Amerigo Reports Q1-2019 Financial Results
May 8, 2019
N.R. 2019- 9
Amerigo Reports Q1-2019 Financial Results
Cash of $5.2 million generated from operations
Net loss of $1.4 million ($0.01 LPS)
VANCOUVER, BRITISH COLUMBIA – May 8, 2019/Amerigo Resources Ltd. (TSX: ARG) (“Amerigo” or
the “Company”) announced financial results for Q1- 2019, which were affected by lower than forecast
production as a result of low plant recoveries, as announced in the Company’s news release of April 15,
2019.
Amerigo posted a net loss of $1.4 million or $0.01 per share. C ash generated from operations before
changes in working capital was $5.2 million. Including changes in working capital, the Company used $1.5
million in operations in the quarter.
Rob Henderson, Amerigo’s President and CEO, stated “Financial r esults were below expectations due to
low production in the quarter. Operating cash flow of $5.2 mill ion in Q1-2019 is expected to be maintained
in Q2-2019 and should then increase in the second half of the year as the planned new extraction sump will
enable more operational flexibility and result in higher plant recovery.”
Amounts in this news release are reported in U.S. dollars except where indicated otherwise.
Amerigo reported a net loss of $1.4 million and cash flow from operations of $5.2 million
Net loss was $1.4 million (Q1-2018: net income of $1.2 million ), due to lower production and lower
metal prices.
Loss per share was $0.01 basic and diluted (Q1-2018: earnings per share of $0.01 basic and diluted).
Cash flow generated from operations before changes in non-cash working capital was $5.2 million
(Q1-2018: $5.9 million.
MVC’s Q1-2019 production was lower than expected, negatively af fecting financial performance
including cash cost
Q1-2019 production was 13.0 m illion pounds of copper (Q1-2018: 14.2 million pounds), as a result of
low plant recoveries. Cauquenes material was extracted from a l ow-grade zone and had higher than
expected fines content and significant iron and clay contamination. MVC also lost 7 operation days in
Q1-2019 as a result of a DET tailings system maintenance shutdown.
Copper production is comprised of 8.4 million pounds from Cauq uenes (Q1-2018: 8.9 million pounds)
and 4.6 million pounds from fresh tailings (Q1-2018: 5.3 million pounds).
Molybdenum production was 0.2 million pounds (Q1-2018: 0.4 mil lion pounds).
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Cash cost (a non-GAAP measure equal to the aggregate of smelti ng and refining charges,
tolling/production costs net of inventory adjustments and administration costs, net of by-product credits)
increased to $2.03/lb (Q1-2018: $1.77/lb).
Total cost (a non-GAAP measure equal to the aggregate of cash cost, DET notional copper royalties
and DET molybdenum royalties of $0.66/lb and depreciation of $0 .33/lb) increased to $3.02/lb (Q1-
2018: $2.83/lb), due to higher cash cost and depreciation, miti gated by lower DET notional royalties
from lower metal prices.
Production ramp up from MVC’s Phase Two expansion is ongoing. Annual production and cost
guidance have been revised
Production in Q2-2019 is expected to be 14.0 million pounds as MVC’s mine plan will continue to be
constrained by the ability to access better quality material until the new sump is operational in July. In
Q3 and Q4-2019, MVC will be operating from a new and deeper Cau quenes sump and the new
concentrate regrind mill will be in operation. The mill has been delivered to MVC and is being installed
and commissioned in Q2-2019. As a result, quarterly production is expected to improve to 22.0 million
pounds.
As a result of the projected production for H1-2019, MVC has r evised its 2019 annual production
guidance to 70 – 75 million pounds of copper and 2 million poun ds of molybdenum at a cash cost of
$1.45 to $1.60/lb, compared to original guidance of 80 - 85 mil lion pounds of copper and 2.5 million
pounds of molybdenum at a cash cost of $1.30 to $1.45/lb. Ameri go’s financial performance in 2019
will be highly dependent on MVC meeting these production goals.
In 2019, MVC continues to expect to incur $5.8 million in sust aining Capex, in addition to $3.1 million
in Capex payments in connection with the Phase Two expansion.
MVC’s average copper price in 2019 was $2.92/lb
MVC’s copper price was $2.92 per pound (“/lb”) (Q1-2018: $3.09 /lb) and MVC’s molybdenum price was
$11.11/lb (Q1-2018: $12.12/lb).
Revenue was $27.7 million (Q1-2018: $33.9 million), including copper tolling revenue of $25.5 million
(Q1-2018: $29.5 million) and molybdenum revenue of $2.2 million (Q1-2018: $4.4 million).
Copper tolling revenue is calculated from MVC’s gross value of copper produced of $36.4 million (Q1-
2018: $46.0 million) and fair value adjustments to settlement receivables of $2.1 million (Q1-2018: ($0.2
million), less notional items including DET royalties of $8.1 m illion (Q1-2018: $10.8 million), smelting
and refining of $4.5 million (Q1-2018: $5.0 million) and transp ortation of $0.4 million (Q1-2018: $0.6
million).
MVC’s financial performance is very sensitive to changes in co pper prices. MVC’s Q1-2019 provisional
copper price was $2.91/lb, and final prices will be the average London Mental Exchange prices for April,
May and June 2019. A 10% increase or decrease from the $2.91/lb provisional price used at March 31,
2019 would result in a $3.9 million change in revenue in Q2-2019 in respect of Q1-2019 production.
Amerigo remains fully leveraged to the price of copper.
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Cash balance at quarter end was $16.6 million
At March 31, 2019 the Company’s cash balance was $16.6 million .
The Company had a $14.9 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 liab ilities as they come due, assuming
copper prices remain at levels above $2.75/lb.
Investor Conference Call on May 9, 2019
Amerigo’s quarterly investor conference call will take place on Thursday May 9, 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
Condensed Interim Consolidated Financial Statements (Unaudited) and Management’s Discussion and
Analysis (“MD&A) for the three months ended March 31, 2019 and the Audited Consolidated Financial
Statements and MD&A for the year ended December 31, 2018, avai lable at the Company’s website
www.amerigoresources.com and at www.sedar.com.
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Key performance metrics for the current and comparative quarter
Q1-2019 Q1-2018
$%
Copper produced (million pounds)1
13.0 14.2 (1.2) (8%)
Copper delivered (million pounds)1
12.9 14.5 (1.6) (11%)
Percentage of production from historic tailings 65% 63% -
Revenue ($ thousands) 2
27,736 33,881 (6,145) (18%)
DET notional copper royalties ($ thousands) 8,136 10,797 (2,661) (25%)
Tolling and production costs ($ thousands) 25,764 28,717 (2,953) ( 10%)
Gross profit ($ thousands) 1,972 5,164 (3,192) (62%)
Net (loss) income ($ thousands) (1,399) 1,217 (2,616) -
(Loss) earnings per share - basic & diluted (0.01) 0.01 (0.02) -
Operating cash flow ($ thousands) 3
5,170 5,944 (774) (13%)
Cash flow paid for purchase of plant and equipment ($ thousands) 3,596 10,274 (6,678) (65%)
Cash and cash equivalents ($ thousands)4
16,597 29,869 (13,272) (44%)
Borrowings ($ thousands)5
66,700 66,047 653 1%
MVC's copper price ($/lb)6
2.92 3.09 (0.17) (6%)
MVC's molybdenum price ($lb)7
11.11 12.12 (1.01) (8%)
Change
1 Copper production conducted under a tolling agreement with DET.
2 Revenue reported net of notional items (smelting and refining c harges, DET notional copper r oyalties and transportation
costs).
3 Operating cash flow before ch anges in non-cash working capital.
4 At March 31, 2019, comprised of $3.2 million in operating cash accounts and a $13.4 million debt service reserve account.
5 At March 31, 2019, comprised o f short and long-term portions of $23.8 and $42.9 million respectively.
6 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.
7 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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March 31, December 31,
2019 2018
$$
Cash and cash equivalents 16,597 21,338
Property plant and equipment 206,729 208,729
Other assets 32,428 27,546
Total assets 255,754 257,613
Total liabilities 147,113 148,403
Shareholders' equity 108,641 109,210
Total liabilities and shareholders' equity 255,754 257,613
Q1-2019 Q1-2018
$$
Revenue 27,736 33,881
Tolling and production costs (25,764) (28,717)
Other expenses (1,705) (1,706)
Finance expense (1,530) (985)
Income tax 131 (1,256)
Net (loss) income (1,399) 1,217
Other comprehensive (loss) income 208 (335)
Comprehensive (loss) income (1,191) 882
(Loss) Earnings per share - basic (0.01) 0.01
(Loss) Earnings per share - diluted (0.01) 0.01
Q1-2019 Q1-2018
$$
Cash flows from operating acitivities 5,170 5,944
Changes in non-cash working capital (6,618) 3,493
Net cash (used in) from operating activities (1,448) 9,437
Net cash used in investing acitivities (3,596) (10,274)
Net cash received from financing acitivites 131 2,882
Net (decrease) increase in cash (4,913) 2,045
Effect of foreign exchange rates on cash 172 300
Cash and cash equivalents, beginning of period 21,338 27,524
Cash and cash equivalents, end of period 16,597 29,869
Summary Consolidated Statements of Financial Position
Summary Consolidated Statements of Loss (Income) and Comprehensive (Loss) Income
Summary Consolidated Statements of Cash Flows
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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.