Amerigo Resources Ltd. (TSX: ARG; ARREF: OTC) has unveiled solid production results for the year ended December 31, 2021 from Minera Valle Central (MVC), the company’s 100% owned operation located near Rancagua, Chile.
“We are pleased to report annual copper production of 63.4 million pounds. MVC’s strong operational performance, together with an annual robust average LME copper price of $4.22/lb resulted in a transformative year for Amerigo under which the company put in place quarterly dividends and share repurchase initiatives,” said Aurora Davidson, Amerigo’s President and CEO.
“We would like to thank the company’s employees for their continued commitment to meeting corporate goals. We look forward to another year of strong performance and robust markets under which the company will continue returning capital to shareholders.”
In 2021, MVC produced 63.4 million pounds (“M lbs”) of copper at a cash cost of US$1.75 per pound (“/lb”) and 1.3 M lbs of molybdenum.
Annual copper production was 4% over guidance, due to higher fresh tailings tonnage and grade. During the year, MVC successfully completed a series of plant modifications to take advantage of the higher throughput of fresh tailings coming from El Teniente.
Production from fresh tailings increased from 45% of copper production in Q1-2021 to 55% of copper production in Q4-2021. To the extent that a higher percentage of production comes from fresh tailings, historical tailings are depleted at a lower rate.
Amerigo’s 2021 cash cost1 of US$1.75/lb was 2% lower than the company’s cash cost1 guidance of US$1.79/lb mostly due to higher than projected production.
Annual molybdenum production was 11% below guidance, driven by the lower molybdenum content found in fresh tailings.
Water reserves at Colihues at year end 2021 were 5.8 million cubic meters, which are sufficient for MVC to maintain the Cauquenes tonnage processing projected in Amerigo’s 2022 production guidance.
MVC’s operations have continued without any significant disruptions due to Covid-19.
In Q4-2021, the company returned US$11.8 million to shareholders. US$9.0 million was returned from the purchase of 8.7 million common shares for cancellation (7.1 million shares repurchased through a Substantial Issuer Bid completed on November 12, 2021, and 1.6 million shares repurchased through an ongoing Normal Course Issuer Bid). US$2.8 million was returned through Amerigo’s Q4-2021 quarterly dividend of Cdn$0.02 per share. In 2022, Amerigo may repurchase for cancellation a further 9.2 million shares under the Normal Course Issuer Bid.
On December 31, 2021, the company’s cash and restricted cash balance was US$63.8 million (a decrease of US$7.6 million from September 30, 2021) and outstanding bank debt was US$31.5 million (a decrease of US$3.5 million from September 30, 2021).
Based on MVC’s mine plan for 2022, Amerigo’s annual production guidance is 61.9 M lbs of copper and 1.2 M lbs of molybdenum.
The company’s 2022 cash cost is expected to be $1.90/lb, driven by higher market-driven treatment and refinery charges ($0.06/lb). Amerigo also anticipates an increase in steel prices which would impact grinding costs ($0.04/lb), projected lower moly by-product credits ($0.02/lb) and a projected escalation of all other costs combined ($0.02/lb).
The company’s 2022 guidance assumes an average market copper price of $3.90/lb, an average molybdenum market price of $17/lb and an exchange rate of the CLP to the US$800. A 10% change in molybdenum price could have a $0.03/lb impact on cash cost, and a 10% change on the CLP to USD foreign exchange rate could have an impact of $0.07/lb on cash cost1.
At these assumed variables, the royalty to Codelco’s El Teniente Division (DET) would be $1.09/lb in 2022. The DET royalty is calculated on a sliding scale based on copper prices. A 10% increase in copper price could have a $0.21/lb impact on the DET royalty.
Projected 2022 EBITDA1 considering these combined variables is expected to be US$50 million (including 2021 settlement adjustments). A 10% increase in copper price could have an impact on EBITDA1 of UD$17 million.
The annual plant maintenance shutdown at MVC and El Teniente is currently expected to last eight days and take place in Q2-2022. The dates of the plant shutdowns could potentially be moved forward. Amerigo’s 2022 annual production guidance factors in lower production from the annual maintenance shutdown, whichever quarter it occurs.
In 2022, MVC will undertake 29 sustaining capital expenditure projects at a target cost of US$6.0 million, including water supply and storage improvements, reallocation of an additional mill to grind fresh tailings, improvements to the moly plant and electrical lines, implementation of an ERP system and others.
MVC will also undertake two additional Capex projects at a target cost of US$4.7 million to reinforce the slurry and water lines between Cauquenes and the MVC concentrator plant and to upgrade the aerial tailings channel within the MVC facilities in response to higher throughput from fresh tailings. Capitalisable maintenance and strategic spares are expected to be US$2.8 million.
For further information please visit: http://www.amerigoresources.com/