Equinox Gold Reports Third Quarter 2022 Financial and Operating Results

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Equinox Gold Greenstone site
Equinox Gold Greenstone site

THUNDER BAY – MINING – Equinox Gold Corp. (TSX: EQX), (NYSE American: EQX) (“Equinox Gold” or the “Company”) is pleased to announce its third quarter 2022 summary financial and operating results. The Company’s unaudited condensed consolidated interim financial statements and related management’s discussion and analysis (“MD&A”) for the three and nine months ended September 30, 2022 will be available for download on SEDAR, on EDGAR and on the Company’s website. The Company will host a conference call and webcast on November 3, 2022 commencing at 7:30 am Vancouver time to discuss the Company’s third quarter results and activities underway at the Company’s projects. Further details are provided at the end of this news release.

Greg Smith, President and CEO of Equinox Gold, commented: “As expected, gold production in the third quarter increased meaningfully from production in the second and first quarters. Costs, however, were higher than expected as the result of persistent global inflationary pressures coupled with lower than planned production. We are reviewing mine plans across the portfolio with a focus on improving productivity while managing costs. Based on production to date, we expect full-year production to be approximately 540,000 ounces of gold and costs to exceed the upper end of guidance by approximately five percent.

“We continue to advance our long-term growth strategy. Our new Santa Luz mine in Brazil achieved commercial production effective October 1st, and our Greenstone project in Ontario was more than 57% complete at the end of October. The Greenstone team continues to perform admirably, keeping the project on budget in an inflationary environment and on schedule to pour first gold in H1 2024.”

HIGHLIGHTS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2022

Operational

  • Produced 143,615 oz of gold during the Quarter; sold 143,032 oz of gold at an average realized gold price of $1,711 per oz
  • Total cash costs of $1,400 per oz and AISC of $1,749 per oz(1)(2)
  • There were no lost-time injuries during the Quarter; the Company’s total recordable injury frequency rate is 2.57 per million hours worked on a rolling 12-month basis
  • Four-day suspension of operations at Los Filos as the result of a community blockade

Earnings

  • Earnings from mine operations of $7.4 million
  • Net loss of $30.1 million or $(0.10) per share
  • Adjusted net loss(1) of $27.6 million or $(0.09) per share, after adjusting for certain non-cash expense items(3)

Financial

  • Cash flow from operations before changes in non-cash working capital of $14.5 million ($54.2 million cash flow used in operations after changes in non-cash working capital)
  • Adjusted EBITDA(1)(3) of $25.7 million
  • Expenditures of $41.1 million in sustaining capital and $131.5 million in non-sustaining capital(1)
  • Cash and cash equivalents (unrestricted) of $141.9 million at September 30, 2022
  • Net debt(1) of $583.8 million at September 30, 2022
  • On October 21, 2022, the Company drew down an additional $100 million on its revolving credit facility

Construction, development and exploration

  • Continued commissioning at Santa Luz; achieved commercial production effective October 1, 2022
  • Advanced Greenstone construction
    • More than 1.8 million work hours complete with no lost-time injuries as at the end of October 2022
    • On schedule to pour gold in the first half of 2024, 57% complete as at October 21, 2022
    • On budget, with 67% ($766 million) of total capital costs contracted and 41% ($501 million) of total construction budget spent at September 30, 2022 (100% basis)
    • Independent quantitative risk assessment confirmed the project remains within the schedule and budget as announced on October 27, 2021, based on detailed engineering and construction progress

Corporate

  • Increased the Company’s liquidity by amending its credit facilities
    • Increased the revolving credit facility (“Revolving Facility”) from $400 million to $700 million
      • $73.3 million of outstanding principal balance under the term loan rolled into Revolving Facility, eliminating the need for principal payments through mid-2026
      • $99.8 million of Revolving Facility drawn in July 2022 and $100.0 million drawn in October 2022; $127.2 million of Revolving Facility undrawn as of the date of this news release
    • Added a $100 million uncommitted accordion feature
    • Extended the maturity from March 8, 2024 to July 28, 2026 with the ability to request a one-year extension
    • Decreased borrowing costs by reducing Revolving Facility interest rate by an average of 25 to 50 basis points
  • On September 1, 2022, Greg Smith, President of Equinox Gold, succeeded Christian Milau as Chief Executive Officer and a Director of Equinox Gold

RECENT DEVELOPMENTS

  • On October 19, 2022, the Company released an updated feasibility study for a potential expansion at Los Filos that contemplates continued development of the Bermejal underground deposit and construction of a 10,000 tonnes per day carbon-in-leach processing plant to operate concurrently with existing heap leach facilities. The technical report is available for download on the Company’s website and under the Company’s profile on SEDAR and on EDGAR
  • On October 24, 2022, the Company filed a preliminary base shelf prospectus with the securities commissions in each of the provinces and territories of Canada to provide the Company with future financial flexibility, but has not entered into any agreements or arrangements to authorize or offer any securities. Once final or effective, the base shelf prospectus, together with a corresponding registration statement to be filed with the United States Securities and Exchange Commission, will allow the Company to make offerings, including through “at-the-market” transactions, of up to $500,000,000 of common shares, debt securities, subscription receipts, share purchase contracts, units, warrants, or any combination thereof, from time to time over a 25-month period in both the United States and Canada. A copy of the preliminary base shelf prospectus can be found under the Company’s profile on SEDAR
  • Based on production to date at Los Filos and Aurizona, both of which experienced operational challenges that are expected to affect Q4 2022 production, and the ongoing inflationary macro-economic environment, the Company expects gold production to be approximately 540,000 ounces for the year with costs to exceed the upper end of AISC guidance of $1,530 per oz by approximately 5%

 

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(1) Cash costs per oz sold, AISC per oz sold, adjusted net income, adjusted EBITDA, adjusted EPS, sustaining capital, non-sustaining capital and net debt are non-IFRS measures. See Non-IFRS Measures and Cautionary Notes.
(2) Consolidated cash cost per oz sold and AISC per oz sold for the three and nine months ended September 30, 2022 exclude Santa Luz results as the mine was in pre-commercial production up until the achievement of commercial production at the end of Q3 2022.
(3) Primary adjustments for the three months ended September 30, 2022 were a $13.4 million loss on change in fair value of share purchase warrants and a $10.6 million unrealized gain on gold contracts. 

 

CONSOLIDATED OPERATIONAL AND FINANCIAL HIGHLIGHTS

Three months ended Nine months ended
Operating data Unit September 30,
2022
June 30,
2022
September 30,
2021
September 30,
2022
September 30,
2021
Gold produced oz 143,615 120,813 139,758 381,880 391,678
Gold sold oz 143,032 120,395 137,144 382,751 390,412
Average realized gold price $/oz 1,711 1,856 1,780 1,804 1,790
Cash costs per oz sold(1)(2) $/oz 1,400 1,482 1,109 1,373 1,113
AISC per oz sold(1)(2)(3) $/oz 1,749 1,657 1,327 1,663 1,396
Financial data
Revenue M$ 245.1 224.6 245.1 692.9 701.1
Earnings from mine operations M$ 7.4 17.0 45.7 52.9 131.2
Net (loss) income M$ (30.1) (78.7) (8.1) (128.6) 445.9
(Loss) earnings per share $/share (0.10) (0.26) (0.03) (0.42) 1.59
Adjusted EBITDA(1) M$ 25.7 24.1 62.9 94.1 177.2
Adjusted net (loss) income(1) M$ (27.6) (47.9) 3.9 (98.5) (0.1)
Adjusted EPS(1) $/share (0.09) (0.16) 0.01 (0.32) 0.00
Balance sheet and cash flow data
Cash and cash equivalents M$ 141.9 159.7 300.3 141.9 300.3
   (unrestricted)
Net debt(1) M$ 583.8 472.2 244.8 583.8 244.8
Operating cash flow before changes  M$ 14.5 16.4 48.3 64.3 141.9
   in non-cash working capital
(1) Cash costs per oz sold, AISC per oz sold, adjusted EBITDA, adjusted net (loss) income, adjusted EPS and net debt are non-IFRS measures. See Non-IFRS Measures and Cautionary Notes.
(2) Consolidated cash cost per oz sold and AISC per oz sold for the three and nine months ended September 30, 2022 exclude Santa Luz results as the mine was in pre-commercial production up until the achievement of commercial production at the end of Q3 2022.
(3) AISC per oz sold excludes corporate general and administration expenses.
(4) Numbers in tables throughout this news release may not sum due to rounding.

The Company sold 4% more gold ounces in Q3 2022 compared to Q3 2021. The increase was mainly driven by increased production at Mesquite and the contribution of pre-commercial production ounces at Santa Luz, offset by decreased production at Los Filos, Aurizona, and RDM, and by no gold sales at Mercedes as the operation was sold on April 21, 2022. Higher gold production at Mesquite was mainly due to accessing the majority of ore from the Brownie open pit late in Q2 2022, allowing for full leaching during Q3 2022. Lower gold production at Los Filos was mainly due to 33% lower gold grades, primarily due to lower-grade mined from the Guadalupe open pit and slow development into higher-grade areas in the Bermejal underground. Lower gold production at Aurizona was due in part to processing stockpile ore with lower grades as high rainfall continued into July 2022 and impeded access to higher-grade ore from the Piaba open pit. Lower than expected equipment availability also impacted the remainder of Q3 2022. Aurizona’s mining contractor has supplemented its fleet in October 2022 to remedy this. Lower gold production at RDM is due to the decision to process low-grade stockpile material while the open pit is being dewatered.

The Company sold 2% fewer gold ounces for the nine months ended September 30, 2022 compared to the comparative period of 2021. The decrease was mainly due to lower production at Aurizona, which experienced a longer rainy season in 2022, and lower production at RDM, which was impacted by a temporary suspension of mining and plant operations in mid-May due to a delay in receiving permits for the scheduled TSF raise, and a transition in Q3 2022 to processing low-grade stockpile material rather than mining in-situ ore. The decrease was partially offset by increased production at Mesquite, driven by earlier delivery of ounces to the leach pad as compared to 2021 due to mine sequencing, and the contribution of pre-commercial production ounces at Santa Luz.

In Q3 2022, earnings from mine operations were $7.4 million (Q3 2021 – $45.7 million) and for the nine months ended September 30, 2022 were $52.9 million (nine months ended September 30, 2021 – $131.2 million). Earnings from mine operations were lower in Q3 2022 compared to Q3 2021 due to lower realized gold price per ounce, higher operating costs, supply constraints, and inflationary pressures, particularly from increased prices of oil and other consumables.

Earnings from mine operations were lower for the nine months ended September 30, 2022 compared to the comparative period of 2021 primarily due to lower earnings from mine operations at Aurizona and Los Filos. Aurizona’s earnings from mine operations decreased by $45.4 million primarily due to selling 26% fewer ounces of gold. Los Filos’ earnings from mine operations decreased by $40.9 million primarily due to an increase in open pit and underground mining costs, reflecting more activity to produce a similar amount of gold as Los Filos moved 14 million more tonnes of waste to process 1,005 more recoverable ounces.

The Company incurred a net loss in Q3 2022 of $30.1 million (Q3 2021 – net loss of $8.1 million) and a net loss for the nine months ended September 30, 2022 of $128.6 million (nine months ended September 30, 2021 – net income of $445.9 million). The net losses were impacted by lower earnings from mine operations and losses of $13.4 million and $72.8 million on the change in fair value of share purchase warrants for the three and nine months ended September 30, 2022, respectively, compared to gains of $1.0 million and $58.3 million during the comparative periods in 2021. Results for the nine months ended September 30, 2021 were also impacted by a $186.1 million gain on reclassification of investment in Solaris Resources Inc. (“Solaris”), a $81.4 million gain on bargain purchase price of Premier, a $50.3 million gain on the sale of a partial interest in Solaris and a $45.4 million gain on the sale of the Pilar mine.

In Q3 2022, adjusted EBITDA was $25.7 million (Q3 2021 – $62.9 million) and for the nine months ended September 30, 2022 was $94.1 million (nine months ended September 30, 2021 – $177.2 million). In Q3 2022, adjusted net loss was $27.6 million (Q3 2021 – adjusted net income of $3.9 million) and for the nine months ended September 30, 2022 was a net loss of $98.5 million (nine months ended September 30, 2021 – adjusted net loss of $0.1 million). Adjusted EBITDA and adjusted net loss were impacted by lower earnings from mine operations compared to the comparative periods in 2021.

Sustaining capital expenditures totaled $41.1 and $96.1 million for the three and nine months ended September 30, 2022, respectively. Non-sustaining capital expenditures totaled $131.5 million and $356.4 million for the three and nine months ended September 30, 2022, respectively. Sustaining capital and non-sustaining capital expenditures are broken down by mine site in the MD&A.

SELECTED FINANCIAL RESULTS FOR THE THREE AND NINE MONTHS ENDED SEPT 30, 2022 AND 2021

$ amounts in millions, except per share amounts Three months ended Nine months ended
September 30,
2022
September 30,
2021
September 30,
2022
September 30,
2021(1)
Revenue $               245.1 $               245.1 $               692.9 $               701.1
Cost of sales
Operating expense (188.8) (152.7) (511.8) (439.3)
Depreciation and depletion (48.9) (46.8) (128.2) (130.5)
Earnings from mine operations 7.4 45.7 52.9 131.3
Care and maintenance expense (2.9) (6.0) (8.1) (15.2)
Exploration expense (6.2) (5.6) (13.9) (13.3)
General and administration expense (10.9) (12.4) (33.8) (35.3)
Income from operations (12.6) 21.6 (2.9) 67.5
Finance expense (10.3) (10.7) (27.9) (31.2)
Finance income 1.3 1.1 3.0 1.7
Share of net income (loss) in associate 4.9 (5.3) (2.6) (7.6)
Other (expense) income (11.3) (18.0) (62.9) 416.5
Net (loss) income before taxes (28.0) (11.3) (93.3) 446.9
Income tax (expense) recovery (2.1) 3.2 (35.3) (0.9)
Net (loss) income $               (30.1) $                 (8.1) $             (128.6) $               446.0
Net (loss) income per share attributable to Equinox Gold
shareholders
Basic $               (0.10) $               (0.03) $               (0.42) $                 1.59
Diluted $               (0.10) $               (0.03) $               (0.42) $                 1.38
(1) Financial results for the nine months ended September 30, 2021 include the results of operations for the mines acquired through the Premier Acquisition for the period of April 7 to September 30, 2021.

Additional information regarding the Company’s financial results and activities underway at the Company is available in the Company’s Q3 2022 Financial Statements and accompanying MD&A for the three and nine months ended September 30, 2022, which will be available for download on the Company’s website at www.equinoxgold.com, on SEDAR at www.sedar.com and on EDGAR at www.sec.gov/edgar.

CONFERENCE CALL AND WEBCAST

Equinox Gold will host a conference call and webcast on Thursday, November 3, 2022 commencing at 7:30 am Vancouver time to discuss the Company’s third quarter results and activities underway at the Company. 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 May 3, 2023.

Conference call
Toll-free in U.S. and Canada: 1-800-319-4610
International callers: +1 604-638-5340

Webcast
www.equinoxgold.com

ABOUT EQUINOX GOLD

Equinox Gold is a growth-focused Canadian mining company with seven operating gold mines, construction underway at a new project, and a clear path to achieve more than one million ounces of annual gold production from a pipeline of development and expansion projects. 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 ir@equinoxgold.com.