04:59:28 EDT Fri 29 Mar 2024
Enter Symbol
or Name
USA
CA



Argonaut Gold Inc
Symbol AR
Shares Issued 177,802,911
Close 2019-02-19 C$ 2.09
Market Cap C$ 371,608,084
Recent Sedar Documents

Argonaut Gold loses $7.6-million (U.S.) in 2018

2019-02-19 18:07 ET - News Release

Mr. Pete Dougherty reports

ARGONAUT GOLD ANNOUNCES FOURTH QUARTER AND FULL YEAR FINANCIAL AND OPERATING RESULTS, MEETS 2018 PRODUCTION AND COST GUIDANCE

Argonaut Gold Inc. has released its financial and operating results for the fourth quarter and year ended Dec. 31, 2018. The company reports quarterly and full-year net loss of $17.5-million and $7.6-million, or loss per share of 10 cents and four cents, respectively, adjusted net income (1) of $2.5-million and $16.4-million, and adjusted earnings per share (1) of one cent and nine cents, respectively, derived from the sale of 42,328 and 155,480 gold equivalent ounces (2) (GEOs), respectively, which generated cash flow from operations before working capital changes of $9.2-million and $58.1-million, respectively. During 2018, the company achieved record quarterly and annual production of 51,658 and 165,117 GEOs, respectively. All dollar amounts are expressed in U.S. dollars unless otherwise specified.

Chief executive officer commentary

Pete Dougherty, president and chief executive officer, stated: "We challenged ourselves early in 2017 to achieve an approximate 65-per-cent production growth target between 2017 and 2019. With our record fourth quarter in 2018 leading to a record year for the company in terms of production, we are well on our way to achieving this objective. During 2018, we surpassed the significant milestone of over one million GEOs produced since Argonaut's founding, a testament to our commitment to health and safety, our people, our communities, and our environment. There are two items that highlight that we are conducting our business the right way: One, we received the environmentally and socially responsible company designation in Mexico for the seventh consecutive year, and two, we had our best annual safety performance in the company's history. We continued to derisk and advance our development project portfolio. Our quarterly cash flows were impacted by timing of gold sales, as well as the previously disclosed Republic Metals Corp. bankruptcy filing. Our main focus as a company during 2019 will be expanding the San Agustin mine's crushing capacity and adding cash to the balance sheet through free cash flow generation by our operations while continuing to derisk and advance our development assets."

(1) Note the non-international financial reporting standard measure.

(2) GEOs are based on a conversion ratio of 70 to 1 for silver to gold ounces for 2017 and 2018. The silver to gold conversion ratio is based on the three-year trailing average silver to gold ratio. This is the referenced ratio for 2017 and 2018 throughout the press release.

Key operating and financial statistics for the three months and year ended Dec. 31, 2018, are outlined in the attached table.

                                        FINANCIAL HIGHLIGHTS
                     (in millions of U.S. dollars except for earnings (loss) per share)

                                                           Three months ended Dec. 31,           Year ended Dec. 31,
                                                                  2018           2017           2018           2017
Financial data
Revenue                                                          $51.6          $39.5         $196.1         $155.1
Gross profit (loss)                                              ($9.6)          $8.2          $18.5          $31.3
Net income (loss)                                               ($17.5)          $5.2          ($7.6)         $23.9
Earnings (loss) per share -- basic                              ($0.10)         $0.03         ($0.04)         $0.14
Adjusted net income (1)                                           $2.5           $6.4          $16.4          $14.9
Adjusted earnings per share -- basic (1)                         $0.01          $0.04          $0.09          $0.09
Cash flow from operating activities
before changes in non-cash operating working capital              $9.2          $11.7          $58.1          $45.9
Cash and cash equivalents                                                                      $15.4          $14.1
Net cash (1)                                                                                    $2.4           $6.1
Gold production and cost data
GEOs loaded to the pads (2)                                     95,776         68,108        318,667        217,224
GEOs projected recoverable (2, 3)                               59,706         38,774        181,638        126,755
GEOs produced (2, 4, 5)                                         51,658         34,987        165,117        126,704
GEOs sold (2)                                                   42,328         31,025        155,480        123,554
Average realized sales price                                    $1,226         $1,276         $1,267         $1,257
Cash cost per gold ounce sold (1)                                 $945           $755           $792           $787
All-in sustaining cost per gold ounce sold (1)                  $1,046           $897           $912           $922

(1) Note the non-international financial reporting standard measure.
(2) Gold equivalent ounces are based on a conversion ratio of 70 to 1 for silver to gold ounces 
for 2017 and 2018. The silver to gold conversion ratio is based on the three-year trailing average 
silver to gold ratio. This is the referenced ratio for 2017 and 2018 throughout the press release.  
(3) Two thousand eighteen: Expected recoverable GEOs are based on the assumptions as set forth in 
the El Castillo complex technical report dated March 27, 2018, and the La Colorada gold/silver 
mine technical report dated March 27, 2018. In periods where the company mines material not 
specifically defined in a technical report (for example: low-grade stockpile material), management
uses its best estimate of recovery based on the information available. Two thousand seventeen: 
expected recoverable GEOs: El Castillo expected recovery rates: run-of-mine oxide: 50 per cent,
crushed oxide: 70 per cent, ROM transition; 40 per cent, crushed transition: 60 per cent, crushed 
sulphides argillic: 30 per cent and crushed sulphides silicic: 17 per cent; San Agustin expected 
recovery rates: gold: 66 per cent and silver: 16 per cent; La Colorada expected recovery rates: 
gold: 60 per cent and silver: 30 per cent.
(4) Produced ounces are calculated as ounces loaded to carbon.    
(5) Year ended Dec. 31, 2017, includes GEOs produced by San Agustin prior to declaration of 
commercial production, effective Oct. 1, 2017.                                    

2018 and recent company highlights:

  • Corporate highlights:
    • Set new records for quarterly and annual GEO production;
    • Achieved the milestone of one million GEOs of production since the launch of the company at the end of 2009;
    • Received nationally awarded environmentally and socially responsible company recognition at both the El Castillo complex and La Colorada mine;
    • Increased corporate revolver from $30-million to $50-million with an accordion feature providing up to $75-million;
    • Entered into zero-cost-collar Mexican-peso-to-U.S.-dollar contracts for $24-million with downside protection of 20.00 Mexican pesos to $1 (U.S.) and participation of up to 23.56 Mexican pesos to $1 (U.S.) for 2019;
  • El Castillo complex:
    • Operated with safety results significantly better than industry standards;
    • Increased full-year production by 60 per cent to 117,126 GEOs and reduced cash cost per gold ounce sold by 14 per cent to $737 with the first full year of the San Agustin mine contributing to the El Castillo complex;
    • San Agustin crusher throughput achieved approximately 22 per cent over nameplate capacity of 16,700 tonnes per day;
    • Completed the El Castillo west crusher throughput expansion from 5,000 tonnes per day to 14,000 tonnes per day;
    • Completed construction of the La Victoria leach pad and cell 1 of phase 8A leach pads at El Castillo and the San Agustin phase 2 leach pad expansion;
  • La Colorada:
    • Operated the entire year without a lost-time injury;
    • Completed construction of the northeast phase 2 leach pad;
  • Cerro del Gallo:
    • Relogged drill core and developed a detailed geologic model;
    • Completed a drill program for metallurgical testwork samples;
    • Conducted metallurgical testwork;
  • San Antonio:
    • Submitted new environmental impact assessment application in February, 2019;
  • Magino:
    • Completed federal environmental assessment process with receipt of a positive decision statement;
    • Signed the community engagement agreement with the Metis Nation of Ontario.

Financial results -- fourth quarter 2018

Revenue for the three months ended Dec. 31, 2018, was $51.6-million, an increase from $39.5-million for the three months ended Dec. 31, 2017. During the fourth quarter of 2018, gold ounces sold totalled 41,030 at an average realized price per ounce of $1,226 compared with 29,912 gold ounces sold at an average price per ounce of $1,276 during the same period of 2017.

Production costs for the fourth quarter of 2018 were $38.0-million, an increase from $23.9-million in the fourth quarter of 2017 primarily due to the increase in gold ounces sold and an increase in cash cost per gold ounce sold. Cash cost per gold ounce sold was $945 in the fourth quarter of 2018, compared with $755 in the same period of 2017, due to a higher proportion of gold ounces sold from the El Castillo mine, which has a higher cash cost per gold ounce sold, and an increase in cash cost per gold ounce sold at the San Agustin and La Colorada mines. All operating mines saw an increase in cash cost during the fourth quarter of 2018 due to the increase in cost of consumables, coupled with lower deferred stripping in the fourth quarter 2018 at the La Colorada mine. Depreciation, depletion and amortization (DD&A) expense included in cost of sales for the fourth quarter of 2018 totalled $8.6-million, an increase from $7.4-million in the fourth quarter of 2017, due to the increase in gold ounces sold, as many of the mining assets are amortized on a unit of production basis. Included in cost of sales in the fourth quarter of 2018 is a non-cash impairment writedown of $12.8-million related to the net realizable value of non-current work-in-process inventory at the El Castillo mine, as a result of the increase in management's estimate of future production costs to convert the inventory into saleable form. Additionally, included in cost of sales in the fourth quarter of 2018 is a negative inventory adjustment of $4.0-million at the El Castillo complex and $1.3-million at the La Colorada mine related to the Republic Metals bankruptcy case. The adjustments and non-cash impairments were partially offset by a non-cash impairment reversal of $2.6-million at the El Castillo mine and $900,000 at the La Colorada mine related to the net realizable value of current work-in-process inventory, as a result of an increase in the price of gold as at Dec. 31, 2018.

General and administrative expenses for the fourth quarter of 2018 were $3.4-million, an increase from $2.9-million in the same period of 2017, primarily due to employee-related costs.

Other operating expenses for the fourth quarter of 2018 were $3.1-million, an increase from $800,000 in the fourth quarter of 2017, primarily due to the revision of estimated reclamation costs associated with a section of the La Colorada mine where mining activities have ceased.

During the fourth quarter of 2018, the company recognized a net non-cash impairment of mineral properties, plant and equipment of $2.0-million consisting of a non-cash impairment of $27.7-million at its El Castillo mine and a non-cash impairment reversal of $25.9-million at La Colorada, primarily due to revised life-of-mine (LOM) plans for the El Castillo and La Colorada mines that incorporate updated mineral reserves and LOM cost assumptions, including increased cost assumptions associated with key consumables, such as cyanide, lime and diesel.

Gains on foreign exchange derivatives for the fourth quarter of 2018 were $500,000, compared with losses of $600,000 in the fourth quarter of 2017, primarily due an increase in unrealized gains on the company's outstanding zero-cost-collar contracts on the Mexican peso.

Other expense for the fourth quarter of 2018 was $800,000, a decrease from $1.2-million in the fourth quarter of 2017, primarily due to differences in foreign currency translation effects.

Income tax recovery for the fourth quarter of 2018 was $1.3-million, a decrease from $2.8-million in the same period of 2017. The change is primarily due to the recognition of previously unrecognized Mexican deferred tax assets in the fourth quarter of 2017.

Net loss for the fourth quarter of 2018 was $17.5-million or 10 cents per share, a decrease from net income of $5.2-million or three cents per basic share for the fourth quarter of 2017.

Financial results -- 2018

Revenue for the year ended Dec. 31, 2018, was $196.1-million, an increase from $155.1-million for the year ended Dec. 31, 2017. Gold ounces sold totalled 149,695 at an average realized price per ounce of $1,267 (compared with 120,041 gold ounces sold at an average price per ounce of $1,257 for 2017). Gold ounces sold increased in 2018 primarily due to the commencement of commercial production at the San Agustin mine, effective Oct. 1, 2017, partially offset by a reduction in gold ounces produced and sold at the El Castillo mine.

Production costs for the year ended Dec. 31, 2018, were $122.9-million, an increase from $98.8-million in 2017, primarily due to an increase in gold ounces sold due to a full year of production at the San Agustin mine, which achieved commercial production, effective Oct. 1, 2017. Cash cost per gold ounce sold was $792 for the year ended Dec. 31, 2018, comparable with $787 in the same period of 2017. DD&A expense included in cost of sales for the year ended Dec. 31, 2018, totalled $33.2-million, an increase from $25.0-million for the year ended Dec. 31, 2017, due to an increase in ounces sold. Included in cost of sales is a net non-cash impairment writedown of work-in-process inventory of $3.4-million due to the decrease in the price of gold as at Sept. 30, 2018, and subsequent increase as at Dec. 31, 2018, a non-cash impairment writedown of $12.8-million related to the net realizable value of non-current work-in-process inventory at the El Castillo mine, and a negative inventory adjustment of $5.3-million related to finished goods inventory currently part of the Republic bankruptcy filing.

General and administrative expenses for the year ended Dec. 31, 2018, were $13.0-million, an increase from $11.7-million for the year ended Dec. 31, 2017, primarily due to employee-related costs.

Other operating expenses for the year ended Dec. 31, 2018, were $3.1-million, an increase from $800,000 for 2017, primarily due to the revision of estimated reclamation costs associated with a section of the La Colorada mine, where mining activities have ceased.

During 2018, the company recognized a net non-cash impairment of mineral properties, plant and equipment of $2.0-million consisting of a non-cash impairment of $27.7-million at its El Castillo mine and a non-cash impairment reversal of $25.9-million at La Colorada, primarily due to revised LOM plans for the El Castillo and La Colorada mines that incorporate updated mineral reserves and LOM cost assumptions, including increased cost assumptions associated with key consumables, such as cyanide, lime and diesel.

Gains on foreign exchange derivatives during the year ended Dec. 31, 2018, were $1.1-million, compared with $2.0-million for the year ended Dec. 31, 2017, primarily due to a decrease in realized gains on the company's zero-cost-collar contracts on the Mexican peso.

Other expense for the year ended Dec. 31, 2018, was $700,000, a decrease from $1.8-million of other income in 2017, primarily due to differences in foreign currency translation effects.

Income tax expense for the year ended Dec. 31, 2018, was $6.7-million compared with income tax recovery of $2.8-million in the same period of 2017. The change is primarily due to the recognition in 2017 of a deferred tax asset related to net operating losses (NOLs) from prior years, which were not previously recognized as the utilization of the NOLs became probable with the declaration of commercial production at the San Agustin mine, effective Oct. 1, 2017.

Net loss for the year ended Dec. 31, 2018, was $7.6-million or four cents per share, a decrease from net income of $23.9-million or 14 cents per basic share for the year ended Dec. 31, 2017.

Operational results -- fourth quarter and full-year 2018

In spite of a period of 4.5 months where the company lacked the ability to blast at its La Colorada mine, the company achieved its 2018 production and cost guidance of above 165,000 GEOs at a cash cost per gold ounce sold below $800 and an all-in sustaining cost (AISC) per gold ounce sold below $950, producing 165,117 GEOs at a cash cost per gold ounce sold of $792 and an AISC per gold ounce sold of $912.

During the fourth quarter 2018, the company achieved record quarterly production of 51,658 GEOs at a cash cost of $945 per gold ounce sold and an AISC per gold ounce sold of $1,046 compared with 34,987 GEOs at a cash cost of $755 per gold ounce sold and an AISC per gold ounce sold of $897 during the fourth quarter of 2017. Higher production was due to a 93-per-cent increase in GEO production at the El Castillo complex, primarily due to the successful ramp-up of the San Agustin mine and the west crusher expansion at the El Castillo mine during 2018. Higher per-unit costs are primarily related to cost increases associated with key consumables, such as cyanide, lime and diesel, and to a lower allocation of stripping costs from operating expenses to capital.

During 2018, the company achieved record annual production of 165,117 GEOs at a cash cost of $792 per gold ounce sold and an AISC per gold ounce sold of $912 compared with 126,704 GEOs, including precommercial production from the San Agustin mine of 2,932 GEOs, at a cash cost of $787 per gold ounce sold and an AISC per gold ounce sold of $922 during 2017. Higher production was driven by the commencement of commercial production at the San Agustin mine, effective Oct. 1, 2017.

Bill Zisch, chief operating officer, commented: "I'm very proud of the team for their efforts to ensure we safely achieved our annual production and cost guidance in spite of the operational challenges we faced throughout the year. During 2018, we improved our safety record and increased crushing capacity through both expansion and productivity gains. In 2019, we will be expanding the crushing capacity at the San Agustin mine from 20,000 tonnes per day to 30,000 tonnes per day. At the operations, our focus is to safely deliver on the goal we set for ourselves in early 2017 and achieve over 200,000 GEOs of production in 2019."

2018 capital

Total capital spending for 2018 was $35.9-million, which was below the original guidance range of between $50-million and $55-million and slightly below the revised guidance range of between $37-million and $40-million. Capital spending was below the original guidance range primarily due to a lower allocation of stripping costs from operating expenses to capital at the La Colorada mine and slightly below the revised guidance due to cost savings and change in timing of certain capital projects.

2019 guidance and plans

In 2019, the company plans to produce between 200,000 and 215,000 GEOs (based on the three-year historical average silver to gold ratio of 75 to 1). Cash cost per ounce of gold sold in 2019 is expected to be between $775 and $875.

The company noted the World Gold Council issued amended guidance on AISC during the fourth quarter of 2018. Following the amended guidance, the company's AISC per gold ounce sold would increase from $1,046 to $1,073 for the three months ended Dec. 31, 2018, and from $912 to $969 for the year ended Dec. 31, 2018. The primary reason for the increase is due to a reallocation from expansion capital to sustaining capital, primarily driven by reallocations of capital stripping and leach pad expansion capital.

The company will follow the amended AISC guidance recommended by the World Gold Council for 2019 and therefore has updated its previously reported 2019 AISC guidance from between $875 and $975 to between $975 and $1,075 for 2019.

The company plans to invest a total of between $50-million and $60-million on capital expenditures and exploration initiatives in 2019, including between $27-million and $31-million at the El Castillo complex, between $14-million and $16-million at the La Colorada mine, and between $9-million and $13-million at its development assets.

The company's plans include the following.

El Castillo complex:

  • Construction of the La Victoria leach pad phase 2 at the El Castillo mine;
  • Expansion of the San Agustin crushing and stacking system from 20,000 tonnes per day to 30,000 tonnes per day and construction of the phase 3 leach pad expansion.

La Colorada:

  • Construction of the northeast leach pad phases 4A and 4B;
  • Upgrade to the strip plant.

Magino:

  • Complete provincial environmental assessment process;
  • Advance construction permit, mine closure plan and Schedule 2 authorizations;
  • Advance detailed design and engineering.

Cerro del Gallo:

  • Complete a prefeasibility study.

San Antonio:

  • Advance environmental permitting.

Argonaut Gold fourth quarter and year-end financial results conference call and webcast

The company will host a conference call and webcast on Feb. 20, 2019, at 9 a.m. EST to discuss the results.

Fourth quarter and year-end conference call information for Feb. 20, 2019

Toll-free (North America):  1-888-231-8191

International:  1-647-427-7450

Webcast:  at the Argonaut Gold website

Fourth quarter and year-end conference call replay

Toll-free replay call (North America):  1-855-859-2056

International replay call:  1-416-849-0833

Passcode:  3470117

The conference call replay will be available from 2 p.m. EST on Feb. 20, 2019, to 11:59 p.m. EST on Feb. 27, 2019.

Qualified person, technical information and mineral properties reports

Technical information included in this release was supervised and approved by Brian Arkell, Argonaut's vice-president, exploration, and a qualified person under National Instrument 43-101. For further information on the company's material properties, please see the reports as follows on the company's website or on SEDAR.

El Castillo complex

National Instrument 43-101 technical report on resources and reserves, El Castillo complex, Durango, Mexico, dated March 27, 2018 (effective date of March 7, 2018).

La Colorada mine

NI 43-101 technical report on resources and reserves, La Colorada gold/silver mine, Hermosillo, Mexico, dated March 27, 2018 (effective date of Dec. 8, 2017); Magino gold project feasibility study technical report on the Magino project, Ontario, Canada, dated Dec. 21, 2017 (effective date of Nov. 8, 2017).

San Antonio gold project

NI 43-101 technical report on resources, San Antonio project, Baja California Sur, Mexico, dated Oct. 10, 2012 (effective date of Sept. 1, 2012).

About Argonaut Gold Inc.

Argonaut Gold is a Canadian gold company engaged in exploration, mine development and production. Its primary assets are the El Castillo mine and the San Agustin mine, which together form the El Castillo complex in Durango, Mexico, and the La Colorada mine in Sonora, Mexico. Advanced exploration projects include the San Antonio project in Baja California Sur, Mexico, the Cerro del Gallo project in Guanajuato, Mexico, and the Magino project in Ontario, Canada. The company also has several exploration-stage projects, all of which are located in North America.

We seek Safe Harbor.

© 2024 Canjex Publishing Ltd. All rights reserved.