Amerigo Announces Q1-2022 Results and Quarterly Dividend

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N.R. 2022-5

Q1-2022 net income of $15.5 million, earnings per share of $0.09 (Cdn$0.11)

EBITDA1 of $26.4 million, free cash flow to equity1 of $17.9 million

Dividend of Cdn$0.03 per share payable on June 20, 2022

Amerigo Resources Ltd. (TSX: ARG; ARREF: OTC) (“Amerigo” or the “Company”) is pleased to announce financial results for the three months ended March 31, 2022 (“Q1-2022”). Dollar amounts in this news release are in U.S. dollars unless indicated otherwise.

Amerigo’s quarterly financial results included net income of $15.5 million, earnings per share (“EPS”) of $0.09 (Cdn$0.11), EBITDA[1] of $26.4 million and free cash flow to equity (“FCFE”)1 of $17.9 million.

“We are pleased to report a robust start to the year for Amerigo. We met our copper production and cash cost targets, and our average quarterly copper price increased to $4.64 per pound”, said Aurora Davidson, Amerigo’s President and CEO. “Amerigo’s Board of Directors has declared a quarterly dividend of Cdn$0.03 per share. The Company’s dividend policy combines the strength of sustainable and reliable quarterly dividends, with the flexibility of top-up dividends that can be declared anytime to distribute additional surplus cash to shareholders. We remain comfortable with a targeted minimum corporate cash balance of $20.0 to $25.0 million and our normal course issuer bid remains in place”, added Ms. Davidson.

On May 2, 2022, Amerigo’s Board of Directors declared a quarterly dividend of Cdn$0.03 per share, payable on June 20, 2022, to shareholders of record as of May 30, 2022. Amerigo designates the entire amount of this taxable dividend to be an “eligible dividend” for purposes of the Income Tax Act (Canada), as amended from time to time. Based on the March 31, 2022 share closing price of Cdn$1.84, this would represent an annual dividend yield 6.52%.

This news release should be read in conjunction with Amerigo’s interim consolidated financial statements and Management’s Discussion and Analysis (“MD&A) for Q1-2022, available at the Company’s website at www.amerigoresources.com and at www.sedar.com.

31-Mar-22

31-Dec-21

Q1-2022

Q1-2021

Revenue ($ millions)

53.8

48.9

Net income ($ millions)

15.5

10.9

EPS ($)

0.09

0.06

EPS (Cdn)

0.11

0.08

EBITDA1 ($ millions)

26.4

23.3

Operating cash flow before changes in non-cash working capital1 ($ millions)

20.6

20.0

FCFE1 ($ millions)

17.9

12.6

Cash ($ millions)

71.1

59.8

Restricted cash ($ millions)

6.4

4.2

Borrowings ($ millions)

30.8

30.4

Share outstanding at end of period (millions)

172.8

173.7

Highlights and Significant Items

  • Net income during Q1-2022 was $15.5 million (Q1-2021: $10.9 million), due to higher copper production and higher metal prices. Q1-2022 EPS was $0.09 (Cdn$0.11) (Q1-2021: $0.06; (Cdn$0.08)).
  • In Q1-2022, the Company’s average copper price was $4.64 per pound (“/lb”) (Q1-2021: $4.08/lb) and the Company’s average molybdenum price was $18.33/lb (Q1-2021: $10.88/lb).
  • Q1-2022 production was 16.5 million pounds (“M lbs”) of copper 6% higher than Q1-2021 production of 15.5 M lbs due to higher tonnage, grade and recoveries from fresh tailings and higher grade and recoveries from Cauquenes.
  • Molybdenum production during Q1-2022 was 0.2 M lbs (Q1-2021: 0.4 M lbs) due to lower molybdenum content in fresh tailings.
  • Revenue during Q1-2022 was $53.8 million (Q1-2021: $48.9 million), including copper tolling revenue of $50.4 million (Q1-2021: $45.4 million) and molybdenum revenue of $3.4 million (Q1-2021: $3.5 million).
  • Copper tolling revenue is calculated from the Company’s gross value of copper produced during Q1-2022 of $73.8 million (Q1-2021: $58.1 million) and fair value adjustments to settlement receivables of $5.6 million (Q1-2021: $8.5 million), less notional items including DET royalties of $22.3 million (Q1-2021: $16.0 million), smelting and refining of $6.2 million (Q1-2021: $4.7 million) and transportation of $0.5 million (Q1-2021: $0.5 million). The Q1-2022 settlement adjustments included $3.8 million in settlement adjustments in respect of Q4-2021 production, which are final adjustments (Q1-2021: $5.0 million of final adjustments).
  • The Company generated operating cash flow before changes in non-cash working capital1 of $20.6 million in Q1-2022 (Q1-2021: $20.0 million). Quarterly net operating cash flow was $21.4 million (Q1-2021: $28.1 million). Free cash flow to equity1 was $17.9 million (Q1-2021: $12.6 million).
  • Q1-2022 cash cost1 was $1.90/lb (Q1-2021: $1.88/lb).
  • Amerigo’s financial performance is very sensitive to changes in copper prices. At March 31, 2022, the Company’s provisional copper price was $4.64/lb, and final prices for January, February, and March 2022 sales will be the average London Metal Exchange prices for April, May, and June 2022, respectively. A 10% increase or decrease from the $4.64/lb provisional price would result in a $7.6 million change in revenue in Q2-2022 in respect of Q1-2022 production.
  • In Q1-2022, Amerigo returned $7.6 million to shareholders: $4.2 million were paid on March 21, 2022, through Amerigo’s increased quarterly dividend of Cdn$0.03 per share, and $3.4 million were returned through the purchase of 2.4 million common shares for cancellation through Amerigo’s ongoing Normal Course Issuer Bid (“NCIB”). Amerigo may repurchase for cancellation a further 6.9 million shares under the NCIB. Amerigo is reporting the NCIB monthly activity progress at http://www.amerigoresources.com/investors/share-buybacks/.
  • In Q1-2022, the Company made scheduled debt payments of $nil (Q1-2021: $6.5 million) and paid $2.4 million for plant and equipment (Q1-2021: $0.6 million).
  • At March 31, 2022, the Company held cash and cash equivalents of $71.1 million (December 31, 2021: $59.8 million), restricted cash of $6.4 million (December 31, 2021: $4.2 million) and had working capital of $34.5 million (December 31, 2021: $24.6 million).

Investor Conference Call on May 5, 2022

Amerigo’s quarterly investor conference call will take place on Thursday, May 5, 2022 at 11:00 am Pacific Standard Time/2:00 pm Eastern Standard Time. To join the call, please dial 1-888-664-6392 (Toll-Free North America) and enter confirmation number 54894230.

Upcoming Investor Conferences Participation

Amerigo will be participating in the Sidoti Micro Cap Virtual Conference (May 11 and 12, 2022), the Inflection Partners 2022 Virtual Conference (May 12, 2022) and the International Deal Gateway Mining & Resource Showcase (May 26, 2022).

CEO Aurora Davidson will present the Amerigo investment thesis and will be available for one-on-one meetings throughout each event.

About Amerigo and Minera Valle Central (“MVC”)

Amerigo Resources Ltd. is an innovative copper producer with a long-term relationship with Corporación Nacional del Cobre de Chile (“Codelco”), the world’s largest copper producer. Amerigo produces copper concentrate and molybdenum concentrate as a by-product at the MVC operation in Chile by processing fresh and historic tailings from Codelco’s El Teniente mine, the world's largest underground copper mine. Tel: (604) 681-2802; Web: www.amerigoresources.com; Listing: ARG:TSX.

Summary Consolidated Statements of Financial Position

March 31,

December 31,

2022

2021

$ thousands

$ thousands

Cash and cash equivalents

71,095

59,792

Restricted cash

6,383

4,221

Property plant and equipment

175,863

178,083

Other assets

28,534

27,249

Total assets

281,875

269,345

Total liabilities

134,995

130,552

Shareholders' equity

146,880

138,793

Total liabilities and shareholders' equity

281,875

269,345

Summary Consolidated Statements of Income and Comprehensive Income

Three months ended March 31,

2022

2021

$ thousands

$ thousands

Revenue

53,765

48,907

Tolling and production costs

(32,339)

(30,029)

Other expenses

(414)

(2,837)

Finance gains (expense)

114

(856)

Income tax expense

(5,637)

(4,260)

Net income

15,489

10,925

Other comprehensive loss

(137)

(699)

Comprehensive income

15,352

10,226

Earnings per share - basic & diluted

0.09

0.06

Summary Consolidated Statements of Cash Flows

Three months ended March 31,

2022

2021

$ thousands

$ thousands

Cash flows from operating acitivities

20,609

20,040

Changes in non-cash working capital

765

8,096

Net cash from operating activities

21,374

28,136

Net cash (used in) received from investing acitivities

(2,419)

3,289

Net cash used in financing acitivites

(7,755)

(6,892)

Net increase in cash

11,200

24,533

Effect of foreign exchange rates on cash

103

25

Cash and cash equivalents, beginning of period

59,792

14,085

Cash and cash equivalents, end of period

71,095

38,643

1 Non-IFRS Measures

This news release includes five non-IFRS measures: EBITDA (i), operating cash flow before changes in non-cash working capital (ii), free cash flow to equity & free cash flow (iii) and cash cost (iv).

These non-IFRS performance measures are included in this news release because they provide key performance measures used by management to monitor operating performance, assess corporate performance, and to plan and assess the overall effectiveness and efficiency of Amerigo’s operations. These performance measures are not standardized financial measures under IFRS and, therefore, amounts presented may not be comparable to similar financial measures disclosed by other companies. These performance measures should not be considered in isolation as a substitute for measures of performance in accordance with IFRS.

(i) EBITDA refers to earnings before interest, taxes, depreciation, and administration and is calculated by adding back depreciation expense to the Company’s gross margin.

(Expressed in thousands)

Q1-2022

Q1-2021

$

$

Gross Profit

21,426

18,878

Add

Depreciation and amortization

4,924

4,376

EBITDA

26,350

23,254

(ii) Operating cash flow before changes in non-cash working capital is calculated by adding back the decrease or subtracting the increase in changes in non-cash working capital to or from cash provided by operating activities.

(Expressed in thousands)

Q1-2022

Q1-2021

$

$

Net cash provided by operating activities

21,374

28,136

Add (deduct):

Changes in non-cash working capital

(765)

(8,096)

Operating cash flow before changes in non-cash working capital

20,609

20,040

(iii) Free cash flow to equity (“FCFE”) refers to operating cash flow before changes in non-cash working capital less capital expenditures plus new debt issued less debt and lease repayments. FCFE represents the amount of cash generated by the Company that can be used to pay for:

a) potential distributions to the Company’s shareholders, and

b) any additional taxes triggered by the repatriation of funds from Chile to Canada to fund these distributions.

Free cash flow (“FCF”) refers to FCFE plus repayments of borrowings and lease repayments.

(Expressed in thousands)

Q1-2022

Q1-2021

$

$

Operating cash flow before changes in non-cash working capital

20,609

20,040

Deduct:

Cash used to purchase plant and equipment

(2,419)

(563)

Repayment of borrowings

-

(6,547)

Lease repayments

(283)

(345)

Free cash flow to equity

17,907

12,585

Add:

Repayment of borrowings

-

6,547

Lease repayments

283

345

Free cash flow

18,190

19,477

(iv) Cash cost is a performance measure commonly used in the mining industry that is not defined under IFRS. Cash cost is the aggregate of smelting and refining charges, tolling/production costs net of inventory adjustments and administration costs, net of by-product credits. Cash cost per pound produced is based on pounds of copper produced and is calculated by dividing cash cost over the number of pounds of copper produced.

(Expressed in thousands)

Q1-2022

Q1-2021

$

$

Tolling and production costs

32,339

30,029

Add (deduct):

Smelting and refining charges

6,274

4,762

Transportaton costs

466

519

Inventory adjustments

1,183

2,308

By-product credits

(3,386)

(3,506)

DET royalties-molybdenum

(678)

(557)

Depreciation and amortization

(4,924)

(4,376)

Cautionary Statement on Forward-Looking Information

This news release contains certain forward-looking information and statements as defined in applicable securities laws (collectively referred to as "forward-looking statements"). These statements relate to future events or the Company’s future performance. All statements other than statements of historical fact are forward-looking statements. The use of any of the words "anticipate", "plan", "continue", "estimate", "expect", "may", "will", "project", "predict", "potential", "should", "believe" and similar expressions is intended to identify forward-looking statements. These forward-looking statements include but are not limited to, statements concerning:

• forecasted production and operating costs;

• our strategies and objectives;

• our estimates of the availability and quantity of tailings, and the quality of our mine plan estimates;

• our estimates in respect of annual 2021 sustaining capital expenditures;

• the sufficiency of water reserves of Colihues to maintain projected Cauquenes tonnage processing in 2021 and future years;

• prices and price volatility for copper, molybdenum, and other commodities and of materials we use in our operations;

• the demand for and supply of copper, molybdenum, and other commodities and materials that we produce, sell and use;

• sensitivity of our financial results and share price to changes in commodity prices;

• our financial resources and our expected ability to meet our obligations for the next 12 months;

• the expected amount of MVC’s annual free cash flow that will become available for distribution to Amerigo shareholders each year during the term of the Term Loan;

• our assessment of the probabilities of DET exercising its early exit options under the DET Agreement as remote;

• interest and other expenses;

• domestic and foreign laws affecting our operations;

• our tax position and the tax rates applicable to us;

• our ability to comply with our loan covenants;

• the production capacity of our operations, our planned production levels and future production;

• hazards inherent in the mining industry causing personal injury or loss of life, severe damage to or destruction of property and equipment, pollution or environmental damage, claims by third parties and suspension of operations

• estimates of asset retirement obligations and other costs related to environmental protection;

• our future capital and production costs, including the costs and potential impact of complying with existing and proposed environmental laws and regulations in the operation and closure of our operations;

• repudiation, nullification, modification or renegotiation of contracts;

• our financial and operating objectives;

• our environmental, health and safety initiatives;

• the outcome of legal proceedings and other disputes in which we may be involved;

• the outcome of negotiations concerning metal sales, treatment charges and royalties;

• disruptions to the Company's information technology systems, including those related to cybersecurity;

• our dividend policy; and

• general business and economic conditions.

These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such statements. Inherent in forward-looking statements are risks and uncertainties beyond our ability to predict or control, including risks that may affect our operating or capital plans; risks generally encountered in the permitting and development of mineral projects such as unusual or unexpected geological formations, negotiations with government and other third parties, unanticipated metallurgical difficulties, delays associated with permits, approvals and permit appeals, ground control problems, adverse weather conditions, process upsets and equipment malfunctions; risks associated with labour disturbances and availability of skilled labour and management; risks related to the potential impact of global or national health concerns, including COVID-19, and the inability of employees to access sufficient healthcare; government or regulatory actions or inactions, fluctuations in the market prices of our principal commodities, which are cyclical and subject to substantial price fluctuations; risks created through competition for mining projects and properties; risks associated with lack of access to markets; risks associated with availability of and our ability to obtain both tailings from Codelco’s Division El Teniente’s current production and historic tailings from tailings deposits; risks with respect to the ability of the Company to draw down funds from bank facilities and lines of credit, and the availability of and ability of the Company to obtain adequate funding on reasonable terms for expansions and acquisitions; mine plan estimates; risks posed by fluctuations in exchange rates and interest rates, as well as general economic conditions; risks associated with environmental compliance and changes in environmental legislation and regulation; risks associated with our dependence on third parties for the provision of critical services; risks associated with non-performance by contractual counterparties; title risks; social and political risks associated with operations in foreign countries; risks of changes in laws affecting our operations or their interpretation, including foreign exchange controls; and risks associated with tax reassessments and legal proceedings. Notwithstanding the efforts of the Company and MVC, there can be no guarantee that Amerigo’s or MVC’s staff will not contract COVID-19 or that Amerigo’s and MVC’s measures to protect staff from COVID-19 will be effective. Many of these risks and uncertainties apply not only to the Company and its operations, but also to Codelco and its operations. Codelco’s ongoing mining operations provide a significant portion of the materials MVC processes and its resulting metals production, therefore these risks and uncertainties may also affect their operations and in turn have a material effect on the Company.

Actual results and developments are likely to differ, and may differ materially, from those expressed or implied by the forward-looking statements contained in this news release. Such statements are based on a number of assumptions which may prove to be incorrect, including, but not limited to, assumptions about:

• general business and economic conditions;

• interest and currency exchange rates;

• changes in commodity and power prices;

• acts of foreign governments and the outcome of legal proceedings;

• the supply and demand for, deliveries of, and the level and volatility of prices of copper and other commodities and products used in our operations;

• the ongoing supply of material for processing from Codelco’s current mining operations;

• the grade and projected recoveries of tailings processed by MVC;

• the ability of the Company to profitably extract and process material from the Cauquenes tailings deposit;

• the timing of the receipt of and retention of permits and other regulatory and governmental approvals;

• our costs of production and our production and productivity levels, as well as those of our competitors;

• changes in credit market conditions and conditions in financial markets generally;

• our ability to procure equipment and operating supplies in sufficient quantities and on a timely basis;

• the availability of qualified employees and contractors for our operations;

• our ability to attract and retain skilled staff;

• the satisfactory negotiation of collective agreements with unionized employees;

• the impact of changes in foreign exchange rates and capital repatriation on our costs and results;

• costs of closure of various operations;

• market competition;

• tax benefits and tax rates;

• the outcome of our copper concentrate sales and treatment and refining charge negotiations;

• the resolution of environmental and other proceedings or disputes;

• the future supply of reasonably priced power;

• rainfall in the vicinity of MVC returning to normal levels;

• average recoveries for fresh tailings and Cauquenes tailings;

• our ability to obtain, comply with and renew permits and licenses in a timely manner; and

• our ongoing relations with our employees and entities with which we do business.

Future production levels and cost estimates assume there are no adverse mining or other events which significantly affect budgeted production levels.

Although the Company believes that these assumptions were reasonable when made, because these assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond the Company’s control, the Company cannot assure that it will achieve or accomplish the expectations, beliefs or projections described in the forward-looking statements.

We caution you that the foregoing list of important factors and assumptions is not exhaustive. Other events or circumstances could cause our actual results to differ materially from those estimated or projected and expressed in, or implied by, our forward-looking statements. You should also carefully consider the matters discussed under Risk Factors in Amerigo’s Annual Information Form. The forward-looking statements contained herein speak only as of the date of the news release and except as required by law, we undertake no obligation to update publicly or otherwise revise any forward-looking statements or the foregoing list of factors, whether as a result of new information or future events or otherwise.

Contact Details

Aurora Davidson, President and CEO

+1 604-697-6207

[email protected]

Graham Farrell

+1 416-842-9003

[email protected]

Company Website

http://www.amerigoresources.com/

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