Quarterly Dividends Outlook
$13.8 M
Amerigo's cash balance is currently below the Company's desired cash target of $ $25M due to lower production in Q2-2023 and Q3-2023 from historical floodings in Chile. Operations returned to normal in September 2023, and cash balances are strengthening.
Our analysis indicates that long-term structural supply issues in the copper industry will support higher price levels. In that environment, Amerigo can remain a leader in returning capital and offering best-of-class total returns to investors. Our quarterly dividend is the foundation for the rest of our capital return policy.
Performance Dividends Outlook
Performance dividends allow Amerigo to return excess cash to shareholders flexibly. They will be paid in addition to regular quarterly dividends. Performance dividends will depend on Amerigo’s assessment of the global macro environment and the copper price outlook. In a stable global business environment, with sustained copper prices above $4 per pound, performance dividends are possible.
Copper prices have a strong correlation to increased inflationary expectations. This is another reason why Amerigo believes in higher future copper prices. Performance dividends are not only a flexible way to deploy excess cash from higher copper prices. A secondary benefit of a performance dividend is its unexpected nature. Because short sellers do not receive, but instead must pay, all declared dividends, the simple possibility of an unexpectedly declared performance dividend should help to minimize short selling of Amerigo shares.
Share Buybacks Outlook
In 2021, 2022 and 2023, Amerigo completed three share repurchase programs, a Substantial Issuer Bid (SIB) and two Normal Course Issuer Bids (NCIB), which reduced common shares outstanding by 11%.
An NCIB may be implemented for up to one year and limits the number of shares repurchased daily under the program. Amerigo determines the timing of the purchases. This allows the Company to take advantage of discounted valuations during periods of market weakness.
Amerigo's current NCIB was launched on December 2, 2023. This is the Company's fourth consecutive buyback program and runs until December 1, 2024. Amerigo has currently paused share buybacks under the NCIB.
A SIB is used more infrequently but is a powerful way to quickly return capital to shareholders when the Company perceives its share price as undervalued. If large shareholders have met their investment objectives, a SIB is a valuable tool to remove large share volumes from the market while minimizing downward pressure on Amerigo's share price.
Under NCIBs and SIBs, all shares purchased by Amerigo are cancelled, leaving fewer shares outstanding to receive future dividends.
Our Track Record
$33.2 M Dividends | $23.71 M Share Buybacks
Since starting the capital return strategy in October 2021, Amerigo has paid a cumulative dividend of Cdn$ 0.26 per share ($33.2 million) and used $23.7 million to purchase and cancel 20.15 million common shares. The Company initiated a third Normal Course Issuer Bid share buyback program on December 2, 2023, which ends on December 1, 2024.
Reducing Share Count with Buybacks
A share buyback program is a valuable component of a multi-faceted capital return strategy. A share buyback program allows the Company to opportunistically take advantage of periods of share price weakness and reduce the number of shares available in the market. This lends positive support to the Company’s share price.
Over time, a sustained commitment to reducing the number of outstanding shares will have recognizable benefits to remaining shareholders. All else being equal, a fixed amount of capital being returned to fewer shares means more cash for those remaining shareholders.
