Equinox targets first gold at Greenstone in May

Equinox Gold (TSX: EQX; NYSE-AM: EQX) says it’s on track to produce first gold at the $1.2 billion Greenstone project in northern Ontario next month after starting ore processing this week.

The project, located 275 km northeast of Thunder Bay near the town of Geraldton, is a 60:40 partnership with New York-based Orion Mine Finance. It aims to produce 400,000 oz. of gold per year and more than 5 million oz. over a 14-year mine life.

“Once operating at full capacity, Greenstone will be our largest and lowest cost-mine,” president and CEO Greg Smith said in a release on Tuesday. “We look forward to first gold in May and continuing to advance the project to commercial production.”

Greenstone will be the company’s eighth mine after Aurizona, Fazenda, Santa Luz and RDM in Brazil, Castle Mountain and Mesquite in California and Los Filos in Mexico. Equinox expects total output this year of between 660,000 to 750,000 oz. of gold with all-in sustaining costs of US$1,630 to US$1,740 per oz., it said in February.

Vancouver-based investment bank Haywood Securities recommended Equinox shares for their low price-to-net-asset-value ratio and growth potential. 

“Equinox has moved from a non-producer in mid-2018 to a company with seven operating gold mines and a pipeline of growth projects today,” mining analyst Kerry Smith said in a note on Tuesday. “With higher-cost production, Equinox is highly leveraged to the gold price.”

Shares in Equinox Gold closed unchanged at $8.39 apiece on Tuesday in Toronto, valuing the company at about $2.7 billion. They’ve traded in a 52-week range of $5.36 to $8.79.

Stockpiled ore

Equinox has stockpiled more than 1.5 million tonnes of ore at Greenstone and pre-crushed 70,000 tonnes of low-grade ore for early commissioning feed, it said. Progressively higher-grade ore is to be fed into the mill as production ramps up towards a planned throughput of 27,000 tonnes per day. Commercial production is targeted for this year’s third quarter.

Greenstone’s equipment is working as expected and a second ball mill will be brought online in the coming weeks as throughput is increased, Equinox said. Hiring is on track with more than 400 positions filled including all senior plant operators.

On Monday, the company reported that heavy rainfall caused displacement in the south wall of the Piaba pit at Aurizona in Brazil. Equinox is restricting access to the pit while it completes a geotechnical evaluation. A substantial impact on production isn’t expected, BMO Capital Markets said in a note on Tuesday. 

“Management has indicated that the area was not scheduled for mining in 2024, and current stockpiles can supply at least a month of production,” mining analyst Kevin O’Halloran said. “Development of the Tatajuba pit is also being accelerated.” 

Equinox produced 564,458 oz. of gold last year with all-in sustaining costs of US$1,612 per oz. for US$304.4 million in earnings before interest, taxes, depreciation and amortization. It recorded cash flow from operations before changes in non-cash working capital of US$527.5 million, which included US$225 million from gold prepay arrangements. The company had US$733 million in debt at Dec. 31.