($EQX) Equinox Gold Reported outstanding Q2 earnings results, posting its second consecutive quarter of record results. During Q2, despite temporary mining suspensions at Pilar, Fazenda, and most notably Los Filos, Equinox was able to produce 127k oz. Au. Costs were also better than expected with AISC of $900/oz. during the quarter. This was surprising as it largest operation (by a wide-margin) was put on care and maintenance for two months during Q2, partially negated by processing lower grade solutions on the leach pad.
This, combined with higher gold prices, led to a surge in operating cash flow. At first glance, its seemed high, above $80m but that was as a result of a significant decrease in non-cash working capital. Instead, operating cash flow before changes in non-cash working capital was $61m, a significant increase considering Equinox will only be entering the first phase its multi-year growth spurt beginning in Q4 2020/Q1 2021. The growth spurt which will really start to be recognized in 2H 2021 will serve to lower company-wide all-in sustaining costs (AISC) and be the first big growth catalyst as the company seeks to achieve its objective of becoming a 1m oz. gold producer in Latin America.
Equinox remains very cheap relative to its peer group and mid-tier mining companies with significant embedded growth driven by three cornerstone assets. It is currently trading with an implied gold price of approx. $1,700-$1,750, well below current prices. Equinox remains well capitalized to fund all of its growth projects [Castle Mountain Phase I, Castle Mountain Phase II, Los Filos Expansion, Santa Luz, and Aurizona underground]. Lastly, a short-summary of how Equinox will become a 1m oz. producer.
- Castle Mountain Phase I [Q4 2020] : +45k oz. Au
- Los Filos Expansion [Q3/Q4 2021 - 1H 2020] : +160k oz. Au
- Santa Luz [Q4 2021 - Q1 2022]: +100-110k oz. Au
- Castle Mountain Phase II [2H 2023 - 1H 2024] + 200k oz. Au
- Aurizona U/G [1H 2024 - 1H 2025] + 65 - ??k oz. Au
About the author
Chief Mining Analyst with GoldSeek.com and SilverSeek.com. Author of the Gold Seeker Report weekly newsletter and analyst at the 24K Gold Fund. Previously he was the Senior Mining Equity and Economic Analysis at The Morgan Report. He was a Co-Founder and Director of Lemuria Royalties, before it was acquired in March 2018. He also co-authored The Silver Manifesto with David Morgan in 2015.
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