Equinox Gold Q1 2024 Earnings Call Transcript

Quartr
Provided by Quartr
May 9, 2024

There are 9 speakers on the call.

Operator

I would now like to turn the conference over to Relyn Bailey, Vice President, Investor Relations for Equinox Gold. Please go ahead.

Speaker 1

Thank you, Carl, and thank you, everybody, for joining us this morning. We will, of course, be making a number of forward looking statements today. So please do visit our website, SEDAR and EDGAR to view the rest of our continuous disclosure documents. I'll now turn the conference call over to our President and CEO, Greg Smith.

Speaker 2

Thanks, Raline. Good morning and thanks everyone for joining the call today. On the line with me is our COO, Doug Reddy our CFO, Peter Hardy our EVP of Exploration, Scott Heffernan and our VP of Investor Relations, Rylin Bailey. Again, today, we are discussing Equinox Gold's 2024 First Quarter Financial and Operating Results. Today is also the first opportunity we've had to publicly discuss our recently announced transaction to consolidate ownership of the Greenstone Mine in Ontario.

Speaker 2

So I'm going to start with that and then move on to the Q1 results. So, as most of you know, we already own 60% of the Greenstone Mine with our joint venture partner Orion Mine Finance owning the other 40%. On April 23, we announced that we are acquiring Orion's 40% interest. This transaction delivers full ownership of Greenstone Mine to Equinox Gold and consolidates ownership of 1 of the largest and highest grade open pit gold mines upscale in Canada. The total acquisition cost is $995,000,000 in cash and shares.

Speaker 2

Dollars 250,000,000 will be satisfied through the issue of 42,000,000 common shares of Equinox Gold to Orion. The remaining $745,000,000 will be paid in cash sourced from a new $500,000,000 3 year term loan. The proceeds from the recently completed $299,000,000 equity offering of common shares of Equinox Gold and a deferred payment of $40,000,000 due at the end of this year. We expect the transaction to close in the near term. So, I want to take the opportunity now to thank Orion Mine Finance and their team for being great partners on the development of this mine and to welcome them as meaningful shareholders of Equinox Gold.

Speaker 2

As existing owners of Greenstone, we know this mine well and consider this a very logical and attractive transaction for Equinox. It is accretive to our cash flow and EBITDA delivering substantial near term value. It increases the company's average mine life, reserves and production, while lowering our consolidated per ounce operating costs. It enhances our strategic flexibility and operational control decision making. And it increases the company's exposure to the top tier mining jurisdiction of Ontario and gives us a 100% ownership of a rare long life high quality mine of scale.

Speaker 2

Based on analyst consensus estimates, you can see on this slide that our consolidated production will immediately increase this year as Greenstone starts commercial operations. And over the next 2 years, we start to see our overall cost decrease with the increased exposure to the lower cost production from the Greenstone mine. You can also see the meaningful increase to our EBITDA or our earnings before interest tax and depreciation and amortization. This headline increase in EBITDA also results in an increase of EBITDA on a per share basis, making this an accretive transaction for Equinox in the near term. Also based on consensus net asset values for our mining and development assets, you can see the substantial increase in overall exposure to Canada, which will exceed 52% with the completion of this consolidation.

Speaker 2

And this is specifically exposure to Ontario, which is one of the lowest risk operating jurisdictions globally for mining. Our current production guidance for this year is currently 660,000 to 750,000 ounces. On closing of the consolidation of Greenstone, our consolidated pro form a guidance increases to a midpoint of 780,000 ounces with a corresponding decrease to our consolidated cash costs and all in sustaining costs. We will formally update our 2024 guidance once we have closed the transaction. So where does this take us?

Speaker 2

We still got our 7 producing mines across Brazil, Mexico and the United States, and of course, we'll have production in Canada in just a couple of weeks. Pro form a, we'll see a production bump of around 160,000 ounces per year by owning 100 percent of Greenstone now, which we expect to be in commercial production in Q3 this year. Our production is supported by a large gold endowment, including pro form a transaction, 19,000,000 ounces in reserves and an additional 17,000,000 ounces in measured and indicated resources. And with this consolidation of Greenstone, we've taken another important step toward achieving our vision of 1,000,000 ounces of gold production per year. I'll now give a quick overview of the Q1 results, and then I'll turn the call over to Pete and Doug for more details.

Speaker 2

During the Q1, we produced just under 112,000 ounces of gold and sold just over 116,000 ounces. Cash cost per ounce sold was $15.67 per ounce and all in sustaining cost per ounce sold was $19.50 per ounce. Q1 is seasonally and typically a lower production quarter for us. This Q1 was a good quarter with Los Filos in Arizona currently both our largest mines, both exceeding plan for the Q1 and setting us up well to achieve our fiscal 2024 guidance. We did report in April that we have experienced some geotechnical issues in the south wall of the Piava open pit at Aurizona and have temporarily suspended mining in Piava.

Speaker 2

To mitigate this, we processed low grade stockpiled ore through April and we have accelerated mining in the new Tatajuba open pit. We expect first ore from Tatajuba in early June. We are continuing to assess the impact this might have on production from Aurizona for this year, but at this stage, we're not revising our consolidated guidance. Our safety performance this quarter was good. 6 of our sites had no lost time incidents and our 12 month rolling total recordable injury frequency rate stands at 1.55 per 1000000 hours worked.

Speaker 2

We had no significant environmental incidents in Q1. And shortly following this call, we will publish our fiscal 2023 ESG report, which this year is a consolidation of our ESG, climate, tailings and water stewardship reports into one comprehensive document. It will be available on our website, and I'd encourage everyone on this call to check it out. It is an excellent report. On the development side, commissioning of Greenstone remained a key focus for the company during the Q1, and we are pleased to report in early April that we had started processing material through the full grinding circuit.

Speaker 2

Commissioning is progressing well, and we're looking forward to our first gold pour at Greenstone later this month. So, this is coming very soon. Doug will have more details on the current status of Greenstone later in the call. We are also advanced we also did advance the permitting of our plant expansion at Castle Mountain, which would increase production at Castle Mountain to over 200,000 ounces of gold per year. We recently received the notice of completion from the Federal Bureau of Land Management and are now working with them to complete the notice of intent, which will formally kick off permitting for the expansion, and we expect that to finish up sometime in mid-twenty 26.

Speaker 2

At our Aurizona mine in Brazil, we also plan to start development of the underground portal at Piava later this year. And as mentioned earlier, we have accelerated the development of the new Tatajuba open pit with mining commencing in May and 1st ore expected in June. With that, I'll turn it over to Pete to discuss our financial results.

Speaker 3

Thanks, Greg. We're now on Slide 10 in the presentation. We sold 117,000 ounces of gold, as Greg mentioned, at an average realized price of $2,066 per ounce, revenues of $241,000,000 Income from mine operations was $11,000,000 compared to $14,000,000 in Q1 2023. We had $184,000,000 in operating expenses in Q1 2024, which is a decrease from the immediate prior quarter of Q4 last year when we experienced $198,000,000 of expenses, but an increase from Q1 2023's $172,000,000 On a per unit basis, we had cash cost of $15.67 per ounce compared to $13.46 per ounce in Q1 2023. The difference is primarily driven by lower production at Los Filos, which Doug will discuss in a minute and higher costs at Faizenda and Santa Luz, offset partially by the positive impact of higher production at Mesquite.

Speaker 3

Our all in sustaining cost per ounce for Q1 2024 was 19.50 dollars compared to $16.58 in Q1 last year. The change in AIC is the result of the same factors that affected cash costs. And in addition, we spent about $12,000,000 more on sustaining capital in Q1 this year versus Q1 last year, which was primarily on deferred stripping. Our EBITDA in Q1 2024 was $28,000,000 or $52,000,000 on an adjusted basis. We had a net loss of $43,000,000 for the quarter or basic loss per share of $0.13 On an adjusted basis, we had a net loss of $14,000,000 or $0.04 per share.

Speaker 3

Cash flow from operations before changes in non cash working capital

Speaker 4

was $48,000,000 or $0.15 a share.

Speaker 3

With respect to our sustaining spend, we spent $32,000,000 during the quarter. In April, in addition to announcing the transaction to consolidate our ownership of Greenstone, we also extended each of the $140,000,000 Mubadala convertible notes by 6 months, so they now mature in October 2024 September 2025. We also repriced the Mubadala note that matures next year to convert at $6.50 per share from the original conversion price of $7.80 per share. The purpose of extending those notes was to move the maturity of the 2024 note outside of the Greenstone commissioning period. Moving to Slide 11, please note these figures are as at March 31 and not pro form a.

Speaker 3

In terms of liquidity and capital position, we ended quarter with $125,000,000 of unrestricted cash. At March 31, the company had issued a cumulative total 22,500,000 shares under the ATM program for total gross proceeds of $100,000,000 As such, the ATM is now fully utilized and we have not renewed it. We expect to retain about $75,000,000 of cash from the recent equity offering after making the initial 9.50 $5,000,000 payment to Orion to acquire the remaining 40 percent of Greenstone. With regards to Greenstone, a total of $1,300,000,000 has been spent on the project to date. Greenstone was built during a difficult macroeconomic environment.

Speaker 3

Equinox Gold successfully navigated that environment by nimble management, while also benefiting from U. S. Dollar strength compared to the Canadian dollar. We expect Greenstone to start producing gold this month and quickly begin generating gold credits. We ultimately expect Greenstone to achieve commercial production largely on budget and expect to fund any pre commercial expenditures through our treasury and operating cash flow.

Speaker 3

At the end of Q1, we also have 165 $1,000,000 available to draw on our revolving credit facility. Additionally, we have $100,000,000 on our accordion feature of the revolving credit facility that remains available and undrawn. We have other levers including our $100,000,000 investment portfolio. As Equinox Gold depends in part on operating cash flow to fund Greenstone, we have gold hedges in place to ensure minimum gold price and secure the related cash flow in a portion of our gold sales during Greenstone commissioning and ramp up. At April 1, 2024, the company had collars on 112,000 ounces of gold for April to December with a floor of 2,008 per ounce and a ceiling of 22,021 per ounce.

Speaker 3

On 112,000 ounces hedged, 64,000 are in Q2, 33,000 in Q3 and 15,000 in Q4. I'll also note that the $500,000,000 term loan we expect to execute on close of the Greenstone final acquisition includes a requirement to hedge a minimum of 15% of production over 36 months from close of the transaction. Management has 1 month to put the hedges in place after close, which we expect to occur shortly. We're now on Slide 12. For the past few years at Equinox Gold, we've been acquiring and building mines and have been using debt as one of the funding methods for doing so, including an additional $500,000,000 term loan that we'll use to consolidate the Greenstone ownership.

Speaker 3

This slide demonstrates Equinox Gold's historic leverage as measured by net debt to EBITDA ratio from Q1 2020 through Q4 2023 and pro form a leverage through 2026 as per analyst consensus. The general trend we see is that leverage in the company increased as acquisitions were completed and as mines were being built. This is a natural consequence of using debt as well in labor for funding acquisitions and construction. Leverage peaked in Q1 2020, a few months after construction of Aurizona was completed, and again in late 2022 as construction Greenstone was ongoing and construction of the Santa Luz mine was completed. Another trend we see in this chart is that as mines are commissioned ramped up, the leverage decreases as Equinox Gold has the benefit of the EBITDA and cash flow generated by the new mine.

Speaker 3

Greenstone is expected to be a high margin producer. On the right side of the chart, we see that based on analyst consensus figures, leverage is expected to quickly decrease as Greenstone EBITDA is generated and we use cash flow to reduce debt. Ideally, we want leverage during non construction periods to be below one times and expect to achieve that in late 2025. With completion of Greenstone construction and pending gold production, management's goal is to reduce Equinox Gold's leverage as quickly as possible through the generation of operating cash flow from Greenstone and the other mines. With that, I will turn it over to Doug for a review of the operations.

Speaker 3

Thanks, Pete. We're now

Speaker 5

on Slide 13 of the presentation. At the Mesquite mine, gold production was 22 1,000 ounces with an all in sustaining cost of $11.88 per ounce. The mine benefited from lower fuel consumption and pricing in Q1. Stripping continued in the Ginger pit. That was a new discovery that was brought into the mine plan last year.

Speaker 5

Ore from Ginger comes on to leach pad in Q1 of 2025. Mining in Q1, we saw the completion of the Vista East pit, and additional ore was continuing to come as a positive reconciliation in the Don Juan pit. For the rest of 2024, production is mostly from drawdown of the leach pad inventories that have been accumulated in the latter part of 2023, also from side slope leaching and leaching of the additional ore that's been coming from the current mining. We also completed a drilling program that was designed to expand the ginger deposit that was completed in Q1. At Castle Mountain, production was 4,700 ounces at a high all in sustaining cost of $2,600 per ounce.

Speaker 5

Phase 1 is a small operation that involves mining and processing of low grade mineralized dump material. This material needs to be removed from the old pits in anticipation of mining higher grade in situ ore during the Phase 2 expansion. Most of the material in Q1 was crushed and agglomerated, comprising 85% of the ore that was being stacked. We continue to work on cost reductions at Castle Mountain. For Phase 2, as Greg noted earlier, we did receive a notice of completion from BLM for our permit application, and the permitting process continues to work towards the notice of intent.

Speaker 5

At Los Filos, production was 24,000 ounces with an all in sustaining cost of $2,424 per ounce, but this should be better in H2. In this quarter, the crusher was suspended while a planned move of the conveyor was being completed. During this time, production was only from run of mine ore and drawdown of the leach pad inventories that have been accumulated in H2 Ounces produced were higher than planned for the quarter. Ore for crushing, which is the higher grade ore, was stockpiled during Q1 and is being processed in Q2. That material will be under leach in late Q2 and in Q3.

Speaker 5

Operational improvements on the mining side that were reported in the previous quarter continued into 2024, especially in the open pit where we also had positive reconciliations for the Los Filos and Guadalupe open pits. Los Filos underground production was steady, but in the mining in a new area in the south mine, the area is called Diego, that was slow for production as it was in a startup phase with a new contractor. We do see that recovering during the subsequent quarters and coming up to full speed and production in Diegos. We have continued our dialogue with our community partners on new agreements, and these agreements are so that we can next page. In Brazil, at the Aurizona mine, production was 23,800 ounces with an all in sustaining cost of $19.73 per ounce.

Speaker 5

Mining was focused on waste and the majority of the ore that was processed was from the stockpile, which is normal during the rainy season. The Bene 2 tailings storage facility was commissioned in Q1 and is now the deposition area for our tailings. And we commenced the closure of the Bene I tailings storage facility. We have had exceptional rain year to date, highest rainfall in the life of the Aurizona mine. We suspended mining in the Piaba open pit after geotechnical instability led to displacement of the and no environmental damage.

Speaker 5

We continue working on remediation planning and activities with safety being the top priority. In late April, we commenced mining activities at the new Tatajuba open pit and anticipate ore coming in June from there to feed the the At the Pazenda mine, production was 14,400 ounces, and the all in sustaining cost was $17.45 per ounce. Plant feed is currently 45% from open pit and 55% from underground. In the open pit, we changed the mining contractor in Q1, and this impacted the adherence to the mine plan. The new open pit contractor is now fully mobilized and is catching up.

Speaker 5

In the underground mine, the development was behind and this delayed access to some of the higher grade stopes. Development rates have increased in April, if we look to catching up on mining in both open pit and underground in H2 of 2024. Drilling programs continue to replace reserves in the underground at Fazenda. At RDM, gold production was 10,900 ounces, and the all in sustaining cost was $1800 per ounce. We changed the rental mining fleet during Q1.

Speaker 5

This is rental equipment that is operated by our team. We also received the permit for the dry stack tailings area. We will be implementing that method of tailings management in the second half of this year. At Santa Luz, production was 11,836 ounces, and the all in sustaining cost was 2,500 and $19 per ounce. Plant throughput overall recoveries were impacted by several modifications and changes that were being made to the process plant.

Speaker 5

Elution efficiency and the number of elutions was improved. Electro winning and detox were also improved. These changes led to recovery improvements by April that we're now seeing on average in April 68.5% recovery. In Q2 and Q3, we will be working on the installation of a new trunnion, which should enable up to a 10% increase in throughput in the SAG mill and also a desliming circuit, and that will be to reduce the total organic carbon content and improve overall gold recovery by up to 6%. So the objective here is to achieve recoveries of around 73% or higher for the second half of the year.

Speaker 5

Moving on to Page 15. At Greenstone, we're in hot commissioning, and we've been processing ore since April 6. Primary and secondary crushing and the HPGR circuit are performing well. We've been running each ball mill with full load and have gradually ramped up to running them in tandem. The gravity circuit and the ILR or intensive leach reactor are in operation.

Speaker 5

The stockpile and broken ore in the pit at April 30 was over 1,900,000 tonnes. The tailings facility is permitted and in use. And by the end of April, we were operating at about 40% to 50% of design capacity and continued to ramp up in this last week. Naturally, there are some stoppages while the team resolves issues and adjusts the equipment during this commissioning period, but the first gold port is on track for this month. With that, I'll hand it back to Greg.

Speaker 2

Thanks, Doug. I'm going to finish off with a few final comments on the Greenstone Mine given the recent transaction announcement. So, at 400,000 ounces of gold production per year on average over the 1st 5 years, Greenstone really is a world class generational gold mine It will be Equinox Gold's largest, longest life and lowest cost mine once ramped up to commercial operations over the coming months. We feel extremely privileged to have seen this asset go from acquisition through construction into commissioning and now consolidated 100% into our company. Greenstone is a rare asset.

Speaker 2

It will be one of Canada's largest gold mines and will be one of Canada's highest grade open pit gold mines of scale. It will also be one of the very few gold mines of this size globally that is not held by a major mining company. Greenstone will also be a low cost gold mine with cash cost expected to be in the lowest quartile of gold mines globally. Achieving production at Greenstone will significantly reduce our operating costs and meaningfully increase our cash flow. There is substantial opportunity to extend the more than 14 year mine life that is currently defined at Greenstone.

Speaker 2

We already are seeing increased mine life through drilling that we have done in the southeast end of the open pit and there is opportunity to further expand the open pit to the west. There is also a substantial underground resource at Greenstone of over 4,000,000 ounces in all categories and we will start to assess and ultimately surface this value once we have the mine in commercial production. Finally, with this transaction, we will consolidate ownership of mineral claims over a highly perspective 100 kilometer trend to the west of the Greenstone mine with multiple near mine gold deposits and a number of targets across the trend. This includes the Perkbank deposit, which already has over 680,000 high grade gold ounces in resource. To conclude, with the consolidation and commissioning of Greenstone, we'll be substantially increasing our annual production into historically strong gold prices and into a bullish macro outlook for gold with the potential for decreasing interest rates later this year.

Speaker 2

We will now have also increased exposure to Canada and to low cost production from a significant mine at the beginning of its mine life, decreasing our operating costs and increasing our EBITDA and cash flow. And we have a production profile and portfolio that now elevates Equinox Gold to a large gold producer. Stop there and pass back to Rui for Q and A.

Speaker 1

Thanks, Greg. Operator, can you please remind people how to ask a question?

Speaker 6

Certainly.

Speaker 1

Thank you. I'll wait for people to join up. I do have a question that's come in online. Greg, you mentioned consolidation of Round Around Greenstone and in the Greenstone District. What is the potential there and what are the plans for exploration?

Speaker 2

I'll get Scott Heffernan to answer that one.

Speaker 7

Yes, sure. The short answer is that the exploration potential is excellent and that we're now busy designing exploration strategies and plans. The belt as Greg mentioned is over 100 kilometers long, it's host to a number of defined resources including 700,000 ounce Brookbank deposit as well as a number of past producers such as Sand River and Leach, the old Sand River and Leach mines. These are mainly active in 1940s 50s. So the immediate focus will be on the existing resources to determine the potential to expand them and to course determine if they can be bolt on to Greenstone or whether they represent standalone targets.

Speaker 7

Additionally, there's the greenfield potential. The belt has seen little to no modern exploration in the last 70 years and the potential to discover the next greenstone is real. So the immediate work will largely be desktop in nature, compilation and target generation, and this will progress into more field based activities in due course.

Operator

The first question comes from Anita Soni of CIBC World Markets. Please go ahead.

Speaker 6

Doug, so my first question is with regards to the guidance. So I see in the presentation you indicated the pro form a guidance would be in the range of 7.30 to 7 sorry, 8.30. Does that like so when is that just pending the close of the transaction that would be the guidance we can just adjust for when the transaction closes? Or is that subject to change as well?

Speaker 2

It's pro form a right now, Anita, based on just adjusting the Greenstone piece for 100%. And until we close the transaction, it will remain pro form a. And then once we close, we'll update it formally.

Speaker 6

And other parts to that moving parts, obviously, I mean, you've lost Filos, you indicated that was the closure or so the crusher being offline for 70% of the quarter was on plan, but it does require a pretty steep ramp up in for all of the last three quarters. Would you expect to be hitting your guidance at Los Filos this quarter or this year?

Speaker 2

Yes. Yes. The production at Los Filos in Q1 was actually better than planned. And Los Filos is absolutely on track for their guidance for the year.

Speaker 6

Okay. And so a similar question with Aurizona, would you I mean, would we should we adjust for the 4 to 6 weeks downtime that you have?

Speaker 2

Yes. I think that Aurizona is a little more complicated because at this stage, we don't know exactly what the rest of the year will look like. We did continue processing through April and we are now into Tatajuba and started mining and we'll have ore back online in June. The main flex there, Anita, is how soon we get back into the main Piaba pit because grade in Piaba is higher and that would increase production depending on when we can get back in there. So, we don't know yet.

Speaker 2

It's still raining in Brazil And as the dry season comes, we'll advance the remediation. And then we'll have an update on that. But based that's why I say in the call, we're not changing our consolidated guidance. I think there's enough room within our guidance to accommodate any changes at Aurizona at this stage. But we'll have a more formal update on Aurizona over the next couple of months as we get into the dry season.

Speaker 6

Okay. And then just a little bit more focus now on Greenstone. So I think you mentioned 1,500,000 tonnes of ore. And as you know, I'm always interested in the grade. Could you Doug, can you give us what the grade of that is, including the average and some highs and lows on that?

Speaker 5

Yes, the stockpile at the start up was 1 point 5,000,000 tonnes, but we also have broken ore in the pit. So in total, it's about 1,900,000 tonnes. Feed during the start up, we chose to start with bin 3 materials, so it's about 0 point 4 grams per tonne. And as we move through commissioning, we'll be feeding bin 2, bin 1 material into the plant, which gets up to around 2 grams per tonne. Overall, I think you're asking how our reconciliation is.

Speaker 5

Bang on for where we expect it, with the exception that we're getting additional tonnes from outside of our ore blocks. So lower grade material that's in addition. So we add more to bin 3 that's beyond what we had planned.

Speaker 6

Yes. Actually, I was just trying to get a handle on what you're working with in the 1st sort of 6 to 9 months in terms of feeding the mill. So I think you have about 60 the 1.5 would be about 60 days of full throughput stockpile. And I'm just trying to get a gauge of how much that mining fleet has to ramp up to match the mill once it gets going. We'll be The average grades of the bin 2 and bin 3?

Speaker 5

So you're asking what's coming direct feed from the pit? Yes. Currently, we are broken ore from the pits around 2 grams. So when we're feeding that in, it's going in at 2 grams. Our operating rates, 70,000, 80,000 tonnes a day.

Speaker 5

We have additional capacity to be able to ramp that up, but it's just being time to be able to feed into the mill, and we'll gradually be ramping up through the year as we bring in additional equipment.

Speaker 6

Okay. And then what's your current strip ratio?

Speaker 5

Current, I would have to get back to you because, of course, a lot of that is I won't say it's pioneering, but it's early stages of the pit. So it's dealing with things such as we've been dealing with the Glory hole that was there with filling that with low grade material mining around that. So it's not a straightforward question, but I'll look into what it currently is and get back to you.

Operator

The next question comes from Mike Parkin of National Bank. Please go ahead.

Speaker 4

Hi, guys. Just a couple of questions. When like what are you kind of thinking in terms of potential timing in news flow on the Aurizona underground? I know I believe there was a study you guys were working on. When could we expect that and if that is something that you move ahead with, when could you see potentially capital being committed for that project?

Speaker 2

Q4. So, we're going to get into the dry season here, Mike, and then we'll start that initial development of the I think this year in our budget, we had about $10,000,000 allocated to the commencement of that development. So it's not a particularly huge project in 2024, but later this year is when we intend on getting in there. At the moment, we're in the process of finalizing contractors and mobilizing the timeline for mobilization of the people that are going to be working on it. So it's advancing, but there's not a whole lot to say yet and that will come later this year.

Speaker 4

Okay. And then switching over to Greenstone, just in terms of labor hiring, where are you on that? Is that continuing to track fairly well?

Speaker 5

We're fully our off side is fully staffed up. We have a few people who are from the project side who are just helping address any potential issues that come up during commissioning, but we're good.

Speaker 4

Okay, great. And then just a random thought for you. With gold prices being so high, is there any potential recoverable ounces in any of your historic keeps that if you did like a shock to them where historically a lower gold price wouldn't have justified the cost. But at these gold prices, you could shock some of the older pads to extract gold that might not have recovered at normal cyanide concentrations?

Speaker 5

That is something that we have been doing over the last few years at Los Filos. When we have an opportunity, we take some of the older material, especially if it's higher grade material that's been crushed and fully leached. We do look at turning it. But when we turn it, we add lime to it and then it gives another good pulse of gold out of it. A little bit more difficult to do at Mesquite because it's one big large pad and it is does cause us to have a longer it's not the lead cycle, it's the cycle of solution going through that pad.

Speaker 5

And Castle Mountain is a much smaller pad. We would consider anything that works on other pads, we would consider that for Castle Mountain as well. But Felis is the one where we already are doing that.

Speaker 4

Okay. That's it for me guys. All the best with the ramp up of Greenstone. Thanks, Mike. Thanks.

Speaker 4

I'll take

Speaker 1

a quick question from one of our analysts online. Just wondering if Orion is responsible for continuation of their CapEx spend until the transaction closes?

Speaker 2

No, the economic cutoff was April 30.

Speaker 1

Operator, can we take the questions from the phone?

Operator

The next question comes from Kerry Smith of Haywood Securities. Please go ahead.

Speaker 8

Thanks, operator. A couple of questions. Firstly, for Peter, you say you spent the $123,000,000,000 on a 100% basis on the project as of March 31, how much more would there be to spend? Or I guess another way to say it is, what will the final CapEx number be? Or is that the final number?

Speaker 3

It's close to the final number, Kerry. Right now, the spend is really more on working capital. We're imminently pouring gold. I think we've said in the past, we expect the operation to achieve cash flow neutrality fairly quickly after it starts pouring gold. So we're seeing and the construction has been principally complete since late last year.

Speaker 3

So, yes, we think we're right near the end here.

Speaker 8

Okay. Okay, great. And maybe for Doug, on TAD, you're going to have this gap where you won't have any tons coming any ore tons coming out of the main pad or pit and you're going to be accessing Orange, Tata Zumebo. What is the grade door like? Can you deliver a similar amount of ounces per month from Tata Zumebo or will there be a production decline on a monthly basis because the plants maxed out and the grade from Tatajuba is 20% less or whatever the number is?

Speaker 5

Tonnes wise, we've done the plan so that we can take up the feed to the plant. That's not an issue. I mean, Scott's far more cognizant of the work we've been doing at Tata Yuba overall on the reserves resource reserve side. So I'll let him speak to that.

Speaker 7

Sure. So you're right, Kerry, the grade is lower on average Tatajuba than in Piava proper. But the ore zone does daylight and right now the equipments in that upper lateral saprolite zone where you have collapse and distribution of grade over much broader area. So not much, I mean we're right into ore. Tatajuba is exposed now with the vegetation having been cleared and mining is underway.

Speaker 8

So Doug you're kind of

Operator

Bodyland?

Speaker 5

That's what we're looking at. Yes. I mean, we did put in the a pebble crusher, which has been fully commissioned, but that for Tatajuba ore that has no bearing. It just gives us the opportunity when we start to get back into fresh material, whether it be the Piaba Underground. So in the meantime, Tatajuba is just it's a waste.

Speaker 5

It's so much softer and allows us to be able to operate at high throughput.

Speaker 8

Okay, great. And you talked about this internal evaluation on Castle Mountain Phase 1. When would that be finished?

Speaker 5

We've been working it through with different scenarios during the 1st part of this quarter. I think we'll continue to be working that through for the rest of Q2, probably have some conclusions in Q3. And that's kind of our normal business planning cycle overall for leading into our mine plans that go into the budget cycle. So it's a natural cadence for us.

Speaker 8

Okay. And then on the discussions with the 3 communities at Los Filos, as long as you're making would it be fair to say that as long as you're making progress in those discussions that you don't have a definitive end date where you say, if we don't have an agreement by the end of the year, we're done and we're going to shut down or would you continue to just keep going as long as you're making progress?

Speaker 5

We continue to have the dialogue with all three communities. The dialogue is going very well. Obviously, we have overall timing when it comes to operating the mine, as we've said, efficiently, given that heap leach is not the way to go. We want to transition over to CIL. And but in regards to the specifics of timing and everything, I think that's something that I can't really get into because that's part of the dialogue.

Speaker 5

It is a conversation. It's not it's driven by working together jointly on this.

Speaker 8

Okay. But would it be fair to assume that you'll continue the dialogue at least for the rest of 2024 then and there's no risk that you would move to shut it down this year or a very low risk?

Speaker 5

We have a mine plan through 2024.

Speaker 8

Okay. And on the hedging that you have to put on for the new $500,000,000 loan, you said that would be over the next 36 months to mid-twenty 26. Will that be equal by quarter, Peter, or how might that hedge be added?

Speaker 3

Yes. Thanks, Karen. We're reviewing that strategy and haven't decided on it yet. There's different options, including the one you're referring to doing a straight line hedge. We may move some more of the hedge upfront, but we haven't decided that fully.

Speaker 3

Once we have decided it, we'll let everybody know what we did.

Speaker 8

Okay, got you. Okay, great. And then the last question I had, Doug, was just on Santa Luz, with the new China and the desalining. Were these projects, I guess, probably should have been done a year and a half ago. I'm just wondering why it took so long to decide to push ahead of them.

Speaker 8

Was it just you need to do the engineering or you weren't quite sure what the ultimate strategy might be?

Speaker 5

No. We've it's methodically working through test work to make sure that when we went to from pilot plant to industrial scale, we weren't going to disrupt anything. And then doing the engineering work and doing the ordering and delivery of the equipment and scheduling it so that we can get other changes completed before we start to do this. If you change everything at once, you don't really know what's working. So that's why it's a stepwise fashion of working through all the changes in Q1.

Speaker 5

So we're ready for the Q2, Q3 implementation of these 2, and then we'll see the results in Q3.

Speaker 8

Okay. Okay. Thanks very much. I appreciate it, guys.

Speaker 2

Thanks, Gary.

Speaker 1

Thanks, Gary.

Operator

So we

Speaker 1

do have a few questions online. I'll get back to you by e mail about those. And I think we're done for now. Greg, do you have any closing remarks?

Speaker 2

No. None for me, Rillyn, other than just thanks again, everyone, joining the call. Thanks for the continued support, and we'll talk to you next quarter.

Speaker 1

Perfect. Thank you. Operator, you can now conclude the call.

Powered by Quartr

Key Takeaways

  • Equinox agreed to acquire Orion’s remaining 40% interest in the Greenstone Mine for US$995 million—US$250 million in shares and US$745 million in cash (funded by a US$500 million term loan, equity offering and deferred payment)—with closing expected imminently.
  • This consolidation delivers 100% ownership of one of Canada’s largest, highest-grade open pit gold mines, adding ~160,000 oz/year of production, extending mine life and reserves, lowering per-ounce operating costs, and being accretive to cash flow and EBITDA.
  • On a pro forma basis, 2024 production guidance increases to a midpoint of 780,000 ounces with reduced cash and all-in sustaining costs; formal guidance will be updated once the transaction closes.
  • In Q1 2024 Equinox produced ~112,000 oz and sold ~116,000 oz of gold at a cash cost of US$15.67/oz (AISC US$19.50/oz), generated US$48 million of operating cash flow, and maintained strong safety performance with six sites reporting no lost-time incidents.
  • Greenstone commissioning is progressing well: processing commenced April 6, crushing and grinding circuits are operating, stockpiles exceed 1.9 Mt, ramp rates reached 40–50% of design by end-April, and the first gold pour is expected this month.
AI Generated. May Contain Errors.
Earnings Conference Call
Equinox Gold Q1 2024
00:00 / 00:00