In a Nov. 1 research note, Haywood analyst Kerry Smith reported that Equinox Gold Corp. (EQX:TSX.V), in its first quarter of commercial production at the Aurizona mine, "delivered a solid Q3/19, beating expectations, and is already generating free cash flow."
Smith highlighted that Equinox's Q3/19 financials beat expectations. Cash flow per share was US$0.33, above Haywood and consensus' forecast of US$0.28 and US$0.31, respectively. Earnings per share of US$0.07 was slightly below consensus' forecast of US$0.075.
As for gold production, Equinox yielded 62,656 ounces in Q3/19 from both its Aurizona and Mesquite mines at an average cash cost of US$800 per ounce (US$800/oz) versus Haywood's projected 65,000 ounces (65 Koz) at an average cash cost of $895/oz.
Another achievement during the quarter, Smith pointed out, was commercial production from Aurizona, which began July 1. Subsequently, Aurizona delivered 29,350 ounces in Q3/19 at an average cash cost of US$781/oz. Production was just below Haywood's 30 Koz estimate; average cash cost was well below its US$910/oz forecast. "The mine exceeded our expectations," Smith commented. Accordingly, Haywood boosted its 2019 production projection for Aurizona to 75 Koz from 68 Koz.
As for Mesquite, it continued to do well, noted Smith, "delivering good cash flow with US$11.7 million in Q3/19." This resulted from 33,306 ounces of production at an average cash cost of US$819/oz. This result compares to Haywood's 34.9 Koz and US$945/oz cash cost projections. Haywood models 2019 production from Mesquite at 125 Koz.
At the end of Q3/19, Equinox had US$45.5 million in cash, restricted and unrestricted, an increase over that of Q2/19 of US$33 million.
Smith indicated that in other news, Equinox's board of directors approved phase one construction at the miner's Castle open-pit leach gold mine and a US$58 million budget for it. The company aims to pour first gold in Q3/20 at Castle for phase one. Phase two would be an expansion.
Along with first gold at Castle, other near-term catalysts are an initial mineral estimate for Tatajuba, expected in Q1/20, and a phase 2 feasibility study for Castle, anticipated in H2/20.
Haywood has a Buy rating and a CA$13.75 per share target price on Equinox. This represents a 61% projected return as the company's current share price is around CA$7.95.
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Disclosures from Haywood Securities, Equinox Gold Corp., November 1, 2019
Analyst Certification: I, Kerry Smith, hereby certify that the views expressed in this report (which includes the rating assigned to the issuer’s shares as well as the analytical substance and tone of the report) accurately reflect my/our personal views about the subject securities and the issuer. No part of my/our compensation was, is, or will be directly or indirectly related to the specific recommendations.
Important Disclosures
Important Disclosures:
▪The Analyst(s) preparing this report (or a member of the Analysts' households) have a financial interest in Equinox Gold Corp. (EQX-V).
▪ As of the end of the month immediately preceding this publication either Haywood Securities, Inc., one of its subsidiaries, its officers or directors beneficially owned 1% or more of Equinox Gold Corp. (EQX-V).
▪ Haywood Securities, Inc. has reviewed lead projects of Equinox Gold Corp. (EQX-V), Harte Gold Corp. (HRT-V) and a portion of the expenses for this travel have been reimbursed by the issuer.
▪ Haywood Securities, Inc. or one of its subsidiaries has managed or co-managed or participated as selling group in a public offering of securities for Equinox Gold Corp. (EQX-V) in the last 12 months.
▪ Haywood Securities Inc. or an Affiliate has received compensation for investment banking services from Equinox Gold Corp. (EQX-V) in the past 12 months.
Other material conflict of interest of the research analyst of which the research analyst or Haywood Securities Inc. knows or has reason to know at the time of publication or at the time of public appearance: n/a.
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