Equinox earns $556.8-million (U.S.) in 2021

2022-02-24 23:04 ET - News Release

Mr. Christian Milau reports

EQUINOX GOLD REPORTS STRONG OPERATING CASH FLOW OF $321 MILLION IN 2021, ACHIEVES 26% PRODUCTION GROWTH WITH 602,668 OUNCES OF GOLD SOLD

Equinox Gold Corp. has released its unaudited financial and operating results for the fourth quarter and fiscal year ended Dec. 31, 2021. These results are preliminary and could change based on final audited results. Equinox's 2021 audited consolidated financial statements and accompanying management's discussion and analysis for the three months and year ended Dec. 31, 2021, will be released in mid-March. (All financial figures are in U.S. dollars, unless otherwise indicated.)

Christian Milau, chief executive officer of Equinox, commented: "Equinox Gold's 2021 results demonstrate consistent year-on-year production and cash flow growth as the company advances toward its target of achieving more than one million ounces of annual gold production. During 2021, our seven operating mines produced 602,110 ounces of gold and generated operating cash flow of $256-million, compared to 2020 production of 477,200 ounces of gold and $321-million in operating cash flow. We realized more than $1-billion in revenue for the year, and produced our millionth ounce of gold, both important milestones for our growing company.

"We achieved significant reserve and resource growth, adding more than three million ounces of gold reserves to our portfolio through the acquisition of Premier Gold and its Greenstone project. We also increased mineral reserves and demonstrated mine life extension at Aurizona and Castle Mountain, and drilled more than 219,000 metres across the portfolio. The next few years will be focused on delivering organic growth from our pipeline of development and expansion projects, which will collectively add more than 600,000 ounces of annual production to the company at reduced costs."

2021 highlights

Operational:

• Realized 26-per-cent production growth compared with 2020;
• Achieved 2021 guidance with total production of 602,110 ounces of gold;
• Sold 602,668 ounces of gold at an average realized gold price of $1,791 per oz;
• Total cash costs of $1,087 per oz and all-in sustaining costs (AISC) of $1,350 per oz (1);
• Produced the company's millionth ounce of gold and realized over $1-billion in revenue;
• Achieved a total recordable injury frequency rate (2) of 3.05, 17 per cent better than 2020, with 13 lost-time injuries;
• Achieved a significant environmental incident frequency rate (2) of 0.68, 60 per cent better than 2020;
• Continued pro-active COVID-19 health and safety protocols with no production days lost due to COVID-19; supported community health with donations of supplies and support for education, medical staffing and vaccination programs.

Earnings:

• Earnings from mine operations of $230.6-million;
• Net income of $556.8-million or $1.95 per share:
  • Includes $85.8-million unrealized gain on change in fair value of warrants, $58.1-million unrealized gain on change in fair value of gold contracts, $186.1-million gain on reclassification of investment in Solaris Resources Inc. from fair value to cost accounting, $50.3-million gain on sale of partial interest in Solaris, $45.4-million gain on sale of Pilar mine and $81.4-million gain on acquisition of Premier Gold;
• Adjusted net income (1) of $73.8-million or 26 cents per share (1), after adjusting for the non-cash expense items noted above (3).

Financial:

• Cash flow from operations before changes in non-cash working capital of $264.1-million ($320.8-million after changes in non-cash working capital);
• Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $303.1-million (1) (3);
• Expenditures of $144.7-million in sustaining capital and $238.7-million in non-sustaining capital (1);
• Cash and cash equivalents (unrestricted) of $305.5-million at Dec. 31, 2021;
• Net debt (1) of $235.2-million at Dec. 31, 2021, including $139.7-million of in-the-money convertible notes.

Corporate:

• Completed acquisition of Premier Gold, increasing diversification and scale with a 50-per-cent interest in the low-cost, long-life Greenstone gold project in Canada and a 100-per-cent interest in the operating gold-silver Mercedes mine in Mexico;
• Increased Greenstone ownership interest to 60 per cent;
• Sold 10 million shares of Solaris for total cash proceeds of $66.7-million;
• Sold the Pilar mine for $38.0-million, a 1-per-cent net smelter return royalty and 11.6 million shares of Pilar Gold Inc.;
• Invested $51-million (Canadian) in i-80 Gold Corp. to maintain an approximately 25-per-cent interest on a fully diluted basis;
• Announced agreement to sell the Mercedes mine for $100-million, a 2-per-cent net smelter return and 24.73 million shares of Bear Creek Mining Corp. (4).

Construction, development and exploration:

• Commenced Greenstone construction in fourth quarter 2021 with first gold pour targeted for the first half of 2024;
• Advanced Santa Luz construction with first gold pour targeted for late first quarter 2022;
• Increased Aurizona mineral reserves by 73 per cent and completed a positive prefeasibility study for an expansion that would extend the mine life to 11 years and increase annual production by concurrently mining new underground and satellite open-pit deposits with the existing open-pit mine;
• Increased Castle Mountain mineral reserves by 17 per cent and completed a positive feasibility study for a phase 2 expansion that would extend the Castle Mountain mine life to 21 years and increase gold production to more than 200,000 ounces per year;
• Commenced mining the new Guadalupe open-pit deposit and Bermejal underground deposit at Los Filos;
• Drilled 219,000 metres across the portfolio with a focus on mineral reserve growth and mine life extension;
• Added 3.3 million ounces of proven and probable mineral reserves through the Premier Gold acquisition.

Responsible mining:

• Published inaugural environmental, social and governance (ESG) report;
• Published first tailings management report;
• Started implementing toward Sustainable Mining Protocols and Responsible Gold Mining Principles at all mine sites;
• Established a social responsibility and human rights policy, and conducted human rights assessments at two mine sites;
• Set and achieved short-term energy and greenhouse gas emission targets for 2021, submitted data to the Carbon Disclosure Project, and commenced reporting using the Task Force on Climate-related Financial Disclosures framework.

Highlights for the three months ended Dec. 31, 2021

Operational:

• Total recordable injury frequency rate of 2.92 with three lost-time injuries;
• Produced 210,432 ounces of gold during the quarter; sold 212,255 ounces of gold at an average realized gold price of $1,792 per oz;
• Total cash costs of $1,040 per oz and AISC of $1,266 per oz.

Earnings:

• Earnings from mine operations of $99.4-million;
• Net income of $110.9-million or 37 cents per share:
  • Includes $27.5-million unrealized gain on change in fair value of share purchase warrants, $9.4-million dilution gain on investment in associate, and $8.0-million loss on disposal of plant and equipment;
• Adjusted net income of $75.6-million or 25 cents per share, after adjusting for the non-cash expense items noted above (5).

Financial:

• Cash flow from operations before changes in non-cash working capital of $122.2-million ($155.4-million after changes in non-cash working capital);
• Adjusted EBITDA of $130.0-million (5);
• Expenditures of $42.4-million in sustaining capital and $84.6-million in non-sustaining capital.

Construction, development and exploration:

• Commenced full-scale construction at Greenstone with a construction budget on a 100-per-cent basis (of which Equinox will finance 60 per cent) of $1.53-billion (Canadian) ($1.23-billion at a rate of U.S. dollar to Canadian dollar of 1.25), including a $177-million contingency:
  • Initial capital estimate updated in October, 2021, to reflect firm supplier quotes following detailed engineering, a review and update of capital costs, and an increased contingency, including a provision for future inflation and potential COVID-19 impacts;
  • Initial cash spend could be reduced by approximately $100-million through lease financing for mobile equipment and offset economically by up to $70-million of precommercial production revenues (at $1,750-per-ounce gold price).

Postquarter-end highlights:

• Provided 2022 production and cost guidance of 625,000 to 710,000 ounces of gold at cash costs of $1,080 to $1,140 per oz and AISC of $1,330 to $1,415 per oz;
• Provided 2022 capital expenditure guidance of $682-million:
  • $195-million of sustaining capital;
  • $487-million of non-sustaining capital, including $27-million to complete Santa Luz construction and $326-million to advance Greenstone construction;
  • $36-million of exploration expenditures, including sustaining ($6-million) and non-sustaining ($30-million) capital expenditure guidance;
• Commenced commissioning of the Santa Luz gold plant, including leach circuit, SAG (semi-autogenous grinding) mill, ball mill and secondary grinding; construction more than 95 per cent complete and on track for first gold pour by late first quarter 2022;
• Greenstone construction progressing well:
  • Engineering approximately 85 per cent complete;
  • Tailings management facility ahead of schedule;
  • Highway relocation under way;
  • Site civil works and concrete foundation work under way;
• New Brazilian federal legislation announced Feb. 16, 2022, changed minimum freeboard (6) guidelines for all tailings storage facilities (TSFs), effective immediately:
  • As a result of heavy rains that began in November, the RDM TSF freeboard is currently outside of the new guidelines, requiring a temporary suspension of plant operations for an estimated two to three weeks until the water level is reduced, at which point plant operations will resume;
  • Mining and stockpiling of ore will continue during the suspension of plant operations; the company does not anticipate a material impact on production for the year.

(1) Cash costs per oz sold, AISC per oz sold, adjusted net income, adjusted EBITDA, adjusted earnings per share, sustaining capital, non-sustaining capital and net debt are non-international financial reporting standard measures.

(2) Total recordable injury frequency rate and significant environmental incident frequency rate are both reported per million hours worked. Total recordable injury frequency rate is the total number of injuries excluding those requiring simple first aid treatment.

(3) Primary adjustments for the year ended Dec. 31, 2021, were $85.8-million unrealized gain on change in fair value of warrants, $58.1-million unrealized gain on change in fair value of gold contracts, $186.1-million gain on reclassification of investment in Solaris from fair value to cost accounting, $50.3-million gain on sale of partial interest in Solaris, $45.4-million gain on sale of Pilar and $81.4-million gain on acquisition of Premier Gold.

(4) The sale is expected to close around the end of Q1 2022, subject to completion of customary closing conditions and regulatory approvals.

(5) Primary adjustments for the three months ended Dec. 31, 2021, were $27.5-million unrealized gain on change in fair value of share purchase warrants, $9.4-million dilution gain on investment in associate, and $8.0-million loss on disposal of plant and equipment.

(6) Freeboard is the height from the crest of the TSF embankment to the surface of tailings and water in the TSF.

Conference call and webcast

Equinox will host a conference call and webcast on Feb. 25, 2022, commencing at 7:30 a.m. Vancouver time, to discuss the company's financial and operating results for the fourth quarter and fiscal year ended Dec. 31, 2021, and activities under way at the company's projects. All participants will have the opportunity to ask questions of Equinox's chief executive officer and executive team. The webcast will be archived on Equinox's website until Aug. 25, 2022.

Conference call

Toll-free in United States and Canada:  1-800-319-4610

International callers:  1-604-638-5340

Webcast:  at the Equinox website

2022 outlook

For 2022, the company expects to achieve its fourth consecutive year of production growth with guidance of 625,000 to 710,000 ounces of gold, which is an increase of 11 per cent compared with 2021 production (using the midpoint of 2022 guidance). Cash costs for 2022 are estimated at $1,080 to $1,140 per oz, with AISC of $1,330 to $1,415 per oz. Production and cost guidance excludes Mercedes as the previously announced sale to Bear Creek is expected to close around the end of Q1 2022, although ounces produced and capital spent prior to closing will be attributable to Equinox. The company may revise guidance during the year to reflect changes to expected results.

Production is expected to increase quarter over quarter, with 60 per cent of gold production and more than 85 per cent of operating cash flow anticipated in the second half of the year. As production increases, AISC is expected to decrease. Cash costs and AISC are expected to be approximately $1,210 and $1,540 per oz in first half 2022 and $1,025 and $1,295 per oz in second half 2022, respectively. The weighting of production and cash flow into the second half of the year is primarily due to Santa Luz transitioning from construction and commissioning to operations starting in second quarter 2022.

Cash costs for 2022 reflect inflationary pressures across all operations, with approximately 15-per-cent cost escalation for fuel and other major consumables. AISC for 2022 includes $195-million of sustaining capital investment focused primarily on stripping campaigns at Mesquite, Aurizona and Santa Luz to open up new ore sources, and both open-pit stripping and underground development work at Los Filos that were in part delayed during 2021. The company is also completing TSF expansions or lifts at Aurizona, RDM and Santa Luz and completing a leach pad expansion at Castle Mountain. Sustaining capital guidance includes $6-million for exploration, which is almost all capitalized.

The company is undertaking several growth projects during 2022, including completing construction and commissioning of Santa Luz, advancing construction at Greenstone, and conducting exploration focused on mine life extension at Mesquite, Aurizona, Fazenda, Santa Luz and RDM. The company's primary development focus for 2022 is construction at Greenstone, with Equinox's 60-per-cent share of construction capital forecast at $326-million. Non-sustaining capital expenditures also include underground development at Los Filos in part carried over from 2021, a pit expansion at RDM and permitting for the Castle Mountain expansion, with total non-sustaining capital for 2022 forecast at $487-million. Non-sustaining capital guidance includes $30-million for exploration, of which approximately $19-million is expensed with the rest capitalized.

About Equinox Gold Corp.

Equinox is a Canadian mining company operating entirely in the Americas, with seven operating gold mines and a clear path to achieve more than one million ounces of annual gold production from a pipeline of development and expansion projects. Equinox's common shares are listed on the Toronto Stock Exchange and the NYSE American under the trading symbol EQX.

Technical information

Doug Reddy, Msc, PGeo, Equinox's chief operating officer, is the qualified person under National Instrument 43-101 for this Equinox press release, and has reviewed and approved the technical information in this document.

We seek Safe Harbor.

© 2022 Canjex Publishing Ltd. All rights reserved.