Equinox Q4 results exceed forecasts

The Los Filos Mine located 230 km south of Mexico City. Source: Leagold Mining Corp.

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Equinox Gold Corp. [EQX-TSXV, EQXGF-OTC] shares advanced on Monday after the company released fourth quarter financial results that featured lower-than- expected costs.

Equinox recently agreed to acquire Leagold Mining Corp. [LMC-TSX, LMCNF-OTCQX] in an all-share transaction worth $769.3 million that will create one of the world’s leading gold producers operating entirely in the Americas.

The combined company, to be named Equinox Gold, will have six operating mines in Mexico, Brazil and the U.S., with combined production approaching 700,000 ounces of gold in 2020. It will also have two development projects and two expansion projects.

On Monday, Equinox and Leagold announced the receipt of the clearance decision from the Mexican Anti-trust agency with respect to their pending merger. COFECE approval was the final government agency approval required before completing the merger, which is expected to occur during the second week of March, 2020.

Under the leadership of Chairman Ross Beaty, Equinox Gold has emerged as a well-funded, multi-asset company. Its portfolio includes the wholly-owned, past-producing Aurizona Gold Mine, and wholly-owned past-producing Castle Mountain gold mine in California. Equinox struck a deal with New Gold Inc. [NGD-TSX, NYSE American] in September, 2018, enabling it to acquire the Mesquite gold mine in California for $158 million cash.

The acquisition of the Mesquite mine immediately established Equinox as a gold producer with 25,601 ounces of gold in 2018. Mesquite has produced an average of 135,000 ounces of gold annually for the past 10 years, after commencing operations in 1985.

“Equinox Gold achieved its growth objectives in 2019 and had a strong fourth quarter of production from both Aurizona and Mesquite, with lower costs and improved cash flows,’’ said Equinox CEO Christian Milau. “The strategic merger with Leagold Mining, which is expected to close next week, will significantly increase annual gold production and provide shareholders with exceptional leverage to gold from six producing gold mines, two development projects and two growth projects, all located in the Americas,” Milau said.

In the fourth quarter, Equinox reported production of 80,176 ounces of gold at an all-in-sustaining cost (AISC) of US$848 per ounce gold. That helped the company to achieve its 2019 production guidance with total production of 201,018 ounces of gold at mine AISC of US$913 per ounce sold. That was ahead of the AISC guidance range of US$940 to US$990 an ounce.

Equinox shares advanced on the news, rising almost 5% or 47 cents to $10.20. The shares are trading in a 52-week range of $4.91 and $13.53.

Equinox posted 2019 adjusted net income of $38.3 million or 34 cents (basic) per share or 29 cents (diluted).  The net loss for the year was $20.3 million or 16 cents.

Leagold has established itself as a mid-tier gold producer with a focus on opportunities in Latin America.

Its key asset is the Los Filos mine, which is located 230 kilometres south of Mexico City. The open pit mine started commercial production in 2008.

In May, 2018, Leagold completed the acquisition of Brio Gold Inc. [BRIO-TSX], an established Canadian mining company with significant gold producing, development, and exploration-stage projects in Brazil. The company’s portfolio includes three operating gold mines, and a fully-permitted, fully-constructed mine (Santa Luz). Leagold acquired Santa Luz in May 2019 and has said it plans to begin construction at  Santa Luz in early 2021.


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