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Torex Gold Resources reports 1Q adjusted profit

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(Kitco News) - Torex Gold Resources Inc. (TSX: TXG) posted an adjusted profit in the first quarter but has not yet listed new production guidance for 2020 due to uncertainty surrounding the COVID-19 pandemic, the company announced Wednesday.

Adjusted net earnings were listed at $19.9 million, or 23 cents per share, a turnaround from an adjusted loss of $5.7 million, or 7 cents, in the first quarter of 2019.

The company listed a net loss of $47 million, or 55 cents per share on a basic basis and a loss of 57 cents per share on a diluted basis. The net loss was impacted by a 24.8% depreciation in the Mexican peso against the U.S. dollar, the company said. In the first quarter of 2019, the company’s net loss was $1.3 million.

“The U.S. monetary stimulus in reaction to COVID-19 resulted in the depreciation in many emerging-market currencies, including Mexico’s,” said Fred Stanford, president and chief executive officer. “This has us offside with our currency hedges and when ‘marked to market,’ the significant lost opportunity to benefit from the depreciated peso affected earnings.

“There were also benefits realized due to the rapid deterioration in the value of the peso. All said and done, the business was solid for the quarter, [but] the financials are a bit messy.”

Quarterly gold production was 108,537 ounces, up from 77,870 in the same period a year ago, Torex said. The average realized gold price rose to $1,571 an ounce from $1,302.

All-in sustaining costs per ounce were $975. The company said this was impacted by accounting changes in the treatment of stockpiled ore, adding $100 per ounce to AISC.

“This impact will decline over the coming quarters and is expected to average out at the impact expected in the original annual guidance numbers,” Stanford said.

The company said it repaid $21.8 million of outstanding debt during the quarter.

Torex had to temporarily shut down its Mexico operations after the end of the quarter due to government restrictions to combat COVID-19. However, ahead of time, the company developed plans for COVID-19 scenarios, Torex said. While there is uncertainty on when full operations can restart, the company said it is preparing for the possibility that the Mexican decree could be lifted as early as May 18.

“At the end of the quarter, we started a significant planned maintenance shutdown,” Stanford said. “The decree to suspend non-essential businesses in Mexico was enacted during this shutdown, and we did not restart when the maintenance was completed. Extensive infection control has been effective, and the care-and-maintenance team has remained free from COVID-19 infection.”

The company said it’s too early to announce new guidance due to the uncertainty surrounding COVID-19. Previous guidance was withdrawn on April 2.

Jody Kuzenko will succeed Stanford as CEO following the company’s annual shareholder meeting, and Stanford will transition to executive chair.

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