Equinox GoldEQX

Key highlights

• Production increases significantly: Gold production reached 247,000 ounces this quarter, nearly doubling the 125,000 ounces produced a year ago. The addition of the Greenstone and Valentine mines drove the higher volume as both sites transitioned into full production.
• Debt burden reduced: The company used the money from selling its Brazil operations to pay off $979 million in loans and borrowings during the first half of the year. This move brings total debt down to $583 million, which lowers the interest the company has to pay and makes the business more stable for the long term.
• Brazil operations sold: Equinox completed the sale of its Brazil mines in January for total net proceeds of $907.6 million. Getting out of Brazil allows management to focus entirely on its new, larger mines in Canada and the United States.
• Revenue and income growth: Quarterly revenue grew to $769.8 million from $285.8 million a year ago, which helped the company turn a net profit of $230.6 million. A large part of this profit came from a $117.7 million gain on the sale of the Brazil division.
• Improving loan terms: Management amended its main credit line to increase the available borrowing limit to $1 billion and extend the payoff date to 2030. The new deal lowers the interest rate margin to a range of 1.45% to 2.50%, which reduces the cost of maintaining the company's financial safety net.
• Forward production outlook: The company expects to produce more than 1.1 million ounces of gold annually now that its new Canadian mines are running. This increase is a major shift from previous years and is the key to generating the cash needed to fund future dividends.

Our take: A strong and transformative quarter for the business. By selling the Brazil mines and using the $907.6 million in proceeds to slash debt, Equinox has greatly improved its financial health. The move toward a 1.1 million ounce production rate makes the long term case for the stock much more attractive.