EQX / Equinox Gold. Ramping up Greenstone Mine

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EQX, is it still "cheap"? Costs up, in Greenstone  ramp-up

EQX (5.19 -.18); Day's, O:5.00, H:5.27, L:4.95; PER n/a  (R: 3.95-6.50 )

A day later... EQX (5.81 +.62, +11.95% ); O:5.31, H:5.82, L:5.23, PER: 12.03 (R: 3.95-6.50)

EQX vs. Enterprize_Value/ Ebitda Ratio - as "cheapness" measure

=== :  Last :  B.V. :  %BV: FwPE: Yield:  MkCp Ebitd Eb/sh  PEb: Db/Er EV/Eb AveEst  %chg  
NEM: 45.26: 25.97: 173% 7.87x: 2.21% 51.53b 6.01b 5.28:  8.57x 30.4% 24.5y 59.56 +31.6%  
Gold : 19.05: 13.47: 141% 9.98x 2.10% 33.45b 5.29b 3.01:  6.33x 14.5% 6.05yr 25.57 +34.2%  
AEM : 85.89 40.89: 210% 17.3x 1.86% 43.09b 4.20b 8.37: 10.3x  7.88%  13.1yr 93.26 +8.58%
AGI  : 20.15  $7.66:  263% 17.7x 0.50% $8.47b 575m 1.37:  14.7x 0.00% 14.7yr 23.79 +18.1%
EQX: $5.44: $7.50:  77.% 5.29x 0.00% $2.46b 226m 0.50 10.9x 51.9% 5.39yr $7.55 +38.8%
GDX : 39.85  === :   ===    n/a   1.25%: 15.36b   === * 
Gdxj : 50.84  === :   ===    n/a  0.54%: $5.58b   === * 
Aris  : $6.30  $4.81  131% 5.26x 0.00%: $1.07b 138m 0.81  7.78x 33.6% 11.4yr  10.72 +70.2%
EDV : 31.94: 12.35: 180% 6.72x  3.53% $7.64b 924m 3.86 8.27x 39.6% 8.23y 43.51 +36.2%
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EQX/ Equinox Gold    Q3/24 first look: cost guidance revisions; Greenstone achieves commercial production (CCD comment)

Event: EQX released its Q3/24 operating and financial results after market yesterday evening, November 6.

Our take:  Overall, we view the Q3 print as slightly negative. Gold production slightly missed our estimate and consensus, costs were higher, EBITDA slightly missed, and EPS was in line. Full year 2024 cost guidance was increased due to the slower ramp-up at Greenstone (ramp-up issues previously disclosed, more detail here and here), although we highlight that the updated consolidated costs are in line with our estimates, as we had preemptively brought our costs up (as we believe most analysts did, following the rampup news).

Positively, the company also announced commercial production at Greenstone, with the plant operating at 76% of design throughput for a 20-day period. We also note that Q3 revenue and adj. EBITDA were quarterly records. We remain focused on the ramp, as Greenstone is a cornerstone asset representing 44% of operating NAV and driving production growth to >1 Moz by 2026, on our estimates. Greenstone commercial production announced In a separate press release, the company announced commercial production at Greenstone. As of November 5, the trailing 20-day throughput averaged over 20,400 tpd, representing 76% of design. Crushing and grinding circuits have demonstrated the ability to operate at full production rate of 27,000 tpd, gold recovery has reached daily highs of >90%, and averaged 78% through October (target is 91%).

The focus now is on increasing availability and recoveries. Q3/24 operational and financial highlights (see Figures 1-3):

• Gold production of 174 koz, -2% vs. our 177 koz estimate (consensus 179 koz).

• Cash costs of $1,720/oz, +17% vs. our $1,469/oz estimate.

• AISC of $1,994/oz, +7% vs. our $1,857/oz estimate.

• Adj. EBITDA of $142M, -11% vs. our $160M estimate (consensus $151M). • Adj. EPS of $0.09 was in line with our $0.09 estimate (consensus $0.10). 

Negative revision to 2024 cost guidance (more detail in Figure 4): • Recall that we recently took our 2024 Au production estimate down from 732 koz to 611 koz, in line with the midpoint of guidance (590-675 koz) implied by the recent Greenstone production guidance revision (more detail here). •

With Q3 results, EQX has now updated cost guidance for Greenstone to reflect the slower ramp: • Cash costs have increased 22% to $850-950/oz (vs. our $1,146/z estimate) • AISC has increased 24% to $1,050-1,150/oz (vs. our $1,424/oz estimate) • Accordingly, consolidated cost estimates have also been updated: • Cash costs have increased 11% to $1,450-1,550/oz (in line with our $1,527/oz estimate). • AISC has been increased 11% to $1,820-1,920/oz (in line with our 1,876/oz estimate).

Balance sheet update. EQX finished Q3/24 with $168M of cash (flat q/q), $1,482M debt, and $104M available on the $700M revolving credit facility.

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Breaking it down...

EQX vs. Enterprize_Value/ Ebitda Ratio - as "cheapness" measure: 5.39 yr, before update...

=== :  Last :  B.V. :  %BV: FwPE: Yield:  MkCp Ebitd Eb/sh  PEb:  Db/Er EV/Eb AveEst  %chg  
NEM: 45.26: 25.97: 173% 7.87x: 2.21% 51.53b  6.01b 5.28:  8.57x 30.4% 24.5y 59.56 +31.6%  
Gold : 19.05: 13.47: 141%  9.98x 2.10% 33.45b 5.29b 3.01:  6.33x 14.5% 6.05yr 25.57 +34.2%  
EQX: $5.44: $7.50:  77.% 5.29x 0.00% $2.46b 226m 0.50  10.9x 51.9% 5.39yr $7.55 +38.8%

            ShOS: 406m. f.d. 458m.

=====   Last: shOs:  MkCap  +  Debt  - Cash = EntVal/  Ebitda: Eb.yr,  Calc. Rept   
Above : 5.44  452m= 2,460m +1,482m -168m= 3,660m/            226m= 16.19  5.39   
Update: 5.81  406m= 2,360m +1,482m -168m= 3,660m/             301m= 12.16  5.27   
’23-Q3 4.23:  300m    1,270m                              2,190M /   81m :  270m:  8.11    ???   
’23-Q4 4.89:  316m     1,520m                              2,500M /  82m : 291m:  8.59  8.09   
’24-Q1: 6.02                 1,980m                              2,640M /  52m : 260m: 00.0  9.08   
       Q2: 5.23                2,010m                              2,750M /   51m : 220m: 00.0 10.87   
       Q3: 6.09                2,436m                             3,700M / 142m : 327m:  7.44 10.0E   
     11/8 : 5.81:  406m:  2,360m                             3,660M / 150m : 400m: 9.15< 5.27   
  Yr’25 : 6.00                2,400m                             3,700M /200m: 700m* 5.307   
  Yr’25H 9.0E  458m:   4,120m                              5,420M /400m: 1.20B* 4.52 !!!

  CanaGn  Est. :  EPS:  Ebitda: FreeCF AuPrd: FCF/oz: AISC: NetDebt:   
  2024:  $9.00e 0.21:    463m:  (34m):    611 k:  $Neg   1.876:  1,339m   
  2025:  14.00e  1.08:  1,254m:  659m :   988k:  $667   1,453:    973m   
  2026:  14.00e  1.70:  1,792m:  854m : 1,082k:  $789   1,201:    323m   
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