Mr. Pete Dougherty reports
ARGONAUT GOLD ANNOUNCES SECOND QUARTER PRODUCTION OF 31,531 GOLD EQUIVALENT OUNCES, $23 MILLION INCREASE IN CASH FROM MEXICAN OPERATIONS AND UPDATES 2020 GUIDANCE INCLUDING RECENTLY ACQUIRED FLORIDA CANYON AND FREE CASH FLOW SENSITIVITY ESTIMATE
Argonaut Gold Inc. has updated its 2020 guidance following the temporary suspension of guidance due to uncertainties surrounding the COVID-19 pandemic, including Florida Canyon following the merger with Alio Gold Inc. on July 1, 2020. The company expects to produce between 210,000 and 230,000 gold equivalent ounces, which are anticipated to generate between $62-million and $87-million in free cash flow (FCF) at $1,700 per ounce gold, including the recently acquired Florida Canyon mine, during 2020. During the second quarter, Argonaut's existing Mexican operations generated approximately $23-million of FCF and the company ended June 30, 2020, with approximately $65-million in cash and $7-million drawn on its corporate revolving credit facility. All amounts are U.S. dollars unless otherwise stated.
Pete Dougherty, president and chief executive officer, stated: "Despite the temporary suspension of mining, crushing and stacking activities during April and May due to COVID-19 restrictions, we still managed to produce 31,531 GEOs from our Mexican operations and generate approximately $23-million of FCF. While we saw daily gold production dip lower during the months of May and June, we successfully ramped up operations back up to normal rates in early June and, with new leach pads available at both El Castillo and La Colorada, have begun to see daily gold production increase again. The strong quarterly free cash flow generation is a testament to the leverage our operating portfolio of mines provides to the gold price."
2020 FCF guidance
Argonaut is well positioned to generate significant FCF in 2020. The company's anticipated FCF is highly leveraged to the gold price. Between Jan. 1, 2020, and June 30, 2020, Argonaut has generated approximately $29-million of FCF from its Mexican operations. The associated table outlines Argonaut's FCF leverage to the gold price (outside of a construction decision on a development-stage project), including Florida Canyon.
2020 FCF GUIDANCE SENSITIVITY TO GOLD PRICE
(in millions)
$1,500 $1,600 $1,700 $1,800 $1,900
40-62 51-75 62-87 70-97 78-108
Mr. Dougherty continued: "Argonaut is a company that is perfectly positioned for the gold market environment we are in today. We offer significant FCF leverage to the gold price, a strong balance sheet, and a superior pipeline of growth assets in Magino, Cerro del Gallo and Ana Paula with some key decision points within the next three to 18 months. We believe we are well poised to transform Argonaut into a long mine life, lower-cost, intermediate producer over the next few years, as we harvest the cash from our existing higher-cost operating asset portfolio and reinvest in our lower-cost growth asset portfolio."
2020 production guidance
Including the anticipated gold production at the Florida Canyon mine for the full year 2020, Argonaut expects it will produce between 210,000 and 230,000 GEOs in 2020. The associated table outlines the anticipated 2020 GEO production estimate.
2020 GEO PRODUCTION GUIDANCE
(in thousands)
Mine Q1 actual Q2 actual H2 estimate Full-year 2020 estimate
El Castillo 15 9 21-26 45-50
San Agustin 14 14 34-40 62-68
La Colorada 13 8 32-34 53-55
Florida Canyon* 11 13 26-33 50-57
Consolidated* 53 44 113-133 210-230
* Florida Canyon production during Q1 2020 and Q2 2020 was under Alio Gold
prior to the closing of the merger between Alio Gold and Argonaut on July 1,
2020. Two thousand twenty GEO production guidance estimates the combined full-year
2020 production from the El Castillo complex, La Colorada and Florida Canyon.
2020 cost and capital guidance
Including the anticipated gold production, cost and capital estimates at the Florida Canyon mine for the full year 2020, Argonaut estimates it will produce between 210,000 and 230,000 GEOs at a cash cost between $925 and $1,025 and all-in sustaining cost (AISC) between $1,225 and $1,350. Higher AISC is largely driven by the estimated capital requirement at Florida Canyon for leach pad construction, crushing and stacking optimization projects, and the capitalized leases and maintenance for the mobile mine fleet, which are all included in the AISC calculation. The company estimates capital spending of between $64-million and $72-million in 2020, including all 2020 capital at Florida Canyon. The associated table outlines the anticipated 2020 production, cash cost, AISC and capital estimates.
2020 COST AND CAPITAL GUIDANCE
Magino, Cerro
del Gallo,
El Castillo Ana Paula
complex La Colorada Florida Canyon and other Consolidated
GEO
production in 000s 107-118 53-55 50-57 210-230
Cash
costs $ per oz Au 850-950 850-950 1,150-1,250 925-1,025
Capital $ M 12-13 10-11 25-30 17-18 64-72
AISC $ per oz Au 1,225-1,350
(1) GEOs are based on a conversion ratio of 80:1 for silver to gold. The silver to gold conversion
ratio is based on the three-year trailing average silver to gold ratio. This is the referenced
ratio throughout the press release.
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 San Agustin mine, which together form the El Castillo complex in Durango, Mexico, the La Colorada mine in Sonora, Mexico, and the Florida Canyon mine in Nevada, United States. Advanced exploration projects include the Magino project in Ontario, Canada, the Cerro del Gallo project in Guanajuato, Mexico, and the Ana Paula project in Guerrero, Mexico.
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