Amerigo (ARREF) Expects Heavy Rains to Impact Q3 Production
Amerigo Resources ARREF announced that copper production at Minera Valle Central (MVC) for the third quarter of 2023 will be lower than expected due to historic levels of rainfall in Chile. The company estimates it to be at 2.7 million pounds.
Amerigo produces copper concentrate, and molybdenum concentrate as a by-product at its 100% owned MVC operation in Chile by processing fresh and historic tailings from Codelco’s El Teniente mine, the world's largest underground copper mine.
In the second quarter of 2023, copper production at MVC was 13.6 million pounds, which was down 9% year over year. The decline was due to a planned eight-day annual plant maintenance and an unexpected shutdown that started on Jun 23, 2023, caused by extraordinary flooding that disconnected MVC from Chile’s central power grid. The company lost 1.3 million of copper production in the second quarter. The decline in production and lower average copper prices impacted ARREF’s top and bottom-line performance in the second quarter.
The disconnect with the power grid continued till Jul 21. Despite this, MVC produced 90,000 pounds of copper per day from Jul 6 to Jul 21, mitigating the negative production impact from the flooding. On Jul 21, 2023, MVC was successfully reconnected to the power grid, and it resumed normal operations on Jul 22, 2023.
As a result of this setback, Amerigo Resources had earlier lowered its annual copper production guidance by 3% to 60.5 million pounds in 2023. Of this, 13.8 million pounds were expected to be produced in the third quarter of 2023 and 16.6 million pounds in the fourth quarter.
However, Chile has seen unprecedented levels of rainfall recently, which added to Amerigo’s woes. The cumulative rainfall in Chile this year so far has surpassed the total rainfall in the last two years combined. The rainfall prevented MVC to process historical tailings from Cauquenes. All pumping equipment had to be utilized to remove water from Cauquenes rather than provide historic tailings to the concentrator.
The company now expects copper production to be 2.7 million pounds in the third quarter. Given that the rainy season at MVC normally ends in mid-September, Amerigo Resources has maintained its copper output target at 16.5 million pounds for the fourth quarter. The company is currently evaluating all options to increase production in the fourth quarter.
The company added that with a stronger U.S. dollar against the Chilean peso and an untapped $15 million working capital line of credit, its capital strategy remains in place.
Price Performance
Shares of Amerigo Resources have gained 33.3% in the past year compared with the industry’s 47.3% growth.
Image Source: Zacks Investment Research
Zacks Rank & Stocks to Consider
ARREF currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks from the basic materials space are Carpenter Technology Corporation CRS, Hawkins, Inc. HWKN and Alamos Gold Inc. AGI. CRS and HWKN each sport a Zacks Rank# 1 (Strong Buy) at present, while Alamos Gold carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The earnings estimate for Carpenter Technology’s current year is pegged at $3.48 per share, indicating year-over-year growth of 205%. CRS beat the Zacks Consensus Estimate in all the last four quarters, with the average earnings surprise being 10%. The company’s shares have rallied 71% in the past year.
Hawkins has an average trailing four-quarter earnings surprise of 25.5%. The Zacks Consensus Estimate for HWKN’s fiscal 2024 earnings is pegged at $3.40 per share. The consensus estimate for 2024 earnings has moved 38% north in the past 60 days. Its shares have gained 47% in the last year.
The Zacks Consensus Estimate for AGI's current-year earnings has been revised 13.2% upward over the past 60 days. The Zacks Consensus Estimate for current fiscal-year earnings for Alamos Gold is currently pegged at 43 cents per share, implying year-over-year growth of 53.6%. AGI shares have gained around 59% in a year.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Carpenter Technology Corporation (CRS) : Free Stock Analysis Report
Alamos Gold Inc. (AGI) : Free Stock Analysis Report
Amerigo Resources Ltd. (ARREF) : Free Stock Analysis Report
Hawkins, Inc. (HWKN) : Free Stock Analysis Report
