Equinox Gold Reports Operating Cash Flow of $217 Million in 2020
March 3, 2021
all financial figures in US dollars, unless otherwise indicated
Equinox Gold Corp. (TSX: EQX, NYSE American: EQX) (“Equinox Gold” or the “Company”) is pleased to report its unaudited financial and operating results for the fourth quarter and fiscal year ended December 31, 2020. These results are preliminary and could change based on final audited results.
The information below contains highlights of Equinox Gold’s unaudited financial and operating results for the fourth quarter and fiscal year ended December 31, 2020. Further information is available in the PDF at the top of this page. Equinox Gold’s 2020 audited consolidated financial statements and accompanying management’s discussion and analysis for the three months and year ended December 31, 2020, will be released later this month.
“Equinox Gold’s 2020 results reflect delivery on the Company’s growth and diversification strategy. Our seven operating mines generated 477,200 ounces of gold and operating cash flow of $217 million in the year, compared to our 2019 production of 201,000 ounces of gold and $60 million in operating cash flow,” said Christian Milau, Chief Executive Officer. “Our acquisition of Premier Gold Mines will bring further scale and diversification with the addition of a producing mine in Mexico and a 60% interest in the construction-ready, world-class Hardrock project in Ontario, Canada. With strong cash flow from our operating mines and a healthy balance sheet, Equinox Gold is an excellent position to achieve ambitious goals in 2021 and beyond in terms of gold production and cash flow as we continue to develop our extraordinary pipeline of development and expansion projects.”
HIGHLIGHTS FOR THE FULL YEAR 2020
Operational and financial
- Completed more than 13 million work hours with nine lost-time injuries across all sites
- Implemented proactive COVID-19 testing and safety protocols to keep the mines operating effectively while protecting the health, safety and economic wellbeing of our workforce and local communities
- Exceeded revised production guidance with total production of 477,186 ounces (“oz”) of gold
- Mine cash costs of $849 per oz with mine all-in-sustaining costs (“AISC”) of $1,027 per oz sold1,2
- Sold 471,786 oz of gold at average realized gold price of $1,783 per oz, generating revenue of $842.5 million
- Earnings from mine operations of $287.7 million
- Net income of $22.3 million or $0.10 per share
- Adjusted net income of $82.7 million or $0.39 per share, after adjusting for non-cash expenses1,3
- Cash flow from operations before changes in working capital of $231.7 million ($216.6 million after changes in working capital)
- Adjusted EBITDA of $273.8 million1,3
- Expenditures of $76.3 million in sustaining capital and $92.8 million in non-sustaining capital1
- Refinanced debt with low-cost $500 million corporate credit facility
- Cash and cash equivalents (unrestricted) of $344.9 million at December 31, 2020
- Net debt of $200.3 million at December 31, 2020 (including $278.9 million of in-the-money convertible notes)1
- Completed at-market merger with Leagold Mining, expanding the Company’s asset portfolio with four new mines in Mexico and Brazil and a development-stage project in Brazil
- Announced acquisition of Premier Gold Mines (TSX: PG), which will further increase diversification and scale with the addition of a producing mine in Mexico and a construction-ready project in Ontario, Canada
- Increased average daily share trading liquidity from C$3 million in 2019 to more than C$40 million in 2020
- Achieved inclusion in global indices including the GDX, GDXJ, FTSE and S&P/TSX Composites
- Invested C$10.4 million in Solaris Resources (TSX: SLS) to maintain an approximate 26% interest on a fully diluted basis; current market value of Equinox Gold’s basic interest is approximately C$195 million
- Commenced online Environmental, Social and Governance (“ESG”) quarterly reporting
- Increased technical expertise, governance oversight and diversity with Board and management appointments
Construction, development and exploration
- Completed construction and commissioning of Castle Mountain Phase 1 Mine with no lost-time incidents and achieved commercial production on November 21, 2020
- Increased Mesquite Mineral Reserves by 28% and Measured & Indicated Mineral Resources by 94%
- Extended mine life at Mesquite, Aurizona and Fazenda with exploration success
- Completed maiden Indicated Resource for Tatajuba deposit at Aurizona
- Completed a positive PEA4 for potential Aurizona underground development showing 740,500 oz of gold production over a 10-year mine life, an after-tax NPV5% of $288 million and an IRR of 38% at $1,620/oz gold
- Completed 23,916 metres of deep drilling and advanced technical studies to support a prefeasibility study for potential Aurizona underground development
- Completed a positive feasibility study for Santa Luz showing 903,000 oz of gold production over an initial 9.5-year mine life, an after-tax NPV5% of $362 million and an IRR of 67% at $1,600/oz gold
- Commenced construction at Santa Luz in Q4 2020
- Advanced Los Filos optimization study for new carbon-in-leach plant, heap leach expansion, updated mine planning and a Mineral Reserve and Mineral Resource update; targeted for completion in H1 2021
FINANCIAL & OPERATING HIGHLIGHTS FOR Q4 2020
- Completed more than 2.9 million work hours with one lost-time injury across all sites
- Produced 136,352 oz of gold and sold 134,895 oz of gold, generating revenue of $252.6 million
- Mine cash costs of $848 per oz and AISC of $1,093 per oz1,2
- Earnings from mine operations of $95.3 million
- Net income of $89.4 million or $0.37 per share
- Adjusted net income of $33.9 million or $0.14 per share, after adjusting for non-cash expenses1,5
- Cash flow from operations before changes in working capital of $86.7 million ($83.0 million after changes in working capital)
- Adjusted EBITDA of $79.4 million1,5
- Expenditures of $31.5 million in sustaining capital and $17.3 million in non-sustaining capital1
- Mine cash cost per oz sold, AISC per oz sold, adjusted EBITDA, adjusted net income, adjusted EPS, sustaining capital, non-sustaining capital and net debt are non-IFRS measures. See Non-IFRS Measures and Cautionary Notes.
- Consolidated AISC/oz excludes corporate general and administration expenses.
- Primary adjustments for full-year 2020 were $29.9 million loss on the change in fair value of warrants, $14.1 million unrealized loss on the change in fair value of foreign exchange contracts and $12.9 million unrealized loss on the change in fair value of gold collars and forward contracts.
- The Preliminary Economic Assessment (“PEA”) is preliminary in nature and includes Inferred Mineral Resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as Mineral Reserves. There is no certainty that the results contemplated in the PEA will be realized.
- Primary adjustments during Q4 2020 were $17.4 million unrealized gain on the change in fair value of warrants, $11.1 million unrealized gain on the change in fair value of foreign exchange contracts, $11.2 million unrealized gain on the change in fair value of gold collars and forward contracts and $18.5 million unrealized gain on foreign exchange recognized within deferred tax expense.
- Provided 2021 production and cost guidance of 600,000 to 665,000 oz of gold at mine cash costs of $940 to $1,000 per oz and AISC of $1,190 to $1,275 per oz
- Gold production is expected to increase (and AISC decrease) each quarter during the year, with approximately 30% of production occurring in Q4 2021
- Announced positive drill results from Piaba Underground and Genipapo targets at Aurizona
- Santa Luz construction more than 25% complete and on schedule for first gold pour in Q1 2022
- Announced agreement with Orion Mine Finance Group to acquire an additional 10% of the Hardrock Project in Ontario, Canada, bringing the Company’s total interest to 60% following completion of the Premier acquisition (through which the Company will acquire Premier’s 50% interest in Hardrock)
- Premier acquisition expected to close in March 2021, and the additional 10% of Hardrock shortly thereafter
- Premier securityholders approved the acquisition on February 23, 2021
- Require Mexican Comisión Federal de Comptetencia Económica anti-trust clearance decision and other regulatory approvals
Further to the Company’s news release on December 16, 2020, Equinox Gold plans to complete a non-brokered private placement of subscription receipts at a price of C$10.00 per subscription receipt for gross proceeds of C$75 million. The private placement is fully underwritten by the Company’s Chairman, Ross Beaty, and other insiders of Equinox Gold will also be participating in the financing. Each subscription receipt will entitle the holder to receive one common share of Equinox Gold on satisfaction of certain conditions, including completing the Premier Gold acquisition. The financing is subject to completion of definitive documentation, customary closing conditions and regulatory approvals, including the approval of the Toronto Stock Exchange for the pricing and other terms of the financing.
CONSOLIDATED OPERATIONAL AND FINANCIAL HIGHLIGHTS
|Three months ended||Year ended|
|Average realized gold price||$/oz||1,871||1,482||1,783||1,431|
|Mine cash cost per oz sold||$/oz||848||768||849||807|
|Mine AISC per oz sold(3,4)||oz||1,093||856||1,027||929|
|Earnings from mine operations||M$||95.3||38.5||287.7||83.9|
|Net income (loss)||M$||89.4||(8.5)||22.3||(20.3)|
|Earnings (loss) per share||$/share||0.37||(0.08)||0.10||(0.16)|
|Adjusted net income(4)||M$||33.9||20.5||82.7||37.5|
|Balance Sheet and Cash Flow Data|
|Cash and cash equivalents (unrestricted)||M$||344.9||67.7||344.9||67.7|
|Operating cash flow before changes in working capital||M$||86.7||36.2||231.7||76.1|
- At December 31, 2020, the Company adjusted the fair value of heap leach inventory to reflect an updated estimate of conversion costs for heap leach inventory and forward gold prices as of the acquisition date, resulting in a net increase to heap leach inventories, including reprocess material of approximately $10.7 million. The Company has updated financial results for the periods impacted.
- For the year ended December 31, 2020, includes 1,523 oz of gold produced at Castle Mountain during ramp-up and commissioning. For the year ended December 31, 2019, includes 6,076 oz of gold produced at Aurizona during ramp-up and commissioning.
- Consolidated mine AISC per oz sold excludes corporate general and administration expenses.
- AISC per oz sold, adjusted EBITDA, adjusted net income, adjusted EPS and net debt are non-IFRS measures. See Non-IFRS Measures and Cautionary Notes.
CONSOLIDATED 2020 RESULTS COMPARED TO 2020 FORECAST
|2020 Actuals||Guidance Range|
|Gold production (oz)1||477,186||425,000 - 465,000|
|AISC ($/oz)2,3||$1,027||$975 - $1,025|
|Sustaining capital (M$)3||$77||$90|
|Non-sustaining capital (M$)3||$93||$144|
- Production and costs attributable to Equinox Gold post completion of the Leagold merger on March 10, 2020. Includes 1,523 oz of gold produced at Castle Mountain during ramp-up and commissioning.
- AISC per oz sold excludes corporate general and administration expenses.
- AISC per oz sold, sustaining capital and non-sustaining capital are non-IFRS measures. See Non-IFRS Measures and Cautionary Notes.
Guidance was updated on August 10 primarily to reflect the effect of government-mandated temporary suspensions related to COVID-19 and revised on November 9 to reflect the effect of the Los Filos blockade, which was removed in December.
Capital expenditures were lower than planned for the year, primarily due to the suspension of mining and development activities at Los Filos as the result of a community blockade and the deferral of certain expenditures as the result of COVID-19 restrictions.
On February 9, 2021, the Company announced 2021 production guidance of 600,000 to 665,000 oz of gold, an approximate 33% increase over the Company’s 2020 full-year production. Cost guidance includes cash costs of $940 to $1,000 per oz of gold sold and AISC of $1,190 to $1,275 per oz of gold sold. The Company may revise guidance during the year to reflect changes to expected results.
Consolidated gold production is expected to increase quarter-over-quarter during the year, with the fourth quarter benefiting from higher-grade ore at both Los Filos and Mesquite. Cash costs for 2021 reflect the lower grades mined at Los Filos for the first half of the year until the Guadalupe stripping program and Bermejal underground development are complete, providing access to higher-grade ore. Bermejal underground development will not commence, however, until successful resolution of an amended community support agreement with the Carizalillo community. AISC in 2021 reflect significant development and stripping campaigns at Los Filos, Mesquite and Aurizona to access higher-grade ore, which will boost production and reduce costs in the second half of the year.
The Company is investing significantly in its projects in 2021, setting the foundation for lower-cost, longer-life mines and substantial production growth going forward. The Company has budgeted $178 million in sustaining capital for 2021 (including some capital carried over from 2020), compared to the total spend in 2020 of $76.3 million. The Company is also undertaking meaningful growth projects in 2021, including construction of the Santa Luz mine, advancing expansion projects at the Los Filos mine, completing a pit expansion at the RDM mine and significant exploration programs focused on mine life extension. The Company has budgeted $249 million in non-sustaining growth capital for 2021, compared to $92.8 million in 2020.
The Company expects to complete the Premier Gold acquisition in March 2021. Guidance will be updated following completion of the acquisition to include the producing Mercedes Mine in Mexico and to reflect expenditures associated with construction of the Hardrock Mine in Ontario, Canada, which is expected to commence in Q4 2021 as Santa Luz construction is nearing completion.
CONFERENCE CALL AND WEBCAST
Equinox Gold will host a conference call and webcast on Thursday, March 4, 2021, commencing at 7:00 am PT (10:00 am ET) to discuss the Company’s fourth quarter and full-year 2020 results and upcoming milestones. All participants will have the opportunity to ask questions of Equinox Gold’s CEO and executive team. The webcast will be archived on Equinox Gold’s website until September 4, 2021.
Toll-free in U.S. and Canada: 1-800-319-4610
International callers: +1 604-638-5340
Login at www.equinoxgold.com
ABOUT EQUINOX GOLD
Equinox Gold is a Canadian mining company with seven operating gold mines, construction underway at an eighth site, a multi-million-ounce gold reserve base and a clear path to achieve one million ounces of annual gold production from its pipeline of growth projects. Equinox Gold operates entirely in the Americas, with two properties in the United States, one in Mexico and five in Brazil. On December 16, 2020, Equinox Gold announced its friendly acquisition of Premier Gold Mines, which will bring further diversification and scale with the addition of a producing mine in Mexico and a construction-ready project in Ontario, Canada. Equinox Gold’s common shares are listed on the TSX and the NYSE American under the trading symbol EQX. Further information about Equinox Gold’s portfolio of assets and long-term growth strategy is available at www.equinoxgold.com or by email at email@example.com.
EQUINOX GOLD CONTACTS
Christian Milau, Chief Executive Officer
Rhylin Bailie, Vice President, Investor Relations
Tel: +1 604-558-0560
CAUTIONARY NOTES AND FORWARD-LOOKING STATEMENTS
This news release refers to mine cash costs per ounce sold, all-in sustaining costs (“AISC”), AISC per ounce sold, adjusted EBITDA, adjusted net income, adjusted earnings per share, net debt and sustaining and expansion capital expenditures that are measures with no standardized meaning under International Financial Reporting Standards (“IFRS”) and may not be comparable to similar measures presented by other companies. Their measurement and presentation is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. Non-IFRS measures are widely used in the mining industry as measurements of performance and the Company believes that they provide further transparency into costs associated with producing gold and will assist analysts, investors and other stakeholders of the Company in assessing its operating performance, its ability to generate free cash flow from current operations and its overall value. Refer to the “Non-IFRS measures” section of the Company’s Management’s Discussion and Analysis for the period ended June 30,2020, for a more detailed discussion of these non-IFRS measures and their calculation.
Doug Reddy, Msc, P.Geo., Equinox Gold’s COO, and Scott Heffernan, MSc, P.Geo., Equinox Gold’s EVP Exploration, are the Qualified Persons under National Instrument 43-101 for Equinox Gold and have reviewed and approved the technical information in this document.
This news release contains certain forward-looking information and forward-looking statements within the meaning of applicable securities legislation and may include future-oriented financial information. Forward-looking statements and forward-looking information in this news release relate to, among other things: the Company’s ability to successfully complete the Premier acquisition (“Premier Acquisition”) and subsequent acquisition of an additional 10% of Hardrock from Orion Mine Finance Group (“Orion Acquisition”) and achieve the benefits contemplated in the Premier Acquisition and Orion Acquisition; the successful completion of the private placement financing (“Private Placement”), including receipt of relevant approvals; the strategic vision for the Company and expectations regarding exploration potential, production capabilities and future financial or operating performance; the Company’s ability to successfully advance its growth and development projects, including Santa Luz and the Hardrock project and the expansions at Los Filos and RDM; Equinox Gold’s production and cost guidance; and the conversion of Mineral Resources to Mineral Reserves. Forward-looking statements or information generally identified by the use of the words “will”, “continue”, “forward”, “achieve”, “expected”, “expectations”, “potential”, “estimate”, “growth”, and similar expressions and phrases or statements that certain actions, events or results “may”, “could”, “will be” or “should”, or the negative connotation of such terms, are intended to identify forward-looking statements and information. Although the Company believes that the expectations reflected in such forward-looking statements and information are reasonable, undue reliance should not be placed on forward-looking statements since the Company can give no assurance that such expectations will prove to be correct. The Company has based these forward-looking statements and information on the Company’s current expectations and projections about future events and these assumptions include: the consummation and timing of the Premier Acquisition, Orion Acquisition and Private Placement; the strengths, characteristics and potential of Equinox Gold following the Premier Acquisition and Orion Acquisition; Equinox Gold’s ability to achieve its production, cost and development expectations for its respective operations and projects; tonnage of ore to be mined and processed; ore grades and recoveries; prices for gold remaining as estimated; construction and development at Santa Luz , Los Filos, and Hardrock being completed and performed in accordance with current expectations;; currency exchange rates remaining as estimated; availability of funds for the Company’s projects and future cash requirements; exploration programs achieving mine life extension and mineral reserve replacement; capital, decommissioning and reclamation estimates; the Company’s Mineral Reserve and Resource estimates and the assumptions on which they are based; prices for energy inputs, labour, materials, supplies and services; no labour-related disruptions and no unplanned delays or interruptions in scheduled development and production, including by blockade; all necessary permits, licenses and regulatory approvals are received in a timely manner; and the Company’s ability to comply with environmental, health and safety law; and the implications of the novel coronavirus (COVID-19) and any related restrictions, regulations and suspensions with respect to the Company’s operations. While the Company considers these assumptions to be reasonable based on information currently available, they may prove to be incorrect. Accordingly, readers are cautioned not to put undue reliance on the forward-looking statements or information contained in this news release.
The Company cautions that forward-looking statements and information involve known and unknown risks, uncertainties and other factors that may cause actual results and developments to differ materially from those expressed or implied by such forward-looking statements and information contained in this news release and the Company has made assumptions and estimates based on or related to many of these factors. Such factors include, without limitation: fluctuations in gold prices; fluctuations in prices for energy inputs, labour, materials, supplies and services; fluctuations in currency markets; operational risks and hazards inherent with the business of mining (including environmental accidents and hazards, industrial accidents, equipment breakdown, unusual or unexpected geological or structural formations, cave-ins, flooding and severe weather); inadequate insurance, or inability to obtain insurance to cover these risks and hazards; employee relations; relationships with, and claims by, local communities and indigenous populations; the Company’s ability to obtain all necessary permits, licenses and regulatory approvals in a timely manner or at all; changes in laws, regulations and government practices, including environmental, export and import laws and regulations; legal restrictions relating to mining including those imposed in connection with COVID-19; risks relating to expropriation; increased competition in the mining industry; and those factors identified in the Company’s MD&A dated February 28, 2020 and its Annual Information Form dated May 13, 2020, both of which relate to the year-ended December 31, 2019, and the Company’s MD&A dated November 5, 2020 for the three and nine months ended September 30, 2020, which are all available on SEDAR at www.sedar.com and on EDGAR at www.sec.gov/edgar. Forward-looking statements and information are designed to help readers understand management’s views as of that time with respect to future events and speak only as of the date they are made. Except as required by applicable law, the Company assumes no obligation to publicly announce the results of any change to any forward-looking statement or information contained or incorporated by reference to reflect actual results, future events or developments, changes in assumptions or changes in other factors affecting the forward-looking statements and information. If the Company updates any one or more forward-looking statements, no inference should be drawn that the Company will make additional updates with respect to those or other forward-looking statements. All forward-looking statements and information contained in this news release are expressly qualified in their entirety by this cautionary statement.