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ARG: 33% Dividend Increase & Full Debt Repayment

What you need to know:
• Amerigo reported Q3 financial results, generating revenue of $52.5M (+16% YoY) vs. our expectation of $53.0M. EBITDA was $18.7M vs. $21.4M, and OCF was $12.4M vs. $16.4M expected.
• ARG paid off all of its remaining debt subsequent to the quarter (one of its 2025 objectives), freeing up cashflow to be returned to shareholders.
• Amerigo also increased its quarterly dividend by 33% to C$0.04/share, now representing a 5.88% yield.

This morning, Amerigo Resources (ARG:TSX, ARREF:OTC) reported its Q3 financial results, which slightly missed our estimates, but the focal point was management’s capital allocation efforts. Amerigo paid off all of its remaining debt subsequent to the quarter, freeing up additional cashflow for dividends. As such, management increased the quarterly dividend by 33% to C$0.04/share, representing a 5.88% yield. We were highly impressed with the capital allocation execution, with ARG reaching its 2025 objective of becoming debt-free. We are maintaining our BUY rating and our C$3.50/share target price on ARG.

Q3 Financial Highlights
• Copper produced came in at 14.6Mlbs (-11% YoY), which was reported on October 8th. This was lower than our expectations due to reduced fresh tailings throughput after an accident at El Teniente that halted supply for 10 days in August, see our production note for more details on this.
• Revenue was $52.5M compared to our expectation of $53.0M, representing 16% YoY growth. The realized copper price for the quarter was $4.54/lb vs. $4.22/lb in Q3/24.
• Gross margin came in at 25%, compared to our estimate of 29% and the 16% margin reported in Q3/24.
• EBITDA of $18.7M (36% margin) compared to our estimate of $21.4M and $13.3M in Q3/24. Cash costs came in at $1.80/lb, and AISC came in at $3.85/lb, compared to $1.93/lb and $3.72/lb in Q3/24, respectively.
• OCF (before working capital) came in at $12.4M (24% of revenue) compared to our estimate of $16.4M and $8.9M in Q3/24.
• Capex was just $1.3M (vs. $3.0M expected), leading to FCFF and FCFE of $11.1M compared to $5.9M in Q3/24.
• Amerigo announced a 33% increase to its quarterly dividend, now at C$0.04/share (5.88% yield). Management indicated that this is roughly 50% of the annual FCF that will become available from not carrying debt. During the quarter, ARG returned $3.5M to shareholders via its quarterly dividend.
• ARG ended the quarter with $31.1M in cash (including restricted cash) and $7.3M in debt. However, in October (subsequent to the quarter), ARG fully repaid its corporate debt, which was one of its objectives for 2025. For reference, the first tranche of the debt was $64.4M in 2015, and the second tranche was $35.3M in 2017.