Equinox Gold (NYSEAmerican:EQX) has agreed to sell all of its operating assets in Brazil to China-based CMOC Group in a transaction valued at more than $1 billion, according to a company press release issued on Sunday. The deal represents a significant change in the geographic composition of Equinox’s mining portfolio and follows a period of operational expansion in North America.

Under the terms of the agreement, CMOC will acquire Equinox’s 100% interests in several Brazilian gold operations. These include the Aurizona mine in the state of Maranhão, the RDM mine located in Minas Gerais, and the Bahia complex, which is made up of the Fazenda and Santa Luz mines. Collectively, these assets are forecast by Equinox to produce between 250,000 and 270,000 ounces of gold during the current year.

The total consideration for the sale consists of an upfront cash payment of $900 million, payable upon closing, along with a contingent cash payment of up to $115 million. The contingent portion is tied to production performance at the acquired mines and is due one year after the transaction closes.

Equinox Gold, which is listed on the Toronto Stock Exchange and the NYSE American under the symbol EQX, stated that the transaction will have a material impact on its balance sheet. The company said the proceeds from the sale are expected to allow for the full repayment of its existing $500 million term loan, as well as a separate $300 million facility with Sprott. According to Equinox, eliminating this debt would significantly reduce interest expenses and improve per-share cash flow.

Following the divestment, Equinox’s remaining portfolio will be primarily concentrated in North America. The company’s Canadian operations will be anchored by the Valentine and Greenstone mines, both of which entered commercial production within the past 13 months. Valentine reached commercial production approximately one month ago, while Greenstone has been ramping up operations over the past year.

Greenstone is expected to produce between 220,000 and 260,000 ounces of gold this year, a figure that is close to the combined annual output expected from the Brazilian operations being sold. Once fully operational, the Valentine mine is projected to deliver between 175,000 and 200,000 ounces of gold annually. In the United States, Equinox continues to operate the Mesquite mine in California, which has been in production since the late 1980s and is forecast to produce between 85,000 and 95,000 ounces of gold this year.

In addition to its Canadian and U.S. assets, Equinox’s growth profile includes the El Limón and Libertad mines in Nicaragua. These assets were added to the company’s portfolio through its $1.8 billion acquisition of Calibre Mining earlier this year, expanding Equinox’s presence in Central America.

Chief executive officer Darren Hall described the sale of the Brazilian operations as a pivotal development for the company. In comments included in the press release, Hall said the transaction positions Equinox as a North America-focused gold producer supported by cash flow and future growth potential. He also noted that monetizing the Brazilian assets simplifies the company’s portfolio and provides capital that can be allocated to what he characterized as higher-return, lower-risk organic growth opportunities in Canada and the United States.

Equinox indicated that the strengthened financial position resulting from the asset sale will support planned expansions at the Valentine mine and at the Castle Mountain project in California. The company is also pursuing a new development plan for its Los Filos project in Mexico, which it cited as another source of near-term growth.

Looking ahead, Equinox said that as the Valentine and Greenstone mines reach nameplate capacity, and assuming stable performance across its operations, it expects total gold production to reach between 700,000 and 800,000 ounces next year. The company added that it plans to provide formal production and cost guidance in early 2026.

The transaction with CMOC is part of a broader strategic shift by Equinox away from Brazil and toward a more geographically concentrated asset base in North America and select parts of Latin America. While the Brazilian operations have been a meaningful contributor to production in recent years, the company is now relying on newer mines in Canada, long-standing U.S. operations, and recently acquired assets in Nicaragua to drive future output and cash flow.

Canadian mining company Equinox Gold (TSX:EQX) (NYSE:EQX), a gold mining company with seven operating mines, has begun mining activities and preparation at its Santa Luz mine in Brazil. For now, efforts are focused on removing waste rom two locations and developing access roads, ramps, dumps, and ore storage areas in preparation for a pre-stripping campaign. This is set to be finished before the company begins mining ore in late 2021.

Equinox Gold (TSX:EQX) (NYSE:EQX) claims that construction is on track for Q4 2021 commissioning and pour gold in W1 2022. The Santa Luz mine is an exciting project for Equinox Gold (TSX:EQX) (NYSE:EQX) as it is expected to produce 110,000 gold ounces every year for the first five years in operation. This would be a big boost to the company’s production numbers and bottom line. 

Santa Luz is a Leap Toward One-Million Ounces Per Year

The mine is a brownfield past-producing mine, with most site services and infrastructure already set up. Equinox Gold (TSX:EQX) (NYSE:EQX) is able to jump into the project faster and bring it to production faster because of this. Investors have received this project positively, maintaining long-term returns for investors, with the stock up more than 10% since March 31, 2017.

The mine was approved for full-scale construction on November 9, 2020 making this start date very quick for Equinox Gold (TSX:EQX) (NYSE:EQX). With a low initial capex of $103 million, this is a key piece of the puzzle in the company’s mission to be a 1 million-ounces-per-year gold producer. The first gold pour at the open-pit mine is targeted for Q1 2022.

Over its initial 9.5-year mine life, Santa Luz is expected to produce 903,000 ounces of gold and generate $436 million in after-tax net cash flow. This is assuming a base case $1500/oz gold price, but this could very well change with the overall rise in commodities pushing gold higher as it recovers from the lows of 2020.

Equinox Gold (TSX:EQX) (NYSE:EQX) Focuses on Growth

The progress on this mine is a significant step toward the company’s goal of producing 1 million ounces per year, adding about 100,000 ounces to the annual production numbers. The team at Equinox Gold (TSX:EQX) (NYSE:EQX) has over 500 years of cumulative experience, with numerous resources companies launched and grown under their watch, along with 50 mines brought to production in some of the world’s most challenging but rewarding jurisdictions. 

The company is well-capitalized to continue developing more projects on its way to its goal, with over $317 million in cash on the balance sheet. Revenues reported in March 2021 hit $229.7 million, strengthening the company’s position as a top producer and one of the leading Canadian gold mining companies. With a $2.5 billion market cap, Equinox Gold (TSX:EQX) (NYSE:EQX) is an industry leader that continues to charge ahead toward its ambitious goals during a profitable and advantageous period for the mining industry.

The above references an opinion and is for information purposes only. It is not intended to be investment advice. Seek a licensed professional for investment advice. The author is not an insider or shareholder of any of the companies mentioned above.