Amerigo Resources Ltd. (ARG:TSX; ARREF:OTCMKTS) released its Q2/25 production and returned capital figures, reported Ben Pirie, equity research analyst at Atrium Research, in a July 9 research note. Atrium raised its target price on the Canadian copper-molybdenum producer by 20% based on the notable execution of management.
"Q2/25 was a solid quarter operationally, highlighted by lower cash costs and continued capital returns, reinforcing our positive stance on Amerigo," wrote Pirie. "With copper prices above US$5.50 per pound (US$5.50/lb), [the company] continues to offer investors multiple ways to win, including multiple expansion, dividends and buybacks."
38% Return Implied
Atrium's new target price on Amerigo is CA$3 per share, up from CA$2.50, noted Pirie. In comparison, the miner is trading at the time of the analyst's report at about CA$2.26 per share, at a discount to its metals processing peers. From this price, the return to target is 38%.
Amerigo remains a Buy.
Cash Costs a Beat
Amerigo produces copper concentrate and molybdenum concentrate as a byproduct at its Minera Valle Central operation in Chile by processing fresh and historic tailings from Codelco's (Corporación Nacional del Cobre de Chile) El Teniente mine, noted Pirie.
In Q2/25, the analyst reported, Amerigo produced 15,500,000 pounds (15.5 Mlb) of copper, less than Atrium's 16 Mlb estimate but 11% more than Q2/24 production.
During Q2/25, Amerigo processed 129,400 tons per day (129.4 Ktpd) of fresh tailings along with 45.6 Ktpd of historic tailings. The fresh tailings grade was 0.161%, a bit lower than historical grades of 0.18% and higher. The historical tailings grade remained consistent at 0.238%.
The miner's production miss was due to the slightly lower grade from the fresh tailings and issues related to unfavorable weather.
Copper recoveries during Q2/25 were solid, 21.7% from the fresh tailings and 31.3% from the historical tailings.
As for production of molybdenum during Q2/25, it amounted to 390,000 pounds (390 Klb), more than Atrium's forecast and Q2/24 production, both 300 Klb.
Q2/25 cash costs were a beat, at US$1.82/lb versus Atrium's US$1.93/lb projection.
The quarter demonstrated "strong execution from Amerigo's management team, which is building a reputation for accomplishing its goals, acting conservatively and rewarding shareholders," Pirie commented.
Returns Cash to Shareholders
One of Amerigo's compelling features is its dedication to returning capital to shareholders, wrote Pirie. During H1/25, the company distributed US$12.1M to shareholders, US$7M in quarterly dividends and US$5.1M in share buybacks.
As for the latter, reported Pirie, Amerigo purchased 281.4K shares at $1.79 apiece in April, 1.94M shares at $1.73 per share in May and 907.2K shares at $1.90 a share in June. In all, Amerigo bought back 3.13M shares, or 1.9% of its shares outstanding.
"With minimal capex requirements, Amerigo is set up to continue rewarding shareholders by paying down debt, issuing dividends (plus performance dividends) and buying back stock," wrote Pirie.
Further Reduces Debt
Also during Q2/25, noted Pirie, Amerigo paid back more of its debt, decreasing the total to US$7.5M. Since December 2024, it reduced the amount it owes by US$4M.
"Amerigo remains set up to be debt free by year-end, providing even more cash flow available for shareholders," the analyst wrote.
At Q2/25's end, the company had US$23.3M in cash plus US$900,000 of restricted cash.
On Track to Meet Guidance
Amerigo reiterated its 2025 production guidance of 62.6 Mlb of copper (in H1/25 the company achieved 46% of its full-year production target) and cost guidance of US$1.93/lb. The miner is on track to meet both. If it does and if the copper price stays where it is, Amerigo could beat its EBITDA guidance of US$66.7M, Pirie pointed out.
"Amerigo's cash flow is highly leveraged to the copper price," added the analyst. "As per its 2025 guidance, a 24% increase in the copper price would result in a 46% increase in EBITDA, making it an ideal investment for those looking for copper exposure."
Attractive Copper Price
Since early April, the copper price rallied to and remained above US$5.50/lb due to increasing supply constraints and rising demand, fueled by the global green energy transition. The price rose about 10% on July 8 in response to U.S. President Donald Trump's announcement of a 50% tariff on copper imports. Atrium's outlook on the copper price is bullish, noted the analyst. Disrupted production, like at the Cobre Panama mine, and Chinese smelter cutbacks also have buoyed the copper price. LME inventories still are near multiyear lows. The supply gap is projected to widen thanks to increasing demand and inadequate investment in new sources. Geopolitical tensions also are influencing the copper price.
"For Amerigo, these tailwinds support long-term pricing power and reinforce its strategic position as a low-cost copper producer," Pirie wrote.
New Board Member
During Q2/25, Amerigo appointed to its board Ignacio Cruz, a seasoned civil engineer with 40 years of leadership experience in Chile's mining, energy and civil society sectors. Previously, Cruz was chief executive officer of Colbún S.A., Chile's second-largest power generator; held senior roles at Antofagasta Minerals; and was executive chair of TECHO International, Latin America's largest nongovernmental organization.
"[Amerigo] expects to benefit from [Cruz's] extensive infrastructure, strategic and sustainability expertise," Pirie wrote.
On the Horizon
Amerigo will release its Q2/25 financials on July 30 followed by an investor conference call on July 31.
"We expect strong results led by the increased copper price," Pirie wrote.
Catalysts, according to the analyst, include debt paydown, performance dividends and rising copper and molybdenum prices.
Ownership and Share Structure
As for ownership of Amerigo, another feature that Atrium likes, members of management and the board hold 14%. With respect to institutional ownership, Aegis Financial holds 13%, the largest stake. Other institutions hold 53% in aggregate.
As for capital structure, at the end of June, the copper producer has 164.5 million shares outstanding. Its market cap is CA$276.1M.
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