ARG.TO · 2018-07-31 12:00:00

Amerigo Reports Q2-2018 Financial Results

Financials

July 31, 2018

N.R. 2018- 07

 Cash of $6.4 million generated from operations

 Net income of $2.7 million

 Phase Two expansion commencing production in Q3-2018

Vancouver, British Columbia – July 31, 2018/CNW/ - Amer igo Resources Ltd. ("Amerigo" or the "Company")

(TSX: ARG) announced today financial results for Q2-2018.

Rob Henderson, Amerigo’s President and CEO, stat ed “The strong financial performance achieved this

quarter will bolster our efforts in executing the MVC expansion project. Commissioning of the new plant has

started and MVC is on track for delivering a Q4-2018 production rate of 85 - 90 million pounds of copper per

year at a cash cost of $1.45/lb.”

Amounts in this news release are reported in U.S. dollars except where indicated otherwise.

Amerigo’s financial performance was strong in Q2-2018

 Net income was $2.7 million (Q2-2017: net loss of $1.7 million).

 Earnings per share were $0.02 (Q2-2017: loss per share of $0.01).

 Cash flow generated from operations before changes in non-cash working capital was $6.4 million (Q2-

2017: $4.5 million).

MVC’s average copper price in Q2-2018 was $3.16/lb

 MVC’s copper price was $3.16 per pound (“/lb”) (Q2-2017: $2.59/lb) and MVC’s molybdenum price

was $11.51/lb (Q2-2017: $8.00/lb).

 Revenue was $33.0 million (Q2-2017: $29.9 million) , including copper revenue of $29.2 million (Q2-

2017: $25.5 million) and molybdenum and other revenue of $3.8 million (Q2-2017: $4.4 million).

 Copper revenue is calculated from MVC’s gro ss value of copper produced of $45.0 million (Q2-2017:

$39.3 million) less notional items including DET royalties of $10.6 million (Q2-2017: $7.9 million),

smelting and refining of $4.7 million (Q2-2017: $5.4 million) and transportation of $0.5 million (Q2-

2017: $0.5 million).

 Amerigo remains fully leveraged to the price of copper.

 The provisional copper price used by MVC for Q2-2018 production was $3.16/lb. Final prices will be

the average London Metal Exchange prices for July , August and September 2018 respectively.

Financial performance is very sensitive to changes in copper prices. A 10% increase or decrease

from the $3.16/lb price would result in a $4.9 million change in revenue in Q3-2018 in respect of Q2-

2018 production.

Page 2

Production and cash cost for Q2-2018 continued to be in line with guidance

 Q2-2018 production was 14.7 million pounds of copper (Q2-2017: 16.3 million pounds) and included

9.2 million pounds from Cauquenes (Q2-2017: 10.3 million pounds) and 5.5 million pounds from

fresh tailings (Q2-2017: 5.4 million pounds).

 Molybdenum production was 0.4 million pounds, the same as in Q2-2017.

 Cash cost (a non-GAAP measure equal to the aggregate of smelting and refining charges,

tolling/production costs net of inventory adjustm ents and administration costs, net of by-product

credits.) before DET notional copper royalties and DET molybdenum royalties increased to $1.71/lb

(Q2-2017: $1.53/lb) due to higher tolling and production costs.

 Total cost (a non-GAAP measure equal to the aggr egate of cash cost, DET notional copper royalties

and DET molybdenum royalties of $0.79/lb and depreciation of $0.25/lb) increased to $2.74/lb (Q2-

2017: $2.28/lb), due to higher DET notional royalties from higher metal prices.

Amerigo expects strong production in the second half of the year once Phase Two is operational

 At June 30, 2018, the Cauquenes Phase Two expansion project was on time and on budget. Phase

Two will improve flotation recovery efficiency, allowing MVC to increase production to 85 - 90 million

pounds of copper per year, compared to 62.5 million pounds produced in 2017.

 MVC anticipates production of the first concentrates from the Phase Two expansion in Q3-2018 and

expects full production to commence in Q4-2018.

 The Group continues to expect 2018 production of 65 - 70 million pounds of copper at a cash cost of

$1.45 to $1.60/lb. In 2018, the Group also expects to produce 1.5 million pounds of molybdenum.

 In 2018, MVC expects to incur $23.5 million in Phase Two capital expenditures (“Capex”), $5.5

million in sustaining Capex, an additional $1.5 milli on in Capex projects to improve safety and

process efficiencies and a $8.4 million expansion of its molybdenum plant, financed by way of a

seven-year lease and operating contract.

Cash balance at quarter end was $ 21.4 million after $11.4 million in debt repayments YTD-2018

 At June 30, 2018, the Group’s cash balance was $21.4 million.

 Borrowings were $65.6 million after Phase Two l oan draws of $8.8 million and repayments of $8.4

million in the quarter.

 The Group had a working capital deficiency of $9.7 million, caused by scheduled bank debt

repayments in the following twelve months ( $15.2 million) and the expected repayment of the

balance of the DET Price Support Facility in Q3-2018 ($3.2 million).

 The Group does not consider its working capital deficiency constitutes a liquidity risk, as it

anticipates generating sufficient operating cash flow to meet current liabilities as they come due,

including if copper prices were to remain in the short-term at current levels ($2.75/lb). Working

capital deficiencies are not uncommon in companies with short-term debt.

 In H2-2018, MVC expects to draw the remaining $8.7 million available from the Phase Two

expansion loan and make debt repayments of $8.4 million. Total borrowings at year end are

expected to be $67.5 million.

Page 3

 At June 30, 2018, the Group had $21.7 million of undrawn, committed credit facilities, $13.0 million

from a standby line of credit and $8.7 million from the Phase Two expansion loan.

Investor conference call on August 1, 2018

Amerigo’s quarterly investor conference call will take place on Wednesday August 1, 2018 at 11:00 am

Pacific Standard Time/2:00 pm Eastern Standard Time.

To join the call, please dial 1-800-377-0758 (Toll-Free North America) and let the operator know you wish to

participate in the Amerigo Resources conference call.

The analyst and investment community are welcome to ask questions to management. Media can attend on

a listen-only basis.

About Amerigo and MVC

Amerigo Resources Ltd. is an innovative copper produc er with a long-term partnership 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 underground 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 and six months ended June 30, 2018 and the Audited Consolidated

Financial Statements and MD&A for the year ended De cember 31, 2017, available at the Company’s

website at www.amerigoresources.com and at www.sedar.com.

For further information, please contact:

 Rob Henderson, President and CEO (604) 697-6203

 Aurora Davidson, Executive Vice-President and CFO (604) 697-6207

Page 4

Key performance metrics for Q2-2018 and Q2-2017

Q2-2018 Q2-2017

Copper produced (million pounds) 1 14.7 16.3 (1.6) (10%)

Copper delivered (million pounds) 1 14.2 16.2 (2.0) (12%)

Percentage of production from historic tailings 62% 63% -

Revenue ($ thousands) 2 32,999 29,860 3,139 11%

DET notional copper royalties ($ thousands) 10,642 7,856 2,786 35%

Tolling and production costs ($ thousands) 27,209 26,166 1,043 4%

Gross profit ($ thousands) 5,790 3,694 2,096 57%

Net income (loss) ($ thousands) 2,720 (1,653) 4,373 -

Earnings (loss) per share - basic & diluted 0.02 (0.01) 0.03 -

Operating cash flow ($ thousands) 3 6,428 4,470 1,958 44%

Cash flow paid for purchase of plant and equipment ($ thousands) (9,961) (2,006) (7,955) 397%

Cash and cash equivalents ($ thousands) 4 21,390 20,144 1,246 6%

Borrowings ($ thousands) 5 65,561 63,367 2,194 3%

MVC's copper price ($/lb)6 3.16 2.59 0.57 22%

Change

1 Copper production conducted under tolling agreements with DET and in Q2-2017, Maricunga.

Revenue reported net of notional items (smelting and refining charges, DET notional copper royalties and transportation costs).

Operating cash flow before chang es in non-cash working capital.

At June 30, 2018, 2018, $14.0 million in operating cash accounts and a $7.4 million debt service reserve account.

At June 30, 2018, short and long-term portions of $18.9 and $46.7 million respectively.

Copper price before smelting and refining, DET notional copper royalties, transportation costs and settlement adjustments to prior period sales.

Page 5

June 30, December 31,

2018 2017

Cash and cash equivalents 21,390 27,524

Property plant and equipment 191,728 176,011

Other assets 25,198 27,014

Total assets 238,316 230,549

Total liabilities 135,489 132,373

Shareholders' equity 102,827 98,176

Total liabilities and shareholders' equity 238,316 230,549

Q2-2018 Q2-2017

Revenue 32,999 29,860

Tolling and production costs (27,209) (26,166)

Other expenses (1,060) (3,221)

Finance expense (912) (1,662)

Income tax expense (1,098) (464)

Net income (loss) 2,720 (1,653)

Other comprehensive loss (234) (8)

Comprehensive income (loss) 2,486 (1,661)

Earnings (loss) per share - basic and diluted 0.02 (0.01)

Q2-2018 Q2-2017

Cash flows from operating activities 6,428 4,470

Changes in non-cash working capital (4,643) 1,952

Net cash from operating activities 1,785 6,422

Net cash used in investing acitivities (9,961) (2,006)

Net cash from (used in) financing acitivites 447 (7,367)

Net (decrease) increase in cash (7,729) (2,951)

Effect of foreign exchange rates on cash (750) (2)

Cash and cash equivalents - beginning of period 29,869 23,097

Cash and cash equivalents - end of period 21,390 20,144

Summary Consolidated Statements of Financial Position

Summary Consolidated Statements of Comprehensive Income (Loss)

Summary Consolidated Statements of Cash Flows

Page 6

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 relate 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", "e xpect", "may", "will",

"project", "predict", "potential", "should", "believe" and si milar expressions is intended to identify forward-looking statemen ts. Although the Company

believes that these assumptions were reasonable when made, becaus e these assumptions are inherently subject to significant unce rtainties and

contingencies which are difficult or impossibl e to predict and are beyond the Company’s control, the Company cannot assure that it will achieve or

accomplish the expectations, beliefs or proj ections described in the forward-looking st atements. These forward-looking statemen ts involve known

and unknown risks, uncertainties and other factors that may cause ac tual results or events to differ materially from those anti cipated in such

statements. These forward-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;

 the expected improvement of flotation recove ry efficiency from the Phase Two expansion;

 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 ma intenance of the necessary permits and other

authorizations required for, our expansion projects, including the expansion for the Cauquenes deposit and the timing of ramp-u p 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, se vere damage to or destruction of property a nd 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 co st 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 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 that may affect our operating

or capital plans; risks generally encountered in the permitting and development of mineral projects such as unusual or unexpect ed geological

formations, negotiations with government and other third partie s, unanticipated metallurgical difficulties, delays associated w ith permits, approvals

and permit appeals, ground control problems, adverse weather c onditions, process upsets and equipment malfunctions; risks associated with labour

disturbances and availability of skilled labour and management; fluctuations in the market prices of our principal commodities, which are cyclical and

subject to substantial price fluctuati ons; risks created through competition for mini ng projects and properties; risks associat ed with lack of access to

markets; risks associated with availability of and our ability to obtain both tailings from Codelco’s Division El Teniente’s current production and historic

tailings from tailings deposit; risks with respect to completi on of all phases of the Cauquenes expansion, the ability of the C ompany to draw down

funds from bank facilities and lines of credit, the availabilit y of and ability of the Company to obtain adequate funding on re asonable terms for

expansions and acquisitions, includi ng all phases of the Cauquenes expansion; mine pl an estimates; risks pos ed by fluctuations in exchange rates

and interest rates, as well as general economic conditions; risks associated with environmental compliance and changes in environmental legislation

and regulation; risks associated with our dependence on third parties for the provision of critical services; risks associated with non-performance by

contractual counterparties; titl e risks; social and political ri sks associated with operations in foreign c ountries; risks of changes in laws affecting our

operations or their interpretation, including foreign exchange controls; and risks as sociated with 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 provide 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.

Page 7

Actual results and developments are likely to differ, and may differ materially, from t hose 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;

 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 adequat e 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 bank facilities and lines of credit;

 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 (includi ng with respect to size, grade and recoverability) and the geologi cal,

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 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 budgeted 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 materially from those es timated or projected and expressed in, or implied by, our forward-looking statements. Except as required by

law, we undertake no obligation to update publicly or otherwise re vise any forward-looking statements or the foregoing list of factors, whether as a

result of new information or future events or otherwise.

← Back to feed