Amerigo's (ARREF) Minera Valle Central Mine Resumes Operations

Amerigo Resources ARREF announced that the Minera Valle Central (“MVC”) mine started production after being disrupted by unprecedented levels of rainfall in Chile. This has been possible after pumping out 2.2 million cubic meters of water that had accumulated at the Cauquenes historical tailings deposit. The mine’s copper output for the third quarter of 2023 is expected to be 11.1 million pounds.

Amerigo produces copper concentrate and molybdenum concentrate as byproducts at its 100% owned MVC operation in Chile by processing fresh and historic tailings from Codelco’s El Teniente, the world's largest underground copper mine.

In the second quarter of 2023, MVC produced 13.6 million pounds of copper, down 9% year over year. This was due to a planned eight-day annual plant maintenance and an unexpected shutdown that started on Jun 23, 2023, and continued till the end of the quarter. This was caused by extraordinary flooding that disconnected MVC from Chile’s central power grid.

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 impacts of the flooding. On Jul 21, 2023, MVC reconnected to the power grid, and it resumed normal operations on Jul 22, 2023.

To factor in this unexpected shutdown, Amerigo lowered its 2023 copper production guidance to 60.5 million pounds. 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, Amerigo’s woes were far from over. Heavy and sustained rainfall in Chile from Aug 19 to Sept 10 impacted MVC’s operations again. The cumulative rainfall in Chile so far this year has surpassed the combined rainfall of the last two years. All pumping equipment had to be diverted to remove water from Cauquenes rather than providing historic tailings to the concentrator.

Due to this setback, on Sep 9, 2023, ARREF revised MVC’s copper production for the third quarter to 11.1 million pounds from the prior stated 13.8 million pounds. With the rainy season in Chile expected to have officially ended and no heavy rains seen lately, Amerigo has maintained its copper output target at 16.6 million pounds for the fourth quarter.  The company is evaluating all options to increase production in the quarter.

Per the company, with a stronger U.S. dollar against the Chilean peso and an untapped $15 million working capital line of credit, ARREF’s capital strategy is in place.

Price Performance

Shares of Amerigo have gained 49.5% in the past year compared with the industry’s 57.4% growth.

 

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Zacks Rank & Stocks to Consider

ARREF currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks from the basic materials space are Hawkins, Inc. HWKN, Carpenter Technology Corporation CRS and L.B. Foster Company FSTR. HWKN and CRS sport a Zacks Rank #1 (Strong Buy) at present, and FSTR carry a Zacks Rank #2 (Buy). You can seethe complete list of today’s Zacks #1 Rank stocks here.

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 59% in the last year.

Carpenter Technology has an average trailing four-quarter earnings surprise of 10%. The Zacks Consensus Estimate for CRS’s fiscal 2024 earnings is pegged at $3.48 per share. The consensus estimate for 2023 earnings has moved 8% north in the past 60 days. Its shares have gained 106% in the last year.

L.B. Foster has an average trailing four-quarter earnings surprise of 134.5%. The Zacks Consensus Estimate for FSTR’s 2023 earnings is pegged at 53 cents per share. Earnings estimates have been unchanged in the past 60 days. FSTR’s shares have gained 87% in the last year.

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