Release Date: October 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Amerigo Resources Ltd (ARREF, Financial) reported strong financial results for Q3 2024, with a net income of $2.8 million and EBITDA of $13.3 million.
- The company declared its 13th consecutive quarterly dividend, highlighting a consistent return to shareholders.
- Copper production increased by 46% compared to Q3 2023, reaching 16.3 million pounds, driven by improved operations at El Teniente.
- The average copper price received was $4.22 per pound, contributing to a gross copper revenue of $68.8 million.
- Amerigo's cash cost decreased to $1.93 per pound, below the annual guidance, indicating effective cost management.
Negative Points
- The average copper price in Q3 2024 was lower than in Q2 2024, resulting in $3.3 million in negative price settlement adjustments.
- Amerigo's financial performance is highly sensitive to copper prices, which can fluctuate significantly.
- The company experienced a working capital deficiency of $4.9 million as of September 30, 2024.
- Despite strong production, the company faces external risks such as weather impacts and dependency on El Teniente's throughput and grades.
- A new federal tax in Canada on share buybacks could impact the company's capital return strategy.
Q & A Highlights
Q: What are the major factors that can cause production to fluctuate in a quarter?
A: The major factors include the throughput and grades from El Teniente, which are significant drivers outside of our control. We have full control over Cauquenes, which is the processing of old tailings, and we layer that on top of what we receive from El Teniente. El Teniente operations performed well in Q3 and are expected to continue doing so, aligning with Codelco's production recovery guidance. - Aurora Davidson, President and CEO
Q: How does the board decide between performance dividends and share buybacks?
A: Decisions are based on factors like the spot copper price, copper outlook, share price, and macro drivers. The board evaluates these in real-time. Recently, conditions favored a performance dividend, but we are now focusing on share buybacks. Both can occur if copper prices are strong, but timing depends on market conditions. - Aurora Davidson, President and CEO
Q: Are there any significant capital expenditures planned for the near future?
A: We typically have capital-intensive years on a three-year cycle. Last year was capital-intensive due to building a Cauquenes sump. Currently, we don't have any extraordinary projects planned, so CapEx should remain consistent with 2024 levels. A significant drop in treatment and refinery charges is expected, which will positively impact profitability. - Aurora Davidson, President and CEO
Q: Can you explain the reduction in costs on the financial statement?
A: The reduction in other expenses is due to the absence of last year's environmental costs and fluctuations in foreign exchange. Power costs are included in tolling and production costs, not under other expenses. - Aurora Davidson, President and CEO
Q: Are you pioneering a new way for investors to view shareholder returns?
A: We are adopting an old-school approach, focusing on free cash flow to equity and shareholder returns from a different perspective. We aim to be contrarians, emphasizing growth in shareholder returns rather than traditional production growth. - Aurora Davidson, President and CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
