Equinox Gold

Last modified by Asif Farooqui on 2024/01/22 09:51

Contents

Summary
Recent Developments
Financial Highlights
Company Overview
References

Summary

Equinox Gold is a growth-focused gold producer with seven operating mines
The Company has seven operating gold mines in the USA, Mexico and Brazil.

Equinox Gold (NYSE: EQX, TSX: EQX) is a Canadian mining company focused on acquiring, exploring, and developing gold deposits in the Americas. Equinox Gold is producing gold from its Mesquite and Castle Mountain mines in California, its Los Filos mine in Mexico, and its Santa Luz, Aurizona, Fazenda and RDM mines in Brazil. Construction is also underway at the Company’s Greenstone project in Canada, with first gold pour targeted for H1 2024.¹

Equinox Gold has the strongest growth profile in its peer group. Construction at its 60%-owned Greenstone project in Canada is on track for completion in the first half of 2024, and the Company is advancing expansion projects at its Aurizona, Castle Mountain and Los Filos mines. Collectively, these projects could bring nearly 600,000 additional ounces of gold production to the Company over the next few years.

Recent Developments

Equinox Gold Produces 564,500 Ounces of Gold in 2023²

January 11, 2024; Equinox Gold Corp. recorded its strongest production quarter for the year with 155,000 ounces of gold produced in Q4 2023 and achieved consolidated production guidance with total production of 564,500 ounces of gold during 2023. The Company ended the year with approximately $192 million in cash and equivalents.

Production increased during Q4 2023 to 155,000 ounces of gold, the strongest production quarter for the year. Full-year production of 564,500 ounces of gold was within production guidance of 555,000 to 625,000 ounces of gold. Equinox Gold will provide additional discussion and analysis regarding its full year and Q4 2023 production results when the Company reports its audited Q4 2023 and annual 2023 financial and operating results in late February.

Equinox Gold’s Greenstone Project: 96% Complete, Commissioning Underway³

November 20, 2023; Equinox Gold Corp. provided an update on construction and commissioning progress at its Greenstone Project in Ontario, Canada. The Greenstone Project is being developed as a 60/40 partnership, respectively, by Equinox Gold and Orion Mine Finance Group, and will be one of the largest gold mines in Canada, with average annual gold production of more than 400,000 ounces over the first five years and more than five million ounces of gold produced over its initial 14-year mine life.

Financial Highlights

Third Quarter 2023 Results

October 31, 2023; For the three and nine months ended September 30, 2023, the Company sold 4% and 7% more gold ounces compared to the same periods in 2022. The increase in gold sales was primarily due to higher production at Los Filos, Aurizona, and RDM offset partially by lower production at Mesquite. At Los Filos, the higher production was primarily due to higher ore tonnes mined despite the impact to recoveries and production in the Quarter related to solution management issues and some ore with a higher copper content, which has a longer recovery period. At Aurizona and RDM, the higher production was primarily due to higher grades and mill throughput. At Mesquite, the lower production was primarily due to mine sequencing and temporary issues with leach pad chemistry. Gold sales for the nine months ended September 30, 2023 were also impacted by higher production at Santa Luz, which achieved commercial production at the end of Q3 2022.⁴

Cash cost per oz sold and AISC per oz sold were 2% and 7% lower in Q3 2023 compared to Q3 2022, respectively, primarily driven by 4% higher gold sales. Costs during the Quarter continued to track towards the lower end of 2023 guidance due to a number of factors, including sustaining capital spend that was anticipated in the Quarter but has been deferred into Q4 2023, as well as decreases in the costs of key consumables, which had peaked in recent quarters, compared to those used to calculate guidance.

In Q3 2023, income from mine operations was $25.2 million (Q3 2022 – $7.4 million) and for the nine months ended September 30, 2023 was $70.4 million (nine months ended September 30, 2022 – $52.9 million). The higher income from mine operations was mainly the result of higher income from mine operations at Los Filos and Aurizona, which was primarily due to higher production and higher average realized gold price per ounce, offset partially by lower income from mine operations at Mesquite, which was primarily due to lower gold production, and at Santa Luz, which was primarily due to higher mining costs, driven by longer hauls from the bottom of the pit as well as stockpile and blend management. Income from mine operations for the nine months ended September 30, 2023 was also impacted by the sale of Mercedes in April 2022.

Net income for Q3 2023 was $2.2 million (Q3 2022 – net loss of $30.1 million) and net income for the nine months ended September 30, 2023 was $25.0 million (nine months ended September 30, 2022 – net loss of $128.6 million). The higher net income in Q3 2023 compared to Q3 2022 was mainly due to higher income from mine operations, as well as other expense of $2.3 million for Q3 2023 compared to other expense of $11.3 million for Q3 2022, primarily due to a $1.6 million gain on change in fair value of warrants in Q3 2023 compared to a $13.4 million loss on change in fair value of share purchase warrants in Q3 2022. Equinox Gold held warrants to acquire shares of Solaris, all of which were exercised in March 2023.

The higher net income for the nine months ended September 30, 2023 compared to the same period in 2022 was mainly due to higher income from mine operations, in addition to a tax recovery of $18.6 million (nine months ended September 30, 2022 – tax expense of $35.3 million) and other income of $32.1 million (nine months ended September 30, 2022 – other expense of $62.9 million). Other income for the nine months ended September 30, 2023 includes a $35.0 million gain on change in fair value of foreign exchange contracts and a $34.5 million gain on sale of the Company’s partial interest and reclassification of investment in i-80 Gold, offset partially by $13.3 million in expected credit loss and write-offs. Other expense for the nine months ended September 30, 2022 includes a $72.8 million loss on change in fair value of share purchase warrants.

In Q3 2023, adjusted EBITDA was $81.2 million (Q3 2022 – $25.6 million) and for the nine months ended September 30, 2023 was $209.1 million (nine months ended September 30, 2022 – $93.7 million). In Q3 2023, adjusted net income was $28.7 million (Q3 2022 – adjusted net loss of $27.7 million) and for the nine months ended September 30, 2023 was $19.3 million (nine months ended September 30, 2022 – adjusted net loss of $98.8 million). The increase in adjusted EBITDA and adjusted net income in Q3 2023 was primarily due to higher income from mine operations, in addition to a $11.4 million realized gain on foreign exchange contracts in Q3 2023 (Q3 2022 – realized loss of $1.1 million). The increase in adjusted EBITDA and adjusted net income for the nine months ended September 30, 2023 was primarily due to higher income from mine operations, in addition to a $25.9 million realized gain on foreign exchange contracts (nine months ended September 30, 2022 – realized loss of $0.1 million).

Company Overview

Equinox Gold is a growth-focused mining company delivering on its strategy of building the premier Americas gold producer. In its first five years the Company has grown from a single-asset developer to a multi-asset gold producer with seven operating gold mines.

Equinox Gold operates entirely in the Americas. At the date of this MD&A, the Company’s operating gold mines are the Mesquite Mine and Castle Mountain Mine in the United States, the Los Filos Mine complex in Mexico, and the Aurizona Mine, Fazenda Mine, Santa Luz Mine and RDM Mine in Brazil. The Company also has a 60% interest in the Greenstone Project in Canada, which is in construction.

Operating Mines

Equinox Gold is a growth-focused gold producer with seven gold mines and a plan to more than double its gold production over the next few years by advancing a pipeline of development and expansion projects.⁵

Aurizona Gold Mine

Aurizona is located in northeastern Brazil near the town of Godofredo Viana in Maranhão State, and within 3 km of an Atlantic Ocean inlet. Aurizona is accessible by road from São Luis (340 km) or Belem (380 km). Equinox Gold assumed management of the Aurizona mine in 2016 when it was on care and maintenance. A feasibility study was completed in 2017, construction and refurbishment of existing infrastructure began in early 2018 and commercial production was achieved in July 2019. Since re-commencing operations, Aurizona has produced on average more than 125,000 ounces of gold per year.

Current mining operations occur in the Piaba open pit, which is part of a 4-km long gold deposit that trends east-northeast in a single continuous zone. In September 2021, the Company completed a pre-feasibility study demonstrating that mining the Piaba underground deposit and additional open pit satellite deposits concurrent with the existing Piaba open pit will nearly double the mine life to 11 years and also increase gold production, with peak annual production estimated at more than 160,000 ounces of gold per year. A feasibility study for the underground expansion is targeted for completion in mid-2023.

Fazenda Gold Mine

Fazenda is located within the Maria Preta mining district in Bahia State, Brazil, about 180 km northwest of the state capital city of Salvador and only 55 km southeast of Equinox Gold’s Santa Luz mine. Equinox Gold assumed ownership of Fazenda in March 2020 with its acquisition of Leagold Mining.

Fazenda has been in operation for nearly 40 years and has produced more than 3.3 million ounces of gold to date. Open pit mining and heap leaching began in 1984 and transitioned to underground mining with a carbon-in-pulp plant in 1988 (which was subsequently converted to carbon-in-leach in 1992). Today the mine is primarily an underground operation complemented with some small open pits.

Production at Fazenda in 2023 is forecast at 60,000 to 65,000 ounces of gold with all-in sustaining costs between $1,390 to $1,430 per ounce of gold sold. Sustaining capital of $14 million is budgeted for underground development, open-pit waste stripping, a tailings facility raise and fleet and infrastructure improvements. Non-sustaining capital of $12 million is primarily for exploration and underground development.

Santa Luz Gold Mine

Santa Luz is located within the Maria Preta mining district in Bahia State, Brazil, 35 km north of the town of Santa Luz, 240 km northwest of the state capital, Salvador, 55 km northwest of Equinox Gold’s Fazenda mine, and 163 km from Yamana’s Jacobina gold mine.

Santa Luz is Equinox Gold’s newest mine and its second successful mine build in Brazil. Equinox Gold assumed ownership of Santa Luz in March 2020 through its acquisition of Leagold Mining. Equinox Gold updated the Santa Luz feasibility study, commenced re-construction in November 2020 and poured first gold in March 2022 from the mine’s new resin-in-leach (RIL) circuit. Construction was completed with no lost-time injuries and commercial production was declared effective October 1, 2022.

Production at Santa Luz for 2023 is forecast at 60,000 to 70,000 ounces of gold with all-in sustaining costs between $1,775 to $1,950 per ounce of gold sold. Sustaining capital of $17 million is primarily for a tailings facility raise and open-pit waste stripping, as well as installation of a pebble crusher. Non-sustaining capital of $2 million is for exploration.

RDM Gold Mine

RDM is located in Minas Gerais State, Brazil, about 560 km north of the state capital city of Belo Horizonte. Equinox Gold assumed ownership of RDM in March 2020 through its acquisition of Leagold Mining.

The RDM deposit was discovered in 1986 and operated as an open-pit heap leach mine until 1997. Operations recommenced with a carbon-in-leach (CIL) plant in early 2014, producing around 60,000 ounces of gold per year. RDM experienced a number of operating disruptions in Q1 and Q2 2022 as the result of regulatory issues related to the expansion of the mine’s tailings storage facility. In July 2022, Equinox Gold made the decision to focus on processing low-grade stockpiles and perform owner mining to reduce costs while the tailings storage facility expansion is underway. As a result, RDM production was lower and costs higher in 2022 than in normal years. For 2023, Equinox Gold has resumed owner-operated mining but on a smaller scale than in previous years to reduce capital costs.

Production at RDM in 2023 is forecast at 50,000 to 60,000 ounces of gold at all-in sustaining costs between $1,685 to $1,870 per ounce of gold sold. Sustaining capital for 2023 of $13 million is primarily for a tailings facility raise and installation of a tailings thickener, and also for open-pit waste stripping. Equinox Gold has not budgeted any non-sustaining capital at RDM for 2023.

Los Filos Gold Mine

The Los Filos Mine Complex is located in Guerrero State, Mexico, approximately 200 km southwest of Mexico City. Current operations comprise three open pits (Los Filos, Bermejal and Guadalupe) and two underground mines (Los Filos and Bermejal), with ore from all deposits processed by heap leaching. Development and operation of the Bermejal underground mine was temporarily suspended in February 2023.

Los Filos has been operating since 2008. Equinox Gold assumed ownership of the mine in March 2020 through its acquisition of Leagold Mining. Equinox Gold continued with expansion plans, including development of the Guadalupe open pit and the Bermejal underground mine.

Production for 2023 is forecast at 160,000 to 180,000 ounces of gold with all-in sustaining costs between $1,680 to $1,865 per ounce of gold sold. Equinox Gold has engaged an efficiency consultant to identify opportunities to improve productivity and reduce costs at Los Filos. To this end, in February 2023 the Company announced the decision to suspend operations and development at the Bermejal underground deposit while the Company advances plans to improve productivity and reduce costs, with the objective of restarting Bermejal in the future.

Sustaining capital for 2023 is forecast at $40 million, primarily for open-pit waste stripping, underground development, fleet rebuilds and infrastructure improvements, and for exploration. Equinox Gold has not budgeted any non-sustaining capital at Los Filos in 2023.

Castle Mountain Gold Mine

Castle Mountain is an open-pit heap leach gold mine located in San Bernardino County, California, USA, approximately 200 miles north of its Mesquite Mine and 60 miles south of Las Vegas, Nevada. Under a previous owner, Castle Mountain produced more than 1.2 million ounces of gold from 1991 to 2004, when the mine was closed due to low gold prices.

Equinox Gold acquired Castle Mountain in December 2017 and completed a pre-feasibility study in 2018 with the intention of restarting operations. The pre-feasibility study outlined a two-phase development plan, with annual average gold production of approximately 30,000 ounces during Phase 1 using existing operating permits, and a Phase 2 expansion to more than 200,000 ounces of gold per year. Phase 1 construction activities commenced in October 2019 and commercial production was achieved in November 2020.

Production at Castle Mountain in 2023 is forecast at 25,000 to 30,000 ounces of gold with all-in sustaining costs between $1,865 to $1,950 per ounce of gold sold. Costs at Castle Mountain remain elevated in 2023 as a result of the transition to crushing and agglomerating all ore to increase ore permeability and gold production. A portion of the ore under leach continues to be run-of-mine but will gradually transition to all crushed as crusher throughput is improved. Sustaining capital of $2 million is primarily for equipment upgrades. Non-sustaining capital of $11 million is primarily for Phase 2 optimization studies, metallurgical test work and permitting.

Mesquite Gold Mine

Mesquite is an open pit, run-of-mine heap leach gold mine located in Imperial County, California, USA, approximately 200 mines of its Castle Mountain Mine, 16 miles west of the state border with Arizona and 24 miles north of the border with Mexico. Mesquite has produced more than five million ounces of gold since it commenced operations in 1986, with annual gold production averaging approximately 125,000 ounces over the last 10 years.

Mesquite was Equinox Gold’s first operating mine. The Company acquired Mesquite in October 2018, immediately transforming Equinox Gold from a developer to a gold producer. Since then, strong gold prices and exploration success have significantly extended the mine life, bringing consistent cash flow to the Company and substantial value to Equinox Gold shareholders.

Production at Mesquite in 2023 is forecast at 80,000 to 90,000 ounces of gold with all-in sustaining costs between $1,415 to $1,480 per ounce of gold sold. Sustaining capital of $5 million is primarily for open-pit waste stripping. Non-sustaining capital of $16 million is mostly for lease payments for the mining fleet ($13 million) with the remainder allocated to exploration.

Growth Projects

Greenstone Project

Greenstone is a multi-million-ounce gold project located in the top-tier mining jurisdiction of Ontario, Canada. With 400,000 ounces of gold to be produced annually for the first five years (60% attributable to Equinox Gold), Greenstone will be a cornerstone asset in the Company’s portfolio.

Greenstone is located in Geraldton, Ontario, approximately 275 km northeast of Thunder Bay. In December 2020, Premier Gold completed a feasibility study for Greenstone (previously known as Hardrock) outlining the design of an open-pit mine that will produce more than 5 million ounces of gold over an initial 14-year mine life. Equinox Gold acquired Premier Gold and a 50% interest in Greenstone in April 2021, and then acquired another 10% to establish its current 60% interest.

On October 27, 2021, Equinox Gold announced groundbreaking for full-scale construction, with first gold pour targeted for the first half of 2024.

Castle Mountain Expansion

In November 2020, Equinox Gold announced commercial production for the Phase 1 heap leaching operations at Castle Mountain. The project is being developed in a phased ramp-up scenario, starting with heap leaching of stockpile material using existing operating permits, and then a Phase 2 expansion that will include milling and carbon-in-leach (CIL) processing of higher-grade ore.

On March 22, 2021, Equinox Gold released the results of a feasibility study for the planned Phase 2 expansion, which will increase production from the mine to well over 200,000 ounces of gold annually and generate nearly $2 billion of net cash flow (feasibility study estimate at $1,800/oz gold). Phase 2 will also extend the total mine life to more than 20 years.

Phase 1 operations place 12,700 tonnes of ore per day (t/d) on the heap leach pad to produce 25,000 to 30,000 ounces of gold per year. The Phase 2 expansion will include a 45,350 t/d run-of-mine heap leach facility and a new 3,200 t/d milling and leach/CIL plant for higher gra

Aurizona Expansion

In September 2021, Equinox Gold completed a pre-feasibility study outlining a planned expansion of the Aurizona mine. By mining the underground and satellite open-pit deposits concurrent with the existing Piaba open pit, the expansion would extend the Aurizona mine life to 11 years with average annual production of 137,000 ounces of gold per year and total life-of-mine production of 1.5 million ounces of gold. Peak production would average more than 160,000 ounces of gold annually for four years.

The Piaba gold deposit contains gold mineralization in a vein system that extends at least four km along strike with smaller, near-surface satellite deposits to the east and west of the main Piaba deposit. Drilling has shown that gold mineralization also extends below the ultimate Piaba open pit to depths greater than 1,000 m from surface.

Equinox Gold is completing a feasibility study for the expansion with completion targeted for mid-2023. Permits have been received for three underground portal locations; underground development could start as early as Q4 2023.

Los Filos Expansion

In October 2022, Equinox Gold released an updated feasibility study for an expansion at Los Filos. With continued development of the Bermejal underground deposit and construction of a 10,000 tonne-per-day carbon-in-leach (CIL) processing plant, the Los Filos mine life would be extended to 14.5 years with life-of-mine (LOM) average annual production increasing to 280,000 ounces of gold (2023-2036) at all-in sustaining costs of $1,081 per ounce. Total LOM production is estimated at 3.97 million ounce of gold. Peak production during 2025-2030 averages 360,000 ounces of gold per year.

Constructing and operating the CIL plant, compared to the current heap leach only scenario, extends the Los Filos mine life by approximately four years and adds more than 1.1 million ounces of gold to LOM production.

The feasibility study contemplates construction of the CIL plant commencing in 2023 with an 18-month timeline for construction and commissioning, which would allow higher-grade ore to be directed to the CIL plant commencing in mid-2024. While the economic and production estimates outlined in the feasibility study are predicated on that timeline, Equinox Gold has not approved construction for the CIL plant.