Equinox Gold Stock: Santa Luz is now producing (NYSE:EQX)
Vancouver Equinox Gold (NYSE: EQX) released its fourth quarter and full year 2021 results on February 24, 2022.
Note: This article is an essential update of the article published on January 19, 2022.
In my previous article, I analyzed preliminary 4Q21 gold production, and this article covers 4Q21 and full year 2021 results, including gold production. However, the production numbers have changed a bit and have been updated.
A few highlights
Equinox Gold produced 210,432 ounces of gold in 4Q21, an increase of 54.3% over 4Q20 (136,352 oz) and up 50.6% sequentially. The company
2021 target achieved with total production of 602,110 ounces.
Revenue was $381.23 million, a massive jump from the same quarter a year ago. The company posted net profit of $184.08 million, double the net profit quarter of $91.24 million last year.
The business is progressing well and has excellent potential for future growth, making it an excellent long-term investment.
Equinox Gold operates primarily in safe jurisdictions in North and South America with seven mines in production and eight with the Santa Luz project, which will produce approximately 110,500 ounces Au per year with the first gold pour at the end of March.
Additionally, on October 27, 2021, Equinox Gold announcement the inauguration of the large-scale construction of the Greenstone mine in Ontario, Canada.
Below is a summary of the essential data:
Equinox Gold is a reliable proxy for gold. The metal has experienced great volatility over the past twelve months and will likely continue to fluctuate widely.
However, we have benefited from strong momentum for the price of gold, benefiting from the war in Ukraine and a worrying rise in inflation fueled by commodity prices.
As the Fed becomes hawkish again and ready to act aggressively against inflation that it considers too high, we could soon see a reversal in the price of gold below $1,850 an ounce.
This is the main reason why I recommend short-term LIFO trading of a large portion (~40%) of your long position to take advantage of gold’s volatility and reduce the risk of a sudden reversal for the worse.
Stock market performance
Equinox Gold has outperformed the VanEck Vectors Gold Miners ETF (NYSEARCA: GDX) and is now up 18% year over year.
CEO Christian Milau said on the conference call:
we’ve brought together a collection of companies and assets over the past four years, and we’re excited to be at this point in our growth cycle here where we have the diversified gold producer of the Americas with all seven mines in production which will soon be eight, a Santa Luz ramping up in the second quarter of this year and five exciting growth projects.
Equinox Gold – 4Q21 Financial Overview – The Raw Numbers
|Total revenue in millions of dollars||252.63||229.70||226.22||245.13||381.23|
|Net income in millions of dollars||65.25||50.32||325.74||-5.24||184.08|
|EBITDA in millions of dollars||103.54||118.73||364.16||47.55||244.29|
|Diluted EPS in $/share||0.31||0.14||0.96||-0.02||0.54|
|Cash flow from operations in millions of dollars||82.93||79.36||20.17||64.76||155.42|
|Capital expenditures in millions of dollars||50.91||70.87||94.41||71.51||107.44|
|Free cash flow in millions of dollars||32.02||8.49||-74.24||-6.75||47.99|
|Total cash in millions of dollars||344.93||317.53||513.91||459.93||546.03|
|Total long-term debt in millions of dollars||545.24||547.36||540.53||545.09||540.69|
|Shares outstanding (diluted) in millions||266.03||291.62||343.63||300.51||350.97|
The data source: Company press release
Gold production and balance sheet details
1 – Revenue reached $381.23 million in 4Q21
Equinox Gold reported revenue for the fourth quarter of 2021 of $381.23 million. I recommend checking the table above for balance sheet data.
This quarter, Equinox completed the acquisition of Premier, increasing diversification and scale with a 50% interest in the Greenstone gold project in Canada and a 100% interest in the operating Mercedes gold-silver mine. in Mexico. Additionally, Equinox increased Greenstone’s stake to 60%. Too,
- Sale of ten million shares of Solaris for total cash proceeds of $66.7 million.
- Sale of the Pilar mine for $38.0 million, a 1% net smelter return royalty and 11.6 million shares of Pilar Gold Inc.
- C$51 million investment in i-80 Gold Corp. to maintain approximately 25% ownership on a fully diluted basis.
- Announcement of an agreement to sell the Mercedes mine for $100 million, a 2% net smelter return and 24.73 million shares of Bear Creek Mining Corporation (“Bear Creek”).
2 – Free cash flow was $47.99 million in 4Q21
Note: Generic free cash flow is operating cash flow minus capital expenditures.
Trailing twelve year free cash flow was a loss of $24.51 million with 4Q21 free cash flow of $47.99 million.
3 – More than Nand debt and cash of $546.03 million in 4Q21
No net debt as of December 31, 2021. Total cash was $546.03 million and liquidity is around $505 million now.
4 – Consolidated Gold Production Details – Gold production in 4Q21 was 210,432 Au Oz (212,255 Au Oz sold)
The 4Q21 AISC was $1,266 per ounce sold and the realized gold price was $1,792 per ounce.
5 – Orientation 2022
The production forecast is up significantly from 2021 with 625,000 to 710,000 ounces of gold and an AISC of $1,300 to $1,375 per gold sold.
Note: November 4, 2021 – Equinox announcement that it had filed a technical report in accordance with National Instrument 43-101 regarding the pre-feasibility study for an expansion of its Aurizona gold mine in Brazil and an update of the estimate of mineral reserves and mineral resources for Aurizona, the results of which were announced on September 20, 2021.
The main change to the gold production forecast comes from Santa Luz, a new producing mine for the company.
6 – Details of production by mine for the last eight quarters
Equinox Gold has seven mines in operation after the sale of Pilar.
Additionally, Equinox has begun full-scale construction in Greenstone with,
a 100% construction budget (of which Equinox Gold will finance 60%) of C$1.53 billion ($1.23 billion at an exchange rate of C$1.25), including a contingency of $177 million
Initial capital estimate updated October 2021 to reflect firm quotes from suppliers following detailed engineering, review and update of capital costs and increased contingency, including a provision for future inflation and potential impacts of COVID-19
Upfront cash outlay could be reduced by approximately $100 million through lease financing for mobile equipment and offset economically by up to $70 million in pre-commercial production revenue (at $1,750 per year). ounce of gold).
7 – Proven and probable mineral reserves
Mineral Reserves are now 16,402 Moz.
Technical analysis (short term)
EQX is forming an ascending channel pattern with resistance at $9 and support at $8.1.
The trading strategy I recommend is to sell about 25% to 35% of your position between $8.85 and $9.25. The recent gold cross (50MA crossing the 200MA) is an excellent positive signal.
It is reasonable to accumulate EQX again below $8.15.
Watch the price of gold like a hawk.
Warning: The TA table must be updated frequently to be relevant. This is what I do in my stock tracker. The table above has a possible validity of approximately one week. Remember that the TA chart is a tool only to help you adopt the right strategy. This is no way to predict the future. Nobody and nothing can.
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