Title: Amerigo Resources: The High-Yield Copper Factory | Aurora Davidson Show: Mining Network (host Peter) Guest: Aurora Davidson (President & CEO, Amerigo Resources — TSX: ARG, OTCQX: ARREF) Date: 2026-09-21 (YouTube publish date) URL: https://youtu.be/b8oxQ5mYQDM Length: 38:30 Note: YouTube auto-transcript pasted by Stephen; fillers (um/uh, contentless "you know"/"like") and stutters/false starts removed; wording otherwise verbatim; (mm:ss) cues kept in place. ">>" marks a speaker change. Auto-transcript garbles fixed: "America Resources/America/Americo"=Amerigo, "Mina Bay Central/MBC/NBC/MDC"=MVC (Minera Valle Central), "Kadelco/Kodelo/Quidelco/Coco"=Codelco, "Elinine/Elene/Eltone/Altone/Altenee/Elton/Elini/Elinia"=El Teniente, "Cocanis/calcis/cocanis"=Cauquenes (historic tailings), "Molly/malibdin"=moly/molybdenum, "TCRC's"=TC/RCs, "Evida"=EBITDA. Figures as spoken. The CEO is describing her own company (talking her book).
00:00 Hello, welcome back. We're joined with Aurora Davidson, the president CEO of Amerigo Resources. Aurora, good to be with you. >> Thank you for having us here. It's great timing for us to have this chat with you today. >> No, agreed. And obviously you've had a lot of news flow recently. One of them obviously being around the dividend.
00:17 I mean, would it be fair to call you a copper linked high yield dividend play? Is that the right way to think of you guys? >> Yeah, high yield copper factory is even shorter, sweeter, and better. >> It's an interesting business model. Obviously we look at a lot of producing mining companies and development companies and whatnot, but this is a very different business model in a sense because technically I guess you're not even in the mining category, are you really? You're refining fresh and
00:47 historic tailings from the world's largest underground copper mine which is owned by Codelco in Chile. Just to kick things off, can we just go into the business model just in case people aren't aware of who you are? Sure, absolutely. Well, you mentioned an interesting point. We are not a traditional mining company, but we operate within the mining sector.
01:09 So, what does Amerigo do? Amerigo has an operation in Chile called MVC, which is the short for Minera Valle Central. And we produce copper by reprocessing the tailings from Codelco's El Teniente. You also mentioned El Teniente, the world's largest underground copper mine, one of the longest lived copper mines if not the longest lived copper mine on record.
01:34 It has been operating since 1905. So what we do at Amerigo [is recover the copper] that has remained in the tailings after El Teniente's original mining and processing activities. In simple terms, we are extracting additional value from material that has already been mined. One misconception about Amerigo: we go into work every day not to reprocess tailings, but to produce copper, to produce molybdenum.
02:17 And this distinction matters, Peter, because investors ultimately care about copper production. Copper production is a leadway into cash flow and into shareholder returns. So telling a story about tailings reprocessing per se, not interesting; telling a story about a copper producer, much more interesting. So what makes our model different? I often describe Amerigo as a copper factory.
02:45 It's a copper producer with a very different risk profile than a conventional miner. What we don't have, for example, is exploration risk. We do not need to go out and discover the next deposit. We do not have also reserve replacement risk. We don't need to build a new mine every time reserves are depleted. And we also do not face the same level of intensive growth capital requirements that many mining companies face simply to maintain the business.
03:19 What we do as a producer is have direct exposure to copper prices. We have a longstanding operating asset that has been operating for more than 30 years and a business that converts a greater portion of operating cash flow into free cash flow. So, operationally speaking, I think it's important for me to tell your viewers some of our operational benefits.
03:46 One benefit is predictability. We receive the tailings from a very long-lived copper mine that creates a high level of operating consistency that is relatively uncommon in the mining industry, and you know that better than me. We are also not dependent on exploration success, on changing mine plans or on continuously having to replace reserves.
04:14 So predictability is benefit number one from the operational standpoint. The second benefit is operational stability. MVC operates a processing plant, a copper factory rather than a mine. So while every industrial operation will have challenges, we are generally less exposed to many of the geological and mining risks that affect conventional mining operations, and that has contributed to the high plant availability that we have and the operational consistency that MVC has demonstrated quarter on quarter over
04:51 many years now. And the third benefit is capital efficiency. Many mining companies must continually reinvest large amounts of capital into reserve replacement, mine development, growth projects. We don't have to do that. Our sustaining capex requirements are comparatively lower than in traditional mining setups, which means that a larger portion of our cash flow becomes free cash flow.
05:22 And that matters because, as we will surely be discussing in our chat, that free cash flow is what ultimately funds our capital return strategy. >> Yeah. Why don't we go on to that just to begin with in terms of the actual profitability, because obviously very nice copper prices, amazing molybdenum prices as well.
05:43 Obviously your increased performance dividends sort of show to the market that things are obviously going quite well at the moment. What can you tell us about the production profile of the business at the moment and how that might look in the years to come? >> Sure. So our production profile is very straightforward and very predictable, which is important for us.
06:06 For 2026 our guidance is 63.8 million pounds of copper and we also have a guidance of a million and a half pounds of moly. Those numbers are consistent with the production levels that we have had over recent years. We're not pursuing production growth for the sake of growth. Our focus is on having a stable operation.
06:29 Cost control, cost discipline is significantly important for us and we'll talk about that, and therefore cash generation. So one of the strengths of the Amerigo model is that investors do not have to assume a major expansion or a new mine build into the value proposition. The assets that we have at MVC are operating today, they are producing today and we just have to maintain them in perfect operating conditions.
06:57 Regarding your question about profitability, at current prices it's a great time to be having that discussion. Obviously at today's copper and moly prices, as you mentioned, the business is highly profitable. The key point however is that Amerigo has a significant leverage to copper prices because our production profile is stable and our capital requirements are, as I said, comparatively low to mining benchmarks.
07:26 So once our operating costs, the royalties that we pay to El Teniente for letting us work with their tailings, the taxes and our sustaining capex are covered, the additional copper and moly price increases that we had this year flow directly into free cash flow. And our 2026 guidance, which we released early on in the year, illustrates that concept very clearly.
07:51 On our first news release of the year and on our presentation deck online, we told investors, look at a $4.80 copper price, which is what we did our budget for 2026 with, Amerigo [projects EBITDA] of 75 million and free cash flow of 35 million. And then we kept progressing the sensitivity as the copper price increased and we got to the point of $6 copper, which is essentially where we are today on a year-to-date basis.
08:25 The LME average copper price as of today is $6.07 per pound. So if I give you the $6 guidance, it's as good as it gets. At $6, we said projected EBITDA reaches 100 million and free cash flow approaches 60 million. So all of that variability and sensitivity to the rise in copper prices are embedded within the communication that we give to our shareholders at the start of the year.
08:54 And the key takeaway here is operating leverage. Our story becomes boring, and I hope the interview doesn't become that boring when I keep [talking] about relatively stable production, but it gives us the base where a significant portion of the higher copper price then is able to flow through EBITDA and to free cash flow.
09:20 And you mentioned moly as well, because moly has an important contribution to our business, especially at current prices. It is our secondary revenue stream at Amerigo and it provides a meaningful contribution to revenue and also to cash cost, which is a non-accounting term, because in the computation of cash cost the moly revenue works as a byproduct credit.
09:54 So on our guidance as well, we worked for 2026 on our budget and guidance with a moly price of $21 per pound. And we told the market for every $2 change in moly price, the impact on cash cost is 4 cents per pound and impact on EBITDA is 1.8 million. So during the first half of the year, June 30th results, the moly price that we got at MVC was approximately $28 per pound.
10:27 So there's a benefit from that and we continue to see strong moly prices into today. >> It's interesting listening to this type of business in a way because there are factors sort of not in your control, right? The pricing of the metals isn't in your control. The feed material isn't in your control.
10:45 It's tailings coming from Codelco. I guess the one thing that is in your control to an extent is cost, right? The cost profile of this. So I think your current cash costs or most recent numbers are about $1.98 per pound of copper. I believe that's right. How much of that is controllable cost versus sort of fixed cost that you don't really have much control over? And I assume that obviously like all businesses you want to get those lower. What can you be
11:15 doing? >> Well, yes, you're right. Our cash cost guidance for this year is $1.98 per pound. And I would say there are three aspects of the cash cost mechanics that are outside of our control. One of them are TC/RCs, treatment and refinery charges. We work under our sales contract with an annual benchmark where we are not subject to spot TC/RC.
11:46 So at the beginning of the year we know what the TCs and the RCs are going to be, and that's an industry benchmark and that continues to be so. So we don't have a control over that. We don't have control over the foreign exchange relationship between the Chilean peso, where a lot of our operating costs originate, and the US dollar, which is our reporting currency.
12:15 So a stronger Chilean peso will result in a higher cash cost and vice versa. We don't control that and we don't hedge for that. And the other aspect that we don't control is moly price, because in the cash cost computation, as I mentioned, the moly revenue functions as a byproduct credit. So once you take those three elements out of the equation, we are in control of the cash profile at MVC, and our managers are rewarded and incentivized to maintain a tight control over those costs.
12:50 And we've seen that. We usually end the year with a highly correlated actual cash cost result to our cash cost guidance. We work very hard on our model to identify the nuances, which costs are originating in pesos, which costs are originating in dollars, and one of the KPIs of our managers in Chile is cash cost control excluding moly price and excluding foreign exchange effect, because they don't have a control of that.
13:24 So we reward for managing those aspects of the business that we have the control on. >> And what about other costs, which again I assume won't be as high as normal mining companies, but things like capex? I think from memory you are planning to build a new sump at the project. What sort of costs would they potentially come out to and when will you start construction on that? >> Sure.
13:55 Well, when you talk about capex, we have three different buckets of capex within the operation at MVC. Sustaining capex is one of them, and that is the cost of maintaining your plant in tiptop condition. We also have done a lot of risk mitigation projects and capex initiatives in recent years to reduce the potential risks to our business, and they have had tremendous paybacks for us.
14:22 And we also have optimization projects. The sump that you're referring to: we have to build a new sump in Cauquenes, which is the area of historic tailings where we're working, every three or four years. We are starting the construction of a new sump in 2027. In fact we have started with some of the engineering work this year in preparation of that work.
14:47 I don't know what the cost of a sump will be, for example, but out of memory, if I recall correctly, our latest sump, which we did about three or four years ago, was 7.4 million, so it's around that range. It'll probably be the most significant project within our 2027 capex, but inflation-adjusted capex of 7.4 million is peanuts compared to some of the capex requirements that you see with some of our peers.
15:14 >> Yeah, of course. It's not as if you've got to build a new shaft or anything, is it? So that's interesting, and I guess a lot of this revolves around your relationship with Codelco really, doesn't it? So again for those who are new to the story, how does that relationship work in terms of more detail around the contract that you have, the terms, the length, what sort of blend they have with the historic and
15:41 the fresh tailings, things like that. >> Sure. The relationship with Codelco is the angular [stone] or the backbone of our business. Amerigo bought the MVC operation in 2003, and MVC already had more than a decade of operational alignment and experience working with the fresh tailings of El Teniente back in the day, and with time we added as well the processing of historic tailings.
16:13 So how this works is, we have a master agreement with El Teniente. MVC has a master agreement with El Teniente, and that agreement gives us the rights of having the access to reprocess their tailings, both their fresh tailings and their historic tailings. And just to explain what those are, the fresh tailings is the current production coming out of the mine.
16:39 So whatever the mine is producing, we're receiving it as it starts its transportation from the mine into the MVC plant, where it is bypassed into our facility. We have a concentrator, and once we recover the copper and the moly and produce a copper and moly concentrate, we return those tailings to El Teniente for depositing in their tailings deposit.
17:10 So it's interesting, we receive all of the fresh tailings by gravity. That's one of the significant benefits of how the geographical setup is structured. The mine is 36 kilometers away from the MVC plant. There's a concrete launder owned by El Teniente where the tailings come to us in the form of a slurry, a wet slurry.
17:38 They are bypassed [into] our plant and then we return them also in the form of a slurry down to the tailings deposit. The historic tailings are older tailings that were deposited adjacent to the MVC plant decades ago by El Teniente. In other words, that was their old tailings deposit. They are dry, so we have to recover them hydraulically by adding water to create the slurry, and then we transport them as well, but we pump them into the concentrator plant,
18:09 and then we also return them by the same means, the concrete launder, to the tailings deposit of El Teniente. So we don't get to own the tailings. We get the right to process them and then return them to El Teniente. And in compensation for letting us work with their tailings, we give them a royalty, which is based obviously on our production levels and also based on the copper prices and the moly prices.
18:42 It's a sliding scale where there is a higher royalty factor at a higher copper price and vice versa. That is the gist of the relationship. We have an agreement that currently has a term to 2037. We have extended that agreement before and we expect that we will continue doing the same. The last extension was 12 years ago, where we extended the term from 2021 to 2037.
19:15 >> How many years of feed are actually left at the current mining rates that you're doing at the moment? >> Well, the fresh tailings are tied up to the life of mine of El Teniente, right? And El Teniente has a life of mine of decades ahead of us, I don't know, 2100 or 2105 projected life of mine. The historic tailings are finite.
19:41 Depending on the processing rates, I'd say the current historic tailings that we're working in probably have six or seven additional years, but the core of the business for us are the fresh tailings. >> And what does the royalty review look like? Because from my understanding there's obviously this sliding scale; we're obviously at quite high prices at the moment. From memory, when I was looking at this, you're in a review process at the moment, right, because the copper price has reached
20:08 a higher level. How much can you talk about that at the moment, or is that still ongoing? Is there anything you can say about it? >> It is ongoing, but by the same token it's something that has been publicly disclosed. So in the master agreement that sliding scale had a copper price cap of $4.80 per pound for fresh tailings and $5.50 per pound for the Cauquenes tailings.
20:36 And once those limits were reached, we needed to sit down and define new royalty terms with El Teniente, which is ongoing. So that process continues to be in place and it's in progress right now. But the only thing that has to be defined are the new royalty terms, actually the new royalty factors. There is nothing else to change with respect of any other clauses of the contract, just that one.
21:08 >> I mean, would you think about talking about extensions and other things, or is this just get the [royalty done]? >> This is a very precise discussion on the royalty rates. It doesn't open up our discussions to anything else. >> One of the things I noticed in the contract was an unforeseen exit clause.
21:28 I was just wondering how that works and what would have to happen for Codelco to action that. >> Yeah. The agreement that we have with El Teniente is a very long-lived agreement. We entered into it in 2014 with a termination date right now of 2037. So you can appreciate that it is an agreement that has to work for a long period of time.
21:57 It contained actually three early exit options, which were exercisable under very specific circumstances: one in 2021, so that has lapsed; 2024, which has also lapsed; and every three years thereafter, only in the event, and this is the interesting part, only in the event of changes that were unforeseen by any of the parties, MVC or El Teniente, at the time the agreement was entered into.
22:28 We judge the probabilities of El Teniente exercising their early option to be very remote, and so did the banks that lent us $100 million to build the expansion on the back of this agreement and on the back of that clause. So this is not an annual renegotiation mechanism. It is not a convenience clause.
22:52 It is just a clause that needed to be in place given the long-term agreement of the contract, and to address specific unforeseen circumstances that two very informed parties could not have foreseen at the time the agreement was entered into. So it makes the lawyers happy. It has never made us lose sleep over it. >> And then just switching, less so on the relationship with Codelco, but more about your current cap structure, cash, debt position, things like that. How well situated are you at the moment? And what's the breakdown of founders or management who own shares versus institutional or the retail makeup as well?
23:39 >> Yeah, it's also a very simple story. Our capital structure: basically we have one type of common shares. We have no warrants. We have options to our MVC employees, management and directors, which are fortunately all of them in the money. So it's a very simple capital structure.
24:06 In terms of ownership, I think that right now we have around 46% of our float, to the extent that you can estimate it, because you'll never have a clear calculation, but 46% of it sits with retail investors, with high net worth individuals and family offices. 41% is with institutions, and management and the board has around 13%. So that's the breakdown.
24:37 We have no debt. We repaid all of our debt in October of 2025. So after many years of having carried debt to expand our MVC facility without diluting shareholders, that was a great accomplishment and a significant token. And in terms of cash, it's interesting as well, because we define a cash threshold that we believe is prudent to hold, to have working capital, to protect at least two of our quarterly dividends and to have optionality with our share buyback program. That amount is $30 million US.
25:26 We always work with US dollars. And any cash in excess of $30 million is essentially returned to our shareholders, in absence of any other expansion projects that we identify. We don't have any right now. So we're not hoarding the cash on the balance sheet. We're returning it to shareholders through our capital return strategy.
25:54 So it's a very simple balance sheet. And when you see the level of cash, just to give you an example, June 30th 2026, which is our most recent reporting quarter, we had $50.4 million cash at the end of the quarter and we declared a performance dividend of 18 cents Canadian, which cost $20.4 million.
26:22 So that was, in one single transaction, a return of 20 million to shareholders, and we went back, quote unquote, to the 30 million minimum cash balance. >> Okay, that's really impressive. It's quite nice to hear a story where actually you hear a big game from a lot of mining companies about redistribution of capital when mines are in production, and then it often doesn't ever happen.
26:51 It's actually quite a nice way of doing things. I guess in terms of, you did all of that as dividend, right? I know you have done and you have looked at buybacks before. How do you start differentiating between more value between a dividend and a buyback? Well, when we talk about our capital return strategy, which is probably one of the things that I talk about the most, I always mention the three components of the capital return strategy, because it lets your viewers really understand what
27:24 we're shooting for. In the capital return strategy at Amerigo [we have a quarterly] dividend, [a performance] dividend and we have share buybacks. So those are three tools that we use, and the base is a quarterly dividend. That is our angular piece. It is a consistent dividend. We're currently paying 4 cents Canadian per share per quarter to our shareholders.
27:51 And we pay it very regularly on a quarterly basis, same declaration dates, record dates, payment dates. So you can just budget your household spending around that quarterly dividend if you need to do that. The performance dividend is what we have been significantly deploying in 2026.
28:16 We now have three performance dividends, and those three performance dividends are for a total of 55 cents Canadian per share as of now. So they are significantly stronger than the full annual [quarterly] dividend. How does a performance dividend work? It is essentially a cash sweep. As I mentioned in the prior example I gave you, Peter, we had 20 million over our minimum cash threshold.
28:48 The most efficient way, the fastest way of returning that cash to shareholders is through a performance dividend, which doesn't mean we're not active with our share buybacks. We have been active with our buybacks consistently every year. We in fact have retired 15% of the shares that we had at the beginning of the CRS, so five years ago, and our minimum commitment to the shareholders is that the share buybacks will be used to ensure there is no dilution year on year.
29:34 Dilution comes from the issuance of shares for exercises of options that are in the money to the team that makes this possible. So at the end of the day the shareholders know that there's going to be no dilution, but share buybacks are a very strong mechanism for us that we use from time to time depending on where we see the share price and how we see the combination of the return, what makes the biggest contribution for shareholders, and that changes from time to time.
30:03 There was one year, three years ago, where we essentially used all of our normal course issuer bid room six months before the normal course issuer bid was set to expire, because we knew that the share price was very depressed and we had the money to buy back shares, and we aggressively used the full capacity of our normal course issuer bid.
30:29 We're using less recently, because if we wanted to return $20 million through share buybacks, it would have taken us all the year and I don't know if we would have had the full capacity to return that. So shareholders would be knocking on our door saying you're not returning that excess cash to us as quickly as you said.
30:53 So that's one of the reasons why some of the tools work better at some stage of the cycle and some work better in others. But at the end of the day, we're allocating the same dollar. Our responsibility as management is to determine whether that dollar will create more value for shareholders through a dividend or by reducing the share count.
31:18 And things change from time to time. So there is no specific recipe that we follow blankly. We are observing the market and we're observing the share price and we're observing the copper outlook and acting accordingly. The objective at the end of the day is to maximize the long-term value on a per share basis for our shareholders.
31:39 >> And I know you mentioned earlier obviously the company doesn't really need to grow, especially with the copper price at the moment and the way that the structure is set up with the tailings reprocessing. But is there any growth potential in the company, or would you even be interested in expanding into other tailing deposits around Chile or any other country? >> Well, two parts to your question.
32:06 The growth potential at MVC was aggressively sought by adding historical tailings reprocessing into the mix and by increasing our processing capacity at MVC to ensure that we could process all of the fresh tailings of El Teniente and that we could capture the full benefit of the infrastructure that exists between the mine, MVC and the current tailings deposit that is El Teniente's tailings deposit.
32:35 So 12 years ago we undertook a significant expansion of MVC to ensure that we had that growth. When Amerigo bought MVC in 2003 we were producing less than 25 million pounds of copper; we're producing close to 65 million pounds of copper, just to use round numbers.
32:58 So that growth of the existing asset has been addressed. The growth outside of MVC is very interesting for us when we look at a very defined investment criteria, which are copper tailings in low-risk jurisdictions. So we would love to have another MVC. We keep our eyes open and we know that we would be the best operator for any mine that has historic tailings that want to monetize those tailings as El Teniente has done.
33:34 This is a story where we know that the world needs more copper, and I believe that accessing the tailings that are already existent, and let's just think about Chile, we don't have to think about any other jurisdiction. Chile is a low-risk jurisdiction with significant copper tailings. Would we be open to having other copper tailings projects in Chile? You betcha.
33:58 >> I guess you wouldn't necessarily need to be attached to an existing producing mine. Could you just do it with pure historical tailings, even a closed down mine? And if so, what sort of grade and volumes would you need to make it attractive and worth building a new plant for, for example? I don't think we need to go into the specifics of whether it's a closed down mine or with historic tailings that are just being held there as part of the
34:33 post mining process. I think that partnering with an operating mine that has historic tailings or that is producing fresh tailings would be more interesting, because then there is an alignment of interest similar to what we have with El Teniente. Now working with tailings is not for the faint of heart.
34:54 You mentioned grades. Obviously tailings are the end result of the mining process, so by definition they're going to be having low grades. Just to give you an example, 2025 the grade of our historic tailings was 0.24% copper. The grade of the fresh tailings was 1.7% copper [as spoken; likely 0.1x%]. I'm talking about low grades that require significant volume for you to have an economic operation, and we get that with El Teniente.
35:28 We are a significantly high volume operation. And when you think about our copper factory, don't think it's just a little factory out there in the end, as we process around 150,000 tons per day of material. So we're a high volume, low grade operation, and we've made it work for more than 30 years and we continue to do so for more than that into the future.
35:59 So you need the high volume component to make money with the low grade that the tailings inherently have. >> Yeah. But even with Chile, it's not as if there's [not] more than enough tailings potentially, by the sounds of it, in Chile alone where you could potentially do this again. Okay, that's super exciting. And I guess if we were looking forward 12 months, say next September or sometime next year, would there be any real differences in the company between now and then?
36:50 >> Well, if we chat again next year, and I think we'll chat before then, what am I looking for for next year? I want us to have by then more than five years of operations at MVC without a lost time accident. That is the number that I want to see the most a year from now. We have a very clean safety record and I want that to continue. So that's number one. And other than that, as you know, we're not pursuing growth for growth's sake, but we keep our eyes open for opportunities that are eventually going to be accretive to our shareholders.
37:13 In the meantime and until that happens, our objective is to operate MVC as we have been doing it now, safely, reliably, to generate strong cash flow, to continue to be uber disciplined with our cost management, to protect our balance sheet, to protect our operating asset. So if we do that operationally and copper prices continue to be in the strong position we expect them to be, I would expect to continue having significant cash flow generation and to be aggressively deploying the tools of the capital return strategy. So that shouldn't change that much, all things being equal. So when I think about Amerigo now, Peter, I don't think about a different company. I think it's just a matter of continuing to execute and work on the model. We have a model and the model works. So I want to continue seeing that work that way.
38:22 >> Yeah. No, don't fix it if it's not broken, eh. Aurora, really appreciate your time. Thank you. >> Thank you so much.