Release Date: February 27, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Amerigo Resources Ltd (ARREF, Financial) met its expectations for 2024, including share buybacks, performance dividends, and maintaining a quarterly dividend.
- The company achieved operational excellence with NBC beating production and cash cost guidance, maintaining plant availability of 97%, and operating without lost time accidents for three consecutive years.
- Amerigo Resources Ltd (ARREF) generated strong operating cash flow of $47.1 million before changes in working capital, emphasizing its cash flow-focused strategy.
- The company successfully returned $78.1 million to shareholders since the implementation of its Capital Return Strategy in 2021, with a significant portion allocated to dividends and buybacks.
- Amerigo Resources Ltd (ARREF) reported a 91% total return since October 2021, outperforming copper peers, copper ETFs, LME copper, and copper futures.
Negative Points
- The company faced a nationwide blackout in Chile, affecting operations temporarily, although it was not material enough to report.
- There was a working capital deficiency of $6.5 million at the end of 2024, despite holding higher cash reserves due to administrative delays.
- Other losses amounted to $4.2 million, including foreign exchange losses and non-cash accounting items related to dismantling provisions and equipment write-downs.
- The Chilean peso's exchange rate against the US dollar is a significant variable cost concern, impacting financial performance.
- Despite share repurchases, the total outstanding shares remained about the same due to options being exercised, which may dilute shareholder value.
Q & A Highlights
Q: How did the recent nationwide blackout in Chile affect Amerigo Resources, and is there an expectation of recurrence?
A: The blackout affected NBC and El Teniente for less than a day, but operations are back to normal. The effects were not material enough to report, and it was related to an infrastructure problem. It is considered a one-off event and not expected to recur. (Aurora Davidson, CEO)
Q: Despite share repurchases, the total outstanding shares remain the same. How does the board view this, and what is the approach to options being exercised?
A: Most option exercises are cashless, reducing the issuance of new shares. The board is committed to buying back at least the same number of shares issued annually, ensuring a stable or slightly declining share count. (Aurora Davidson, CEO)
Q: What has been the average cost for molybdenum pricing in the last quarter?
A: The average molybdenum price has been around $21 per pound, remaining stable through 2024 and into the current year. (Aurora Davidson, CEO)
Q: What is the most concerning variable cost for Amerigo Resources going forward?
A: The most impactful variable cost is the exchange rate of the Chilean peso versus the US dollar. The weaker peso has been beneficial, but it remains a key factor to monitor. (Aurora Davidson, CEO)
Q: How does Amerigo Resources allocate free cash flow between dividends and stock repurchases, and is there a possibility of increasing the permanent dividend?
A: The company can do both buybacks and performance dividends at current copper prices. Decisions are made quarterly based on factors like copper price and outlook, with a framework to maintain at least $25 million in cash reserves. The board will consider increasing the permanent dividend once the company is debt-free. (Aurora Davidson, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
