Molybdenum plant commissioned ahead of schedule; One-off operating events impact bottomline earnings
AMERIGO RESOURCES LTD. (Vancouver, British Columbia) reported results of the three-month period ended March 31, 2005 today. Significant events are as follows:
Net earnings after tax for the quarter ended March 31, 2005 were US$1,644,722 compared to earnings of $2,578,907 in the immediately preceding quarter.
Earnings were impacted by an annual charge of US$504,760 for stock-based compensation, as prescribed under a recently enacted accounting standard. This is a non-cash expense to the Company arising from the annual stock option grant to employees, officers and directors. Net earnings for the quarter ended March 31, 2005 before stock-based compensation were $2,149,482, compared to earnings of $2,578,907 in the immediately preceding quarter.
Earnings were also impacted by the following one-off operating events:
- 9 days downtime due to El Teniente maintenance shutdown in January
- Shell failure in Mill no. 4 resulted in reduced grinding capacity and lower recoveries for 2 weeks
- Flotation cells taken offline to install new aeration equipment as part of expansion to optimize future recoveries
- Below budget Colihues extraction due to late delivery of new extraction equipment
Production under budget – Despite the one-off events mentioned above, production was down by only 14% compared to the previous quarter and 11% higher than Q1-2004 production. Copper produced in Q1-2005 was 7.50 million pounds, compared to 6.78 million pounds of copper produced in Q1-2004.
Cash costs before El Teniente royalty were higher at US$0.91 per pound in Q1 - 2005 compared to US$0.76 in the preceding quarter and US$0.64 in Q1-2004. Lower production and a high percentage of fixed costs result in higher cash cost per pound.
Cost increases are also due to higher energy and steel costs, and significantly higher smelter and refinery charges in 2005 consistent with industry-wide increases to treatment, refining and shipping charges. Smelter and refinery charges were US$0.35/lb in the quarter, compared to an average cost of US$0.20/lb in 2004. Since MVC does not ship concentrate overseas, smelter and refinery charges include the participation by the smelter in MVC’s cost savings for shipping.
MVC management also took the opportunity offered by the El Teniente shutdown to undertake annual maintenance of the MVC plant. Accordingly, maintenance costs of US$0.15/lb are 27% above budget. Maintenance costs per pound are expected to decrease in subsequent quarters as a result of the “upfront” maintenance undertaken in Q1.
Total costs after royalty, depreciation and accretion were US$1.14 per pound in the quarter ended March 31, 2005 compared to US$0.98 in the preceding quarter and US$0.80 in Q1-2004. Contributing to the total cost increase are higher royalty payments at higher copper prices.
The outlook for the remainder of the year should see lower operating costs per pound due to higher expected production related to the plant expansion and the benefit of molybdenum production as a by-product credit.
Cash balances increased to US$8,812,296 at March 31, 2005 after capital expenditures of US$4,517,658 in Q1-2005 related to the copper plant expansion and the molybdenum plant.
Molybdenum plant completed in the quarter - Construction for the molybdenum plant was completed on March 2005, 3 months ahead of schedule. Production of saleable molybdenum concentrate started during the commissioning phase in April 2005 and is expected to be in excess of 500,000 pounds of molybdenum in concentrates in 2005, with an increase to 800,000 to 1,000,000 pounds in 2006.
The information in this news release and the Selected Financial Information contained in the following page should be read in conjunction with the Consolidated Financial Statements and Management Discussion and Analysis for the period ended March 31, 2005, which will be available at the Company’s website at www.amerigoresources.com and at www.sedar.com.
Please click here to view the complete financial statements in PDF format
Amerigo Resources Ltd. is a Canadian copper and molybdenum producing company forecasting 18,000 tonnes of copper production and 500,000 pounds of molybdenum in 2005 from its MVC operations near Santiago, Chile. Tel: (604) 681-2802; Fax: (604) 682-2802; Web: www.amerigoresources.com; Listing: ARG:TSX
For further information, please contact:
Jeffrey Giesbrecht, Secretary
Amerigo Resources Ltd. (604) 697-6201
The Toronto Stock Exchange has not reviewed nor accepted responsibility for the adequacy or accuracy of the contents of this news release, which has been prepared by management. Statements contained in this news release that are not historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks and uncertainties which could cause actual results to differ materially from estimated results. Such risks and uncertainties are detailed in the Company’s filings with the TSX and on SEDAR. Forward-looking statements are based on the beliefs, estimates and opinions of the Company’s management on the date the statements are made. The Company undertakes no obligation to update these forward-looking statements if management’s beliefs, estimates or opinions, or other factors, should change.