Equinox Gold Corp. (TSX-V: EQX, OTC: EQXGF) (“Equinox Gold” or the
“Company”) is pleased to announce that the Company has released its
unaudited condensed consolidated interim financial statements (“Q2
Financial Statements”) and related management’s discussion and
analysis (“Q2 MD&A”) for the three and six months ended June
30, 2018 (“Q2 2018” or the “Quarter”).
Equinox Gold’s principal assets are its
wholly-owned, past-producing Aurizona Gold Mine in Maranhão, Brazil
(“Aurizona”) and its wholly-owned, past-producing Castle Mountain
Gold Mine in California, USA (“Castle Mountain”). The Company’s
primary focus is completing construction and achieving production
at Aurizona, which is on track to pour gold before the end of 2018
with average annual production of over 136,000 ounces. The Company
also recently completed a prefeasibility study for Castle Mountain
with the objective of commissioning Phase 1 production by the end
of 2019.
Second Quarter 2018 Financial Highlights
and Recent Developments
- Aurizona construction on schedule to achieve year-end 2018 gold
pour
- Overall project 60% complete and plant construction 51%
complete at June 30, 2018
- SAG and ball mills delivered to site, installation
underway
- Pre-production mining activities commenced in April
- Ore stockpiling commenced in July
- $146 million Aurizona construction budget on track and fully
funded. As at June 30, 2018:
- $64 million spent (includes project construction activities
from Q4 2017)
- Cash on hand of $65 million
- Undrawn portion of construction debt facility of $30
million
- Receivables in excess of $12 million
- Castle Mountain prefeasibility results announced
- 16-year mine life with 3.6 million ounces (“oz”) of gold
reserves
- 2.8 million oz life-of-mine (“LOM”) gold production
- $763 per oz LOM all-in sustaining costs (“AISC”)
- $865 million after-tax LOM cumulative cash flow
- $406 million after-tax net present value discounted at 5%
(“NPV5%”)
- Divestiture of non-core assets
- Shareholders approved spin-out of copper assets to create
Solaris Copper
- Koricancha sale announced for gross proceeds of C$19.9 million
(US$15.1 million)
- Received milestone payment of $4.7 million related to December
2017 sale of Coringa project
Aurizona
Aurizona construction is proceeding on schedule
to achieve first gold pour by year-end 2018. The overall project
was 60% complete and plant construction was 51% complete at the end
of June. Pre-production mining activities commenced in April and
ore stockpiling commenced in July in preparation for commissioning
later in 2018.
During the Quarter the Company expended $21.9
million on Aurizona construction activities which, when added to
the amount expended on early project works during Q3 and Q4 2017
and Q1 2018, brings the total construction expenditures at June 30,
2018 to $63.5 million. With a construction budget of $146 million,
the remaining project capital will be funded by cash and marketable
securities of $65.5 million, receivables of more than $12.0 million
and $30.0 million of undrawn construction debt financing.
While the Aurizona construction team is focused
on achieving production, Equinox Gold’s exploration team is focused
on mine life extension and district-scale opportunities. During the
Quarter the Company announced that an initial drill program is
underway at Tatajuba, the western extension of the main Piaba Trend
that hosts Aurizona. The Tatajuba target measures over 4 km in
length as defined by coherent gold-in-soil anomalism, geophysics
(magnetics), auger drilling and limited diamond drilling. The
initial 2,000 metre (“m”) drill program is focused on an
approximately 600 m long portion of the trend where historical
drilling intersected significant shallow gold mineralization. Other
district-scale targets will be tested with upcoming exploration
programs and a study is underway examining opportunities to develop
the underground potential of the Aurizona gold deposit. Drill
results from more than 15,000 m of drilling in 2017 at the
Piaba and Piaba West targets are being incorporated into a resource
update that is targeted for completion in Q3 2018.
Castle Mountain
The Company expended $1.7 million on exploration
and related technical activities during the Quarter to support
completion of a prefeasibility study for Castle Mountain. The
Company released the results of the prefeasibility study on July
16, 2018, contemplating a low-cost heap leach gold mine that will
produce 2.8 million oz of gold and generate $865 million
in after-tax cash flow over a 16-year mine life.
Castle Mountain will be developed in two phases
with annual average gold production of 45,000 oz over the first
three years (“Phase 1”) and annual average gold production of
203,000 oz from years 4 to 16 (“Phase 2”), for total LOM gold
production of 2.8 million oz. LOM AISC are estimated at $763/oz,
which is in the lowest quartile of the industry. The Project
demonstrates strong returns with an after-tax NPV5% of $406
million and an after-tax internal rate of return of 20% using the
base case gold price of $1,250/oz ($534 million and 25% at
$1,350/oz gold price). The Project is expected to generate average
annual after-tax net operating cash flow of $83 million with
cumulative LOM after-tax net cash flow of $865 million. At
$1,350/oz gold, the Project would average more than $96 million in
after-tax net operating cash flow annually and generate more than
$1 billion in cumulative after-tax net cash flow over the 16-year
mine life.
Initial capital for Phase 1 construction is
estimated at $52 million, with many aspects of the Phase 2
expansion incorporated into the design to reduce total LOM capital
costs. Initial capital for Phase 2 construction is estimated at
$295 million. LOM sustaining capital is estimated at $142
million.
Corporate and Other
With completion of the Castle Mountain
prefeasibility study, Equinox Gold’s proven and probable reserves
increased by more than 350% to 4.5 million oz of gold at a gold
grade of 0.65 g/t with 3.0 million oz in the Proven category
contained in 145.0 million tonnes at a gold grade of 0.63 g/t and
1.6 million oz in the Probable category contained in 72.4
million tonnes at a gold grade of 0.68 g/t. The Company’s combined
Measured & Indicated Mineral Resources are now estimated at 6.0
million oz of gold (inclusive of reserves) with 3.5 million oz in
the Measured category contained in 169.8 million tonnes at a gold
grade of 0.64 g/t and 2.5 million oz in the Indicated category
contained in 101.5 million tonnes at a gold grade of 0.76 g/t,
and additional Inferred Mineral Resources of 2.9 million oz
contained in 178.5 million tonnes at a gold grade of 0.51 g/t.
Standby Loan
At the time of its acquisition by Equinox Gold,
Anfield Gold Corp. (“Anfield”) and its largest shareholder, Ross
Beaty, offered future support to ensure cash receivable in relation
to Anfield’s disposal of its Coringa project (the “Coringa
Disposal”) would be realized by Equinox Gold prior to the end of
2018. On August 2, 2018, the Company formalized this offer of
support by entering into a standby loan arrangement (the “Standby
Loan”) with its Chairman, Ross Beaty, wherein he will make
available up to $12 million that can be used by the Company for the
continued development, construction and general working capital
requirements of the Company’s Aurizona Gold Mine located in
Brazil.
The remaining $12 million receivable under the
Coringa Disposal is not due until December 2019 and, when received,
will be used to repay any amounts drawn under the Standby Loan.
The Standby Loan is unsecured. In the event the
Company draws on the loan and defaults on repayment, Mr. Beaty has
the right to assume a share pledge the Company holds as security
for its $12 million receivable from Serabi Gold plc (“Serabi”).
The Standby Loan will bear interest and fees at
commercial rates, draw availability will be from September 1, 2018
to December 20, 2019 and repayment will not be before the end of
the draw availability period, which is expected after receipt of
payment of $12 million in relation to the receivable due from
Serabi.
Mr. Beaty is considered a “related party” of
Equinox, and the loan transaction (the “Transaction”) constitutes a
“related party transaction” within the meaning of Multilateral
Instrument 61-101 Take-over Bids and Special Transactions (“MI
61-101”). The Transaction is exempt from the minority approval
requirement of Section 5.6 of MI 61-101 as neither the fair market
value of the Transaction, nor the fair market value of the
consideration for the Transaction, exceeds 25% of Equinox’s market
capitalization. In addition, the Transaction does not require a
formal valuation since the Transaction does not fall within any of
paragraphs (a) to (g) of the definition of “related party
transaction” under MI 61-101.
To the knowledge of Equinox or any director or
senior officer of Equinox, after reasonable inquiry, no “prior
valuations” (as defined in MI 61-101) in respect of Equinox that
relates to the Transaction, or is relevant to the Transaction, has
been prepared within the 24 months preceding the date hereof.
All of the terms and conditions of the
Transaction were reviewed and unanimously approved by the board of
directors of Equinox at a duly constituted meeting on August 2,
2018.
Grant of RSUs
Pursuant to the Company’s stock option plan and
restricted share unit plan, the Company has granted a total of
292,368 restricted share units (“RSUs”) issuable in common shares
of the Company to certain directors and employees. The RSUs vest
50% after 12 months from the date of grant and the remaining 50%
after 24 months from the date of grant. Incentive stock
options were granted to an employee to purchase 15,000 common
shares at C$1.00 per share vesting 50% after 12 months and the
remaining 50% after 24 months from the date of grant, expiring
after a term of five years.
Also pursuant to its restricted share unit plan,
the Company has made a one-time grant to its Chairman, Ross Beaty,
of four million restricted share units (the “Grant”) with
performance-based vesting conditions (“pRSUs”) to be settled in
common shares (“Shares”) of the Company if certain performance
criteria are met. The pRSUs vest in four separate tranches based on
the Company’s share price performance and contain performance
multipliers ranging from 1x to 3x, depending on the share price
achieved. 15% of the pRSUs (with a 1x multiplier) vest on the
Company’s Share price reaching C$1.50; 20% of the pRSUs (with a 2x
multiplier) vest on the Company’s Share price reaching C$2.00; 30%
of the pRSUs (with a 2.5x multiplier) vest on the Company’s Share
price reaching C$2.50; and the remaining 35% of pRSUs (with a 3x
multiplier) vest on the Company’s Share price reaching C$3.00. The
performance multipliers provide for a total of up to 9.4 million
Shares to be issued if all share price thresholds are achieved,
however if these thresholds are not achieved, no shares will be
issued.
The Grant is valid for five years and any Shares
issued in connection with the Grant will have a mandatory hold
period of two years, resulting in a long term performance incentive
and commitment by Mr. Beaty.
Additional information regarding the Company’s
financial results, activities underway at Aurizona and Castle
Mountain and the Company’s long-term business strategy is available
in the Q2 Financial Statements and accompanying Q2 MD&A, which
are available for download on the Company’s website at
www.equinoxgold.com and on SEDAR at www.sedar.com.
On Behalf of the Board of Equinox Gold
Corp.
“Christian Milau”
CEO & Director
Qualified Person and
Disclosure
David Laing, BSc, MIMMM, Equinox Gold’s Chief
Operating Officer, and Scott Heffernan, MSc, P.Geo. Equinox Gold’s
EVP Exploration, are the Qualified Persons under NI 43-101 for
Equinox Gold and have reviewed, approved and verified the technical
content of this document.
About Equinox Gold
Equinox Gold is a Canadian mining company with a
multi-million-ounce gold reserve base and near-term production from
two past-producing mines in Brazil and California. Construction is
underway at the Company’s Aurizona Gold Mine in Brazil with the
objective of pouring gold by year-end 2018, and the Company is
advancing its Castle Mountain Gold Mine in California with the
objective of commissioning Phase 1 operations by the end of
2019. Further information about Equinox Gold’s current portfolio of
assets and long-term growth strategy is available at
www.equinoxgold.com or by email at ir@equinoxgold.com.
Equinox Gold Contacts
Christian Milau, CEORhylin Bailie, Vice
President Investor RelationsTel: +1 604-558-0560Email:
ir@equinoxgold.com
Cautionary Notes and Forward-Looking
Statements
Neither the TSX Venture Exchange nor its
Regulation Services Provider (as such term is defined in the
policies of the TSX Venture Exchange) accepts responsibility for
the adequacy or accuracy of this release.
This document contains certain forward-looking
information and forward-looking statements within the meaning of
applicable securities legislation (collectively “forward-looking
statements”). The use of the words “will”, “expected”, “objective”,
“anticipated”, “underway”, “targeted”, “expectation”, “scheduled”
and similar expressions are intended to identify forward-looking
statements. Forward-looking statements contained in this news
release include, but are not limited to, statements regarding
construction activities underway at Aurizona, the Castle Mountain
prefeasibility study, the potential for other assets of the
Company, and the growth potential of the Company. Although the
Company believes that the expectations reflected in such
forward-looking statements and/or information are reasonable, undue
reliance should not be placed on forward-looking statements since
the Company can give no assurance that such expectations will prove
to be correct. These statements involve known and unknown risks,
uncertainties and other factors that may cause actual results or
events to differ materially from those anticipated in such
forward-looking statements, including the risks, uncertainties and
other factors identified in the Company’s periodic filings with
Canadian securities regulators, and assumptions made with regard to
the Company’s ability to complete construction at Aurizona on
budget or at all, and the timing to achieve production; the
Company’s ability to recommence production at Castle Mountain, the
timing to achieve production, and the Company’s ability to achieve
the results contemplated in the prefeasibility study; and the
Company’s ability to achieve its expected growth and production
potential. Furthermore, the forward-looking statements contained in
this news release are made as at the date of this news release and
the Company does not undertake any obligations to publicly update
and/or revise any of the included forward-looking statements,
whether as a result of additional information, future events and/or
otherwise, except as may be required by applicable securities
laws.
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