0.04 diluted).
Cash flow generated from operations before changes in non-cash working capital was $27.8 million
(2017: $26.4 million).
MVC’s average copper price in 2018 was $2.92/lb
MVC’s copper price was $2.92/lb (2017: $2.83/lb) and MVC’s mol ybdenum price was $11.84/lb (2017:
$8.20/lb).
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Revenue was $136.8 million (2017: $134.0 million), including c opper tolling revenue of $118.4 million
(2017: $119.5 million) and molybdenum and other revenue of $18.4 million (2017: $14.5 million).
Copper tolling revenue is calculated from MVC’s gross value of copper produced of $188.6 million
(2017: $172.7 million) and fair value adjustments to settlement receivables of ($5.3 million) (2017: $7.1
million), less notional items including DET royalties of $41.1 million (2017: $36.4 million), smelting and
refining of $21.5 million (Q3-2017: $21.7 million) and transportation of $2.2 million (2017: $2.2 million).
MVC’s financial performance is very sensitive to changes in co pper prices. MVC’s Q4-2018 provisional
copper price was $2.77/lb, and final prices will be the average London Metal Exchange prices for
January, February and March 2019. A 10% increase or decrease f rom the $2.77/lb provisional price
used at December 31, 2018 would result in a $4.9 million change in revenue in 2019 in respect of
2018 production.
Amerigo remains fully leveraged to the price of copper
MVC achieved record production at a cash cost of $1.56/lb
Annual copper production of 65 million pounds (2017: 62.5 mill ion pounds) included 43.7 million
pounds from Cauquenes (2017: 39.3 million pounds) and 21.3 mill ion pounds from fresh tailings in
2018 (2017: 21.8 million pounds). In 2017, 1.5 million pounds o f copper were also produced through
a tolling agreement with Minera Maricunga that expired that year.
Molybdenum production was 1.9 million pounds (2017: 1.6 millio n pounds).
Cash cost (a non-GAAP measure equal to the aggregate of smelti ng and refining charges,
tolling/production costs net of inventory adjustments and admin istration costs, net of by-product
credits) decreased to $1.56/lb (2017: $1.64/lb).
Total cost (a non-GAAP measure equal to the aggregate of cash cost, DET notional copper royalties
and DET molybdenum royalties of $0.68/lb and depreciation of $0.23/lb) decreased to $2.47/lb (2017:
$2.50/lb), due to lower cash cost.
MVC’s Phase Two Project met the banks’ completion test in Dece mber 2018
MVC’s new rougher flotation cells started to produce concentra tes on August 20, 2018 and the new
cleaner flotation circuit came on-line on October 12, 2018. Ins tallation of a regrind mill, originally part
of the Phase Two expansion, is estimated to be completed in June 2019.
The 60-day production test required under the Cauquenes expans ion finance loan was completed on
December 21, 2018. MVC is now ramping up to full capacity and the project’s $1.5 million concentrate
regrind mill is expected to be installed in June 2019.
The Phase Two capital expenditure (“Capex”) is estimated at $3 9.9 million -including the regrind mill-
compared to budget of $35.3 million, primarily due to a 9.3% ap preciation of the Chilean peso during
the construction period compared to budget, and additional equipment installed during commissioning.
Remaining Phase Two Capex payments of $3.1 million will be made in 2019.
MVC also expanded its molybdenum plant in order to process the additional molybdenum available
from the Cauquenes expansion. The molybdenum plant expansion ha d a cost of approximately $7.8
million and was financed through a 5-year capital lease agreement.
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In 2019, the Company expects to produce 80 to 85 million pound s of copper at a cash cost of $1.30
to $1.45/lb, and production of 2.5 million pounds of molybdenum. In Q1-2019, production will be lower
than average and cash cost will be higher than average as MVC’s mine plan extracts lower quality
material from Cauquenes, further affected by a longer than expected annual maintenance shutdown.
In 2019, MVC expects to incur $5.8 million in sustaining Capex .
Cash balance at year end was $21.3 million, debt repayments in 2018 were $19.7 million
At December 31, 2018, the Company’s cash balance was $21.3 mil lion.
The Company had a $16.9 million working capital deficiency, ca used by $22.5 million in scheduled
bank debt repayments in the following twelve months.
Amerigo does not consider that its working capital deficiency constitutes a significant liquidity risk, as
it anticipates generating operating cash flow to meet current l iabilities as they come due, assuming
copper prices remain at levels above $2.70/lb.
Borrowings at year end were $66.2 million. In 2018 MVC receive d debt proceeds of $23.3 million which
were used in the Cauquenes Phase Two Expansion. MVC also made debt repayments of $19.7 million
on the Phase One expansion loan and on a loan with Codelco’s Di vision El Teniente which was fully
repaid in the year.
Investor Conference Call on February 22, 2019
Amerigo’s quarterly investor conference call will take place on Friday February 22, 2019 at 11:00 am Pacific
Standard Time/2:00 pm Eastern Standard Time.
To join the call, please dial 1-800-273-9672 (Toll-Free North A merica) and let the operator know you wish
to participate in the Amerigo Resources conference call.
The analyst and investment community are welcome to ask questio ns to management. Media can attend
on a listen-only basis.
About Amerigo and MVC
Amerigo Resources Ltd. is an innovative copper producer with a long-term relationship with Corporación
Nacional del Cobre de Chile (“Codelco”), the world’s largest copper producer.
Amerigo produces copper concentrate at the MVC operation in Chile by processing fresh and historic tailings
from Codelco’s El Teniente mine, the world's largest undergroun d copper mine. Tel: (604) 681-2802; Fax:
(604) 682-2802; Web: www.amerigoresources.com; Listing: ARG:TSX.
The information and data contained in this news release should be read in conjunction with the Company’s
Audited Consolidated Financial Statements and Management’s Disc ussion and Analysis (“MD&A) for the
years ended December 31, 2018 and 2017, available at the Compan y’s website at
www.amerigoresources.com and at www.sedar.com.
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2018 and 2017 Annual Key Performance Metrics
2018 2017 Change %
Copper produced (million pounds)1
65.0 62.5 2.5 4%
Copper delivered (million pounds) 63.9 62.9 1.0 2%
Percentage of production from historic tailings 68% 63% 5%
Revenue ($ thousands) 2
136,833 134,027 2,806 2%
DET notional copper royalties ($ thousands) 41,088 36,388 4,700 13%
Tolling and production costs ($ thousands) 111,855 107,986 3,869 4 %
Gross profit ($ thousands) 24,978 26,041 (1,063) -
Net income ($ thousands) 10,495 7,989 2,506 -
Earnings per share - basic 0.06 0.05 0.01 20%
Operating cash flow ($ thousands) 3
27,794 26,387 1,407 5%
Cash flow paid for purchase of plant and equipment ($ thousands) (35,957) (14,693) 21,264 145%
Cash and cash equivalents ($ thousands) 21,338 27,524 (6,186) (22%)
Borrowings ($ thousands)4
66,212 63,067 3,145 5%
MVC's copper price ($/lb) 5
2.92 2.83 0.09 3%
MVC's molybdenum price ($/lb) 6
11.84 8.20 3.64 44%
Years ended December 31,
1 Copper production conducted und er a tolling agreement with DET.
2 Revenue reported net of notional items (smelting and refining charges, DET notional copper royalties and
transportation costs).
3 Operating cash flow before ch anges in non-cash working capital.
4 At December 31, 2018 includes s hort and long-term portions of $23.5 and $42.7 million, respectively.
5 MVC’s copper price is the average notional copper price for the period, before smelting and refining, DET notional
copper royalties, transportation costs and settlement adjustments to prior period sales.
6 MVC’s molybdenum price is the average realized molybdenum price in the period, before roasting charges and
settlement adjustments to prior period sales
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December 31, December 31,
2018 2017
$$
Cash and cash equivalents 21,338 27,524
Property plant and equipment 208,729 176,011
Other assets 27,546 27,014
Total assets 257,613 230,549
Total liabilities 148,403 132,373
Shareholders' equity 109,210 98,176
Total liabilities and shareholders' equity 257,613 230,549
2017 2017
$$
Revenue 136,833 134,027
Tolling and production costs (111,855) (107,986)
Other expenses (5,230) (8,089)
Finance expense (4,306) (5,112)
Income tax (4,947) (4,851)
Net income 10,495 7,989
Other comprehensive (loss) income (1,089) 1,055
Comprehensive income 9,406 9,044
Earnings per share - basic 0.06 0.05
Earnings per share - diluted 0.06 0.04
2018 2017
$$
Cash flows from operating acitivities 27,794 26,387
Changes in non-cash working capital (642) 6,357
Net cash from operating activities 27,152 32,744
Net cash used in investing acitivities (35,957) (14,693)
Net cash received (used) in financing acitivites 3,665 (7,565)
Net (decrease) increase in cash (5,140) 10,486
Effect of foreign exchange rates on cash (1,046) 1,117
Cash and cash equivalents, beginning of year 27,524 15,921
Cash and cash equivalents, end of year 21,338 27,524
Year ended
December 31,
Summary Consolidated Statements of Financial Position
Summary Consolidated Statements of Income and Comprehensive Inc ome
Summary Consolidated Statements of Cash Flows
Year ended
December 31,
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Cautionary Statement on 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 relate to futur e events or Amerigo’s future performance. All statements other than statements
of historical fact are forward-looking statements. The use of a ny of the words "anticipate", "plan", "continue", "estimate", " expect", "may", "will",
"project", "predict", "potential", "should", "believe" and simi lar expressions is intended to identify forward-looking stateme nts. Although Amerigo
believes that these assumptions were reasonable when made, because these assumptions are inherently subject to significant uncertainties and
contingencies which are difficult or impossible to predict and are beyond Amerigo’s control, Amerigo cannot assure that it wil l achieve or
accomplish the expectations, beliefs or projections described in the forward-looking statements. These forward-looking statements involve known
and unknown risks, uncertainties and other factors that may cau se actual results or events to d iffer materially from those ant icipated in such
statements. These forward-looking statements speak only as of the date of this news release. These forward-looking statements include but are
not limited to, statements concerning:
a forecasted increase in production and a reduction in operati ng costs;
our strategies and objectives;
the expected improvement of flotat ion recovery efficiency from the Phase Two expansion;
our estimates of the availab ility, quantity and grade of tailings (including, but not limited to, the estimated higher grades from the Cauquenes
deposit), and the quality of our mine plan estimates;
prices and price volatility for copper and other commodities and of materials we use in our operations;
the demand for and supply of cop per and other commodities and materials that we produce, sell and use;
sensitivity of our financial results and share price to change s in commodity prices;
our financial resources and our expected ability to meet our o bligations 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 tolling/production;
our ability to procure or have access to financing and to comp ly with loan covenants;
the probability of DET exercisi ng any of its early exit options under the Master Agreement;
the production capacity of our operations, our planned product ion levels and future production;
potential impact of production an d transportation disruptions;
hazards inherent in the mining industry causing 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 Capex (including 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 costs a nd 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 c ontracts;
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 royalties;
disruptions to the Company's in formation technology systems, including those related to cybersecurity;
our dividend policy; and
general business and economic conditions.
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Inherent in forward-looking statements are risks and uncertaint ies beyond our ability to predict or control, including risks t hat may affect our
operating or capital plans; risks generally encountered in the permitting and development of mineral projects such as unusual or unexpected
geological formations, negotiations with government and other third parties, unanticipated metallurgical difficulties, delays associated with permits,
approvals and permit appeals, ground control problems, adverse weather conditions, process ups ets and equipment malfunctions; risks
associated with labour disturbances and availability of skilled labour and management; fluctuations in the market prices of ou r principal
commodities, which are cyclical and subject to substantial price fluctuations; risks created through competition for mining projects and properties;
risks associated with lack of access to markets; risks associat ed with availability of and our ability to obtain both tailings from DET’s current
production and historic tailings from tailings deposit; the availability of and ability of the Company to obtain adequate funding on reasonable terms
for expansions and acquisitions; mine plan estimates; risks posed by fluctuations in exchange rates and interest rates, as well as general economic
conditions; risks associated wi th environmental compliance and changes in environmental legislat ion and regulation; risks asso ciated with our
dependence on third parties for the provision of critical services; risks associated with non-performance by contractual counterparties; title risks;
social and political risks associated with operations in foreig n countries; risks of changes in laws affecting our operations or their interpretation,
including foreign exchange controls; and risks associated with tax reassessments and legal proceedings. Many of these risks a nd uncertainties
apply not only to the Company and its operations, but also to C odelco and its operations. Code lco’s ongoing mining operations provide a
significant portion of the materials the Company processes and its resulting metals production, therefore these risks and unce rtainties 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 MD&A. Such statements are based on a number o f assumptions which may prove to be incorrect, including, but n ot limited to,
assumptions about:
general business and economic conditions;
interest rates;
changes in commodity and power prices;
acts of foreign governments and the outcome of legal proceedin gs;
the supply and demand for, deliveries of, and the level and vo latility of prices of copper and other commodities and products used in our
operations;
the ongoing supply of material fo r processing from Codelco’s current mining operations;
the ability of the Company to profitably extract and process m aterial from the Cauquenes tailings deposit;
the timing of the receipt of and retention of permits and othe r regulatory and governmental approvals;
the availability of and ability of the Company to obtain adequ ate funding on reasonable terms for expansions and acquisitions;
our costs of production and our production and productivity levels, as well as those of our competitors;
changes in credit market conditi ons and conditions in financial markets generally;
our ability to procure equipment and operating supplies in suf ficient quantities and on a timely basis;
the availability of qualified employees and contractors for ou r operations;
our ability to attract and retain skilled staff;
the satisfactory negotiation of collective agreements with uni onized employees;
the impact of changes in foreign exchange rates and capital repatriation on our costs and results;
engineering and construction time tables and capital costs for our expansion projects;
costs of closure of various operations;
market competition;
the accuracy of our preliminary economic assessment (including with respect to size, grade and recoverability) and the geolog ical,
operational and price assumptions on which these are based;
tax benefits and tax rates;
the outcome of our copper concentrate sales and treatment and refining charge negotiations;
the resolution of environmental and other proceedings or dispu tes;
the future supply of reasonably priced power;
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our ability to obtain, comply with and renew permits and licen ses in a timely manner; and
our ongoing relations with our employees and entities with whi ch we do business.
Future production levels and cost estimates assume there are no adverse mining or other event s which significantly affect budg eted production
levels.
We caution you that the foregoing list of important factors and assumptions is not exhaustive. Other events or circumstances c ould cause our
actual results to differ materia lly from those estimated or pro jected and expressed in, or implied by, our forward-looking sta tements. Except as
required by law, we undertake no obligation to update publicly or otherwise revise any forward-looking statements or the foreg oing list of factors,
whether as a result of new information or future events or otherwise.