Equinox unveils up to $200 million in gold agreements

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Equinox Gold Corp. [EQX-TSX; EQX-NASDAQ] has announced up to $200 million in gold prepay and gold purchase and sale agreements.

“These arrangements enhance the financial flexibility of the company and provide additional cash liquidity at attractive terms as the company continues to fund its 60% interest for construction of the Greenstone gold mine, which is on budget and on track for the first gold production in the second half of 2024,’’ the company said.

Greenstone is a multi-million-ounce gold project located in Ontario.

With targeted production of 400,000 ounces annually for the first five years (60% attributable to Equinox), Greenstone will be a cornerstone asset for the company’s portfolio.

Equinox’s share of construction capital in 2023 is forecast at $277 million. As of December 31, 2022, Greenstone was 65% complete.

Equinox said it has entered into a gold forward sale and prepay arrangement with a syndicate of its existing lenders whereby the company has received an upfront payment of $140 million, based on gold forward curve prices averaging approximately US$2,170 an ounce, in exchange for equal monthly deliveries of gold from October, 2024 to July, 2026 totalling 79,310 ounces.

Gold deliveries can be from production from any of the company’s operating mines and the gold prepay can be settled prior to maturity through accelerated delivery of the remaining deliverable gold ounces.

The company can increase the total proceeds to $150 million through execution of an additional gold prepay on or before June 30, 2023.

In addition, the company has signed a non-binding term sheet for a gold purchase and sale agreement with Sandbox Royalties (a company owned 34% by Equinox), whereby on closing, the company will receive a payment of $50 million from Sandbox in exchange for monthly deliveries of gold equal to or greater that 333 gold ounces or gold ounces equal to 1.2% of the monthly production from the Greenstone mine (100%).

Gold deliveries would start in October, 2023, and continue until 60,000 ounces has been delivered. Under the agreement, Sandbox will make ongoing cash payments equal to 20% of the spot gold price for each gold ounce delivered.

Gold deliveries can be from any of the company’s operating mines.

Equinox will have the option to buy down 75% of the delivery obligation at the then current spot gold price, subject to the adjustment for the ongoing payment and minimum price per ounce of $2,000.

The Sandbox agreement can be increased to $75 million on mutual agreement of Equinox Gold and Sandbox Royalties.

Details of these agreements were announced after the close of trading on March 28, 2023, when Equinox shares closed at $6.94. The shares currently trade in a 52-week range of $11.46 and $3.23.

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