Amerigo (ARREF) Affirms 2024 Guidance Despite Heavy Rains
Amerigo Resources ARREF announced that due to the impacts of heavy rains in Chile, copper output at its Minera Valle Central (“MVC”) operation would likely be impacted by 1 million pounds in the second quarter of 2024. Despite this setback, the company is on track to meet its production targets for 2024.
Amerigo produces copper concentrate and molybdenum concentrate as a by-product at its fully-owned MVC operation in Chile by processing fresh and historic tailings from Codelco’s El Teniente mine, the world's largest underground copper mine. From Jun 13, 2024, to Jun 23, the region near MVC recorded heavy rainfall of 267 mm.
The power supply was unaffected during the period and MVC continued to process fresh tailings on a normal basis. The rains, however, led to water accumulation in the Cauquenes historic tailings deposit, halting the processing of historic tailings.
The company deployed floating pumps to remove water from Cauquenes and has so far extracted 1.6 million cubic meters of accumulated rainwater. Water removal is expected to be completed by Jun 29 and Amerigo expects processing of historical tailings to resume on Jun 30.
Notably, in 2023 Chile had seen unusually heavy and sustained rain from Aug 19 to Sep 10 . The rainfall in Chile for the full year 2023 was around 695 mm, which had surpassed the combined rainfall of 287 mm in 2022 and 247 mm in 2021. Amerigo had to pump out 2.2 million cubic meters of water that had accumulated at the Cauquenes historical tailings deposit. All pumping equipment had to be diverted to remove water from Cauquenes instead of providing historic tailings to the concentrator.
Amerigo produced 57.6 million pounds of copper in 2023, which had been impacted by this unprecedented level of rainfall. MVC had completed building a new water containment dam in Cauquenes ahead of the rainy season this year, which served as a first line of defense limiting the amount of water accumulated in the deposit and thus lessening the impact on production.
In 2024, Amerigo expects to produce 62.4 million pounds of copper and 1.2 million pounds of molybdenum, with 61% of copper production coming from fresh tailings. The copper production guidance projects an 8% year-over-year increase.
In the first quarter, Amerigo delivered a solid performance with copper production of 16 million pounds, which surpassed its guidance by 2%, and molybdenum production of 0.3 million pounds, which was 4% higher than expectations. ARREF’s normalized cash cost of $1.89 per pound was 9% below its guided annual cash cost. This better-than-expected performance was attributed to the company’s commitment to improving operational efficiency and cost-control efforts. Amerigo expects this outperformance in the first quarter to offset the shortfall of 1 million pounds in the second quarter, thereby maintaining confidence in achieving its guidance for the year.
Price Performance
Shares of Amerigo have gained 8% year to date compared with the industry’s 21.1% growth.
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Zacks Rank & Other Key Picks
ARREF currently sports a Zacks Rank #1 (Strong Buy).
Some other top-ranked stocks from the basic materials space are Ero Copper Corp. ERO, Ecolab Inc. ECL and ATI Inc. ATI. ERO sports a Zacks Rank of 1 at present, and ECL and ATI have a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Ero Copper’s 2024 earnings is pegged at $1.66 per share. The consensus estimate for 2024 earnings has moved 20.3% north in the past 60 days. It has an average trailing four-quarter earnings surprise of 53.9%. ERO shares have gained 39% year to-date.
The consensus estimate for Ecolab’s 2024 earnings is pegged at $6.59 per share, indicating an increase of 26.5% from the prior year’s reported number. It has an average trailing four-quarter earnings surprise of 1.3%. ECL shares have gained 21% year to date.
The Zacks Consensus Estimate for ATI’s 2024 earnings is pegged at $2.41 per share. The consensus estimate for ATI’s current-year earnings has been revised 3% north in the past 60 days. It has an average trailing four-quarter earnings surprise of 8.3%. The company’s shares have gained 24% so far this year.
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