Equinox Gold Reports First Quarter 2022 Financial and Operating Results

2022-05-03

TSX - Toronto Stock Exchange · Gold · Silver · Canada

Canada NewsWire

All dollar figures in US dollars, unless otherwise indicated

VANCOUVER, BC , May 3, 2022 /CNW/ - Equinox Gold Corp. (TSX: EQX) (NYSE American: EQX) ("Equinox Gold" or the "Company") is pleased to announce its first quarter 2022 summary financial and operating results. The Company's unaudited condensed consolidated interim financial statements and related management's discussion and analysis for the three months ended March 31, 2022 will be available for download on SEDAR, on EDGAR and on the Company's website. The Company will host a conference call and webcast on May 4, 2022 commencing at 7:30 am Pacific Time to discuss the Company's first quarter results and activities underway at the Company's projects. Further details are provided at the end of this news release.

Christian Milau , CEO of Equinox Gold, commented: "Over the first few months of 2022 we poured first gold at our new Santa Luz mine in Brazil , strengthened our balance sheet and investment portfolio with the sale of our non-core Mercedes mine, and made good progress with construction at our Greenstone project. We expect gold production to increase and costs to come down over the next three quarters with new production from Santa Luz, increased production from our other Brazil mines as the rainy season ends, and growing production at Mesquite. We are on track to achieve guidance for 2022, with 60% of production and more than 85% of cash flow forecast to come in the second half of the year. We look forward to achieving commercial production at Santa Luz and reporting on construction milestones at Greenstone as we ramp up activity heading into the summer season."

HIGHLIGHTS FOR THE THREE MONTHS ENDED MARCH 31, 2022

Operational

Produced 117,452 oz of gold during the quarter; sold 119,324 oz of gold at an average realized gold price of $1,862 per oz Total cash costs of $1,238 per oz and AISC (all-in sustaining costs) of $1,578 per oz (1) Recommenced plant operations at RDM on March 14 following a temporary suspension on February 26 to reduce water levels in the tailings storage facility; mining and stockpiling of ore continued during the suspension Total recordable injury frequency rate of 3.76 for the quarter with five lost-time injuries, and 3.01 on a rolling 12-month basis

Earnings

Earnings from mine operations of $28.5 million Net loss of $19.8 million or $(0.07) per share Adjusted net loss of $23.9 million (1) or $(0.08) per share (1) , after adjusting for certain non-cash expense items (2)

Financial

Cash flow from operations before changes in non-cash working capital of $33.5 million ( $16.4 million cash flow used in operations after changes in non-cash working capital) Adjusted EBITDA of $43.4 million (1)(2) Expenditures of $37.1 million in sustaining capital and $90.7 million in non-sustaining capital (1) Cash and cash equivalents (unrestricted) of $151.2 million at March 31, 2022 Net debt (1) of $385.1 million at March 31, 2022 (including $278.9 million of in-the-money convertible notes)

Construction, development and exploration

Poured first gold at Santa Luz on March 30, 2022 ; commissioning and ramp up continuing towards achieving commercial production Advanced Greenstone construction

POST QUARTER HIGHLIGHTS

Sold Mercedes on April 21, 2022 to Bear Creek Mining Corporation for aggregate consideration of: Exploration drilling in 70-km-long greenstone belt that hosts Fazenda and Santa Luz identified multiple near-mine and regional discoveries that highlight growth potential Received $40 million ( C$50 million ) and transferred five million shares of the Company's investment in Solaris Resources Inc. following the exercise of warrants the Company granted on April 28, 2021 Acquired 1 million shares of Solaris at C$6.75 per share on exercise of share purchase warrants. Following the exercise of the share purchase warrants, the Company owns 13,826,737 shares, representing approximately 12.71% of Solaris

| _ | | | 1. | Cash costs per oz sold, AISC per oz sold, adjusted net income, adjusted EBITDA, adjusted EPS, sustaining capital, non-sustaining capital and net debt are non-IFRS measures. See Non-IFRS Measures. | | 2. | Primary adjustments for the three months ended March 31, 2022 were $18.7 million unrealized loss on change in fair value of share purchase warrants, $10.5 million unrealized foreign exchange loss, $18.1 million unrealized gain on foreign exchange contracts and $5.4 million unrealized gain on gold contracts. |

| CONSOLIDATED OPERATIONAL AND FINANCIAL HIGHLIGHTS | | | | | | | | | | | | | | Three months ended | | | | Operating data | Unit | March 31, 2022 | December 31, 2021 | March 31, 2021 | | Gold produced | oz | 117,452 | 210,432 | 129,233 | | Gold sold | oz | 119,324 | 212,255 | 128,555 | | Average realized gold price | $/oz | 1,862 | 1,792 | 1,786 | | Cash costs per oz sold (1) | $/oz | 1,238 | 1,039 | 1,141 | | AISC per oz sold (1)(2) | $/oz | 1,578 | 1,265 | 1,482 | | | | | | | | Financial data | | | | | | Revenue | M$ | 223.2 | 381.2 | 229.7 | | Earnings from mine operations | M$ | 28.5 | 99.4 | 44.2 | | Net (loss) income | M$ | (19.8) | 109.0 | 50.3 | | (Loss) earnings per share | $/share | (0.07) | 0.37 | 0.21 | | Adjusted EBITDA (1) | M$ | 43.4 | 130.0 | 60.9 | | Adjusted net (loss) income (1) | M$ | (23.9) | 72.2 | (3.2) | | Adjusted EPS (1) | $/share | (0.08) | 0.24 | (0.01) | | | | | | | | Balance sheet and cash flow data | | | | | | Cash and cash equivalents (unrestricted) | M$ | 151.2 | 305.5 | 317.5 | | Net debt (1) | M$ | 385.1 | 235.2 | 229.8 | | Operating cash flow before changes in non-cash working capital | M$ | 33.5 | 122.2 | 62.0 | | (1) Cash costs per oz sold, AISC per oz sold, adjusted EBITDA, adjusted net income, adjusted EPS and net debt are non-IFRS measures. See _Non-IFRS Measures _. | | | | | | (2) Consolidated AISC per oz sold excludes corporate general and administration expenses. | | | | |

During Q1 2022, the Company recognized revenue of $223 .2 million on sales of 119,324 ounces of gold, compared to revenue for the three months ended December 31, 2021 ("Q4 2021") of $381 .2 million on sales of 212,255 ounces of gold. Gold ounces sold and revenues are comparable to Q1 2021. The decrease in ounces sold from Q4 2021 to Q1 2022 was mainly due to decreased production at Los Filos, Aurizona, Mesquite and RDM. In accordance with the sites' mine plans, waste stripping occurs early in the calendar year, resulting in the majority of ore tonnes being mined later in the year. In addition to this, Q1 2022 production for RDM and Aurizona was lower than Q4 2021 due to higher levels of rainfall impeding production.

In Q1 2022, earnings from mine operations were $28 .5 million, a decrease compared to $99 .4 million in Q4 2021. Earnings from mine operations was impacted by lower gold production and higher operating costs due to oil prices, supply chain constraints and inflationary pressures. Net loss in Q1 2022 was $19 .8 million compared to net income of $109 .0 million in Q4 2021, driven by the decrease in earnings from mine operations and a $18.7 million loss on the change in fair value of share purchase warrants in Q1 2022 compared to a gain of $27.5 million in Q4 2021.

Adjusted EBITDA for Q1 2022 of $43.4 million decreased from $130.0 million in Q4 2021 driven by lower earnings from mine operations in Q1 2022. Adjusted net loss was $23.9 million for Q1 2022 compared to adjusted net income of $72.2 million in Q4 2021.

| SELECTED FINANCIAL RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021 | | | | | | | | $ amounts in millions, except per share amounts | Three months ended | | | March 31, 2022 | March 31, 2021 | | | Revenue | $ 223.2 | $ 229.7 | | Cost of sales | | | | Operating expense | (152.4) | (146.8) | | Depreciation and depletion | (42.3) | (38.7) | | Earnings from mine operations | 28.5 | 44.2 | | Care and maintenance expense | (0.4) | (2.0) | | Exploration expense | (3.2) | (3.0) | | General and administration expense | (11.8) | (7.4) | | Income from operations | 13.1 | 31.9 | | Finance expense | (9.4) | (8.7) | | Finance income | 0.8 | 0.4 | | Share of net loss in associate | (1.6) | (2.7) | | Other (expense) income | (19.0) | 49.3 | | Net (loss) income before taxes | (16.1) | 70.3 | | Income tax expense | (3.7) | (20.0) | | Net (loss) income | $ (19.8) | $ 50.3 | | Net (loss) income per share attributable to Equinox Gold shareholders | | | | Basic | $ (0.07) | $ 0.21 | | Diluted | $ (0.07) | $ 0.14 |

Additional information regarding the Company's financial results and activities underway at the Company's projects is available in the Company's Q1 2022 Financial Statements and accompanying management's discussion and analysis for the three months ended March 31, 2022 , which will be available for download on the Company's website at www.equinoxgold.com , on SEDAR at www.sedar.com and on EDGAR at www.sec.gov/edgar .

RECENT DEVELOPMENTS

Due to a reversal of previous decisions by SUPRAM (State Environmental Agency - Minas Gerais), permitting the next TSF raise at RDM is delayed. Discussions with regulatory authorities are ongoing. If the Company is not able to achieve satisfactory resolution prior to the need to start the next raise in Q2 2022, operations at the mine may be temporarily suspended commencing in Q2 or Q3 2022.

The RDM TSF is raised on an intermittent basis throughout the mine life to store additional tailings produced from ongoing operations. The TSF has been designed and is operated to industry best practices and is regularly inspected and audited by independent parties. A design alteration was filed with SUPRAM in 2017 to change from a centreline to a downstream design, which is considered the safest construction method, and since 2018 each raise has been completed using a downstream design. Permits to raise the TSF using a downstream design were granted in 2019 and 2020. In 2020, the Company requested a raise method formalization as an addendum to the license to operate, confirming the change to a downstream design, and in early 2021 SUPRAM granted the permit to raise the TSF to its current level. In 2021, the Company applied for a permit for the next TSF raise, which has not been granted to date.

NON-IFRS MEASURES

The Company's financial and operating results are prepared in accordance with International Financial Reporting Standards ("IFRS"). This news release includes the following non-IFRS measures which have no standardized meaning under IFRS and may not be comparable to similar measures presented by other issuers. Such non-IFRS measures have been derived from the Company's financial statements and are consistently measured and presented. Non-IFRS measures are intended to provide additional information about the performance of the Company and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. Numbers presented in the tables below may not sum due to rounding.

Cash costs and cash costs per oz sold

Cash costs is a common financial performance measure in the gold mining industry; however, it has no standard meaning under IFRS. The Company reports total cash costs on a per oz sold basis. The Company believes that, in addition to conventional measures prepared in accordance with IFRS, certain investors use this information to evaluate the Company's performance and ability to generate operating income and cash flow from mining operations. Cash costs include mine site operating costs plus lease principal payments, but are exclusive of depreciation and depletion, reclamation, capital and exploration costs and net of by-product sales and then divided by ounces sold to arrive at cash costs per oz sold. The measure is not necessarily indicative of cash flow from operations under IFRS or operating costs presented under IFRS.

AISC per oz sold

The Company is reporting AISC per oz of gold sold. The methodology for calculating AISC was developed internally and is calculated below. Readers should be aware that this measure does not have a standardized meaning. Current IFRS measures used in the gold industry, such as operating expenses, do not capture all of the expenditures incurred to discover, develop and sustain gold production. The Company believes the AISC measure provides further transparency into costs associated with producing gold and will assist analysts, investors and other stakeholders of the Company in assessing its operating performance, its ability to generate free cash flow from current operations and its overall value. In calculating AISC, the Company includes silver by-product credits as it considers the cost to produce the gold is reduced as a result of the by-product sales incidental to the gold production process, thereby allowing management and other stakeholders to assess the net costs of gold production.

The following table provides a reconciliation of cash costs per oz of gold sold and AISC per oz of gold sold to the most directly comparable IFRS measure on an aggregate basis.

| $'s in millions, except ounce and per oz figures | Three months ended | | | | March 31, 2022 | December 31, 2021 | March 31, 2021 | | | Gold ounces sold | 119,324 | 212,255 | 128,555 | | Operating expenses | $ 152.4 | $ 215.5 | $ 146.8 | | Lease payments | 2.4 | 3.8 | 2.2 | | Silver by-product credits | (1.0) | 0.3 | (0.1) | | Non-recurring charges recognized in operating expenses (1) | — | (0.4) | — | | Fair value adjustment on acquired inventories | (5.9) | 1.4 | (2.3) | | Total cash costs | $ 147.8 | $ 220.6 | $ 146.6 | | Cash costs per gold oz sold | $ 1,238 | $ 1,039 | $ 1,141 | | Total cash costs | $ 147.8 | $ 220.6 | $ 146.6 | | Sustaining capital | 37.1 | 42.4 | 41.3 | | Reclamation expenses | 2.4 | 5.5 | 2.6 | | Sustaining exploration expenses | 1.0 | — | 0.1 | | Total AISC | 188.3 | 268.5 | 190.6 | | AISC per oz sold | $ 1,578 | $ 1,265 | $ 1,482 | | (1) Non-recurring charges recognized in operating expenses relates to an impairment charge on replacement parts at Mesquite. | | | |

Sustaining and non-sustaining capital reconciliation

Sustaining capital expenditures are defined as those expenditures which do not increase annual gold ounce production at a mine site and excludes all expenditures at the Company's projects and certain expenditures at the Company's operating sites which are deemed expansionary. Sustaining capital expenditures can include, but are not limited to, capitalized stripping costs at open pit mines, underground mine development, mining and milling equipment and TSF raises.

The following table provides a reconciliation of sustaining capital expenditures to the Company's total capital expenditures for continuing operations.

| | Three months ended | | | | $'s in millions | March 31, 2022 | December 31, 2021 | March 31, 2021 | | Capital additions to mineral properties, plant and equipment (1) | $ 129.1 | $ 135.4 | $ 112.1 | | Less: Non-sustaining capital at operating sites | (30.3) | (23.4) | (27.1) | | Less: Non-sustaining capital at development projects | (60.4) | (62.4) | (8.3) | | Less: Capital expenditures - corporate | (0.1) | (0.1) | (0.4) | | Less: Other non-cash additions (2) | (1.2) | (7.1) | (35.1) | | Sustaining capital expenditures | $ 37.1 | $ 42.4 | $ 41.3 | | (1) Per note 5 of the condensed consolidated interim financial statements. Capital additions are exclusive of non-cash changes to reclamation assets arising from changes in discount rate and inflation rate assumptions in the reclamation provision. | | | | | (2) Non-cash additions include right-of-use assets associated with leases recognized in the period and capitalized depreciation for deferred stripping activities. | | | |

Total mine-site free cash flow

Mine-site free cash flow is a non-IFRS financial performance measure. The Company believes this measure is a useful indicator of its ability to operate without reliance on additional borrowing or usage of existing cash. Mine-site free cash flow is intended to provide additional information only and does not have any standardized meaning under IFRS and may not be comparable to similar measures of performance presented by other mining companies. Mine-site free cash flow should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.

The following table provides a reconciliation of mine-site free cash flow to the most directly comparable IFRS measure on an aggregate basis:

| | Three months ended | | | | $'s in millions | March 31, 2022 | December 31, 2021 | March 31, 2021 | | Operating cash flow before non-cash changes in working capital | $ 33.5 | $ 122.2 | $ 62.0 | | Add: Operating cash flow used by non-mine site activity (1) | 39.1 | 32.7 | 17.1 | | Cash flow from operating mine sites | $ 72.6 | $ 154.9 | $ 79.1 | | | | | | | Mineral property, plant and equipment additions | $ 129.1 | 135.4 | 112.1 | | Less: Capital expenditures relating to development projects and corporate and other non-cash additions | (61.7) | (69.6) | (43.8) | | Capital expenditure from operating mine sites | 67.3 | 65.8 | 68.4 | | Lease payments related to non-sustaining capital items | 3.4 | 3.5 | 1.2 | | Non-sustaining exploration expenses | 2.1 | 3.0 | 2.2 | | Total mine site free cash flow | $ (0.3) | $ 82.7 | $ 7.3 | | (1) Includes taxes paid that are not factored into mine site free cash flow and are included in operating cash flow before non-cash changes in working capital in the statement of cash flows. | | | |

AISC contribution margin, EBITDA and adjusted EBITDA

The Company believes that, in addition to conventional measures prepared in accordance with IFRS, certain investors use AISC contribution margin and adjusted EBITDA to evaluate the Company's performance and ability to generate cash flows and service debt. AISC contribution margin is defined as revenue less AISC. EBITDA is defined as earnings before interest, tax, depreciation and amortization. Adjusted EBITDA is defined as earnings before interest, tax, depreciation, and amortization, adjusted to exclude specific items that are significant but not reflective of the underlying operating performance of the Company, such as the impact of fair value changes of warrants, foreign exchange contracts and gold contracts; unrealized foreign exchange gains and losses, transaction costs, and share-based compensation expense. It is also adjusted to exclude items whose timing or amount cannot be reasonably estimated in advance or that are not considered representative of core operating performance, such as impairments and gains and losses on disposals of assets.

Prior to Q4 2021, adjusted EBITDA was calculated excluding transaction costs as an adjusting item. Commencing in Q4 2021, the Company has adjusted for transaction costs as this item is not considered representative of core operating performance. The calculation of adjusted EBITDA for March 31, 2021 has been adjusted to conform with the current methodology and is different from those previously reported.

The following tables provide the calculation of AISC contribution margin, EBITDA and adjusted EBITDA, as calculated by the Company:

| AISC Contribution Margin | | | | | | | | | | | Three months ended | | | | $'s in millions | March 31, 2022 | December 31, 2021 | March 31, 2021 | | Revenue | $ 223.2 | $ 381.2 | $ 229.7 | | Less: AISC | (188.3) | (268.5) | (190.6) | | AISC contribution margin | $ 34.9 | $ 112.7 | $ 39.1 |

| EBITDA and Adjusted EBITDA | | | | | | | | | | | Three months ended | | | | $'s in millions | March 31, 2022 | December 31, 2021 | March 31, 2021 | | Net (loss) income before tax | $ (16.1) | $ 88.2 | $ 70.3 | | Depreciation and depletion | 42.6 | 66.7 | 38.8 | | Finance expense | 9.4 | 10.3 | 8.7 | | Finance income | (0.8) | (1.1) | (0.4) | | EBITDA | $ 35.1 | $ 164.1 | $ 117.4 | | Non-cash share-based compensation expense (recovery) | 1.3 | 0.8 | (0.1) | | Unrealized loss (gain) on change in fair value of warrants | 18.7 | (27.5) | (33.3) | | Unrealized gain on gold contracts | (5.4) | (4.3) | (42.1) | | Unrealized (gain) loss on foreign exchange contracts | (18.1) | (1.7) | 11.3 | | Unrealized foreign exchange loss (gain) | 10.5 | (10.8) | (1.0) | | Non-recurring charges recognized in operating expense (1) | — | 0.4 | — | | Transaction costs | 0.1 | 0.5 | 0.5 | | Share of net loss (income) on investment in associate | 1.6 | (8.3) | 2.7 | | Other (income) expense (2) | (0.4) | 16.8 | 5.5 | | Adjusted EBITDA | $ 43.4 | $ 130.0 | $ 60.9 | | (1) Non-recurring charges recognized in operating expenses relates to an impairment charge on replacement parts at Mesquite. | | | | | (2) Other expense for the three months ended March 31, 2022 includes a $1.9 million loss on the change in fair value of derivative liabilities. Other expense for the three months ended December 31, 2021 includes an $8.0 million loss on disposal of plant and equipment and a $6.0 million expected credit loss. Other expense for the three months ended March 31, 2021 includes a $1.7 million loss on disposal of plant and equipment and a $1.0 million loss on change in fair value of marketable securities. | | | |