How are energy investors positioned?
Amerigo Resources Ltd., with a market capitalization of $4.57 billion, reported its Q2 2025 earnings, meeting expectations with an earnings per share (EPS) of $0.05, while revenue surpassed forecasts at $50.8 million against a projected $49.4 million. The stock price of Amerigo Resources saw a modest increase of 1.42% following the earnings release, reflecting positive investor sentiment despite a slight year-over-year revenue decline. According to InvestingPro analysis, the company appears undervalued based on its Fair Value metrics.
Key Takeaways
- Revenue exceeded forecasts, coming in at $50.8 million.
- EPS met expectations at $0.05.
- Stock price increased by 1.42% post-earnings.
- Copper production remains strong, aligning with annual guidance.
- No environmental incidents or lost time accidents reported.
Company Performance
Amerigo Resources demonstrated resilience in Q2 2025, achieving a net income of $7.5 million. Despite a slight dip in revenue compared to Q2 2024, the company maintained robust operational performance, particularly in copper and molybdenum production. The company’s strategic focus on process optimization and cost management contributed to its stable financial results.
Financial Highlights
- Revenue: $50.8 million, down from $51.6 million in Q2 2024.
- EPS: $0.05, matching the forecast.
- EBITDA: $17.8 million.
- Gross profit: $12.1 million, compared to $16.5 million in Q2 2024.
- Copper production: 15.5 million pounds.
Earnings vs. Forecast
Amerigo Resources met EPS expectations with a reported $0.05 per share, while revenue exceeded forecasts by 2.94%, totaling $50.8 million. This revenue surprise, although modest, indicates effective cost management and operational efficiency.
Market Reaction
The market reacted positively to Amerigo Resources’ earnings report, with the stock price rising by 1.42% to $2.15. This movement positions the stock closer to its 52-week high of $2.44, reflecting investor confidence in the company’s financial health and strategic direction. InvestingPro data reveals two significant strengths: the company holds more cash than debt on its balance sheet and maintains a perfect Piotroski Score of 9, indicating strong financial health. For comprehensive analysis, including 12 additional ProTips, consider accessing the full Pro Research Report.
Outlook & Guidance
Looking ahead, Amerigo Resources maintains its annual cash cost guidance at $1.93 per pound and plans to fully repay its debt by year-end. The company is considering increasing dividends and share buybacks, underscoring its commitment to shareholder value. Capital expenditures for 2025 are projected at $13 million. With a current dividend yield of 1.92% and strong cash flows, InvestingPro analysis indicates robust shareholder returns potential. Discover detailed valuation models and future growth projections with the comprehensive Pro Research Report.
Executive Commentary
Aurora Davidson, CEO, emphasized the company’s focus on maximizing shareholder value, stating, "Our ultimate goal is to generate maximum value for shareholders." She also highlighted the flexibility of the capital return strategy, noting, "The CRS has to be flexible," which suggests a proactive approach to capital allocation.
Risks and Challenges
- Copper market volatility could impact pricing and revenue.
- Supply chain disruptions may affect production schedules.
- Fluctuations in global demand for copper and molybdenum.
- Potential regulatory changes in Chile, where operations are based.
- Currency exchange rate fluctuations impacting financial results.
Q&A
During the earnings call, analysts inquired about copper market dynamics and the company’s settlement pricing mechanism. Executives addressed concerns about tariff impacts on copper pricing and clarified strategies for future cash allocation, reinforcing the company’s strategic focus on operational efficiency and shareholder returns.
Full transcript - Amerigo Resources Ltd. (ARG) Q2 2025:
Joanna, Conference Operator: Afternoon. My name is Joanna, and I will be your conference operator today. At this time, I would like to welcome everyone to the American Resources Second Quarter twenty twenty five Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the formal remarks, there will be a question and answer session.
You. Mr. Graham Farrell of NorthStar Investor Relations, you may begin your conference.
Graham Farrell, NorthStar Investor Relations, NorthStar Investor Relations: Thank you, operator. Good afternoon,
Graham, Investor Relations, Amerigo: and welcome, everyone, to Amerigo’s quarterly conference call to discuss the company’s financial results for the 2025. We appreciate you joining us today. This call will cover Amerigo’s financial and operating results for the second quarter ended 06/30/2025. Following our prepared remarks, we will open the conference call to a question and answer session. Our call today will be led by Amerigo’s President and Chief Executive Officer, Aurora Davidson along with the company’s Chief Financial Officer, Carmen Amensquita.
Before we begin our formal remarks, I would like to remind everyone that some of the statements on this conference call may be forward looking statements. Forward looking statements may include, but are not necessarily limited to, financial projections or other statements of the company’s plans, objectives, expectations or intentions. These matters involve certain risks and uncertainties. The company’s actual results may differ significantly from those projected or suggested by any forward looking statements due to a variety of factors, which are discussed in detail in our SEDAR plus filings. I will now hand the call over to Aurora Davidson.
Please go ahead, Aurora.
Aurora Davidson, President and Chief Executive Officer, Amerigo: Thank you, Graham. Welcome to Lerna’s earnings call for the 2025. We are pleased to report positive operational and financial results. Amerigo has again demonstrated its operational excellence and capital allocation agility. We achieved strong copper production, managed cost effectively and reinforced our commitment to shareholder returns.
Our Chilean operation, NDC, continued to operate consistently in the second quarter with no lost time accidents among our employees and no environmental incidents. In both of these operational performance categories, MVC continues to extend its multiyear company records. Copper production was 15,500,000 pounds and molybdenum production was also robust. Copper production in the first half of the year added for 46% of Amerigo’s annual guidance of 62,900,000.0 pounds. Our yearly guidance takes into account our lower production in Q1, which was associated with the annual maintenance shutdown.
Therefore, our production guidance remains in place. We also maintained strict cost controls and our cash cost per pound declined to a dollar and 82¢ in the second quarter. Our annual cash cost guidance of a dollar and 93¢ per pound is also expected to be met. This guided cash cost target excludes the impact of MVC’s collective bargaining cost, which is scheduled for October. Collective bargaining per separately every three years at MVC for our two collective agreements.
Amerigo’s financial performance in the second quarter included revenue of 50,900,000.0 at an average NDC copper price of $4.40 a pound. This price excludes positive price driven settlement adjustments of $700,000 on the first quarter sales. The quarter was 6,500,000.0
Joanna, Conference Operator: with earnings per share of 5¢.
Aurora Davidson, President and Chief Executive Officer, Amerigo: By the end of the year. In line with America’s Capital Return Strategy or CRS, a quarterly dividend of 6 Canadian per share with state representing 3,500,000.0. Additionally, 3,100,000.0 common shares were repurchased and canceled during the quarter at a weighted average price of a dollar and 78¢ Canadian per share, representing 4,000,000. Year to date, copper prices have been stronger than we budgeted with NDC receiving a copper price of $4.42 per pound compared to our conservative estimate of $4.15 per pound in 02/2025. This is good news that we’ll discuss copper prices further shortly.
The molybdenum price has been $20.3 per pound and is trending very close to our annual estimate of $21 per pound. The average exchange rate of the Chilean pesos with the US dollar in the first half of the year was 955 pesos, also very close to our estimate of 940 pesos. Following the close of the second quarter, our operational results for July has been very positive with disruptions to 20 The price has also remained in July at $4 and 40 at 4¢ per pound. If these conditions persist during August and September, we anticipate third quarter. Moving on to the of the copper landscape, I would like to provide a quick summary.
If copper market is tight by Sorry. Levels. If you look for standard checklist for copper, here are a few essential points. Global mine copper production is expected to hold 60% or that is the 2025 has made in the 02/2023. Factors such as my age increasing capital requires resources, political uncertainty, and declined act as headwinds against.
Copper market. We continue to work our goal, spot treatment and counter charges, also known as CCRCs. This reflects the difficulty of miners’ face in securing product management. To remain possible, sellers must and low CCRCs they now charge copper miners indicates the desperation to secure an adequate supply. This means that 70% global smelter operations are currently unprofitable.
This could lead to smelter shutdowns and cause a sharp decrease in the growth of refined copper output. In 2023, refined copper supply grew by 4.2% and is now estimated to grow by only 1.3% in 2025. Refined product inventories in Yealandian Shanghai have also fallen sharply this year. Concurrent with this suffering supply scenario in the constant state average global market demand This demand has been a certification, the growth of AI data centers, group authorization, and traditional demand. We’ve had to talk before the company.
By putting together this plan to run outlook, a market deficit is expected by year end, and the International Energy Agency projects market for equity with. This is bullish for copper prices in Amerigo. In addition, tariff induced market distortions are occupying or have identified market tightness and have impacted short term copper prices. During our last earnings call, I discussed the high arbitrage since the year with copper business as the LME market at the Comet. This trend continues which were so high just weeks ago.
But the best to pay US price on copper. And that’s because for its cover. However, the higher complex prices had a positive impact on LME prices, which in turn had a positive effect on our nickel. As for the pricing and the expected Relative to LME prices with the average reaching over 45¢ per pound. Despite diversion, to a massive redirection of copper inventories from Europe and Asia to The US, driven both by speculation and structural factors.
US buyers scrambled to secure copper before August 3. The on warrants making it more Thank you for the audit of the official copper. Additional information was finally released by the US government indicating the tariff would only apply to copper such as wires? To $4.36. This is.
I’m not. Capture copper price packs very shortly ready and convert them into for sure. It’s your own strategy. I will just go next. I’m going to continue to return capital to shareholders at rapid pace.
In the second
Graham, Investor Relations, Amerigo: Operator, it seems like the load is having connection issues.
Joanna, Conference Operator: Am I
Aurora Davidson, President and Chief Executive Officer, Amerigo: not being correctly heard?
Graham, Investor Relations, Amerigo: Now we can hear you now, but you’ve cutting in and out, Aurora.
Aurora Davidson, President and Chief Executive Officer, Amerigo: Oh, I’m sorry about that. Well, I’ll I’ll I’ll continue. The script will be on the website, and we can we can go over any questions. Sorry about that. K.
Cumulatively, the CMS has returned 92,200,000.0 since its inception with 66% of the amount returned via dividends and 34% through buybacks. In addition to these returns of capital, there is also the benefit of share price appreciation. During the second quarter, Amerigo share price increased from $1.91 to CAD 2.12. And today, the share price is CAD 2.17, representing a 36% year to date increase. I am often asked about whether Amerigo’s Board of Directors prioritizes dividends over share buybacks.
The answer is that the CRS is flexible and multifaceted. There is no absolute preference for one over the other. Instead, we use these tools strategically to maximize shareholder value under varying market conditions. The CRS provides us with the flexibility to adapt to the inherent volatility of the corporate sector without being locked into single method. The quarterly dividends are the foundation of the CRS.
They provide a stable and predictable return to shareholders. Performance dividends are a flexible tool. We use the dividends to distribute excess cash and copper prices are strong, and the company’s cash balance exceeds 25,000,000. Performance dividends enable us to quickly share the benefits of spikes in copper prices with shareholders. And share buybacks are used opportunistically to take advantage of periods of share price weakness and to reduce dilution.
We have stated the board’s intention to buy back enough shares to eliminate annual shareholder dilution at a minimum, but we have been doing more than that. And to be clear, being active on share buybacks does not mean there will be no performance dividends. Both can occur under strong copper prices. So our preference is for a balance and opportunistic approach to capital return. The consistent forward dividends provide stability, performance dividends capture upside, and share buybacks, manage dilution and capitalize on undervaluation.
Our ultimate goal is to generate maximum value for shareholders and to utilize all the tools of the CRS to achieve this. Amerigo’s CFO, Carmen Amesquita, will now discuss the company’s financial results. Carmen, please go ahead. Thanks, Aurora.
Joanna, Conference Operator: I’m pleased to present the financial report for the 2025 from Amerigo and its MVC operation in Chile. During the three months ended 06/30/2025, the company posted a net income of $7,500,000 earnings per share of $05 or $06 Canadian and EBITDA of 17,800,000.0. Net income was 2,200,000.0 lower than in Q2 twenty twenty four, primarily because during the 2024, Amerigo booked $6,900,000 in positive fair value adjustments to copper revenue receivables, resulting from a sharp quarter on quarter increase in copper prices. For comparison, during Q2 twenty twenty five, the total positive fair value adjustments amounted to $700,000 Revenue in Q2 twenty twenty five was $50,800,000 compared to $51,600,000 in Q2 twenty twenty four. This included copper tolling revenue of $43,800,000 and molybdenum revenue of $7,000,000 In Q2 twenty twenty five, the gross value of copper tolled on behalf of DET was 66,900,000.0 From this gross revenue, we deducted notional items, including DET royalties of 19,900,000.0, smelting and refining of 3,600,000.0 and transportation of 400,000.0 and then added positive fair value adjustments to settlement receivables of 700,000.0, which, as I mentioned, were significantly lower than the positive fair value adjustments in the 2024.
Revenue also included molybdenum revenue of 7,000,000. We reported a provisional copper price of $4.42 per pound on our q two twenty twenty five sales, which coincidentally were the same provisional price we had for the 2025. The final settlement prices for April, May and June 2025 sales will be based on the average London Metal Exchange prices for July, August and September 2025, respectively. We now know July’s average provisional price or average price, which is $4.44. A 10% increase or decrease from the $4.42 per pound provisional price used on 06/30/2025, would result in a $6,900,000 change in revenue in Q3 twenty twenty five regarding Q2 twenty twenty five production.
Tolling and production costs increased 10% from $35,100,000 in Q2 twenty twenty four to $38,700,000 in Q2 twenty twenty five, which can be mainly attributed to an 11% increase in production between both quarters due to the timing differences of MVC’s annual maintenance shutdown, which in 2024 took place in the second quarter, but this year took place during the first quarter. The most significant cost variances between the two quarters were consumption driven. They included higher copper higher power costs of $1,200,000 lime costs of $600,000 and other direct tolling costs, such as copper reagents, of $800,000 Moly production costs increased by $300,000 due to higher production associated with more processing of historic tailings in twenty twenty Q2 twenty twenty five. The gross profit after revenue and production costs was $12,100,000 compared to $16,500,000 in Q2 twenty twenty four. General and administration expenses were $1,000,000 compared to $1,100,000 in Q2 twenty twenty four.
These expenses included salaries, management and professional fees of 600,000.0, office and general expenses of 200,000.0 and share based payments of 200,000.0. Other gains were 100,000.0 compared to 600,000.0 in the 2024, driven mainly by foreign exchange gains in both periods. Finance expense was 400,000.0 consistent with Q2 twenty twenty four and consisted entirely of interest on loans and bank charges. Income tax expense was $2,600,000 compared to $5,600,000 in Q2 twenty twenty four. Beginning this quarter, we’ve included a breakdown of the company’s tax expense in the P and L, separating current taxes from deferred income taxes.
The current tax represents both actual income tax for MBC and repatriation taxes to bring funds from Chile to Canada. Deferred income tax is an accounting figure used to reconcile timing differences. In Amerigo’s case, primarily arising from the differences in the timing of financial and tax depreciation. Current tax expense in Q2 twenty twenty five was $4,400,000 compared to $6,300,000 in Q2 twenty twenty four. Before moving on to the statement of financial position, I will mention some non IFRS measures used by the company, cash cost, total cost, and all in sustaining cost.
Amerigo’s cash cost in q two twenty twenty five was $1.82 per pound, decreasing from $1.96 per pound in Q2 twenty twenty four. The 14¢ per pound reduction in cash cost was primarily due to a 19¢ per pound decrease in smelting and refining charges in response to the current annual benchmark, offset by increases of 3¢ per pound in lime costs and other direct costs. Total costs decreased to $3.55 per pound, a decrease of 23¢ per pound from q two twenty twenty four’s $3.78 per pound. This was the result of a 14¢ reduction in cash cost, a 4¢ decrease in DEP royalties, and a 5¢ decrease in depreciation. All in sustaining costs, which include total costs, sustaining CapEx and corporate G and A, were $3.69 per pound in Q2 twenty twenty five compared to $4.2 in Q2 twenty twenty four.
This is the result of per pound decreases of 23¢ in total cost, 27¢ in sustaining CapEx and 1¢ in corporate G and A expenses. Moving on to the statement of financial position. On 06/30/2025, the company had cash and cash equivalents of 23,300,000.0, restricted cash of 900,000.0, and had a working capital deficiency of 5,400,000.0, down from a working capital deficiency of 6,500,000.0 on 12/31/2024. Trade and accounts payable decreased from 24,600,000.0 as of 12/31/2024 to 19,700,000.0 at the June 2025. Current income tax liabilities also decreased from 8,500,000.0 on 12/31/2024 to 100,000.0.
Most of the tax balance due at the 2024 related to income tax owing by MVC in respect of 2024 earnings, which exceeded the monthly tax installments made. This tax was paid in April 2025 when MVC’s annual tax declaration was filed in Chile. Note that in line with Chilean tax requirements, MVC placed monthly tax installments based on a percentage of revenue, which may or may not be close to the final corporate tax for a given year. Then in April of the following year, when the tax declaration is filed for the previous year, any difference in the amount owing exceeding the monthly tax installments is paid. You will notice that the company’s debt, which is shown as 7,000,000 net of transaction fees, is now shown fully as current debt.
As guided to the market, we intend to make the remaining scheduled payment of 4,000,000 in the second half of the year and prepay the remaining 3,500,000.0, which is formally due on 06/30/2026. In this way, Amerigo will be in a zero debt position by the 2025. Regarding cash flows during the quarter, Amerigo generated $11,900,000 in cash flow from operations. Net operating cash flow, which includes changes in noncash working capital, was 6,300,000.0. Included in the changes in noncash working capital are payments related to current income taxes income tax liabilities, rather, of 9,500,000.0, which includes the $20.24 income tax payments we previously discussed.
These decreases in accounts payable and income tax result in an outlay of cash, thereby decreasing the cash flow from operations net of these noncash working capital changes. In terms of uses of cash during the quarter, 1,400,000.0 was used for investing activities, in other words, for CapEx payments, and 9,400,000.0 was used in financing activities. These financing activities included Amerigo returning 7,600,000.0 to shareholders, 3,500,000.0 through Amerigo’s regular quarterly dividend of 3¢ Canadian per share, and 4,000,000 from the purchase and cancellation of 3,100,000.0 common shares through a normal course issuer bid. The company also paid 4,000,000 on borrowings, including 2,300,000.0 paid with restricted cash. Briefly touching on the results for the first half of the year compared to guidance, our cash cost for the six months ended 06/30/2025 was $2 per pound, and our forecast indicates that we are on track to meet the company’s 2025 guidance of an annual normalized cash cost of $1.93 per pound.
Our normalized cash cost guidance excludes any signing bonus associated with a three year collective labor agreement with NBC’s operators union that will occur later this year. In 2025, NBC is expected to incur CapEx of $13,000,000 of which $4,400,000 is optimization CapEx, 4,400,000.0 is sustaining CapEx, and $4,200,000 is CapEx associated with the annual plant maintenance shutdown and strategic spares. Year to date 2025, CapEx additions were $6,000,000 and CapEx payments were 8,200,000.0 We remain on track with our annual CapEx guidance. We will report Amerigo’s Q3 twenty twenty five financial results in October 2025 and want to thank you for your continued interest in the company. We will now take questions from call participants.
Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the one on the touch tone phone. You will hear a prompt that your hand has been raised. If you wish to decline from the polling process, please press the star followed by the two.
And if you are using a speakerphone, please let the handset before pressing any key. First question comes from Carrie Fisher at CIBC World Markets. Please go ahead.
Carrie Fisher, Analyst, CIBC World Markets: Yes. Good afternoon, everybody. I
Joanna, Conference Operator: I
Carrie Fisher, Analyst, CIBC World Markets: I believe I it’s already been flagged that there was really a lot of problems with the connection while Aurora was speaking, particularly about the outlook for copper and copper markets. But I think you said that the the text of the speech will be available on the website, so I don’t expect you to repeat it here. I did wanna ask, though, about the likelihood, because I think you mentioned it, but I didn’t get it because the phone broke up, of a positive fair value adjustment in the third quarter given where copper prices are and have been. Is that a reasonable expectation?
Joanna, Conference Operator: Carrie, first of all, sorry
Aurora Davidson, President and Chief Executive Officer, Amerigo: about that. We did a sound check before we had the call, and we didn’t have any problems. So it’s unfortunate that I didn’t come through. But, yes, the text of the of the earnings call will be available on the website as soon as we get it from the supplier. I did speak about the fact that July has been a good month both in terms of production, and we also saw because now we have the the average prices for the for the month of of July, $4.44 per pound.
We mark to market on average at $4.42 at the June thirtieth as Carmen was mentioning. So right now, as we speak, there is a positive small positive adjustment on a pricing basis during for for the first month that has settled, which is essentially, we have settled now April after July average prices. The outlook remains positive from our perspective. I did speak about, and hopefully, that wasn’t broken about what happened yesterday with the clarification of what The U. S.
Tariff is going to be looking like, essentially exempting copper concentrates and copper and refined copper from the tariffs. And that caused a sharp correction of that arbitrage that we have been seeing between COMEX and the LME markets for most of the year. So if you look at copper COMEX price day and the LME, there’s a 3¢ difference, which is life is back to normal in terms of what what you what you normally have in those markets. Does that answer your question?
Carrie Fisher, Analyst, CIBC World Markets: Yes. That’s fine. And I’ll read the text. My second question sort of lot feel, but I’m wondering if you’ve heard of a a company called Stillbright.
Aurora Davidson, President and Chief Executive Officer, Amerigo: No. I haven’t heard about them.
Carrie Fisher, Analyst, CIBC World Markets: Okay. Well, I’ll leave that with you to research. Stillbright, I just saw an interview today on television. I had never heard of it before. It’s a start up kind of a technology company that has received some seed financing.
But what they have is a new process for essentially smelting copper, but it’s through flotation cells and they use vanadium as a catalyst. And they’re able to recover the copper without producing the waste products that many smelters do, lead and arsenic. And they can do at a lot much lower cost and quicker start up to build these things. But I from what the person said, I think it’s unlikely that it would be targeted towards processing tailings. I think it’s more an an alternative to shipping ore to China to be smelted and doing it domestically in The US and other countries.
But anyway, worth researching. So I’ll leave that with you. The only other question I had actually is for a Carmen question. It’d be exciting for Carmen. It’s a two part question.
One is that with all the depreciation we’re taking at over 22,000,000 a year, which I know helps with, you know, cash conservation by deferring taxes, because there’s tax depreciation. I don’t know what CCA is versus depreciation rates in Chile. But in any event, it seems to me that the fixed assets now are being considerably undervalued in the balance sheet. And related to that balance sheet, we also have 24,000,000 of other assets, and I forget what those are. So that the question is, are the assets undervalued in the balance sheet?
And what are the the 24,000,000 of other assets?
Joanna, Conference Operator: Alright. So I think you have to remember when you look at depreciation, tax depreciation and accounting depreciation are different. So what we’re taking on the on the p and l, that’s, you know, that’s just our standard depreciation rate over the the life of the the asset, whereas the tax depreciation is completely different. So it’s not, you know, not in a we don’t do it in a way to to save taxes on the accounting side.
Carrie Fisher, Analyst, CIBC World Markets: Okay. Sorry. I phrased the question improperly. Forget about the tax depreciation. It just seems to me that even with the depreciation rate depreciation rates come to use relative to the the age and the value of the assets that the assets and the balance sheet are probably understated, which is a good thing for us.
But I guess it doesn’t matter a lot given that there’s no fixed, you know, debt on the balance sheet as well. So there’s no leverage to that. But still, book value matters to some people.
Joanna, Conference Operator: Yeah. I wouldn’t say the the assets are understated.
Carrie Fisher, Analyst, CIBC World Markets: Okay. Can you answer your question? What are the other assets? 24,000,000.
Joanna, Conference Operator: Sure. So that relates to all of the plant plant and equipment that’s that’s on-site. So mostly the plant.
Carrie Fisher, Analyst, CIBC World Markets: Other assets are plant, not fixed assets.
Joanna, Conference Operator: Yeah. So machinery machinery and equipment would would relate to all of the
Aurora Davidson, President and Chief Executive Officer, Amerigo: other assets that are not
Carrie Fisher, Analyst, CIBC World Markets: in Okay. So that’s part of the whole plant and equipment then. Okay. That’s a good thing.
Joanna, Conference Operator: Exactly.
Aurora Davidson, President and Chief Executive Officer, Amerigo: Yeah. That’s the plan.
Joanna, Conference Operator: That’s the majority of of what we have in fixed assets on the balance sheet, and then there’s also the machinery and equipment that we use as well.
Carrie Fisher, Analyst, CIBC World Markets: Okay. If I get just one final question for Aurora, it seems to me that that in the quarter we’ve had with the, obviously, The US copper price up because of the Trump tariffs and that’s now gone away. Still, I would have thought there would have been a greater arbitrage effect on on the LME price than we actually saw. Can you explain why that didn’t happen?
Joanna, Conference Operator: Terry, what we basically do
Aurora Davidson, President and Chief Executive Officer, Amerigo: is we mark to market as as as we always disclose based on the progression of the copper prices at month end, and then we settle those prices at the actual average price for the LME of of of the month in question. So for example, when you’re looking at the average prices that we had in 2000 and and in in for the second quarter, I’ll tell you what they were, and although this is available online, the average LME copper price for April was $4.17. There was a significant decline from $4.42 to $4.17 in April. So that was final price for January sales with the April LME price, $4.17. The final settlement price for the February sales, which was the May price, was $4.32.
And the final settlement price for the March sales was June average price of $4.46. So if if if you’re looking at what happened there that I didn’t see that huge pickup, April was just a defining moment or a defining month of negative adjustments from $4.42 to $4.70. And then for May was also settled at a lower price of $4.32 compared to the $4.42 that we had mark to market. So the only month in the second quarter where there were positive sale settlement adjustments compared to our mark to market at March 31 was the month of June. I’m sorry if this all sounds so confusing.
We try to simplify all of that information in the notes to our, actually, news release. So all of that information is there, but there there certainly was a negative final settlement when you looked at the vehicle realized prices of $4.17.
Carrie Fisher, Analyst, CIBC World Markets: Right. I I get that, and I actually do understand it because I’ve been following the company a long time. I I I didn’t phrase the question very well, I guess. I was just thinking about the LME price versus the spot price and and The US copper price and why there wasn’t a greater pull on the LME price. Nothing to do with Amerigo.
Just just maybe that’s the question that can’t be answered, but it just surprised me that there wouldn’t have been a greater effect on the LME.
Aurora Davidson, President and Chief Executive Officer, Amerigo: A greater positive or a greater negative effect?
Carrie Fisher, Analyst, CIBC World Markets: Well, if The US if the price of copper is higher in The US because Americans are buying it to front run the tariffs, you would expect that would increase demand for copper even globally, which would reflect on the LME settlement price.
Joanna, Conference Operator: And I
Aurora Davidson, President and Chief Executive Officer, Amerigo: think it did. And I mentioned that sorry. That was one of the things that I mentioned on the script. The the the run up that we saw on on comics prices during the quarter and, basically, during the first semester of the year had a positive effect on the LME. I think it did pull it up.
And
Graham, Investor Relations, Amerigo: now if
Aurora Davidson, President and Chief Executive Officer, Amerigo: you if you look at the prices today, $4.39 Comix LME spot price $4.36 were back to normal. But I think that that that trading run opened up a lot of eyes into what’s going on with the copper fundamental structure, not just a trading story, which is a benefit for for the industry in general for for all of us, for sure.
Carrie Fisher, Analyst, CIBC World Markets: Right. Okay. That that’s good. I’ll read I’ll read it on. I don’t wanna take up more time now, but thanks for everything.
That’s great.
Joanna, Conference Operator: Thank you. The next question comes from Ben Piri at Atrium Research. Please go ahead.
Graham, Investor Relations, Amerigo: Hi, Aurora, Graham and Carmen. It’s Ben from Atrium again. Firstly, congrats on a strong quarter, and it’s good to see the shareholders that were awarded you guys for all the hard work. Just a couple of questions here, and I think Terry was covered a couple of them around the LME prices there. But in terms of CapEx, obviously, you had the maintenance shutdown in Q1, so it’s elevated.
Q2 is quite low. What can we expect in Q3 and Q4 from a CapEx perspective?
Aurora Davidson, President and Chief Executive Officer, Amerigo: You shouldn’t expect any changes from the original guidance, which was $13,000,000 I think I already spoke about that. What is in those $13,000,000, we have essentially five process optimization projects, which have a a price tag of 4,400,000.0. This includes finalizing some projects that we initiated in 02/2024, basically, to expand and optimize the control of flotation sales and improve water evacuation in Cauquenes. We also have a project to optimize flotation in the cascades, and we have the addition of a second thickener for the mixed concentrate. So what has transpired in terms of Q1, Q2, we had a front loading of a lot of the CapEx associated with two things.
The timing of the plant maintenance shutdown and the workload of of those optimization projects. But we’re we’re on track to not have more than that $13,000,000 of of total CapEx for the year. I did mention 4.4 for our communication. The other categories are $4,700,000 sorry. $44,200,000.0 for our plant shutdown and $4,000,000 just for sustaining CapEx, full and sustaining CapEx.
Graham, Investor Relations, Amerigo: Okay. Understood. Thank you. And then, yeah, in terms of share buybacks, and we did hear you’re cutting in a little bit cutting in and out a little bit. But on the buybacks, in particular, in Q2, there was obviously quite a jump from Q1.
Think it was a 4x or 5x in terms of shares bought back. Why such a big change? And then in terms of consistency going into Q3 and Q4, and then you mentioned you’re sort of going to be opportunistic with the buybacks, but can you just touch on this jump from Q1 to Q2?
Aurora Davidson, President and Chief Executive Officer, Amerigo: Yes. I think what was happening was basically a strong cash generation and the recognition that there is a there was, especially in the second quarter, an opportunity of buying back those shares at a really good price. I I did mention that our average buyback price in the quarter was a dollar and 78¢. So I think that was for for the first message. So I think that we were just watching how much cash is coming in as free cash flow and what is the best way of allocating that cash to ensure that we kept up with essentially that distribution commitment and share buybacks was an obvious opportunity for us in the second quarter.
Graham, Investor Relations, Amerigo: Right. Okay. And then so maybe you can touch on that sort of strategy in terms of how you’re prioritizing shareholders return shareholder returns because then it did cut out a little bit, but it sounds like when the share price is higher, you’ll probably scale back the buyback. But if if copper is high performance dividends.
Aurora Davidson, President and Chief Executive Officer, Amerigo: It it’s it’s it’s basically a more holistic answer. I wouldn’t like I I wouldn’t like to just provide a very linear response saying if if copper price is here, we do this or we do that or if the share price is here, we we we we we take this route. I think that the answer is that our CRS has to be flexible. We have no absolute preference other than ensuring that we live up to our word of returning that cash to shareholders. And we use the tools strategically.
You know quite well that for us, the foundation of the CRS is the quarterly dividend. We want to provide that very stable, very predictable return to shareholders under this copper price conditions where that 3¢ Canadian dividend is absolutely safe, then the question becomes what do we do next, performance dividends or the share buybacks? The performance dividends are a great tool. For example, when we have a spike in copper prices, we saw that happening in the 2024. And the obvious answer was we’ve realized the benefits of this strong settlement in the quarter for prior quarter sales, and we have to return this.
The best way of doing it quickly is through the performance dividend. But share buybacks, know, if we see a period of share price weakness, we act on that. If we want to reduce dilution, we act on that. We we have stated at the very minimum, we want to end each year with no dilution. And but we’ve done more than that this year.
Certainly, you saw the activity that we had in the second quarter. And literally, what was happening is we had the free cash flow. We were looking at our share price movement, and we thought this is a great opportunity to go out in the market and buy back those shares at a at a bargain price, and we did that.
Graham, Investor Relations, Amerigo: Understood. Yep. No. That makes sense. And then I guess just the last question would be, obviously, you’ve been paying down the debt quite aggressively over the last year and a half.
What are the plans to do with the excess cash flow once this debt is paid off at the end of the year? Is there a chance that the fixed dividend portion could increase?
Aurora Davidson, President and Chief Executive Officer, Amerigo: That is an that that is certainly a possibility. De depending on where share price performance is, additional activity on the buyback is also possibility or a half year or more frequent performance dividend. So it’s a, b, or c. That’s that’s the that’s the easy answer because that’s basically there’s going to be a substantial catalyst in terms of additional free cash flow to equity. I think Carmen mentioned that.
On average, if you look at our scheduled debt repayments for for the debt worth 7,000,000, After that, 2,000,000 finance cost. So that’s $9,000,000 that are becoming available as of 02/1926.
Graham, Investor Relations, Amerigo: Yep. Understood. And I guess it’s good to keep that flexibility and and see how things go. Okay. Well, that’s all I had for today.
Again, congrats and and thanks.
Aurora Davidson, President and Chief Executive Officer, Amerigo: Thanks, Ben.
Joanna, Conference Operator: Thank you. The next question comes from John Pulkari at Mutual of America. Please go ahead.
Graham Farrell, NorthStar Investor Relations, NorthStar Investor Relations: Thank you. Another well managed quarter. Thank you. Two questions, and I will not repeat or bother you with the question regarding dividends or increases. But in addition to eliminating dilution, is there a minimum number of shares that you think might be retained as far as reducing the flow to with an aggressive repurchase of shares in the second quarter that obviously will vary from quarter to quarter.
But, again, is there a minimum amount that in order to maintain liquidity that you think would be appropriate that you would not wanna drop below in terms of number of shares outstanding? Or
Aurora Davidson, President and Chief Executive Officer, Amerigo: No. The the the commitment is basically going avoid dilution, and I don’t think that we have reached a situation where we think that buying back any any more shares or buying back a a big block of shares would represent a detrimental decision for the company to take on.
Graham Farrell, NorthStar Investor Relations, NorthStar Investor Relations: Okay. So as we speak, if there was an appropriate decision and there was adequate cash.
Aurora Davidson, President and Chief Executive Officer, Amerigo: As as we speak, sir, buybacks are absolutely on the table as our performance dividend funds possibly in 02/1926, an increase to the to the quarterly dividend. So the three tools remain fully valid and executable on depending on circumstances.
Graham Farrell, NorthStar Investor Relations, NorthStar Investor Relations: Thank you. And the other question I had was just if you could take just a moment now to refresh me on, if you will, the chain of custody for copper delivery. After you’ve extracted the copper from the tailings, they assume it goes to port. And at what point do you turn over, say, title to the to the copper? At what point do you receive It
Aurora Davidson, President and Chief Executive Officer, Amerigo: it it it it is easier than that in terms of when is is title transferred. Our copper concentrate it’s a copper concentrate, so it’s not a it’s not a, obviously, a cathode. It’s not a finished product. It’s it’s like a dark powder called copper concentrate. Yeah.
It is shipped out on a daily basis. As soon as it’s put on the LT and trucks, it passes title. We bill for those deliveries on a weekly basis. We get we get provisional price on a weekly basis, and we settle that final provisional price payment later when the known price comes up that was part of the third month following delivery takes place.
Graham Farrell, NorthStar Investor Relations, NorthStar Investor Relations: Understand. And that provisional price
Aurora Davidson, President and Chief Executive Officer, Amerigo: is yeah. That provisional price is always yeah. Go ahead.
Graham Farrell, NorthStar Investor Relations, NorthStar Investor Relations: Always based on the LME?
Aurora Davidson, President and Chief Executive Officer, Amerigo: It’s always LME. It’s always LME. We actually look the the provisional weekly price is based on what let me hold on. The provisional price that is used until things are settled three months later. Always telling me.
Graham Farrell, NorthStar Investor Relations, NorthStar Investor Relations: Great. Alright. That’s all I had, and thank you again for managing us to another hotel court.
Aurora Davidson, President and Chief Executive Officer, Amerigo: Thank you.
Joanna, Conference Operator: Thank you. The next question comes from William Gallery, an investor. Please go ahead.
Graham, Investor Relations, Amerigo: All right. And I just want to echo the congratulations to everybody on the call, but also to the teams in Chile doing the work. This is incredible operational performance, managerial performance. And just quick follow-up, on the settlement. So it it sounds like the fair value adjustment is made, three months later, and that I mean, we’re marking the market, but when is the cash actually hitting our account?
And then kind of along the same lines, are we waiting to make decisions on cash flow such as buybacks or dividends until we know what the provisional adjustment is? So that way, you you know, essentially, there’s gonna be a quarterly delay in the effect of the the cash flows and then the decisions we make based on the cash flows.
Aurora Davidson, President and Chief Executive Officer, Amerigo: William, thank you for recognizing the team in Chile. They are they are the real the real people that make all of this happen. We we just coordinate them. Question regarding the the mark to market, but I think that, you know, we mark to market every every every month. Common prepares consolidated financial statements on a on a monthly basis, not on a quarterly basis.
We take the the LME and the LME sorry, the LME spot price and the LME n plus three price, and we create a progression for the n plus one, n plus two based on those two data points, and we we do the mark to market on on a on on a monthly basis. But I think most important or the most important part of your question is what happens with the cash and what happens with the decision making around that cash. So the payment terms from Credelco to NDC can be summarized in three three steps. We issue weekly invoices each Monday for 75% of the prior week’s copper production, which is provisionally priced as I was speaking in my prior question as the week’s average LME price. Once the month is completed, we issue one monthly invoice to true this app to true the amount up to set 90% of the month’s production, which is provisionally priced at the monthly average price less than weekly interim payments.
So, basically, at each month end, we are caught up with 90% of the deliveries that were done during the during the prior month priced at the the the most recent LME price for 90% of those deliveries. And then the final terms when the final terms are known three months later, we issue one final either credit note or debit note at the final price, which is the m m plus c price. So cash flow is coming in on a weekly basis at 75% of our production rate. It is screwed up to 90% of our production rate a week after the end of the month. And the final the final settlement, positive or negative, takes place three weeks before.
So there’s always there’s a continuum of of cash flow coming in on a weekly basis. We update all of this information in our model. So we basically are working with real time data that allows us to to know how much, for example, can be allocated to share buybacks on a weekly basis when we are active on the buyback program. Or, you know, when copper prices are closer to down to lower prices, how safe is our our CapEx payment or debt repayment as quarterly dividend. So we’re monitoring all of that information essentially, I would say, We have that.
We’re just plugging the copper price that that that that we think is going to apply for each week, and and we have all the data right in front of us.
Graham, Investor Relations, Amerigo: Perfect. Thank you so much. To I have another two follow ups, not to that specific area. But with regards to cost guidance, it’s, you know, it’s around $2 per pound. And, obviously, it’s been beaten in q one and q two and and really In
Aurora Davidson, President and Chief Executive Officer, Amerigo: q in q two. In q two.
Graham, Investor Relations, Amerigo: Q two. Okay. And largely because of smelting refining charges being lower. Is that something and I know you’ve maintained
Graham Farrell, NorthStar Investor Relations, NorthStar Investor Relations: the the cost go ahead.
Aurora Davidson, President and Chief Executive Officer, Amerigo: No. We we guided. If you’re interested in the guidance, I would say the best source of information and probably the the news release you should keep close close to you year round is our guidance news release, which is usually our first news release of the year. We provide there not only what the cash flow guidance is going to be, but also for for branches in terms of what happens with copper prices moving up or down, moly prices moving up or down, and even foreign exchange. When we provided our guidance for for the year in terms of cash cost, We knew already what the spot prices oh, sorry.
What the TCRCs, treatment and refinery charges were going to be for the year. So any variations that you’ve seen from guidance to actual are not driven by a lower smelter and refinery charges.
Graham, Investor Relations, Amerigo: And and I guess and and I’m probably just ignorant and don’t understand it, and maybe you can better explain it. But so are these decreases that at least the lower numbers than the cash cost guidance expected from smelting and refining? And I guess what I’m getting at is, is this something that’s gonna be long term or is this this kind of one off?
Aurora Davidson, President and Chief Executive Officer, Amerigo: No. The variances that we’re seeing right now are coming in from higher moly production. They’re coming in from a better or from a lower from a least strong Chilean peso compared to U. Dollar. Those are the significant variances are coming from.
They’re not coming by lower smelter and refinery charges. In our case, as it’s also the case for most copper concentrate producers, we work not on the basis of spot treatment and refinery charges, but on what’s called an annual benchmark treatment and refinery charge that is known at the end of the prior year, and then you work with those figures and with those charges for the rest of the year irrespective of what happens with the spot TCRC. So there are long term or annually set rate that doesn’t change through the year.
Graham Farrell, NorthStar Investor Relations, NorthStar Investor Relations: Okay. Thank you. And then
Graham, Investor Relations, Amerigo: and then the the last subject, and I and I’ll preempt this question by thanking you for doing the interviews that you do, the kinda long form hour, hour and a half long, videos, those are incredibly helpful and answer a lot of my questions. And and part of that, when your question about the the overall DET contracts, both for historic and fresh tailings, you know, there’s obviously, you provide guidance in the management discussion analysis saying, you know, basically, there’s very little, you know, chance of DEP canceling our contract in the short term. But with regards to the current extension contract deadlines, obviously, it’s been renewed and renewed. When can you provide us any guidance on when we might hear about talks of an additional extension or just kind of, you know, when we should start thinking about hearing that or or, I don’t know, some some sort of guidance on that.
Aurora Davidson, President and Chief Executive Officer, Amerigo: We we are twelve years away from the contract expiring. I can assure you one thing. If if I’m still CEO in in in in twelve years, you will not hear from it on year eleven. You’ll probably will hear from it around year six before we we six years before. This is critical to us.
It is it is a genesis of what the company is. So this is not a discussion or a negotiation that we’re gonna leave to the end of or or closer to 02/1937. But we’re still twelve years away from that.
Graham, Investor Relations, Amerigo: Yeah. I know. And and I I obviously, it’s very important. I I think it’s very important. That’s why I figured
So I I appreciate it, and your confidence is one of the main reasons I’m I’m an investor. You are one of the main reasons I’m an investor in America. So I appreciate you and all and the entire team there. So thank you for all the work that you do.
Aurora Davidson, President and Chief Executive Officer, Amerigo: You’re very kind. Thank
Joanna, Conference Operator: you. We have no further questions. I will turn the call back over to Aurora Davidson for closing comments.
Aurora Davidson, President and Chief Executive Officer, Amerigo: Thank you very much. Again, my apologies for, any, communication disruptions through the the call. We we try to avoid them as as much as we can. Thank you for attending today’s call, and thank you to Carmen and Graham for being on the call, as well. The recording and the script will be available on Amerigo’s website in the next few days.
We will hold our next earnings call on Thursday, October 30, to report our third quarter results. Please visit our website regularly for updates, and feel free to contact us with any questions at your convenience. Thank you for your continued interest in Amerigo.
Joanna, Conference Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating, and we ask that you please disconnect your
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