Touted as one of the best performing OTCQX companies, AMERIGO RESOURCES LTD (OTCMKTS:ARREF) is living up to expectations as a must watch in the mining sector. Even though the stock is trading near all-time highs, it has some room to continue powering high, supported by robust financial and production results.The stock is currently trading in a strong uptrend at the $0.862 handle and close to its 52-week high of $1.9 a share. That said, the recent pullback in our view presents a unique buying opportunity for investors who missed out on the initial run. ARREF Daily ChartIncreased trading volumes in recent trading session look set to push the stock to the $0.98 handle, a critical resistance level, above which Amerigo Resources could rise to its 52-week high.On the downside, the stock faces immediate support at the $0.77 handle, below which it could drop to the $0.70 handle another critical support level.Before reviewing catalysts, we believe have the potential to push the stock higher, let us first understand what the company does in pursuit of a value proposition.Amerigo Resources Business DescriptionAmerigo Resources is a mining company focused on the exploration and production of copper and molybdenum. The company produces the two metals form fresh and oil tailings generated by the world’s largest underground copper mine, El Teniente, in Chile.Founded in 1984, the company was formerly known as Golden Temple Mining Corp and changed its name to Amerigo Resources in 22.Recent Developments Amerigo Resources stock has caught our attention as a must watch in the mining sector after the company reported solid production results from its 100% owned Monera Valle Central mine in Chile. The company says it produced record quantities of copper and molybdenum last year.The MVC mine produced 62.5 million pounds of copper at a cash cost of $1.64 per pound. Molybdenum production, on the other hand, stood at 1.6 million pounds. The results exceeded the company’s full-year guidance of production of 60.65 million pounds of copper at a cash cost of $1.6 to $1.75 per pound.Also, Amerigo Resources is on course on the expansion of MVCs Cauquenes Phase two, slated for completion in the third quarter. Once complete, the project will increase the company’s production capacity at the mine to between 85 and 90 million pounds per year, at a cash cost of between $1.45 and $1.6 per pound.For the current year, Amerigo Resources expects between 65 and 70 million pounds of copper and 1.8 million pounds of molybdenum at a cash cost of $1.45 and $1.6 pound, from its Chile mine.
“MVC performed strongly again in 2017. The completion of the Cauquenes expansion in the second half of the year will increase production and lower unit costs, enabling Amerigo to further benefit from improved copper prices expected in 2018,” said CEO Rob Henderson.
Financial Results Amerigo Resources reported gross copper revenue of $50.3 million for the three months ended September 30, 2017, nearly double, revenues of $32.5 million reported a year ago. Revenue from Molybdenum stood at $2.5 million compared to $2.1 million reported in 2016 same quarter. Tolling and production costs in the quarter stood at $25.5 million compared to $24.3 million reported a year ago The Company attributes the increase to higher power and lime costs.Gross profit in the quarter came in at $11.9 million compared to a gross profit of $0.9 million for Q3-2016. Net income came in at $7.9 million compared to a net loss of (-$2.5 million reported a year ago. The increase in net income was because of the stronger copper process and an additional $4.5 million from positive settlement adjustment form previous quarter copper deliveries.Amerigo Resources exited the third quarter with a working capital deficiency of $5.1 million compared to working capital of $0.6 millions on December 31, 2016.
“The Group does not consider its working capital deficiency as a liquidity risk, as it is only required to repay the DET Price Support Facility by December 2019 and at a rate of $1.0 million per month, and the Group anticipates generating sufficient operating cash flow to meet current liabilities as they come due. Working capital deficiencies are not uncommon in companies with short-term portions of debt,” Amerigo Resources in a statement
Amerigo is to release its 2017 full year financial results, at market open on February 21, 218. Conclusion After a record-breaking year on copper and Molybdenum production, it goes without saying that the company is set to report better than expected financial results for F2017. Solid financial results should act as a catalyst in propelling the stock up the charts from current trading levels.A positive outlook, which underscores robust growth, is another catalyst that should help support the stock going forward. That said, we believe the stock remains well positioned to move higher especially after the recent pullback.We will be updating our subscribers as soon as we know more. For the latest updates ARREF, sign up below!Disclosure: We have no position in ARREF and have not been compensated for this article.Image courtesy of jan buchholtz via Flickr
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