Amerigo Resources Ltd. (TSX:ARG) ("Amerigo" or the "Company") reported today
results for the quarter ended June 30, 2009.
Mr. Steven Dean, Amerigo's Chairman, stated, "We successfully achieved a
significant copper production increase in the quarter and started generating
cash flow from operations again. Production for Q3-2009 is expected to show
further improvements and power costs are expected to at least remain at levels
comparable to Q2-2009. If copper prices continue at current levels or higher and
molybdenum prices continue to improve, the Company's financial results and
operating cash flow should continue to strengthen in the latter part of 2009."
In the quarter ended June 30, 2009 ("Q2-2009") management was able to achieve
the following:
Key achievements
- Generated cash flow from operations of $7,420,230. Excluding the effect of
changes in working capital items, cash flow from operations in Q2-2009 was
$1,757,434;
- Increased copper production by 36% compared to Q2-2008 and 35% compared to
Q1-2009, reaching historical high Q2 production of 4,358 tonnes of copper.
- Reduced operating costs by $5,237,937 compared to Q2-2008, despite a 36%
increase in production between the two comparative quarters.
- Returned MVC to an operating breakeven point; operating profit excluding
amortization and accretion costs, which are non-cash items, was $1,677,635 in
Q2-2009;
- Reduced operating and financial net losses. In Q2-2009, at an average copper
sales price of $2.06/lb, the Company posted an operating loss of $250,309 and a
net loss of $2,325,059 compared to an operating loss of $2,601,186 and a net
loss of $4,779,074 in Q1-2009.
- Entered into a facility to hedge a portion of its copper production in the
second half of 2009, securing a minimum copper price of $2.00/lb for 800 tonnes
per month of copper production. The maximum hedged copper price under this
facility was set at $2.47/lb.
- Made debt repayments of $1,333,961 to Enami and $663,216 to Molymet.
- Negotiated repayment terms for approximately $6,491,644 of royalty payments
deferred by El Teniente from November 2008 to April 2009, to be paid in 14
monthly instalments commencing July 2009.
- Continued to renew current debt in Chile at renewal dates and received
confirmation that a $6,033,492 bank loan will be structured into a two-year loan
effective October 2009.
Financial results
- In Q2-2009, at an average copper sales price of $2.06/lb, the Company had an
operating loss of $250,309 and a net loss of $2,325,059, compared to operating
profit of $7,608,957 and net earnings of $6,218,444 in Q2-2008. Significant
factors affecting financial performance in Q2-2009 included a 42% decrease in
revenue due to lower copper and molybdenum prices, partially offset by a 22%
reduction in cost of sales compared to Q2-2008.
- Cash flows provided by operating activities totalled $7,420,230 or 6 cents per
share in Q2-2009 compared to cash flows from operating activities of $8,136,753
or 9 cents per share in Q2-2008, largely due to the receipt of tax refunds of
approximately $4,024,000 during the quarter.
Production
- Production in Q2-2009 was 9.61 million pounds of copper and 99,683 pounds of
molybdenum, compared to 7.08 million pounds of copper and 147,508 pounds of
molybdenum produced in Q2-2008. The Company successfully started reprocessing of
old tailings using a new processing method as of April 2009. The increased
production and higher grades from old tailings contributed to a 36% copper
production increase in the quarter, compared to Q2-2008. Molybdenum production
continued to be adversely affected due to lower grades and resulting low plant
recovery rates.
Revenue
- Revenue decreased to $18,067,033 compared to $31,164,236 in Q2-2008 due to
sharply decreased metal prices. The Company's copper selling price before
smelter, refinery and other charges was $2.06/lb in Q2-2009 compared to $3.80/lb
in Q2-2008, and the Company's molybdenum selling price was $9.08/lb in Q2-2009
compared to $34.12/lb in Q2-2008. The impact on revenue from lower metal prices
was mitigated by an increase of 33% in copper sales volume in Q2-2009 due to
higher production.
- The average copper sales price of $2.06/lb in Q2-2009 is final pricing based
on MVC's pricing terms and quota delivery schedule with Enami. The London Metal
Exchange ("LME") average copper prices in Q2-2009 went from a low of $1.9988/lb
in April to a high of $2.2743/lb in June, which due to current pricing terms
with the Company's smelter represent final prices in the quarter that are not
subject to price adjustments.
- At June 30, 2009 MVC was slightly more than one month behind in its delivery
of quotas to Enami; it is expected that this lag will be gradually reduced in
the second half of 2009. Accordingly, the pricing term for the remaining months
of 2009 will in effect be the pricing of the month prior to delivery ("M-1") or
the pricing of the month of delivery ("M") until monthly quotas are fully
regularized to correspond with the scheduled month of delivery, again
eliminating the risk exposure of pricing adjustments.
Costs
- Cash cost (the aggregate of smelter, refinery and other charges, production
costs net of molybdenum-related net benefits, administration and transportation
costs) before El Teniente royalty was $1.56/lb in Q2-2009, compared to $2.11/lb
in Q2-2008. Cash costs decreased in Q2-2009 as a result of lower overall
production costs, principally power costs.
- Total cost (the aggregate of cash cost, El Teniente royalty, depreciation and
accretion) in Q2-2009 was $2.14/lb compared to $3.02/lb in Q2-2008. The decrease
in total cost was driven by lower cash cost and lower El Teniente royalty due to
lower copper and molybdenum prices between the comparative periods.
- Power costs in Q2-2009 were $6,096,922 ($0.1247/kwh) compared to $9,002,362
($0.2462/kwh) in Q2-2008. Electricity costs in Chile are expected to remain
stable during the second half of 2009.
- Operating costs such as power, steel and reagents have decreased from their
high 2008 levels. Unit costs were also positively impacted by higher copper
production in the quarter. If production continues to increase as expected and
other factors remain unchanged, unit costs will continue to trend downwards in
the second half of 2009.
Cash and Financing Activities
- Cash balance was $6,304,152 at June 30, 2009 compared to cash of $3,187,084 at
December 31, 2008 and cash of $3,462,650 at March 31, 2009.
- Subsequent to June 30, 2009, a Chilean bank loan of $5,432,225 with a review
date of July 2009 was extended to a review date of September 2009.
- The Company received tax refunds from the Chilean Internal Revenue Service of
approximately $4,024,000 in the three months ended June 30, 2009. Further
refunds of approximately $3,080,000 are expected to be received either late in
Q3-2009 or early in Q4-2009.
Investments
- Payments for capital expenditures were $3,244,767 in Q2-2009 compared to
$5,672,077 in Q2-2008. Capital expenditures incurred in the quarter were
$1,729,596 (Q2-2008: $4,355,788) of which $571,159 were for MVC's power plant.
- The Company's investments in Candente Resource Corp. ("Candente") and Los
Andes Copper Ltd. ("Los Andes") had a fair value of $4,948,746 and $763,068
respectively at June 30, 2009. Fair value increases of these investments in
Q2-2009 totalled $2,066,456 and were included as other comprehensive income, and
therefore not included in the net loss for the quarter.
The information in this news release and the Selected Financial Information
contained in the following page should be read in conjunction with the Unaudited
Consolidated Financial Statements and Management Discussion and Analysis for
quarter and the six months ended June 30, 2009, which will be available at the
Company's website at www.amerigoresources.com and at www.sedar.com.
Amerigo Resources Ltd. is a Canadian junior company producing copper and
molybdenum from its MVC operations near Santiago, Chile.
Statements contained in this news release that are not historical facts are
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements are subject to
risks and uncertainties which could cause actual results to differ materially
from estimated results. Such risks and uncertainties are detailed in the
Company's filings with the TSX and on SEDAR. Forward-looking statements are
based on the beliefs, estimates and opinions of the Company's management on the
date the statements are made. The Company undertakes no obligation to update
these forward-looking statements if management's beliefs, estimates or opinions,
or other factors, should change.
AMERIGO RESOURCES LTD.
SELECTED FINANCIAL INFORMATION
QUARTERS ENDED JUNE 30, 2009 and 2008
All figures expressed in US Dollars
Consolidated Balance Sheets
June 30, December 31,
2009 2008
$ $
-----------------------------
Cash and cash equivalents 6,304,152 3,187,084
Mineral property, plant and equipment 117,608,731 116,243,844
Other assets 35,473,076 24,827,949
-----------------------------
Total assets 159,385,959 144,258,877
-----------------------------
-----------------------------
Total liabilities 59,970,225 50,223,162
Shareholders' equity 99,415,734 94,035,715
-----------------------------
Total liabilities and shareholders' equity 159,385,959 144,258,877
-----------------------------
-----------------------------
Consolidated Statements of Operations
and Comprehensive Income (Loss)
Quarter ended Quarter ended
June 30, June 30,
2009 2008
$ $
-----------------------------
Total revenue, net of smelter and
refinery charges 18,067,033 31,164,236
Cost of sales (18,317,342) (23,555,279)
Other expenses (945,676) (861,489)
Non-operating income (loss), net (759,056) 503,280
Income tax recovery (expense) (219,389) (906,973)
Non-controlling interests (150,629) (125,331)
-----------------------------
Net earnings (loss) (2,325,059) 6,218,444
Other comprehensive income (loss) 2,066,456 (875,419)
-----------------------------
Comprehensive income (loss) (258,603) 5,343,025
-----------------------------
EPS (LPS) - Basic and Diluted (0.02) 0.07
Consolidated Statements of Cash Flows
Quarter ended Quarter ended
June 30, June 30,
2009 2008
$ $
-----------------------------
Net cash provided by operating activities 7,420,230 8,136,753
Net cash used in investing activities (3,244,767) (7,648,878)
Net cash used in financing activities (1,333,961) (254,597)
-----------------------------
Net cash inflow during the period 2,841,502 233,278
-----------------------------
-----------------------------
AMERIGO RESOURCES LTD.
SELECTED TRAILING DATA
All figures expressed in US Dollars
----------------------------------------------------------------------------
Q2-2009 Q1-2009 Q4-2008 Q3-2008 Q2-2008
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Copper
production
(tonnes) 4,358 3,228 4,323 4,634 3,212
----------------------------------------------------------------------------
Copper sales
(tonnes) 4,304 3,228 4,336 4,626 3,234
----------------------------------------------------------------------------
Molybdenum
production
(lbs) 99,683 97,184 211,729 261,234 147,508
----------------------------------------------------------------------------
Molybdenum
sales (lbs) 92,065 101,661 219,215 258,499 143,048
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Company's
recorded
copper price
($/lb)(i) 2.06 1.82 1.31 2.81 3.80
----------------------------------------------------------------------------
(i) Before smelter
and refinery costs
and settlement
adjustments to
prior quarters'
sales
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Revenue $18,067,033 $13,021,611 $ 614,179 $ 29,915,602 $31,164,236
----------------------------------------------------------------------------
Power costs 6,096,922 5,842,586 6,316,698 8,723,416 9,002,362
----------------------------------------------------------------------------
El Teniente
royalty 3,634,597 1,387,644 2,615,100 6,631,296 5,319,664
----------------------------------------------------------------------------
All other
cost of sales 8,585,823 8,392,567 10,639,015 13,408,668 9,233,253
----------------------------------------------------------------------------
Operating
profit (loss) (250,309) (2,601,186) (18,956,634) 1,152,222 7,608,957
----------------------------------------------------------------------------
Write-down of
investments - - 6,617,602 12,237,741 -
----------------------------------------------------------------------------
All other
expenses
(gains),
including
taxes 2,074,750 2,177,888 (4,393,362) (678,092) 1,390,513
----------------------------------------------------------------------------
Net earnings
(loss) $(2,325,059) $(4,779,074)$(21,180,874)$(10,407,427)$ 6,218,444
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Earnings (loss)
per share
(basic) (0.02) (0.04) (0.23) (0.11) 0.07
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Cash cost
($/lb) 1.56 1.94 1.99 1.60 2.11
----------------------------------------------------------------------------
Total cost
($/lb) 2.14 2.42 2.43 2.40 3.02
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Cash flow from
(used in)
operations $ 7,420,230 $(8,639,787)$ (7,363,121)$ 7,638,590 $ 8,136,753
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Cash flow used
for capital
investments $ 3,244,767 $ 2,965,313 $ 4,605,232 $ 5,985,103 $ 5,672,077
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Closing cash
position $ 6,304,152 $ 3,462,650 $ 3,187,084 $ 4,258,600 $11,192,995
----------------------------------------------------------------------------
Working
capital (10,318,380) (8,094,959) (14,116,136) (1,088,106) 11,852658
----------------------------------------------------------------------------
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