Note: This article is an essential update to the article published on January 19, 2022.
In my preceding article, I analyzed the 4Q21 preliminary gold production, and this article covers the 4Q21 and full-year 2021 results, including gold production. However, the production numbers have changed a little and have been updated.
A few highlights
Equinox Gold produced 210,432 Au oz, in 4Q21, an 54.3% increase over 4Q20 (136,352 oz) and up 50.6% sequentially. The company
Achieved 2021 guidance with a total production of 602,110 ounces.
The revenues came in at $381.23 million, a massive jump from the same quarter a year ago. The company posted a $184.08 million net income, double last year’s $91.24 million net income quarter.
The company is advancing well and has excellent future growth potential, qualifying it as an excellent long-term investment.
Equinox Gold is mining essentially in safe jurisdictions in North and South America with seven producing mines and eight with the Santa Luz project, which will produce about 110,500 Au ounces per year with the first gold pour done in late March.
Furthermore, on October 27, 2021, Equinox Gold announced the groundbreaking for the full-scale construction of the Greenstone Mine in Ontario, Canada.
Below is a summary of essential data:
Equinox Gold is a reliable proxy for gold. The metal has experienced much volatility over the past twelve months and will probably continue to fluctuate widely.
However, we have enjoyed a strong momentum for the gold price benefiting from the war in Ukraine and a concerning jump in inflation fueled by red hot commodity prices.
With the Fed turning hawkish again and willing to act aggressively against inflation that it sees as too high, we may soon witness a gold price reversal back to below $1,850 per ounce.
It is the main reason why I recommend short-term trading LIFO a large part (~40%) of your long position to profit from the gold volatility and reduce the risk of a sudden turnaround for the worse.
Equinox Gold has outperformed the VanEck Vectors Gold Miners ETF (NYSEARCA: GDX) and is now up 18% on a one-year basis.
CEO Christian Milau said in the conference call:
we’ve put together a collection of companies and assets over the last four years, and we’re excited to be at this point in our growth cycle here where we’ve got the diversified Americas gold producer with the seven producing mines soon to be eight, one Santa Luz is ramping up in quarter two this year and five exciting growth projects.
Equinox Gold – Financial Snapshot 4Q21 – The Raw Numbers
|Total Revenues in $ Million||252.63||229.70||226.22||245.13||381.23|
|Net Income in $ Million||65.25||50.32||325.74||-5.24||184.08|
|EBITDA $ Million||103.54||118.73||364.16||47.55||244.29|
|EPS diluted in $/share||0.31||0.14||0.96||-0.02||0.54|
|Operating Cash flow in $ Million||82.93||79.36||20.17||64.76||155.42|
|Capital Expenditure in $ Million||50.91||70.87||94.41||71.51||107.44|
|Free Cash Flow in $ Million||32.02||8.49||-74.24||-6.75||47.99|
|Total Cash $ Million||344.93||317.53||513.91||459.93||546.03|
|Total Long term Debt in $ Million||545.24||547.36||540.53||545.09||540.69|
|Shares outstanding (diluted) in Million||266.03||291.62||343.63||300.51||350.97|
Data Source: Company release
Gold Production And Balance Sheet Details
1 – Revenues were a whopping $381.23 million in 4Q21
Equinox Gold reported revenues for the fourth quarter of 2021 of $381.23 million. I recommend checking the table above for the 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 gold-silver Mercedes mine in Mexico. Moreover, Equinox increased Greenstone’s ownership interest to 60%. Also,
- Sold ten million shares of Solaris for total cash proceeds of $66.7 million.
- Sold the Pilar Mine for $38.0 million, a 1% net smelter return royalty and 11.6 million shares of Pilar Gold Inc.
- Invested C$51 million in i-80 Gold Corp. to maintain an approximate 25% interest on a fully diluted basis.
- Announced 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: The generic free cash flow is the cash from operations minus CapEx.
Trailing twelve-year free cash flow was a loss of $24.51 million with a free cash flow for 4Q21 of $47.99 million.
3 – No more Net debt and cash of $546.03 million in 4Q21
No Net debt as of December 31, 2021. The total cash was $546.03 million, and liquidity is ~$505 million now.
4 – Gold production consolidated details – 4Q21 gold production was 210,432 Au Oz (212,255 Au Oz sold)
AISC in 4Q21 was $1,266 per ounce sold, and the gold price realized was $1,792 per ounce.
5 – 2022 Guidance
Production guidance is up significantly from 2021 with 625K to 710K oz of gold and AISC of $1,300 to $1,375 per gold sold.
Note: On November 4, 2021 – Equinox announced that it had filed a National Instrument 43-101 technical report regarding the pre-feasibility study for an expansion at its Aurizona gold mine in Brazil and an updated Mineral Reserve and Mineral Resource estimate for Aurizona, the results of which were announced on September 20, 2021.
The principal change to gold production guidance comes from Santa Luz, a new producing mine for the company.
6 – Production details per mine for the last eight quarters
Equinox Gold owns seven operating mines now after the sale of Pilar.
Also, Equinox commenced full-scale construction at Greenstone with,
a construction budget on a 100% basis (of which Equinox Gold will fund 60%) of C$1.53 billion ($1.23 billion at a rate of USD: CAD 1.25), including a $177 million contingency
Initial capital estimate updated in October 2021 to reflect firm supplier quotes following detailed engineering, a review and update of capital costs, and an increased contingency including a provision for future inflation and potential COVID-19 impacts
Initial cash spend could be reduced by approximately $100 million through lease financing for mobile equipment and offset economically by up to $70 million of pre-commercial production revenues (at $1,750 per oz gold price).
7 – Proven and Probable Mineral Reserves
Mineral reserves are now 16.402 Moz.
Technical Analysis (Short Term)
EQX forms an ascending channel pattern with resistance at $9 and support at $8.1.
The trading strategy that I recommend is selling about 25%-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 below $8.15 again.
Watch the gold price like a hawk.
Warning: The TA chart must be updated frequently to be relevant. It is what I am doing in my stock tracker. The chart above has a possible validity of about a week. Remember, the TA chart is a tool only to help you adopt the right strategy. It is not a way to foresee the future. No one and nothing can.
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