Amerigo Resources Ltd. [ARG-TSX; ARREF-OTCQX] reported production results for the year ended December 31, 2021, from Minera Valle Central (MVC), the company’s 100%-owned operation near Rancagua, Chile. Dollar amounts are in U.S. dollars unless indicated otherwise.
“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/pound, resulted in a transformative year for Amerigo under which the company put in place quarterly dividends and share repurchase initiatives,” said Aurora Davidson, president and CEO.
In 2021, MVC produced 63.4 million pounds of copper at a cash cost of $1.75 per pound and 1.3 million pounds of molybdenum. Annual copper production was 4% over guidance, due to higher fresh tailings tonnage and grade. Production from fresh tailings increased from 45% of copper production in Q1 2021 to 55% of copper production in Q4 2021.
Amerigo’s 2021 cash cost of $1.75/lb was 2% lower than the company’s cash cost guidance of $1.79/lb mostly due to higher than projected production. Annual molybdenum production was 11% below guidance.
In Q4 2021, the company returned $11.8-million to shareholders. The company returned $9.0-million from the purchase of 8.7 million common shares for cancellation (7.1 million shares repurchased through an issuer bid on November 12, 2021, and 1.6 million shares repurchased through a normal course issuer bid). The company returned $2.8-million through its Q4 2021 quarterly dividend of CAD$0.02/share. In 2022, Amerigo may repurchase for cancellation a further 9.2 million shares under the normal course issuer bid.
On December 31, 2021, Amerigo’s cash and restricted cash balance was $63.8-million (a decrease of $7.6-million from September 30, 2021) and outstanding bank debt was $31.5-million (a decrease of $3.5-million from September 30, 2021).
Based on MVC’s mine plan for 2022, Amerigo’s annual production guidance is 61.9 million lbs copper and 1.2 million pounds of molybdenum. The company’s 2022 cash cost is expected to be $1.90/lb, driven by higher market-driven treatment and refinery charges (six cents/lb). Amerigo also anticipates an increase in steel prices, which would impact grinding costs (four cents/lb), projected lower moly by-product credits (two cents/lb) and a projected escalation of all other costs combined (two cents/lb).
Projected 2022 EBITDA (earnings before interest, taxes, depreciation and amortization) is expected to be $50-million (including 2021 settlement adjustments). A 10% increase in copper price could have an impact on EBITDA of $17-million.
In 2022, MVC will undertake 29 sustaining capital expenditure projects at a target cost of $6-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 $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. Capitalizable maintenance and strategic spares are expected to be $2.8-million.
MVC will make two semi-annual bank debt repayments of $3.5-million plus interest (in June and December, 2022) and will make payments of approximately $1.3-million in connection with its molybdenum plant lease.
Amerigo produces copper concentrate and molybdenum concentrate as a by-product at the Minera Valle Central operation in Chile by processing fresh and historic tailings from Codelco’s El Teniente mine.