Torex Reports Strong 1Q23 Results
Torex Gold is again on track to meet full-year operating guidance, according to the company’s 1Q23 financial and operating results. In addition, Torex announced that the Media Luna project has made significant progress in scheduling and budgeting.
Among Torex’s 1Q23 highlights was the production of 122,918oz of gold fueled by a record milling rate of 13,073 tpd and a record mining rate at ELG Underground of 1,738 tpd. Due to the company’s robust production, Torex is now in great position to meet its annual production target of between 440,000 and 470,000oz, which would mark the fifth consecutive year the company reaches its operating targets.
In addition, Torex has announced the sale of 118,445oz of gold at an average realized gold price of US$1,899/oz, net income of US$68.2 million on a basic and diluted basis and adjusted net earnings totaling US$50.3 million on a basic and diluted basis. The company also reported cash flow from operations of US$47 million, negative free cash flow of US$54 million and net cash of US$318.4 million.
“2023 is an important year for Torex and we are off to an excellent start. With US$564 million of available liquidity at quarter-end, strong cash flow from ELG, and continued momentum on production and cost management, we are wellpositioned to fund the remaining US$683 million of capital on the Media Luna Project while delivering on our commitments and generating solid value for shareholders,” said Jody Kuzenko, President and CEO of Torex.
Kunzenko said 2Q23 and 3Q23 production is expected to be closer to the lower end of the quarterly run rate of the fullyear forecast. During this time, the company also anticipates completion of mining at the Guajes pit, increased focus on waste stripping at the El Limón pit and disposal of stockpiled material. The company said total cash costs and total operating costs over the next two quarters will be above the upper end of the expected annual range. However, production and costs will return to normal levels in 4Q23 as higher grades are processed and production increases.
For Media Luna, the company has indicated that 2023 will see significant investment, since Torex plans to allocate between US$390 million and US$440 million to its development. The company reported that quarterly expenditures are expected to increase in the second half of 2023 and remain relatively constant until the first half of 2024, before declining as development activities wind down ahead of commercial production, anticipated to begin in early 2025.
Torex announced that by the end of 1Q23, Media Luna’s development was 24% complete, with detailed engineering approaching 50% and procurement 40% complete. In addition, several key purchase orders were awarded during 1Q23. These included Sandvik’s purchase of the mine’s primary production fleet of 35 vehicles, 15 of which are battery electric and 20 diesel.
In addition, surface and underground developments are progressing as planned. At the end of 1Q23, construction of the Guajes tunnel advanced 4,080m, with daily progress rates of 7m in the last three months. Meanwhile, in the Lower South Portal, daily progress averaged 4.3m. The company added that drilling of the Guajes tunnel on the south side of the Balsas River remains on schedule for 1Q24 or even earlier.
The company said since the Media Luna project has made great progress, its execution plan remains unchanged from that published in February 2023. “With a full year of execution now behind us and 21 months remaining, the Media Luna Project continues to progress toward the overall schedule and budget. (...) With strong available liquidity and solid cash flow forecast from El Limon Guajes through the end of 2024, we are well positioned to not only fund the Media Luna development, but to continue to advance additional valueenhancing initiatives with a view to continue to extend the life of mine and optimize the economics at our flagship Morelos property,” said Kuzenko.
Torex Gold Provides Update on Its Media Luna Project
Torex Gold Resources’ 2Q23 update on the development of its Media Luna project showed the project continues to make significant progress. The company also said it is on track to reach commercial production at Media Luna in 1Q25.
The company reported that by 2Q23, Media Luna had established 35% progress in engineering, procurement, underground development, and surface construction. It said that detailed engineering is 60% complete, while procurement stands at 48%. The main engineering activities include the detailing of the underground infrastructure for ore and tailings treatment, as well as developments on the power supply and distribution systems. Regarding surface facilities, final designs for the water treatment plant and flotation plant foundations were issued. Foundation and electrical layout designs were also reviewed by CFE, and the overall design and installation of the 115kV and 230kV systems and associated infrastructure are making headway and are on schedule.
“Civil works on both sides of the Balsas River continued during the quarter, and concrete installation will commence as the site-wide concrete contractor is selected. With development activities tracking to plan, robust financial liquidity, and strong ongoing cash flow from El Limón Guajes, we are well positioned physically and financially to deliver Media Luna on time and on budget, with first concentrate production in 4Q24 and commercial production in early 2025,” said Jody Kuzenko, President and CEO of Torex.
With CA$143.6 million of expenditures incurred through H1 and the quarterly spend rate expected to increase further, full-year guided expenditures are trending toward the lower end of the guided range of CA$390 million to CA$440 million. As of June 30, 45% of upfront project expenditures had been committed or incurred, according to a separate company press release.
Capital Expenditures
Total upfront expenditures related to the development of Media Luna are tracking to the initial estimate of CA$874.5 million. At quarter-end, Torex had incurred CA$268.3 million of project period expenditures (31% to date) with CA$395.9 million of expenditures committed or incurred (45% to date), said Torex.
The company has guided CA$390 to CA$440 million of capital expenditures related to the development of the Media Luna Project in 2023 (CA$143.6 million accrued during H1, including CA$77.2 million in Q2). Quarterly expenditures are expected to increase in 2H23, and remain relatively consistent through 1H24, before declining as development activities wind down ahead of commercial production, which is anticipated in early 2025, said the company.
In 2Q23, Torex said that most of the schedule-critical purchase orders have been awarded or will be awarded soon.
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During the quarter, Torex purchased the following: paste plant conveyors and hoppers, underground material handling transfer conveyors, rubber lined pipe spools for the tailings system that feeds the paste plant, and camp modules. The company’s most significant purchases were Maclean’s battery electric mining fleet for production support and Rokion’s personnel transportation equipment, as well as motors for ball mills.
Torex also awarded the vertical development and underground construction contracts, allowing contractors to start working. Torex Gold said the work to expedite the filter presses at the paste plant had been successful. Meanwhile, efforts continue to accelerate the delivery of critical underground electrical equipment to mitigate schedule risks.
Torex’s breakthrough on the Guajes Tunnel remains on schedule for 1Q24, if not sooner. During 2Q23, delivery of the Guajes conveyor table segments began, as well as preparing the tunnel for installation of the conveyor anchors. By the end of June, the Guajes Tunnel had advanced 4,500m and the Lower South Portal advanced 2,075m. Development of the main Media Luna lower spiral ramp continued and was completed in mid-July.
In 2Q23 the first 112-meter ventilation raise was completed at Media Luna Upper and the second 175-meter pilot raise was initiated. At the end of June, there were 18 active headings, six in Media Luna Lower and 12 in Media Luna Upper. Development at all sites continues to progress at a good pace due to excellent ground conditions, the company said.
On the north side of the Balsas River, work was completed on the water treatment plant and the grading of the 230kV substation. Meanwhile, on the south side of the Balsas River, the expansion of the construction camp platform continued. Preparation of the foundations for the new kitchen and office areas are underway.
Torex reported that the operational strategy for the surface and underground workings is on track to enable commercial production in 1Q25. Moreover, the company said that according to progress made during 2Q23 and its rigorous assessment of the project, the overall project execution plan remains unchanged from the last published plan in February 2023. Despite Torex saying there are some changes to the plan, these modifications are not expected to affect the project schedule as the original plan considered the possibility of schedule adjustments and supply chain disruptions.
Study Shows Torex Gold’s Commitment to Mexico Wealth Generation
Torex Gold has reported significant contributions from its 2022 mining operations and investments in Mexico and in the state of Guerrero, according to its Economic Impact Study, conducted by Deloitte LLP. The company said it remains committed to generating wealth in the country, focusing on the development of its Media Luna Project and other exploration targets.
“The insights outlined in the study commissioned from Deloitte provide an independent and holistic view of the significant economic impact of the company’s operations in Mexico and Guerrero state and the meaningful contributions we make on an annual basis to the state and national economies,” said Jody Kuzenko, president and CEO of Torex Gold. “We are demonstrating our strong commitment to Mexico and creating the conditions to sustain our positive economic impact for decades to come.”
In a press release, the company said that to evaluate Torex Gold’s contributions in Guerrero and throughout Mexico, the Economic Impact Study traced how the company’s expenditures and investments benefited federal and state economies in 2022. To make this assessment, the study considered Torex’s direct, indirect and induced impact. The direct impact includes factors such as the employment and income of workers directly employed and contracted, the indirect impact is associated with businesses that provide goods and services, and the induced impact relates to the spending of wages and salaries earned by employees and suppliers.
The Economic Impact Study for 2022 highlights an annual contribution of US$960 million to the country’s GDP, including US$600 million to the state of Guererro, representing 3% of the state’s GDP in 2022. In addition, the company has created or sustained 12,912 jobs annually in Mexico, which is equivalent to generating 25.8 jobs for every US$1million that the company spends in the country.
For the state of Guerrero, 3,539 jobs were created or sustained, which is equivalent to generating 7.1 jobs for every US$1 million invested in the state. In addition, the company contributed US$168.4 million in labor income in Mexico, and US$54.5 million to labor income in Guerrero, while adding US$278.2 million in annual contributions to government revenues in Mexico with a combined annual capital and operating expenditures of US$506 million in 2022.
“We have always been focused on operating in a way that generates value for our shareholders while creating lasting prosperity for our people, local communities and business partners. By continuing to mine responsibly, and through our focus on local employment, local procurement and sustainable community development, we will continue to do our part to
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be an important and highly relevant part of the economies of both Mexico and Guerrero,” said Faysal Rodriguez, senior vice president for Mexico.
Torex is the leading gold producer in Guerrero and ranks second in gold production in Mexico. In 2022, 16% of Mexico’s total annual gold production came from Torex’s operations.