Amerigo Reports Q2-2019 Financial Results
August 8, 2019
N.R. 2019- 12
Amerigo Reports Q2-2019 Financial Results
Q2-2019 net loss of $6.6 million ($0.04 LPS) as a result of low production and low
copper prices
June 2019 debt repayments made on schedule
VANCOUVER, BRITISH COLUMBIA – August 8, 2019/Amerigo Resources Ltd. (TSX: ARG) (“Amerigo”
or the “Company”) announced financial results for Q2- 2019.
Amerigo’s financial results in Q2-2019 were affected by low production at Minera Valle Central ("MVC"), the
Company’s 100% owned operation located near Rancagua, Chile, and by low copper prices in the period.
Rob Henderson, Amerigo’s President and CEO, stated “MVC experienced a very poor start up to the Phase
Two expansion project this year due to low recoveries from the historic Cauquenes tailings deposit. In July,
MVC completed construction of the deep level extraction sump an d the new concentrate regrind mill, with
which we expect performance to improve. In order to have more s hort-term financial flexibility, the existing
MVC bank loans are expected to be restructured in Q3-2019.”
Amounts in this news release are reported in U.S. dollars except where indicated otherwise.
Amerigo reported a financial loss of $6.6 million in Q2-2019
Net loss was $6.6 million (Q2-2018: net income of $2.7 million ), due to lower production and lower metal
prices.
Loss per share was $0.04 (Q2-2018: earnings per share of $0.02 ).
The Company used cash flow of $4.8 million in operations, befo re changes in non-cash working capital
(Q2-2018: generated cash flow from operations of $6.4 million b efore changes in non-cash working
capital). Net cash from operating activities in Q2-2019 was $3.0 million (Q2-2018: $1.8 million).
MVC’s Q2-2019 production remained low, negatively affecting financial performance
Q2-2019 production was 13.3 m illion pounds of copper (Q2-2018: 14.7 million pounds), as a result of
continued low plant recoveries during the quarter. Cauquenes ma terial was still being extracted from
the same low quality, high fines extraction zone that adversely affected Q1-2019 production.
Copper production is comprised of 8.2 million pounds from Cauq uenes (Q2-2018: 9.2 million pounds)
and 5.1 million pounds from fresh tailings (Q2-2018: 5.5 million pounds).
Molybdenum production was 0.2 million pounds (Q2-2018: 0.4 mil lion pounds). The material
processed in the molybdenum plant in recent months has also bee n very fine, negatively affecting
production.
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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 $1.97/lb (Q2-2018: $1.71/lb).
Total cost (a non-GAAP measure equal to the aggregate of cash cost, DET notional copper royalties
and DET molybdenum royalties of $0.65/lb and depreciation of $0 .33/lb) increased to $2.95/lb (Q2-
2018: $2.74/lb), due to higher cash cost and depreciation, miti gated by lower DET notional royalties
from lower metal prices.
Production at MVC is ramping up following completion of the new Cauquenes extraction sump
MVC completed the construction of a new, deeper Cauquenes extr action sump which became
operational on July 6, 2019. The sump has a depth of 48 meters and has enabled MVC to regain
access to coarser material with better grades and better recove ries. Further plant optimization is still
in progress.
MVC has also installed and is operating its new concentrate re grind mill, thus completing the
Cauquenes Phase II expansion.
MVC expects its 2019 annual production to be 70 – 75 million p ounds of copper and 1.5 million pounds
of molybdenum at a cash cost of $1.60 to $1.75/lb. Amerigo’s fi nancial performance in 2019 will be
highly dependent on MVC meeting its production goals and recovery targets.
In 2019, MVC continues to expect to incur $5.8 million in sust aining Capex, in addition to $3.1 million
in Capex payments from the Phase Two expansion.
MVC’s average copper price in Q2-2019 was $2.67/lb
MVC’s copper price was $2.67per pound (“/lb”) (Q2-2018: $3.16/ lb) and MVC’s molybdenum price was
$11.84/lb (Q2-2018: $11.51/lb).
Revenue was $22.7 million (Q2-2018: $33.0 million), including copper tolling revenue of $20.5 million
(Q2-2018: $29.2 million) and molybdenum revenue of $2.2 million (Q2-2018: $3.8 million).
Copper tolling revenue is calculated from MVC’s gross value of copper produced of $37.3 million (Q2-
2018: $44.5 million) and negative fair value adjustments to set tlement receivables of $3.2 million (Q2-
2018: positive adjustments of $0.6 million, less notional items including DET royalties of $8.3 million
(Q2-2018: $10.6 million), smelting and refining of $4.8 million (Q2-2018: $4.7 million) and transportation
of $0.5 million (Q2-2018: $0.5 million).
MVC’s financial performance is very sensitive to changes in co pper prices. MVC’s Q2-2019 provisional
copper price was $2.67/lb, and final prices will be the average London Metal Exchange (“LME”) prices
for July, August and September 2019. A 10% increase or decrease from the $2.67/lb provisional price
used at June 30, 2019 would result in a $3.6 million change in revenue in Q3-2019 in respect of Q2-
2019 production.
Amerigo remains fully leveraged to the price of copper.
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Cash balance at quarter end was $8.4 million
At June 30, 2019 the Company’s cash balance was $8.4 million ( December 31, 2018: $21.3 million).
MVC completed its scheduled semi-annual bank repayment, reduci ng borrowings to $57.6 million.
At June 30, 2019, the Company had a $33.3 million working capi tal deficiency (December 31, 2018:
$16.9 million), caused by the then estimated $25.7 million in s cheduled bank debt repayments
payable within a year.
Subsequent to June 30, 2019, the Company received a Commitment Letter from and executed a
Financing Mandate Agreement with Scotiabank Chile to refinance MVC’s loans (refer to Amerigo’s
news release of August 6, 2019). Under the proposed terms and conditions set out in the Commitment
Letter, Scotiabank Chile is to arrange a four-year senior secured term loan facility (the “New Facility”)
of up to $56.5 million on a best efforts basis. Scotiabank Chil e has committed to underwrite 50% of
the New Facility, up to US$28.25 million, as it has received fi rm credit approval. Proceeds from the
New Facility will be used to refinance MVC’s existing loans and to finance transaction related costs.
Closing of the New Facility is expected in Q3-2019.
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 $2.60/lb.
Investor Conference Call on August 9, 2019
Amerigo’s quarterly investor conference call will take place on Friday August 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.
For further information, please contact:
Rob Henderson, President and CEO (604) 697-6203
Aurora Davidson, Executive Vice-President and CFO (604) 697-6 207
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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, 20 19 and the Audited Consolidated
Financial Statements and MD&A for the year ended December 31, 2018, available at the Company’s
website www.amerigoresources.com and at www.sedar.com.
Key performance metrics for the current and comparative quarter
Q2-2019 Q2-2018
$%
Copper produced (million pounds) 1 13.3 14.7 (1.4) (10%)
Copper delivered (million pounds) 1 13.4 14.2 (0.8) (6%)
Percentage of production from historic tailings 62% 62% -
Revenue ($ thousands) 2 22,692 32,999 (10,307) (31%)
DET notional copper royalties ($ thousands) 8,322 10,642 (2,320) ( 22%)
Tolling and production costs ($ thousands) 28,794 27,209 1,585 6%
Gross (loss) profit ($ thousands) (6,102) 5,790 (11,892) (205%)
Net (loss) income ($ thousands) (6,564) 2,720 (9,284) -
(Loss) earnings per share - basic & diluted (0.04) 0.02 (0.06) -
Net cash from operating activities 2,951 1,785 1,166 65%
Cash flow from operating activities before changes
in working capital ($ thousands) (4,754) 6,428 (11,182) (174%)
Cash flow paid for purchase of plant and equipment ($ thousands ) (2,849) (9,961) 7,112 (71%)
Cash and cash equivalents ($ thousands) 8,415 21,390 (12,975) (61%)
Borrowings ($ thousands) 3 57,641 65,561 (7,920) (12%)
MVC's copper price ($/lb)4 2.67 3.16 (0.49) (16%)
MVC's molybdenum price ($lb) 5 11.84 11.51 0.33 3%
Change
1 Copper production conducted under a tolling agreement with DET.
2 Revenue reported net of notional items (smelting and refining charges, DET notional copper royalties and transportation costs).
3 At June 30, 2019, comprised o f short and long-term portions of $25.7 and $31.9 million respectively.
4 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.
5 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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June 30, December 31,
2019 2018
$$
Cash and cash equivalents 8,415 21,338
Property plant and equipment 205,238 208,729
Other assets 23,512 27,546
Total assets 237,165 257,613
Total liabilities 133,683 148,403
Shareholders' equity 103,482 109,210
Total liabilities and shareholders' equity 237,165 257,613
Q2-2019 Q2-2018
$$
Revenue 22,692 32,999
Tolling and production costs (28,794) (27,209)
Other expenses (1,212) (1,060)
Finance expense (1,501) (912)
Income tax 2,251 (1,098)
Net (loss) income (6,564) 2,720
Other comprehensive income (loss) 434 (234)
Comprehensive (loss) income (6,130) 2,486
(Loss) earnings per share - basic (0.04) 0.02
(Loss) earnings per share - diluted (0.04) 0.02
Q2-2019 Q2-2018
$$
Cash flows (used in) from operating acitivities (4,754) 6,428
Changes in non-cash working capital 7,705 (4,643)
Net cash from operating activities 2,951 1,785
Net cash used in investing acitivities (2,849) (9,961)
Net cash (used in) received from financing acitivites (8,233) 447
Net decrease in cash (8,131) (7,729)
Effect of foreign exchange rates on cash (51) (750)
Cash and cash equivalents, beginning of period 16,597 29,869
Cash and cash equivalents, end of period 8,415 21,390
Summary Consolidated Stateme nts of Financial Position
Summary Consolidated Statements of Loss (Income) and Comprehens ive (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:
the New Facility, including the expectation to use the proceeds of the New Facility to restructure the MVC bank loans during Q3-2019;
the Company’s expectation that M VC’s performance will improve as a result of MVC having completed construction of a deep level extraction
sump and the concentrate regrind mill;
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 availability, quantity and grade of taili ngs (including, but not limited to, the estimated higher grades and recoveries 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;
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disruptions to the Company's in formation technology systems, including those related to cybersecurity;
our dividend policy; and
general business and economic conditions.
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 legislati on 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 news release. Such statements are based on a number of assumptions which may prove to be incorrect, includin g, but not
limited to, assumptions about:
the proposed indicative terms for the New Facility being the t erms ultimately agreed to between the parties and Scotiabank Chile being able
to secure an additional lender for the New Facility, and the parties being able to close the New Facility during Q3-2019.
general business and economic conditions;
interest rates;
commodity (and in particular, copper) 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;
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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;
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.