Equinox Gold(EQX) - 2024 Q1 - Quarterly Report

Business Overview Equinox Gold is a multi-asset gold producer with seven operating mines in the Americas and an eighth, Greenstone, commencing in 2024, aiming for over one million ounces annually - Equinox Gold is a multi-asset gold producer with seven operating mines in the Americas (two in the US, one in Mexico, four in Brazil) and an eighth mine, Greenstone in Canada, expected to commence operations in 2024[8] - The company's strategic vision is to become a premier Americas-focused gold producer, aiming for an annual output of over one million ounces. This growth is planned through expanding current assets and potential acquisitions[9] Q1 2024 Highlights Q1 2024 saw 111,725 ounces of gold produced, $11.4 million income from mine operations, a $42.8 million net loss, and significant progress at the Greenstone project Operational and Financial Highlights In Q1 2024, the company produced 111,725 ounces of gold and sold 116,504 ounces at an average price of $2,066/oz, resulting in $11.4 million income from mine operations but a net loss of $42.8 million, or $0.13 per share, with Adjusted EBITDA at $52.2 million Q1 2024 Key Metrics | Metric | Value | Unit | | :--- | :--- | :--- | | Gold Produced | 111,725 | ounces | | Gold Sold | 116,504 | ounces | | Average Realized Gold Price | $2,066 | per oz | | Cash Costs | $1,567 | per oz sold | | AISC | $1,950 | per oz sold | | Income from Mine Operations | $11.4 | million | | Net Loss | $42.8 | million | | Adjusted Net Loss | $14.4 | million | | Adjusted EBITDA | $52.2 | million | Corporate and Guidance Highlights The company provided 2024 guidance for gold production of 660,000 to 750,000 ounces at an AISC of $1,630 to $1,740 per ounce, and fully utilized its at-the-market equity program, raising gross proceeds of $50.2 million 2024 Full Year Guidance | Metric | Guidance Range | Unit | | :--- | :--- | :--- | | Gold Production | 660,000 - 750,000 | ounces | | Cash Costs | $1,340 - $1,445 | per oz | | AISC | $1,630 - $1,740 | per oz | | Total Expenditures | $424 | million | - In Q1 2024, the company issued 10.9 million common shares under its ATM Program for gross proceeds of $50.2 million, fully utilizing the program[12] Construction, Development and Exploration Highlights Significant progress was made at the Greenstone project, with commissioning of key circuits advanced and over 1.5 million tonnes of ore stockpiled, keeping the project on track for its first gold pour in Q2 2024 - Greenstone project commissioning advanced significantly, with the crushing circuit, HPGR, ball mill 1, and other key components commissioned. The project is on track for first gold pour in Q2 2024[15] - Equinox Gold's 60% share of spending at Greenstone was $54 million during Q1 2024[15] Recent Developments Subsequent to Q1 2024, Equinox Gold acquired the remaining 40% of Greenstone for $995 million, extended convertible note maturities, and addressed a geotechnical event at Aurizona Greenstone Acquisition and Financing Subsequent to the quarter, Equinox Gold agreed to acquire the remaining 40% of the Greenstone project from Orion for $995 million, moving to 100% ownership, funded by a new $500 million term loan and a $299 million equity financing, which closed in April 2024 - On April 23, 2024, the company entered a binding agreement to acquire Orion's 40% interest in the Greenstone mine for $995 million, which will give Equinox Gold 100% ownership[15] - The acquisition is funded by a new $500 million three-year term loan and a bought deal equity financing that raised gross proceeds of approximately $299 million[15] Other Corporate and Operational Updates The company extended the maturity of its 2019 and 2020 convertible notes, while a geotechnical event at the Aurizona mine paused mining in the Piaba pit, with activities transitioning to the Tatajuba open pit, and $60 million was drawn from its revolving credit facility in April 2024 - Maturity dates for the $139.7 million 5.00% 2019 Convertible Notes and the $139.3 million 4.75% 2020 Convertible Notes were extended by six months each[15] - A geotechnical event at the Aurizona mine paused mining in the Piaba pit. Mining has commenced at the Tatajuba open pit to provide plant feed by June 2024[15] - On April 9, 2024, the company drew down $60.0 million on its Revolving Facility[15] Consolidated Operational and Financial Highlights Q1 2024 saw decreased gold production and sales but higher realized prices, leading to a net loss of $42.8 million due to increased costs and fair value losses on gold contracts Q1 2024 Performance Summary Compared to Q1 2023, gold production and sales decreased, primarily due to planned lower production at Los Filos; however, a 9% higher realized gold price of $2,066/oz boosted revenue to $241.3 million, while costs increased, with AISC per ounce sold rising 18% to $1,950, driven by lower production at Los Filos and cost pressures in Mexico and Brazil, resulting in a net loss of $42.8 million from a $17.4 million net income in Q1 2023, largely due to a loss on the fair value of gold contracts Consolidated Highlights (vs. Q1 2023) | Metric | Unit | Q1 2024 | Q1 2023 | Change | | :--- | :--- | :--- | :--- | :--- | | Gold Produced | oz | 111,725 | 122,746 | -9.0% | | Gold Sold | oz | 116,504 | 123,295 | -5.5% | | Avg. Realized Gold Price | $/oz | 2,066 | 1,895 | +9.0% | | Revenue | M$ | 241.3 | 234.1 | +3.1% | | Cash Costs per oz sold | $/oz | 1,567 | 1,346 | +16.4% | | AISC per oz sold | $/oz | 1,950 | 1,658 | +17.6% | | Income from mine operations | M$ | 11.4 | 14.5 | -21.4% | | Net Income (Loss) | M$ | (42.8) | 17.4 | N/A | | Adjusted EBITDA | M$ | 52.2 | 57.0 | -8.4% | - The net loss in Q1 2024 was primarily driven by a $13.9 million 'other expense' (vs. $31.9 million 'other income' in Q1 2023), which included an $11.6 million loss on the change in fair value of gold contracts[20] - Higher cash costs were driven by lower production at Los Filos and the strengthening of the Mexican Peso (MXN) and Brazilian Réal (BRL) against the USD[18] Sustaining and Non-sustaining Expenditures In Q1 2024, total expenditures were $113.9 million, comprising $44.6 million in sustaining and $69.3 million in non-sustaining expenditures, with the largest non-sustaining expenditure being $52.8 million for the Greenstone project Q1 2024 Expenditures ($ millions) | Category | Sustaining | Non-sustaining | Total | | :--- | :--- | :--- | :--- | | Total Expenditures | $44.6 | $69.3 | $113.9 | | Greenstone | $— | $52.8 | $52.8 | | Los Filos | $17.4 | $— | $17.4 | | Aurizona | $15.0 | $2.2 | $17.2 | Operations This section details the Q1 2024 operational performance of each of the company's seven gold mines across the US, Mexico, and Brazil, highlighting production, costs, and key developments Mesquite Gold Mine, California, USA Mesquite's Q1 2024 production increased 34% YoY to 22,025 ounces, driven by higher ore tonnes stacked from three contributing pits, leading to a 33% decrease in AISC per ounce sold to $1,188, with the 2024 outlook for 75,000-85,000 ounces focusing on waste stripping at the Ginger pit Mesquite Q1 2024 Performance (vs. Q1 2023) | Metric | Unit | Q1 2024 | Q1 2023 | Change | | :--- | :--- | :--- | :--- | :--- | | Gold Produced | oz | 22,025 | 16,405 | +34% | | Gold Sold | oz | 23,783 | 16,406 | +45% | | Cash Costs per oz sold | $/oz | 1,153 | 1,129 | +2% | | AISC per oz sold | $/oz | 1,188 | 1,780 | -33% | - The decrease in AISC was due to higher ounces sold and minimal sustaining capital spend in Q1 2024 compared to significant capitalized stripping in Q1 2023[28] - 2024 guidance is 75,000-85,000 oz of gold at an AISC of $1,410-$1,510/oz. The focus will be on waste stripping of the Ginger pit[31][32] Castle Mountain Gold Mine, California, USA Castle Mountain's Q1 2024 production was up 6% YoY to 4,716 ounces, but AISC per ounce sold increased significantly by 67% to $2,618, driven by increased mining contractor rates, a higher proportion of more expensive crushed ore, and a $2.5 million inventory write-down, with the company evaluating reduced activities for Phase 1 operations Castle Mountain Q1 2024 Performance (vs. Q1 2023) | Metric | Unit | Q1 2024 | Q1 2023 | Change | | :--- | :--- | :--- | :--- | :--- | | Gold Produced | oz | 4,716 | 4,455 | +6% | | Gold Sold | oz | 4,716 | 4,455 | +6% | | Cash Costs per oz sold | $/oz | 2,303 | 1,244 | +85% | | AISC per oz sold | $/oz | 2,618 | 1,567 | +67% | - Higher costs were driven by increased mining contractor rates and a higher proportion of crushed/agglomerated ore. Costs were also impacted by a $2.5 million inventory write-down to NRV[37][38] - The company is evaluating the Phase 1 operation, which could result in reduced activities and production while awaiting Phase 2 permits, expected to continue into fiscal 2026[43] Los Filos Gold Mine, Guerrero, Mexico Los Filos saw a 39% YoY decrease in Q1 2024 production to 23,955 ounces, due to a planned focus on waste stripping and crusher downtime, resulting in a 43% increase in AISC per ounce sold to $2,424, with future performance and expansion plans contingent on successfully renegotiating land access agreements with local communities Los Filos Q1 2024 Performance (vs. Q1 2023) | Metric | Unit | Q1 2024 | Q1 2023 | Change | | :--- | :--- | :--- | :--- | :--- | | Gold Produced | oz | 23,955 | 39,574 | -39% | | Gold Sold | oz | 26,315 | 39,611 | -34% | | Cash Costs per oz sold | $/oz | 1,761 | 1,507 | +17% | | AISC per oz sold | $/oz | 2,424 | 1,696 | +43% | - Lower production was planned, focusing on waste stripping (strip ratio of 11.2 vs 4.7 in Q1 2023) and a crusher relocation that took it offline for 70% of the quarter[48] - Future guidance and the potential CIL plant expansion are subject to the successful execution of new social and land access agreements with local communities. Failure to reach agreements may lead to a re-evaluation or cessation of operations[56] Aurizona Gold Mine, Maranhão, Brazil Aurizona's Q1 2024 production fell 8% YoY to 23,857 ounces, with AISC rising 21% to $1,973/oz, due to mine sequencing, heavy rainfall, and geotechnical activity limiting access to ore; a subsequent geotechnical event has paused mining in the Piaba pit, with operations transitioning to the Tatajuba deposit, which may impact 2024 guidance Aurizona Q1 2024 Performance (vs. Q1 2023) | Metric | Unit | Q1 2024 | Q1 2023 | Change | | :--- | :--- | :--- | :--- | :--- | | Gold Produced | oz | 23,857 | 25,800 | -8% | | Gold Sold | oz | 24,506 | 26,539 | -8% | | Cash Costs per oz sold | $/oz | 1,360 | 1,197 | +14% | | AISC per oz sold | $/oz | 1,973 | 1,634 | +21% | - A geotechnical event on March 27, 2024, caused by heavy rains, has restricted access to the Piaba pit, pausing mining activities there[67] - To mitigate the impact, mining has commenced at the Tatajuba deposit, originally planned for Q4 2024. The company will provide an update to 2024 production guidance when more information is available[68] Fazenda Gold Mine, Bahia, Brazil Fazenda's Q1 2024 production decreased 8% YoY to 14,402 ounces, while AISC increased 36% to $1,745/oz, attributed to lower grades from both open pit and underground sources due to mine sequencing and development delays, with higher costs driven by lower production and increased labor costs Fazenda Q1 2024 Performance (vs. Q1 2023) | Metric | Unit | Q1 2024 | Q1 2023 | Change | | :--- | :--- | :--- | :--- | :--- | | Gold Produced | oz | 14,402 | 15,685 | -8% | | Gold Sold | oz | 14,483 | 16,012 | -10% | | Cash Costs per oz sold | $/oz | 1,510 | 1,153 | +31% | | AISC per oz sold | $/oz | 1,745 | 1,279 | +36% | - Production was lower due to lower grades from open pit mining (mine sequencing) and lower tonnes from underground due to slow development rates[74] - Underground mining unit costs were higher due to increased labor costs from renegotiated contracts and fewer tonnes mined[75] RDM Gold Mine, Minas Gerais, Brazil RDM had a strong quarter, with production increasing 72% YoY to 10,932 ounces, driven by higher grades from in-situ mining compared to processing low-grade stockpiles in Q1 2023, leading to a 24% decrease in AISC per ounce sold to $1,801 RDM Q1 2024 Performance (vs. Q1 2023) | Metric | Unit | Q1 2024 | Q1 2023 | Change | | :--- | :--- | :--- | :--- | :--- | | Gold Produced | oz | 10,932 | 6,342 | +72% | | Gold Sold | oz | 11,125 | 6,024 | +85% | | Cash Costs per oz sold | $/oz | 1,709 | 1,557 | +10% | | AISC per oz sold | $/oz | 1,801 | 2,368 | -24% | - The significant production increase was due to higher grades from in-situ mining. In Q1 2023, production was hampered by a license delay and reliance on low-grade stockpiles[84] Santa Luz Gold Mine, Bahia, Brazil Santa Luz production fell 18% YoY to 11,836 ounces in Q1 2024, with AISC rising 56% to $2,519/oz, due to lower recoveries (53.9% vs 62.6% in Q1 2023) and plant downtime for modifications, with the 2024 focus on improving plant throughput and recoveries through planned upgrades Santa Luz Q1 2024 Performance (vs. Q1 2023) | Metric | Unit | Q1 2024 | Q1 2023 | Change | | :--- | :--- | :--- | :--- | :--- | | Gold Produced | oz | 11,836 | 14,485 | -18% | | Gold Sold | oz | 11,575 | 14,249 | -19% | | Cash Costs per oz sold | $/oz | 2,053 | 1,581 | +30% | | AISC per oz sold | $/oz | 2,519 | 1,610 | +56% | - Lower production was caused by 14% lower recoveries and increased plant downtime for modifications to the detox, ADR, and electrowinning circuits[94] - The focus for 2024 is to improve recoveries to 73% or more in H2 2024. Planned upgrades include a new trunnion and a desliming circuit in late Q2 2024[99] Development Projects The company is advancing key development projects including the Greenstone project nearing completion, and evaluating expansions at Los Filos, Castle Mountain, and Aurizona Greenstone Project, Ontario, Canada The Greenstone project is nearing completion, with commissioning activities advancing in Q1 2024; ore was introduced to the grinding circuit in April, with the first gold pour expected in May 2024 and commercial production targeted by the end of Q3 2024, as Equinox Gold has moved to acquire 100% ownership of the project - Ore was introduced into the system on April 6, 2024. The first gold pour is expected in May 2024, with commercial production targeted by the end of Q3 2024[105] - As of Q1 2024, $1.3 billion (100% basis) has been spent on construction and commissioning. Equinox Gold's share was $54 million in the quarter[104] Los Filos Expansion, Guerrero, Mexico The company has not yet made a construction decision for the Los Filos expansion, which involves building a CIL plant, as the decision is contingent on operating stability, successful renegotiation of land access agreements, permits, and market conditions - A construction decision for the CIL plant has not been made. The decision depends on operating stability, renegotiating land access agreements, permits, and market conditions[107] Castle Mountain Expansion, California, USA The permitting process for the Phase 2 expansion at Castle Mountain is advancing, with the company receiving a determination from the Bureau of Land Management (BLM) that its plan is complete in Q1 2024, and the next step, formal environmental analysis (EIS/EIR), expected throughout 2024 and 2025 - The company received BLM determination that the Mine and Reclamation Plan for the Phase 2 expansion is complete in Q1 2024[110] - The formal Environmental Impact Statement (EIS) / Environmental Impact Report process is anticipated to occur throughout 2024 and 2025[110] Aurizona Expansion, Brazil The company is advancing engineering studies for a potential underground mine at Aurizona, with construction of a portal and underground decline planned to commence in late 2024 to allow for bulk sampling and further drilling - Engineering studies for an underground mine at Piaba pit continued in Q1 2024. Construction of a portal and decline is planned for late 2024[112] Health, Safety and Environment The company reported two lost-time injuries in Q1 2024, with safety and environmental incident rates well below targets - The company reported two lost-time injuries in Q1 2024. The 12-month rolling Total Recordable Injury Frequency Rate (TRIFR) was 1.55 per million hours worked, well below the 2024 target of 3.00[113] - There were no significant environmental incidents in Q1 2024. The 12-month rolling Significant Environmental Incident Frequency Rate (SEIFR) was 0.30 per million hours worked, below the target of 1.26[114] Community Development and ESG Reporting Equinox Gold engaged in community development activities across its operations and achieved an improved Morningstar Sustainalytics ESG Risk Rating in March 2024 - The company engaged in numerous community development activities across its operations in Canada, Brazil, Mexico, and the USA, focusing on health, education, skills training, and cultural support[116][117][119][120] - In March 2024, the company received an improved Morningstar Sustainalytics ESG Risk Rating of 31 (lower is better), a 14% improvement from its 2023 score[122] Corporate Key corporate activities include the acquisition of the remaining 40% of Greenstone, full utilization of the ATM equity program, and extension of convertible note maturities - Announced the acquisition of the remaining 40% of Greenstone from Orion for $995 million, to be funded by a new $500 million term loan and a $299 million equity offering that closed in April 2024[123][124][125] - The At-the-Market (ATM) Equity Program was fully utilized in Q1 2024, raising gross proceeds of $50.2 million from the issuance of 10.9 million shares[126] - Subsequent to quarter-end, the maturity dates of the 2019 and 2020 convertible notes were extended by six months each, and the conversion price of the 2020 notes was amended from $7.80 to $6.50 per share[127] Financial Results This section provides a detailed overview of the company's financial performance, including revenue, net income, and key financial metrics for Q1 2024 and prior periods Q1 2024 Financial Performance The company reported a net loss of $42.8 million for Q1 2024, compared to a net income of $17.4 million in Q1 2023, with the negative swing primarily due to a $13.9 million 'other expense', which included significant losses on the fair value of gold and foreign exchange contracts, compared to a large 'other income' in the prior-year period, and income from mine operations also decreased to $11.4 million from $14.5 million YoY Selected Financial Results ($ millions) | Line Item | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Revenue | 241.3 | 234.1 | | Income from mine operations | 11.4 | 14.5 | | Finance expense | (17.4) | (12.7) | | Other income (expense) | (13.9) | 31.9 | | Net income (loss) | (42.8) | 17.4 | | Basic EPS ($/share) | (0.13) | 0.06 | - Revenue increased 3% YoY due to a 9% higher realized gold price, which offset a 6% decrease in gold ounces sold[130] - Other expense of $13.9 million in Q1 2024 was mainly driven by a $11.6 million loss on the change in fair value of gold contracts and a $4.0 million loss on foreign exchange contracts. This contrasts with a $31.9 million other income in Q1 2023, which included a $34.5 million gain on the sale of an investment[137] Selected Quarterly Information The company's quarterly results show fluctuating performance, with revenue peaking in Q4 2023 at $297.8 million, and the net loss of $42.8 million in Q1 2024 following three consecutive quarters of net income Quarterly Revenue and Net Income (Loss) ($ millions) | Quarter | Revenue | Net Income (Loss) | | :--- | :--- | :--- | | Q1 2024 | 241.3 | (42.8) | | Q4 2023 | 297.8 | 3.9 | | Q3 2023 | 284.7 | 2.2 | | Q2 2023 | 271.6 | 5.4 | | Q1 2023 | 234.1 | 17.4 | Liquidity and Capital Resources The company's liquidity position, working capital, and cash flow are detailed, highlighting the impact of recent financing activities and future commitments Liquidity Position As of March 31, 2024, the company had $125.3 million in cash and cash equivalents and $164.6 million undrawn on its $700 million revolving credit facility, with subsequent financing activities in April, including a new $500 million term loan and a $299 million equity offering, significantly bolstering liquidity to fund the Greenstone acquisition and other commitments - At March 31, 2024, the company had cash and cash equivalents of $125.3 million and $164.6 million available under its revolving facility[142] - In April 2024, the company secured a new $500 million term loan and raised approximately $299 million in gross proceeds from an equity offering to fund the Greenstone acquisition[143] - Management believes current liquidity and expected cash flows are sufficient to meet financial, operating, and capital commitments over the next 12 months[144] Working Capital and Cash Flow Net working capital decreased to $101.3 million at quarter-end from $354.4 million at year-end 2023, primarily due to the reclassification of the 2020 Convertible Notes to current liabilities, while cash provided by operating activities was $17.9 million, a significant decrease from $143.4 million in Q1 2023, which had benefited from a $139.5 million gold prepay arrangement - Net working capital decreased from $354.4 million (Dec 31, 2023) to $101.3 million (Mar 31, 2024), mainly due to an increase in the current portion of loans and borrowings[146] - Cash provided by operating activities was $17.9 million in Q1 2024, down from $143.4 million in Q1 2023[150] - Cash used in investing activities was $108.8 million, primarily for capital expenditures of $104.8 million, with Greenstone accounting for $55.7 million of that spend[151] Outstanding Share Data As of May 8, 2024, the company had 386.4 million shares issued and outstanding, with a fully diluted count of 470.2 million - As of May 8, 2024, the company had 386,395,908 shares issued and outstanding. The fully diluted share count is 470,212,952[153] Commitments and Contingencies The company has total commitments of $1.95 billion, with $720 million due within one year, and is addressing environmental fines and civil actions - As of March 31, 2024, the company had total commitments of $1.95 billion, with $720.0 million due within one year[154] - The company is facing environmental fines totaling $10.2 million and public civil actions related to a 2021 rain event at Aurizona. Management believes the claims are without merit and has not recognized a provision[156] Non-IFRS Measures This section provides reconciliations of non-IFRS financial measures, including cash costs, AISC, Adjusted EBITDA, Adjusted Net Income, and Net Debt Reconciliation of Costs The company reconciles operating expenses to non-IFRS measures like cash costs and All-In Sustaining Costs (AISC); for Q1 2024, total cash costs were $182.6 million ($1,567/oz) and total AISC was $227.2 million ($1,950/oz) Reconciliation of Cash Costs and AISC (Q1 2024, $ millions) | Metric | Value | | :--- | :--- | | Operating expenses (IFRS) | 183.8 | | Silver revenue | (0.6) | | Fair value adjustment on acquired inventories | (0.6) | | Total cash costs | 182.6 | | Sustaining capital | 39.0 | | Sustaining lease payments | 2.6 | | Reclamation expense | 2.8 | | Sustaining exploration expense | 0.2 | | Total AISC | 227.2 | Reconciliation of EBITDA and Net Income The company adjusts its IFRS net loss to calculate non-IFRS measures like Adjusted EBITDA and Adjusted Net Loss; for Q1 2024, the net loss of $42.8 million was reconciled to an Adjusted EBITDA of $52.2 million and an Adjusted Net Loss of $14.4 million, with adjustments primarily related to unrealized gains/losses on derivatives and foreign exchange Reconciliation to Adjusted EBITDA (Q1 2024, $ millions) | Metric | Value | | :--- | :--- | | Net income (loss) | (42.8) | | Income tax expense | 8.5 | | Depreciation and depletion | 46.4 | | Finance expense / (income) | 15.4 | | EBITDA | 27.7 | | Adjustments (derivatives, FX, etc.) | 24.5 | | Adjusted EBITDA | 52.2 | Reconciliation to Adjusted Net Income (Q1 2024, $ millions) | Metric | Value | | :--- | :--- | | Net income (loss) | (42.8) | | Adjustments (derivatives, FX, share-based comp, etc.) | 28.4 | | Adjusted net income (loss) | (14.4) | Net Debt Net debt increased to $803.8 million as of March 31, 2024, up from $733.0 million at the end of 2023, reflecting a decrease in cash and cash equivalents during the quarter Net Debt Calculation ($ millions) | Metric | Mar 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Total debt | 929.1 | 925.0 | | Less: Cash and cash equivalents | (125.3) | (192.0) | | Net debt | 803.8 | 733.0 | Internal Controls and Procedures Management is responsible for internal controls over financial reporting, with no material changes reported in Q1 2024 - Management is responsible for establishing and maintaining adequate internal controls over financial reporting. No changes in these controls that have materially affected, or are reasonably likely to materially affect, the company's internal controls were reported for Q1 2024[181] Cautionary Notes and Forward-looking Statements The report contains forward-looking statements regarding production guidance and project development, which are subject to various risks and uncertainties - This report contains forward-looking statements regarding production guidance, project development timelines (Greenstone, Castle Mountain, Los Filos, Aurizona), the Greenstone acquisition, and other strategic objectives. These statements are subject to various risks and uncertainties[182][185]