Mr. Dan Symons reports

ARGONAUT GOLD APPROVES MAGINO PROJECT CONSTRUCTION, RECEIVES FIXED BID PRICING PROPOSAL, ANNOUNCES US$50 MILLION BOUGHT DEAL FINANCING OF SENIOR UNSECURED CONVERTIBLE DEBENTURES AND EXPANSION OF CORPORATE REVOLVING CREDIT FACILITY TO UP TO US$125 MILLION

Argonaut Gold Inc.'s board of directors has approved the construction of the company's 100-per-cent-owned Magino gold project in Ontario, Canada. Argonaut is also pleased to announce it has received a fixed-bid pricing proposal for a significant portion of the initial capital requirement for the Magino project, and it has secured debt financing of up to $175-million (U.S.) by way of a $50-million (U.S.) bought deal offering of senior unsecured convertible debentures and the extension/expansion of its existing revolving credit facility (RCF) for up to $125-million (U.S.).

Magino construction approval and financing plan

Management recommended, and the board of directors has approved, the construction of the Magino project. Argonaut anticipates a two-year construction period, commencing in January, 2021, following the closure plan filing and the posting of a financial assurance bond with the Province of Ontario. The first gold pour is anticipated during the first half of 2023. In the Magino feasibility study technical report filed in December, 2017, initial capital was estimated at $321-million (U.S.) and has recently been estimated at between $360-million (U.S.) and $380-million (U.S.), including contingency and inflation. Therefore, the company has provided an allowance in its total financing plan in excess of $400-million (U.S.). The financing announced today is expected to more than fully satisfy such financing requirements, including the financial sources outlined in an attached table.

The company anticipates that these sources will provide in excess of $400-million (U.S.) through 2022, assuming a gold price at or above $1,600 (U.S.) per ounce. Therefore, the company will allow its extended and expanded corporate RCF of up to $125-million (U.S.) to act as a backstop to the financing plan. The company, with assistance from its financial adviser, Endeavour Financial, evaluated a number of financing options to finance the Magino project. After reviewing the available alternatives, the company chose to pursue the corporate RCF and convertible package as it:

• Provides a very attractive, low cost of capital;
• Provides balance sheet flexibility;
• Does not require gold hedging;
• Provides corporate flexibility;
• Ensures operating flexibility to pursue future Magino expansion opportunities and/or advance other projects in parallel.

The timing of capital spend for the construction is expected to be approximately as follows:

• 2020 -- 10 per cent (primarily securing long-lead-time items and posting financial assurance with the Province of Ontario);
• 2021 -- 40 per cent;
• 2022 -- 40 per cent;
• 2023 -- 10 per cent.

Fixed-bid pricing proposal

The company has received a fixed-bid pricing proposal that covers approximately 50 per cent of the recent initial capital estimate of between $360-million (U.S.) and $380-million (U.S.). Argonaut is currently reviewing the fixed-bid pricing proposal and, if satisfactory terms can be met, anticipates entering into a negotiated contract before the commencement of construction in January, 2021.

Bought deal offering of senior unsecured convertible debentures

The company also announced today that it has entered into an agreement with BMO Capital Markets and Bank of Nova Scotia, under which the underwriters have agreed to buy, on a bought deal basis, $50-million (U.S.) of senior unsecured convertible debentures at a price of $1,000 (U.S.) per debenture. The company has granted the underwriters an option, exercisable at the offering price for a period of 30 days following the closing of the offering, to purchase up to an additional 15 per cent of the offering to cover overallotments, if any. The offering is expected to close on or about Oct. 30, 2020, and is subject to Argonaut Gold receiving the approval of the Toronto Stock Exchange and all necessary regulatory approvals.

The debentures will mature on Nov. 30, 2025, and will bear interest at an annual rate of 4.625 per cent, payable semi-annually in arrears on May 31 and Nov. 30 of each year, commencing on May 31, 2021. At the holder's option, the debentures may be converted into common shares of the company at any time prior to the close of business on the earlier of the last business day immediately preceding the maturity date or the date fixed for redemption at a conversion rate of 350.1155 per $1,000 (U.S.) principal amount of debentures (equal to a conversion price of approximately $2.86 (U.S.) per common share), subject to adjustment in certain circumstances, in accordance with the trust indenture governing the debentures.

The debentures will not be redeemable before Nov. 30, 2023. On or after Nov. 30, 2023, the debentures may be redeemed, in whole or in part, from time to time at the option of the company at par plus accrued and unpaid interest, if any, to, but excluding, the date of redemption, provided that the volume-weighted average trading price of the common shares on the TSX converted daily into U.S. dollars at the Bank of Canada single rate of exchange for such date and such U.S.-dollar prices averaged for the 20 consecutive trading days ending five trading days preceding the date on which the notice of redemption is given is not less than 125 per cent of the conversion price. Argonaut intends to use the net proceeds of the offering for the advancement of the company's Magino project and for general corporate purposes.

The debentures to be issued under the offering will be offered by way of a short form prospectus in each of the provinces of Canada, excluding Quebec, and may be offered in the United States on a private placement basis, pursuant to an exemption from the registration requirements of the United States Securities Act of 1933, as amended, and certain other jurisdictions.

Corporate revolving credit facility

The company has received commitments to extend and expand its existing RCF with Bank of Montreal and Bank of Nova Scotia to $100-million (U.S.), with an accordion feature of $25-million (U.S.). The RCF has a three-year term and bears a sliding-scale interest rate of LIBOR plus 2.25 per cent to 3.5 per cent. Standby fees for the undrawn portion of the RCF are also on a similar sliding-scale basis between 0.56 per cent and 0.79 per cent. The RCF is subject to commitment reductions in the final six months of the term, as outlined in an attached table.

Magino feasibility study highlights

The Magino feasibility study demonstrated that the Magino project is a strategic, scalable, long-life asset in the attractive mining jurisdiction of Ontario, Canada. Highlights from the Magino feasibility study include:

• A 10,000-tonne-per-day processing facility;
• Average annual gold production of 150,000 ounces over the first five years;
• A 17-year mine life;
• Cash cost of $669 (U.S.) per gold ounce sold;
• All-in sustaining cost of $711 (U.S.) per gold ounce sold.

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; 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, and the Cerro del Gallo project in Guanajuato, Mexico. The company holds several other exploration-stage projects, all of which are located in North America.

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