Amerigo Resources : Q4 2024 Investor Conference Call (Text)

FINAL TRANSCRIPT

Amerigo Resources Ltd.

Full Year 2024 Earnings Conference Call

February 27, 2025 - 11:00 a.m. P.T.

Length: 35 minutes

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CORPORATE PARTICIPANTS

Graham Farrell

Amerigo Resources Ltd. - Investor Relations

Aurora Davidson

Amerigo Resources Ltd. - President & Chief Executive Officer

Carmen Amezquita

Amerigo Resources Ltd. - Chief Financial Officer

CONFERENCE CALL PARTICIPANTS

Paulson Partners

Terry Fisher

CIBC World Markets - Analyst

John Polcari

Mutual of America Capital Management - Analyst

PRESENTATION

Operator

Good afternoon. My name is Sylvie and I will be your conference operator today. At this time, I would like to welcome everyone to the Amerigo Resources Full Year 2024 Earnings Conference Call.

Note that all lines have been placed on mute to prevent any background noise. After the formal remarks, there'll be a question-and-answer session. If you would like to ask a question during this time, simply press star then the number one on your telephone keypad. If you would like to withdraw from the question queue, please press star then number two. Thank you.

Mr. Graham Farrell, Investor Relations, you may begin the conference.

Graham Farrell - Investor Relations, Amerigo Resources Ltd.

Thank you, operator. Good afternoon and welcome, everyone, to Amerigo's quarterly conference call to discuss the Company's financial results for the fourth and full year of 2024. We appreciate you joining us today. This call will cover Amerigo's financial and operating results for the fourth quarter and full year ended December 31, 2024. Following our remarks, we will open the conference call to a question-and-answer session.

Our call today will be led by Amerigo's Chief Executive Officer, Aurora Davidson, along with the

Company's Chief Financial Officer, Carmen Amezquita.

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 filings.

I will now hand a call over to Aurora Davidson. Please go ahead, Aurora.

Aurora Davidson - President & Chief Executive Officer, Amerigo Resources Ltd.

Thank you, Graham. Welcome to Amerigo's earnings call for the fourth quarter and 2024 annual results.

On the annual earnings call a year ago, I mentioned we were excited about 2024 and spoke about the inevitability of higher copper prices and what Amerigo shareholders could expect under such conditions. These expectations included share buybacks, the eventual deployment of performance dividends, and our well-established quarterly dividend. We also predicted an increase in our share price, bringing our dividend yield down closer to other high-dividend-paying stocks. That increase in share price would reflect the market's increasing recognition of Amerigo's ability to continue to operate efficiently and pay its quarterly dividend. In other words, the expectation was that Amerigo would shine as a total return vehicle for investors in 2024.

I am pleased to report that those expectations were all met. From my perspective, the foundation of this was another excellent operational performance by MVC. As you have seen in our production and financial results news releases, MVC beat production and cash cost guidance. It also operated safely and in full environmental and regulatory compliance. Our team has clearly internalized these principles. We produce copper and financial margins without accidents or environmental incidents.

Operational excellence involves focus, attention to detail and a long-term mindset. The following are only a few examples of MVC's operational excellence. They include plant availability of 97%, three consecutive years of operations without lost time accidents, and the implementation of multiple risk mitigation projects. Our Company's best practices include staying within our circle of competence and focusing on our key variables. We don't try to optimize everything but concentrate on the most impactful. We also follow conservative financial practices and are constantly taking steps to build a business that lasts over the long term. Once you can develop and maintain efficient operations and low costs, well, now you're talking, and Amerigo does this regularly. In 2024, MVC beat its cash cost guidance again, posting a cash cost of $1.89 per pound in the year.

Another success driver in 2024 was a stronger copper price, which rose 8% from 2023 to an average price of $4.15 per pound. Carmen will provide more details following my remarks, but I want to mention why low costs are so important. The cheaper a company can operate, the more resilient it is.

Operating with low costs is not just about saving money; it is a prerequisite for long-term business success.

Remember that we produce copper from the current and historic tailings from El Teniente. The size of our resource has never been in question and we have built our business to make sure we are there to generate value from it for as long as possible. In 2024 Amerigo generated operating cash flow before changes in working capital of $47.1 million. But as I've said before, we are a cash flow story, not an earnings story. The reason why I repeat this again and again when speaking to shareholders is that I think you should follow our operational cash flow number like a hawk. Cash flow, not reported earnings, determines long-term value. And with Amerigo's capital return strategy, or CRS as we now call it, your shares in Amerigo are, in fact, your share of Amerigo's free cash flow. Cash flow is a true measure of our business health. So there you have it. Strong production, increased copper prices, and low cost resulted in robust cash flow generation in 2024.

So, how did we use our excess cash flow in 2024? Well, in much the same way as we have used it over the last three years. We have returned it to shareholders. Let me jump right into the details of the success of our CRS. Amerigo's capital return strategy was implemented in October 2021. Since then, $78.1 million has been returned to shareholders via buybacks and dividends at an allocation rate of 67% dividends and 33% buybacks. Regarding dividends, a cumulative dividend of CAD$0.42 has been paid to shareholders for $52.5 million. This includes our first performance dividend, which was paid after a relatively short period of higher copper prices in the late spring of 2024. We are confident this was the first of many performance dividends.

Regarding buybacks, so far Amerigo has allocated $25.5 million to purchase and cancel 21.6

million shares, or 11.9% of the shares that were issued and outstanding when the CRS was launched.

The average copper price over this period was $4.03 per pound. Despite short periods of volatility, the copper price hasn't started the kind of upward movement we anticipate from the fundamental mismatch between supply and demand, and yet over this period our CRS has proven it can effectively capture the benefit of short bursts of higher copper prices for shareholders. We are eagerly waiting to show how effective the CRS will be with a sustained rise in copper prices. Since inception of the CRS, the actual amount of capital returned to shareholders is impressive, but what is even more impressive is the total returned to shareholders over the period. I will discuss this subject in more detail through 2025, just as last year.

I talked about how growth and your personal return on invested capital should matter more to you than production growth. I want to highlight how well Amerigo has performed for shareholders since the CRS was implemented. It is pretty remarkable in both absolute and relative terms. In a qualitative risk-adjusted comparison to our peers in the copper industry, Amerigo's performance rises to even higher levels. Remember, we have no resource expropriation, debt, or growth capital expenditure risk.

To give you a peek of the upcoming discussions, we recently ran some numbers to measure the returns from share appreciation and dividends from October 2021 to mid-February 2025. Over that period, Amerigo had a 91% total return, outperforming copper peers, copper ETFs, LME copper, and copper futures. If you go back to the textbooks, the key factors that impact total returns are capital allocation decisions, organizational structure, a focus on long-term versus short-term results, operational efficiency, and margins. Amerigo excels in all of these areas. Of course, factors outside the

Company's control, such as market conditions, also play a role in the Company's success, so let me briefly address these market conditions and our outlook.

Our view on copper continues to be bullish and the consensus is not whether copper prices will rise, but by how much. The reason behind this has been mentioned in our calls many times before. It is the interaction of growing demand in traditional and emerging sectors with a constrained copper supply.

The move from an average LME copper price of $3.85 in 2023 to $4.15 in 2024 confirms this trend; however, there has been volatility within this price buildup. In 2024, for example, we moved from a low monthly price of $3.77 in February to a record monthly price of $4.59 in May. Then we retreated to $4.05 in December. Our view is that the average copper price this year will again increase, but we will probably see even more short-term volatility.

So far this year, market reactions have been quite pronounced, likely as a nervous response to a changing global trade landscape. Although some market participants anticipate tariffs to be imposed on copper, which is the most probable cause for the record arbitrage between the COMEX and LME copper prices, no copper tariffs have been imposed yet, which could be read as confirmation of the copper market tightness. A recent report from RBC Capital Markets reported that mining copper production in 2024 was 5% below the original guidance and 2025 guidance came in 5% below expectations. The world mines are producing less copper, which is expected to continue. At the same time, demand is expected to double in the next 15 or 20 years. This is a huge disconnect.

Copper demand grew by around 0.5 million tons in 2024. To put this in perspective, only two copper mines worldwide, Escondida and Collahuasi, produce this much copper annually. If you start increasing this demand growth in response to growth in new sectors, whether it's electrification, AI, or renewable energy, you can easily see that significant deficits will build up. Although copper prices have increased since 2020, miners have still not been incentivized to invest in more copper projects. This can only mean higher copper prices are required to bring on this much-needed supply. Remember that the incentive price must also be maintained over the long-term to be believed by the industry. Only then will capital be allocated to increase the supply of copper. Something has to give in to the copper supply/demand dynamics. We think it will rapidly increase copper prices, leading to even more exciting times for Amerigo.

I will close my remarks by saying that, as an organization, we have a multi-year track record of deploying the firm's resources to earn the best possible return for shareholders. We have maintained a clear focus on maximizing long-term per-share value, avoiding growth for growth's sake, and saying no to marginal opportunities. We will continue to focus on our strong business fundamentals, which are crucial to Amerigo's success. They allow us to be a consistent and predictable compounding machine for shareholders. We will continue to proactively watch for events that could interrupt that compounding process and avoid or mitigate them as best we can. We will continue to maintain our financial and capital allocation discipline and celebrate ending 2025 without debt on our balance sheet. I am confident that in 2025 we will continue to benefit from our unique company strengths. We have a long-term business at MVC that produces additional copper for Chile. MVC has excellent operating performance and generates operational cash flow predictably. Excess cash flow is quickly, flexibly, and efficiently returned to shareholders.

Amerigo's Chief Financial Officer, Carmen Amezquita, will now discuss the Company's financial results. Carmen, please go ahead.

Carmen Amezquita - Chief Financial Officer, Amerigo Resources Ltd.

Thanks, Aurora. I will now present the 2024 annual financial report from Amerigo and its MVC operation in Chile.

In 2024, the Company had another successful year with net income of $19.2 million; earnings per share of $0.12, or CAD$0.16; and EBITDA of $68.8 million. This was possible due to an increased copper production of 64.6 million pounds, an average MVC copper price of $4.15 per pound, and effective cost management.

Revenue in 2024 increased 22% to $192.8 million compared to $157.5 million in 2023. Our top-line revenue number comprised a high gross value of copper tolled on behalf of DET of $269 million compared to $220.7 million in 2023 due to high copper production and copper prices. From this gross revenue we deducted notional items, including DET royalties of $75.4 million, smelting and refining of $25.2 million, transportation of $1.6 million, and positive fair value adjustments to settlement receivables of $3.2 million. Revenue also included increased molybdenum revenue of $22.9 million compared to $19.4 million in 2023 due to stronger molybdenum production of 1.3 million pounds in 2024 compared to 1.2 million pounds in the prior year.

Tolling and production costs increased 3% from $143.3 million in 2023 to $147.4 million in 2024, which can mostly be attributed to the increase in production. Some of the costs that increased year-over-year were other direct tolling, line, and depreciation, which were then offset by a decrease in power costs and grinding media costs. The gross profit after the revenue and production costs was $45.4

million, a 221% increase from $14.2 million in 2023.

General and administration expenses were $5.3 million compared to $5 million in 2023. Then there were other losses of $4.2 million compared to other gains of $1.3 million in the prior year. The loss of 2024 was comprised of foreign exchange losses of $0.6 million and two non-cash accounting items,

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