Earnings Call Transcript - EQX Q1 2021

Operator, Operator

Welcome to the Equinox Gold First Quarter 2021 Financial Results and Corporate Update Conference Call and Webcast. As a reminder, all participants are in listen-only mode. And the conference is being recorded. After the presentation, there will be an opportunity to ask questions. I would now like to hand the conference over to Rhylin Bailie, Vice President, Investor Relations for Equinox Gold. Please go ahead.

Rhylin Bailie, Vice President, Investor Relations

Thank you, Amanda, and thank you, everybody, for joining us today. Some of you were just with us at the AGM, which we wrapped up. And now, of course, we're going to walk through the Q1 results and our corporate update. We will, of course, be making a number of forward-looking statements today. So please do take the time to visit our website and to visit our continuous disclosure documents that are available on SEDAR and on EDGAR. I'm now going to turn the call over to our Chairman, Ross Beaty for opening remarks.

Ross Beaty, Chairman

Thank you very much, Rhylin, and good afternoon, ladies and gentlemen. Thank you for joining us today. As Rhylin said, we just wrapped up our AGM and the very first slide I'm going to show you here in our presentation that's on our website is our wonderful Board of Directors. All of the motions before the meeting were passed. And I appreciate all the support we have from our shareholders. All of the director nominees were voted in as well to serve on the Board for another year, and I want to thank all of the Board members you see here today for their service to the Company. Obviously, the Board runs our governance and major strategy. We spent almost all day yesterday in committee meetings. We had a board dinner where we talked strategy and various issues like cybersecurity, and I have to say every single board member made a significant contribution, and we certainly are well led on that front. Our shareholders should be very proud of the Board as it is right here. I would also like to give a bit of a report card on what we've achieved in the three years since we began right at the beginning of 2018. In 2018, we didn't have any operations at the start of the year. We decided to build the one mine we had under development. We had a pre-feasibility study on the Calco Mountain mine, as well, which we did. We spun out and sold some of our non-core assets. In 2019, we completed the construction of Aurizona and started producing there. We had a full year from Mesquite, producing 200,000 ounces of gold. At the end of the year, we announced that we were going to merge with Leagold. In 2020, we had an extraordinary year, adding four producing mines and a development project with the Leagold deal. Our liquidity and scale attracted new institutional investors, and we listed on the New York Stock Exchange. In this upcoming year, we are guiding for 630,000 ounces this year, and we are very much on the path to produce more than 1 million ounces in just the next couple of years. We expect our production will deliver fabulous returns for shareholders.

Christian Milau, CEO

Great. Thanks, Ross, and it's a good segue into our Q1 operating results. I do want to recognize and congratulate Tom Doug and the team in California with getting Castle Mountain built in that first phase with zero total recordable injury frequency rates. And we did have three LTIs in the first quarter during our 4 million work hours, a little bit higher than our average. We also had a very heavy rain event in Aurizona in Brazil at the end of March. In terms of the operating results, we produced 129,000 ounces, which is a little bit weaker than Q4. Our all-in sustaining cost was $1,480. This is in part due to about $12 million in a net realizable value write-down of inventory at Los Filos and Pilar. In Q1 2021 financial highlights, we had adjusted EBITDA of about $60 million and net income of a healthy $50 million. Our liquidity and capital position ended the quarter with $320 million almost in the bank. Our net debt was $230 million but would be net cash when taking out the convertible notes. In terms of our guidance updates, we swapped Mercedes in Mexico, which we acquired with Premier. The main change is we've added early works construction at Greenstone, which is our 60% share. The main focus is to see production ramp up in the second half of the year.

Doug Reddy, CFO

Okay. Thanks, Christian. In the first half of the year, we do have lower production in California and Mexico, primarily associated with stripping campaigns at Mesquite and Castle Mountain. At Los Filos, we produced just under 30,000 ounces for the quarter at an all-in sustaining cost of $2,230 an ounce, and we took a $9 million inventory write-down. We've seen a good performance of the mining at Aurizona, producing over 32,000 ounces for the quarter at an all-in sustaining cost of $879 an ounce. We also have a project ongoing at Santa Luz. The first gold pour is targeted for Q1 of 2022. The project is on track.

Christian Milau, CEO

In terms of our ESG strategies, we published our first ESG report this morning. It's important for us to look after our environment, social aspects, diversity, and governance. We spent a lot of effort on this and are looking to strengthen our position in this area even further. Our goal is to be a leader in ESG; we have to minimize our impact as much as possible. It’s our priority to ensure the lives of our workers are safely managed.

Rhylin Bailie, Vice President, Investor Relations

Thank you, Christian. Operator, could you please remind people how to ask questions?

Mike Parkin, Analyst

I have a question on the Santa Luz project. You mentioned that it's tracking on schedule. Can you provide an update on the actual budget? Is it still on course given inflationary pressures?

Ross Beaty, Chairman

No, the Santa Luz project is tracking fine. Our update was done late last year, and we have managed to keep costs in line overall. We are monitoring material prices and remain proactive.

Christian Milau, CEO

In answering your question on the potential pressure on budgets for Greenstone and Los Filos, overall, we have seen some inflationary pressure but nothing outside of the ordinary so far. We'll continue to monitor and lock in as much of the cost as possible.

Anita Soni, Analyst

What is the timeframe for the pre-feasibility study for the underground at Aurizona?

Doug Reddy, CFO

For Aurizona, we expect the pre-feasibility study to be completed by Q3.

Kerry Smith, Analyst

Can you confirm the pressure you're feeling from inflation-related costs?

Christian Milau, CEO

I think we've mitigated quite a bit of that in our fixed cost projections. We'll manage through inflation just as we always have. Our focus remains on ensuring our projects are on schedule and within budget.

Rhylin Bailie, Vice President, Investor Relations

Thank you, Christian. As a final note, we will continue to engage with our shareholders and stakeholders through various communications. Are there any final remarks from our speakers?

Ross Beaty, Chairman

Thank you to all of our shareholders for your support. We are a young, dynamic company and hope that you feel proud of what we've built so far.