Earnings Call Transcript - EQX Q4 2025

Operator, Operator

Thank you for standing by. This is the conference operator, and welcome to the Equinox Gold Fourth Quarter and Full Year 2025 Results and Corporate Update. The conference call is being recorded. I would now like to turn the conference over to Mr. Ryan King, EVP of Capital Markets for Equinox Gold. Please go ahead.

Ryan King, EVP of Capital Markets

Well, thank you, operator. Good morning, everyone, and thank you for taking the time to join the call this morning. Before we commence, I'd like to direct everyone to our forward-looking statements on Slide 2. Our remarks and answers to your questions today may contain forward-looking information about the company's future performance. Although management believes our forward-looking statements are based on fair and reasonable assumptions, actual results may turn out to be different from these forward-looking statements. For a complete discussion of the risks, uncertainties and factors that may lead to actual operating and financial results being different from the estimates contained in our forward-looking statements, please refer to the risks identified in the section titled Risks Related to the Business in Equinox Gold's most recently filed annual information form, which is available on SEDAR+, on EDGAR and on our website. Due to the Calibre merger, asset sales and classifying Brazil as discontinuing operations, the audit is taking a bit longer. We do not expect any changes compared to the unaudited results we have released, and we will issue a news release once the final audited results are filed in the coming days. Finally, I should mention that all figures in today's presentation are in U.S. dollars unless otherwise stated. With me on the call today are Darren Hall, Chief Executive Officer; Peter Hardie, Chief Financial Officer; and David Schummer, Chief Operating Officer. Today, we will be discussing our fourth quarter and full year 2025 production and cost results, provide an update on ramp-up progress at our Greenstone and Valentine Gold Mines. Darren will also discuss the improvements of our balance sheet that allowed us to announce capital return initiatives, and then we will take questions. The slide deck we're referencing is available for download on our website at equinoxgold.com. And with that, I'll turn the call over to Darren.

Darren Hall, CEO

Turning to Slide 3, and thanks, Ryan. Good morning, and thank you for joining the call today. Firstly, I would like to thank the entire Equinox Gold team, including all of our business partners across the Americas for their commitment to safety, operational excellence and disciplined execution. There is no better demonstration of their commitment than delivering a year with no material environmental events and a 30% reduction in our all injury frequency rate. Well done, and thank you to the entire team. 2025 was a transformational year for Equinox Gold, one that not only reset the foundation of the business, but marked the beginning of a new chapter. The team delivered record gold production, streamlined the portfolio and dramatically strengthened the balance sheet, positioning the company to deliver meaningful value as we look to the future. The entire organization is aligned on creating shareholder value by consistently delivering on their commitments, which are focused on demonstrating operational excellence, maintaining strict cost discipline and advancing high-return organic growth. We have made material progress on all fronts, including delivering 922,000 ounces in 2025 with cash and all-in costs within guidance. This strong finish to the year reflects continued progress at Greenstone and Valentine alongside reliable performance from the balance of the portfolio. Greenstone ramped steadily throughout the year with Q4 gold production 60% higher than Q1. Valentine commissioning progress exceeded expectations with first gold achieved in September and commercial production declared in November. The result of the team's focus and commitment to deliver is also measured in the significant transformation of our balance sheet. In June 2025, our net debt was approximately $1.4 billion. And at the end of January, we had reduced it to $75 million, all while completing construction and commissioning of Valentine. With a stronger balance sheet and consistent robust cash flow, we are well positioned to take the next step in returning capital to our shareholders. Given this strong position, I am pleased to announce the company's inaugural quarterly cash dividend of $0.015 per share. Additionally, we are filing our notice of intent to initiate a share buyback of up to 5% of the issued and outstanding shares. Together, these actions mark the start of a disciplined capital return strategy and reinforce our commitment to delivering long-term per share value. Turning to Slide 4. Touching briefly on the financial results, and Pete can provide additional color as required. Equinox had a strong finish to the year with 247,024 ounces produced in Q4. We sold over 242,392 ounces at a realized price of $4,060 per ounce, generating $579 million in adjusted EBITDA and $272.9 million in adjusted net income or $0.35 per share. Importantly, we exited 2025 with over $400 million in cash and minimal net debt, giving us financial flexibility heading into 2026. Looking forward, we are encouraged by the strength of the gold price. However, the organization's focus is clear: cost control, disciplined capital allocation and delivering consistent performance across the portfolio. As our cornerstone assets ramp up to nameplate, we see a clear path to expanding margins and strengthening free cash flow generation. Turning to Slide 5. Greenstone finished with a strong fourth quarter, producing over 72,000 ounces, a 29% increase over Q3. We saw meaningful improvements in mining rates, mill throughputs and grade with the plant achieving nameplate capacity for 30 consecutive days during December. For 2026, we anticipate production of 250,000 to 300,000 ounces at all-in sustaining costs of between $1,750 and $1,850 per ounce. To support continued performance gains, we are making targeted investments in the operations, including the purchase of a trommel and other mobile equipment designed to optimize mine and process plant performance. Our long-term objective remains clear at Greenstone to establish life-of-mine production around 300,000 ounces annually. We've demonstrated that the mill can process 30,000 tonnes a day. With the team we now have in place, I'm confident that we'll continue to build on demonstrating meaningful operational improvements. Consider the progress on the key metric of daily tonnes processed greater than nameplate over the last year. In H1 2025, we delivered 17% of the days greater than nameplate. In Q3, we increased to 28% in Q4 to 36%. Looking at Q1 to date through yesterday, we're at 50%. So we're demonstrating continued and steady ramp-up of the assets, which sets us up well for the future. At Valentine, we poured over 23,207 ounces of gold in Q4, its first quarter with the plant averaging 90% of nameplate capacity. We expect to achieve consistent nameplate throughput during Q2 2026 as we anticipate Valentine to contribute 150,000 to 200,000 ounces of gold this year. We are working on the feasibility study for the Phase 2 expansion that would increase throughput to 4.5 million to 5 million tonnes per year and result in production of greater than 200,000 ounces a year for more than the next decade. I anticipate completing the feasibility study over the next couple of months, which will then go to the Board for investment approval in Q2 with work anticipated to commence in the second half of the year. Valentine continues to show strong exploration upside. Our 2025 drill results confirm consistent high-grade mineralization over broad width at the Frank Zone, supporting the potential for a fourth open pit. In 2026, we have 25,000 meters of drilling planned to advance the Frank Zone. We also announced a new discovery, the Minotaur Zone located 8 kilometers north of the mill with a 20,000-meter drill program set to begin this spring, and the zone remains open for expansion. Importantly, the Minotaur discovery confirms that significant gold mineralization exists well outside of the main Valentine Lake Shear zone, opening the broader property and reinforcing the long-term growth potential of the Valentine District beyond the current mine plan. Turning to Slide 6. As we close, I want to underscore the momentum across the business. We have the key ingredients in place to deliver top quartile valuation: new high-quality, long-life assets in Tier 1 jurisdictions, and an organic growth pipeline, a team focused on delivering into expectations, which delivers strong free cash flow and returns capital to shareholders. In 2026, our priorities are clear: ramp up Greenstone and Valentine to nameplate capacity, allocate capital in a disciplined and balanced manner across the portfolio, sustaining investment and shareholder returns while maintaining a strong balance sheet. Our inaugural dividend and application for a share buyback are key steps in this strategy. Consistent with our focus on disciplined growth, we are investing in long-term value creation. This year, we will advance Phase 2 at Valentine, refresh Castle Mountain studies and progress Los Filos, both technically and socially. At Los Filos, I'm encouraged by the continued engagement with our host communities and support from the state and national governments as we remain focused on realizing the asset's full potential and unlocking significant long-term value for all stakeholders. With a stronger portfolio, solid cash flow and clear execution priorities, we are entering 2026 from a position of strength. Our focus remains on disciplined growth, operational delivery and creating long-term value responsibly and consistently for our shareholders and all stakeholders. With that, we'll turn it over to the operator for any questions.

Operator, Operator

The first call for today will come from Francesco Costanzo with Scotiabank.

Francesco Costanzo, Analyst

I'll start with my first one here. It's great to see the announcement of an inaugural dividend alongside an NCIB. And with production and free cash flow growth on the horizon, can you speak to the potential for this dividend to grow in the future and maybe your approach to fixed versus variable dividends? And then on the buyback program, can you explain your strategy for how you plan to deploy those funds?

Darren Hall, CEO

Yes, Francesco, thanks for the comments. And I'll pass it across to Pete to talk about some of the capital allocation and specifically address the questions around dividends and buybacks.

Peter Hardie, CFO

Yes. Thanks, Darren. Yes, we're really excited to be in a position to announce the inaugural dividend. It's been a long-term goal for the company, something we have talked about over the past years. So we're really pleased to be able to do that now. And it underscores the confidence we have in our forward production profile and in our forward cash flow. We started small with our inaugural dividend, starting with a fixed dividend. You can expect it to stay there for the coming future, probably the next 12, 24 months. As we firm up the development pipeline, the peer-leading development pipeline that we have, starting with our Valentine Phase 2 that Darren already mentioned and then looking forward to Castle Mountain heading into 2027. So with that development in front of us, you can expect we'll stay on a fixed dividend, and we will be looking to increase that over time. And that will be a bit of a stay tuned story with respect to those plans. But again, we're just really excited to have been able to announce the inaugural dividend. With respect to the share buyback, we still feel there's a lot of opportunity in our stock price. And at these levels, again, being conservative in our approach, we want to be in a position to when we felt like the shares were not trading as we think they should to be able to buy some of those back and also return capital to shareholders in that manner. And you can expect us to continue to do that. But again, with the peer-leading development pipeline we have and the dollars we're going to devote to that over the coming years, we will remain somewhat conservative.

Darren Hall, CEO

Thanks, Pete. And just to layer in there, Francesco, we will take a somewhat conservative view, but as we work through 2026, and we have a complete understanding of our capital requirements in '27 in light of Valentine Phase 2, importantly, with the record decision anticipated at the end of the year and the positivity we see in and around the dialogue in Mexico, we will have some demands in 2027. We feel very comfortable in being able to fund those organically, but we want to make sure we don't put ourselves in a position where we overcommit to a return on capital through dividends and find ourselves compromised to fund the organic growth, which we don't anticipate. But I think we've got an outstandingly positive outlook on our organic growth. So thanks for the question.

Francesco Costanzo, Analyst

Yes, that's great. And maybe just one more, switching gears here. The sale of the Brazilian assets definitely simplified the portfolio and it accelerated deleveraging with the transaction closing in late January and the $900 million check already cleared. Although post close, there was a bit of news out of a certain Brazilian regulator. So I'm just wondering, Darren, if you can just explain the situation from your side of the table and tell us if there's anything to be concerned about here.

Darren Hall, CEO

Yes. No, thanks, Francesco. It's an interesting situation there. I mean we're confident that the sale of the Brazilian operations fully comply with all laws and contractual obligations. And I'll provide a little context, and bear with me as I do. In Brazil, mineral resources are constitutionally owned by the federal government and the mining titles are granted and administrated by the National Mining Agency. Mining titles such as those for Aurizona, Fazenda and RDM are administered through this federal framework. A group in Bahia, CPPM has made a claim that their consent was required regarding the sale of the Santa Luz operation. However, the transaction took effect through the sale of the outstanding shares of two non-Brazilian wholly owned subsidiaries that then indirectly own all of the Brazilian operations. So we're kind of an arm's length away from that claim. But again, we as Equinox and the partners on the other side of the transaction are confident that the sale of the Brazilian operations fully complied with Brazilian law and all contractual obligations were met. We remain committed to constructive dialogue with any party who wants to raise an issue. As you mentioned, as the sale closed on January 23, we deployed proceeds towards debt reduction, strengthening the balance sheet. Along with cash flow from operations, we ended the year with net debt of around $75 million, which has positioned the company to commence the capital return programs that we just discussed.

Operator, Operator

The next question will come from Jeremy Hoy with Canaccord Genuity.

Jeremy Hoy, Analyst

I'd like to go back to something that was brought up about a month ago when some of the team was in Toronto. If there were to be a positive development at Los Filos, it seems the timing of that build could align with Castle Mountain. Can you provide an update and share your thoughts on how you would handle the development of both opportunities if they were available simultaneously?

Darren Hall, CEO

Yes, Jeremy. It would be great to be in that kind of situation. However, we are encouraged by the discussions we’re having in Mexico. There’s still a lot of work to establish strong 20-year land access agreements, which will ensure reliable production in the long run. Filos is a significant asset with 16 million ounces across all resource categories, representing a substantial opportunity. Our focus this year is on understanding the scope and scale. The early work done in 2021 and 2022, including the feasibility study, was based on a $1,350 gold price for designing the open pits and underground operations. We’re not suggesting we would plan around that price this year, but this will enable us to make more informed decisions by the year’s end regarding potential development. We’re confident in what we’re seeing at Los Filos, and we have a guaranteed record of decision for Castle Mountain in December of this year, which is a known factor. We are working on the feasibility to finalize those estimates, positioning us well to make a commitment in the first half of 2027. We’ll see how the year unfolds, but I would say we are fortunate to have so many options and are well-funded for whatever decisions we make, which is encouraging.

Jeremy Hoy, Analyst

Yes. Thanks, Darren, and we'll watch for developments at Los Filos and Castle eagerly. You did mention that we're going to see a refreshed study for Castle Mountain. Also, we would see the same for Los Filos if positive developments come there. Are you planning to release anything on Greenstone as we've spoken often about expectations for that operation to be somewhat different from what was presented in the last feasibility study? Just wondering what we might see in terms of an updated life-of-mine plan? Will it come in the form of a study, what the timing might be, etc.

Darren Hall, CEO

Yes, Jeremy. To clarify, we will provide updated technical reports for both Greenstone and Valentine by the end of this quarter along with our annual filings. This will ensure everything is current and aligned with the AIF, which will also refresh and clarify our reserves and resources as of December 31st. As for Castle, we are continuing to work on the feasibility study without any surprises from what we've discussed over the last six months. We are focused on finalizing details to have confidence in the scope of work so we can engage constructively with EPCM contractors in the latter half of this year. Filos is a bit earlier in the process as we conduct a preliminary study to determine its scope and scale. I expect this will likely lead into a pre-feasibility study early in Q2 as we gain a better understanding. We hope to have resolved some land access agreements, which will allow us to explore all parts of the deposit and define the project more accurately. There may be some confusion regarding Filos, but it’s actually a positive situation. We acknowledge that it is likely one of the largest undeveloped gold assets in the Americas, so the potential there is significant. We are also noticing a positive change in the narrative coming out of Mexico, which is encouraging.

Operator, Operator

The next question will come from Anita Soni with CIBC World Markets.

Anita Soni, Analyst

Just a few on Greenstone. So I was just wondering, the recovery rate declined a little bit from the third quarter to fourth quarter. Could you give us some color on why that was?

Darren Hall, CEO

Yes. Anita, thank you. And absolutely did. As I think we've discussed previously, there is an association with arsenic and grade. We did see much higher grades in the fourth quarter, and as a consequence, we saw lower recoveries associated with the arsenic lockup. So not an issue per se. It's kind of all anticipated and expected as part of the metallurgy of the deposit.

Anita Soni, Analyst

And then just a similar question, just on the unit cost. The G&A was a little bit higher this quarter. Was there anything specific happening this quarter that would be alleviated in the go forward?

Darren Hall, CEO

Yes, there is. I'll pass it to Pete.

Peter Hardie, CFO

Yes. Anita, sorry, I don't have the G&A detail at hand. Can I reach out to you or one of your associates after the call? I'll pull that together.

Anita Soni, Analyst

And then I had one more on just a question that I noticed for both Valentine and Greenstone. I wanted you to explain to me how you guys are calculating the recovery rates as they come out? Because when I put the tonnes to grade and the output of production, I'm getting recovery rates that are a little bit different. Said differently, I would have got about 75,000 ounces of gold by the three numbers there, and you reported 72,000, and Valentine is a similar issue. So I'm just wondering, are you calculating it as it exits the mill? Or is there a different point at which you're saying this is production?

Darren Hall, CEO

No, I think we'll find that the small differences we may see there is that the numbers we quote as production are poured and bullion, and some of the tonnes grade recovery will be metallurgical as well. So there will be a minor change there based on inventory changes. And to your point, I think you'll probably end up with a marginally higher recovery at Greenstone in Q4 than maybe what we reported if you back into the metal content because we actually did see an inventory build at Greenstone in the fourth quarter. But we can sit down and walk through that in a model discussion, happy to do that. But I think we'll find it's kind of the metallurgical production versus the poured production differences.

Operator, Operator

The next question will come from Mohamed Sidibe with National Bank.

Mohamed Sidibe, Analyst

I may be staying on Greenstone. And given your comments on the throughput and the ability to achieve over the nameplate capacity, how should we think about the throughput levels in 2026 and call it, in the medium term at Greenstone? Should we still be thinking about 27,000 tonnes per day or work towards increasing it towards that 30,000 tonnes per day to maybe offset some of the updates that may be coming in the tech report?

Darren Hall, CEO

Thank you, Mohamed. I hope you have a good Ramadan. Regarding throughput, we are maintaining our guidance of 250,000 to 300,000 ounces at Greenstone this year. We expect to find opportunities to enhance throughput as the year progresses, some of which is already included in our calculations. We have shown we can exceed 30,000 tonnes a day, which we aim for in the long term. This year, if we consider around 9.5 million tonnes at approximately 1.1 grams per tonne at feasibility recovery rates, we're nearing the midpoint of our guidance, which seems like a solid target. With recoveries averaging around 25,000 to 26,000 tonnes daily, we'll have days of even better performance. Currently, we have about 49% to 50% of our days exceeding nameplate capacity, indicating consistent and improving daily performance. Our priority now is to minimize downtime and provide our operations team with more time to effectively run the plant. This will be an ongoing journey throughout the year with some fluctuations. The grades will vary based on our mining locations, and the recoveries will differ depending on the metallurgical types, leading to some ups and downs throughout the year. However, we expect positive trends on a quarterly basis. By 2027, I hope we can discuss those 30,000 tonne daily rates more confidently. The HPGRs have a potential capacity of about mid-30,000s, around 34,000 to 35,000 tonnes a day, but we need to ensure reliable performance through the plant before we can openly and publicly commit to those figures. While I am optimistic, we have work to do this year.

Mohamed Sidibe, Analyst

Maybe if we could switch quickly to Valentine. And given the asset is in ramp-up phase, can you give us some color on the cadence in terms of quarter-over-quarter production? Should we expect higher production in the second half? And what magnitude should we be modeling for 2026?

Darren Hall, CEO

Yes, absolutely. We are currently in the second quarter of a ramp-up. Newfoundland presented some surprises in January, and to be transparent, we achieved 90% of throughput in Q4, but January was at 70%. The weather impacted us initially, but it has improved. We learned from the winter experience and have addressed the issues. In February, we reached 110% of nameplate capacity. There are fluctuations as we work through this, but our team is systematically managing these challenges. We expect to see continuous quarter-on-quarter improvements in the plant's reliability, which will lead to higher output and increased confidence in processing higher-grade materials. We anticipate that the grades will reflect these improvements as well. We remain confident in our guidance of 150,000 to 200,000 ounces, although it is more heavily weighted towards the second half due to throughput and grade considerations, as well as progress in developing the Berry Pit. We are open to discussing our model and providing more details if needed.

Operator, Operator

Your next question will come from John Tumazos with John Tumazos, Very Independent Research.

John Tumazos, Analyst

Considering the overall situation, the current gold price is approximately $5,000, and with about $800 million in capital expenditures, you could generate an additional $600 million in cash while paying off all debt. It seems you have some extra funds available. Are you basing your business strategy on a gold price of $400 while expecting success at all five locations where capital investments are required, due to increased gold production, rather than setting aside funds for acquisitions?

Darren Hall, CEO

Yes. John, no, it's a first world predicament we're in, I guess, is that our focus, given the opportunities we see with organic growth, is ensuring that we exit this year well funded to be able to do that organic growth. M&A is not on our radar. If something passes our screen that makes sense, we will do something. But I can assure you, as of today, we do not have a CA signed with anyone. So our focus is absolutely optimizing what we've got. We spent a lot of time and effort putting all of these assets together over the last six or seven years, and now is our time to be able to start to realize that from that growth. With 400,000 to 500,000 ounces of organic growth in our portfolio that we can see over the next five years. I mean that's where our focus is. So there's a bit of positive confusion in our story right now as we've significantly delevered from $1.5 billion worth of net debt to zero. We're generating cash. We see the opportunities that present in 2027 and beyond. And let's make sure that we do the intelligent thing for the long term in 2026, which is to remain absolutely focused on operational performance and not lose sight of the fact that we produce widgets at a cost. So let's keep that business focused on that so we can maximize our margins at whatever gold price there is and then use that capture to be able to fund our organic growth. I don't know, Pete, anything you'd layer on that?

Peter Hardie, CFO

You've highlighted, John, really well that we're in a great position to fund this future growth. And we're focused on ensuring that we retain the very solid and build on the very solid foundation that we've laid in place here over the last several months, as Darren said, to build out these world-class assets that we are very fortunate to have in our pipeline.

John Tumazos, Analyst

If I can ask one more.

Darren Hall, CEO

Sorry, go ahead John.

John Tumazos, Analyst

No, you go ahead. You're the boss.

Darren Hall, CEO

No, no, no. You guys, we work for you, right? So as the investors, I mean, our focus is we're aligned with you.

John Tumazos, Analyst

So in Nicaragua, you projected $1,800 cash costs up 40% or a little more on 225,000 ounces of output. The second half came in better than that. Could you give us some color on how the costs are going up so much in Nicaragua?

Darren Hall, CEO

Yes. No. Thanks, John. It's a bit of a first world problem. What we're seeing here is the majority of the cost increase is not cost inflation per se, but it's volume-driven. As we develop some newer pits in an underground that are going to basically fund or fuel a level of production at that 200,000 to 250,000 ounces a year over the next five years, there's some increased capital that results in those higher strip ratios, which reflect in a higher all-in sustaining cost. So that's really where that comes from. It's not a drive in a kind of cost per tonne mined or a cost per tonne processed. It's volume-driven as we go from arguably what I'll call smaller pitlets to larger pits and higher strip ratios this year, and that's manifested itself in higher all-in sustaining costs. This lays us up well for the next five years, which is kind of what our story has been over the last five years in Nicaragua is to take some assets that were headed towards closure. We've produced around 1.2 million to 1.3 million ounces from those properties in the last five years, and we've taken reserves from essentially zero to over 1 million ounces. So let's say, five years at 400,000 ounces a year of organic growth. Now we're starting to see track in front of the train, and we're investing in that from developing these larger pits, which will continue that momentum for the next five years.

John Tumazos, Analyst

Will the cash costs in the second year out 2027 drop, say, to $1,500 in Nicaragua after this surge?

Darren Hall, CEO

I mean, I think we'll see that the strip ratio go down, and that will have a positive impact on all-in sustaining costs.

John Tumazos, Analyst

Congratulations.

Darren Hall, CEO

Appreciate it, John. Thanks for your support. I know you've been a shareholder for a long time and persistent through the journey. So thank you.

Operator, Operator

This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Darren Hall for any closing remarks. Please go ahead.

Darren Hall, CEO

Yes. Thank you, operator. And I'd like to thank all of our shareholders for their continued support and your participation and the questions today. It is appreciated and valued. As always, Ryan, Dave, Pete and I are always available if you have any further questions. Take care, be well, and I'll pass it back to the operator.

Operator, Operator

This brings a close to today's conference call. You may now disconnect your lines. Thank you for your participation, and have a pleasant day.