Equinox shares surge following record production year

Equinox Gold (TSX: EQX; NYSE: EQX) shares rose Thursday after reporting its highest quarterly and yearly gold production.

The Canadian miner produced 213,906 oz. gold in the three months to December and 621,870 oz. for the year. The results aligned with the revised guidance of 590,000-675,000 oz. from its seven operating gold mines in Canada, the United States, Mexico and Brazil. The company lowered guidance in October from 655,000–750,000 oz. due to ramp-up delays at the Greenstone mine build in Ontario.

Equinox’s Q4 production exceeded BMO Capital Markets’ consensus estimates of 205,000 oz. gold.

“Production at Santa Luz and, to a lesser extent, Greenstone, was below our forecast but was more than offset by a strong quarter at other operations,” mining analyst Kevin O’Halloran said in a note.

Canaccord Genuity mining analyst Jeremy Hoy took a cautious approach. He is closely monitoring a slower-than-expected ramp-up at Greenstone. “We note that production increased 25% quarter-on-quarter, although it did land 16% below our estimate, suggesting a slightly slower ramp than what we currently model (we forecast a progressive ramp to full capacity in Q4),” the analyst said in a note.

Hoy expects the company’s full Q4 results in late February. They will provide details on Greenstone’s production progress.

Equinox shares were up 6.5% at 11:00 am EDT, giving the company a market capitalization of $4 billion.

Equinox CEO Greg Smith attributed the company’s production growth mainly to the Greenstone mine coming online in May last year. He described 2024 as a pivotal year for Equinox, defined by completing the $1.2 billion Greenstone build. “We consolidated 100% ownership of the mine, achieved commercial production and produced more than 111,700 oz. gold in the first, partial year of operations at Greenstone,” Smith said.

Greenstone will be one of Canada’s largest and highest-grade open-pit gold mines at full production, producing 390,000 oz. per year on average for the first five years and 330,000 oz. annually over an initial 15-year mine life.

The Mesquite mine in California exceeded its yearly guidance of between 55,000 oz. and 65,000 oz., producing 71,980 oz. of gold. Similarly, the Castle Mountain operation produced 20,510 oz. during the year, exceeding the guidance of about 15,000 ounces.

The company ended the year with US$240 million in cash and cash equivalents. During the fourth quarter, Equinox reduced its debt by US$180 million.

Fazenda mine extension

Earlier this week, Equinox revealed an extended mine plan for its Fazenda mine in Brazil, adding seven years to 2033. Exploration success that more than doubled its reserve base drove the mine-life extension.

In Bahia state’s Maria Preta district, Fazenda has been running since 1984 as a combined underground and open-pit mine. It has produced over 3.3 million oz. gold. Equinox took ownership in 2020 after buying Leagold Mining in 2020 for $769.3 million.

This week’s new reserve estimate shows a 142% increase in Fazenda’s contained gold to 763,000 oz, held in 13.2 million tonnes grading 1.8 grams gold per tonne. This increase accounts for 242,000 oz. of mining depletion since the previous reserve update in 2021, the Vancouver-based miner said.

Measured and indicated resources rose fivefold to 21.4 million tonnes at 2.2 grams gold per tonne for 1.5 million oz. of contained metal. The average grade of reserves and resources increased by 22% and 25%, respectively.

The updated reserves and resources reflect over 197,000 metres (1,599 holes) of drilling done between 2021 and 2023. It also includes new geotechnical data, updated mining costs and revised gold price forecasts used in the mine design.