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Equinox Gold Posts Disappointing Q2 Results Amid Cost Burden

Story Highlights

Mining company Equinox Gold has posted weak Q2 results, largely due to rising costs and falling production at Aurizona and RDM mines.

Burdened by rising costs, Equinox Gold Corp. (TSE: EQX) (NYSE: EQX) has reported disappointing results for the second quarter of 2022. Shares of the company were down 2.8% on August 3.

What Does Equinox Gold Do?

With a market cap of C$1.34 billion, six operating gold mines, and a mine in commissioning, Equinox Gold is a Canadian mining company with operations entirely in the Americas. The company, backed by its pipeline of development and expansion projects, aims to tap more than one million ounces of annual gold production.

Q2 Results in Detail

The mining company’s adjusted net loss came in at 16 cents per share. Analysts had expected the company to post a net loss of 5 cents per share in the quarter. The company is facing operational issues due to the high cost of consumables.

Revenues came in at $224.6 million, down from $226.2 million reported in the year-ago period.

The company extracted 120,813 ounces of gold during the reported quarter. Equinox Gold witnessed sales of 120,395 ounces of gold at an average realized gold price of $1,856 per ounce in the reported quarter. Sales of gold declined from 124,712 ounce in the year-ago quarter. The downside was largely triggered by falling production at Aurizona and RDM mines and reduced gold sales at its Mercedes mine.

Total cash costs of $1,482 per ounce were incurred in the quarter, up from $1,089 per ounce from the year-ago period. Also, All-In Sustaining Cost (AISC) of $1,657 per ounce rose significantly from the prior year’s figure of $1,383 per ounce.

During the June quarter, Equinox Gold saw 3.21 per million hours of total recordable injury frequency rate, which were worked on a rolling 12-month basis, along with two lost-time injuries.

In April 2022, the company concluded the sale of its Mercedes mine to Bear Creek Mining Corporation and received $75 million in cash. The company is yet to receive $25 million in deferred cash payments, due within six months of the date of the close of the sale. Equinox Gold also received a 2% net smelter return on Mercedes production and Bear Creek’s shares, amounting to 24.73 million.

Equinox Gold Revises 2022 Outlook

Equinox Gold has updated its 2022 production and cost guidance. The revision has been done to indicate the impact of challenges at RDM, a longer-than-expected ramp-up at Santa Luz, and rising costs due to inflationary pressures.

The mining company now projects production of gold in the 550,000 to 615,000 ounce range. It also expects cash costs of $1,200-$1,250 per ounce and AISC of $1,470-$1,530 per ounce sold.

The revised guidance compares unfavorably with the previously provided production range of 625,000 to 710,000 ounces of gold. The previous outlook included cash costs of $1,080 to $1,140 per ounce and AISC of $1,330 to $1,415 per ounce of gold sold. 

Is Equinox Gold a Good Investment?

As of now, mixed feelings surround Equinox Gold stock. According to TipRanks, analysts are cautiously optimistic about the stock and have a Moderate Buy rating, which is based on four Buys, four Holds, and one Sell.

On similar lines, hedge funds are Neutral about the stock, as they have bought only 58,700 EQX shares in the last three months.

Contrary to the sentiments of analysts and hedge funds, financial bloggers on TipRanks are 88% Bullish on EQX, compared to the sector average of 73%.

Are EQX Investors Walking on a Tight Rope?

The mining company has been grappling with rising costs amid high inflation levels and operational challenges at RDM. Also, the updated guidance for the full-year looks disappointing. However, the company’s prospects look good, as it expects to see enhanced production and costs falling in the second half 2022. Further, as per TipRanks, EQX stock has over 90% upside potential, which enhances its investment appeal.

Read full Disclosure.

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