Mr. Richard Young reports

ARGONAUT GOLD ANNOUNCES THIRD QUARTER FINANCIAL AND OPERATING RESULTS SOLID OPERATING PERFORMANCE AND ACHIEVES COMMERCIAL PRODUCTION AT MAGINO

Argonaut Gold Inc. has released its financial and operating results for the three and nine months ended Sept. 30, 2023, as well as a progress update for the Magino mine. All amounts are expressed in United States dollars, unless otherwise specified.

"We made measurable progress in the third quarter, delivering a solid performance at our existing operations. Despite the early challenges and a slower-than-expected ramp-up, we achieved commercial production at our flagship asset, the Magino mine, after the quarter end. This achievement, coupled with strong performance at our Florida Canyon mine, is a testament to our team who has worked diligently to optimize our operations. Going forward, we will focus on allocating capital towards those assets, projects and activities that generate the highest potential for per-share growth that includes increasing production through reserve and plant expansion at the Magino mine and redevelopment of the Florida Canyon mine," said Richard Young, president and chief executive officer of Argonaut Gold.

"Since the beginning of the fourth quarter, Magino's throughput has been averaging 9,200 tonnes per day, in-line with nameplate capacity. As we continue to ramp up, we are focused on driving mining productivity, mill optimization and further advancing the plant expansion that has the potential to increase throughput to annual production above 200,000 ounces per year for the life of mine," said Marc Leduc, chief operating officer of Argonaut Gold.

Third quarter highlights

Financial highlights:

• Revenues of $104.8-million were 39 per cent higher than $75.3-million from the third quarter of 2022, due to initial production at the Magino mine and higher production at the Florida Canyon mine, partially offset by lower planned production from the company's three Mexican mines -- El Castillo, La Colorada and San Agustin.
• Revenues include $22-million of precommercial production ounces sold from the Magino mine. Subsequent to the end of the third quarter, the Magino mine achieved commercial production on Nov. 1, 2023.
• Gross profit of $17.1-million was 146 per cent higher than $7-million from the third quarter of 2022, due to higher revenues from the Magino mine and Florida Canyon mine.
• Generated cash flow from operating activities before changes in working capital and other items totalling $21.1-million, an increase of 55 per cent from the 2022 comparative period, due to higher gross profit.
• Net loss of $500,000, or nil per share, compared with net loss of $1.3-million, or nil per share, a decrease largely due to higher gross profit, partially offset by increases in foreign exchange losses and unrealized losses on derivative instruments.
• Adjusted net income of $9.9-million, or one cent per basic share, compared with an adjusted net income of $400,000, or nil per basic share, an increase of $9.6-million primarily due to an increased gross profit of $10.2-million.
• Cash and cash equivalents of $44.9-million and net debt of $179.1-million as at Sept. 30, 2023.
• Consolidated production of 53,911 GEOs (gold equivalent ounces), including precommercial production of 10,693 GEOs from the Magino mine, was 17 per cent higher compared with 45,939 GEOs from the third quarter of 2022. The increase in production was largely due to initial production from the Magino mine, as higher production from the Florida Canyon mine offset lower production from the company's Mexican mines.
• Cost of sales per gold ounce sold of $1,607, cash cost per ounce of $1,383 and AISC (all-in sustaining cost) per ounce of $1,601 for the three months ended Sept. 30, 2023, were lower compared with the prior year. Lower costs at Florida Canyon and initial production from Magino more than offset higher costs at the company's Mexican operations.
• On Sept. 29, 2023, the company obtained a waiver on certain financial covenants on its $250-million financing package (collectively referred to as the loan facilities) for the continuing development and construction of the Magino mine. A subsequent waiver was obtained on Oct. 31, 2023, which now requires the company to maintain a minimum cash balance of $10-million at all times until Nov. 30, 2023, and additional financing to be raised by the same date. It was anticipated the company would not be in compliance with certain financial covenants and accordingly obtained the waivers to prevent a default event, which could trigger the loan facilities becoming immediately due and payable.
• On Nov. 2, 2023, the company announced the sale to Franco-Nevada Corp., and certain of its subsidiaries, of an additional 1-per-cent net smelter return (NSR) royalty on its Magino mine, and its non-core royalty holdings in Canada and Mexico, for an aggregate price of $29.5-million. Upon the closing of this transaction, Franco-Nevada will hold an aggregate 3-per-cent NSR royalty on the Magino mine.

Growth highlights:

• Magino mine:
  • The Magino mine achieved commercial production on Nov. 1, 2023. Plant throughput has averaged 9,200 tonnes per day since the beginning of the fourth quarter, with tonnes per operating hour (TPOH) in line with nameplate capacity.
  • Plant ramp-up was delayed due to 20 days of unplanned downtime in September. This was the result of facilitating equipment repairs and plant reliability issues centred on the process control system, which is composed of several disparate systems. The plant has been largely operating at nameplate TPOH capacity since the beginning of the fourth quarter.
  • During the three months ended Sept. 30, 2023, the Magino mine produced 10,661 gold ounces and sold 11,454 gold ounces. Production was lower than expected due to the unplanned downtime, the delay in completing and commissioning the gravity circuit, and lower feed grades.
  • As at Sept. 30, 2023, the company had fully incurred the $755-million ($980-million (Canadian)) estimated cost at completion (EAC). An additional $31-million in non-EAC expenditures were capitalized during the third quarter.
  • Work force buildup of the permanent operating team is nearing completion, but sourcing the remaining labour remains a challenge in the current economic environment, however, vacant roles are being temporarily filled by contract personnel.
  • The 63,000-metre reserve development drill program began on schedule on Aug. 1, and is expected to be completed by mid-2024. The goal is to increase proven and probable reserves by between 500,000 ounces and one million ounces of gold.
  • In addition, engineering work is under way to evaluate a potential plant expansion from the current nameplate capacity of 10,000 tonnes per day to between 17,500 tonnes per day and 20,000 tonnes per day.
• Florida Canyon mine:
  • Permitting is well under way for phase 3 of the South heap leach pad, scheduled to be built in 2024, as well as permits to increase solution flow rates on to the leach pads to further increase gold recoveries.
  • The Florida Canyon mine is expected to initiate civil earthworks for the phase 3 pad in the fourth quarter of 2023.
  • The proof-of-concept drill program on the East sulphide resource began on schedule on Aug. 1, with the 8,300-metre phase 2 drill program expected to be completed by mid-November at a cost of $4-million, with analysis work expected through the end of the year.
  • Drilling concluded in the 1,250-metre West sulphide program in July, and logging and analysis work is continuing.
  • An infill drill program is also under way on the oxide resources, which is expected to be completed by year-end.

Two thousand twenty-three outlook analysis

The Magino mine achieved commercial production on Nov. 1, 2023, however, due to a slower than planned commissioning and ramp up to commercial production, and lower than planned gold grades processed, gold production is expected to be below the published production guidance. GEO production for the company's United States and Mexican operations are expected to total between 160,000 ounces and 165,000 ounces, approximately 5 per cent to 10 per cent above the higher end of the production guidance range. As a result of the slower than planned ramp up and lower gold grades processed at the Magino mine, the cost of sales per ounce, cash cost per ounce and AISC per ounce are expected to be higher than guidance targets set at the beginning of the year. The company remains on target to achieve the low end of consolidated production guidance for 2023.

Exploration cost guidance was updated at mid-year, increasing by $10-million, to account for exploration and reserve development programs under way at the Magino and Florida Canyon mines.

Estimates of future production, cost of sales per gold ounce sold, cash cost per ounce, and AISC per ounce are based on mine plans that reflect the method by which the company is expected to mine reserves at each site. Actual gold production and associated costs may vary from these estimates due to a number of operational and non-operational risk factors. Refer to the risk factors section of the management's discussion and analysis (MD&A) for more details.

This press release should be read in conjunction with the company's unaudited interim condensed consolidated financial statements for the three and nine months ended Sept. 30, 2023, and associated management's discussion and analysis for the same period, which are available on the company's website, in the investors section under financial filings, and under the company's issuer profile on SEDAR+.

Conference call and webcast

Management will host a live conference call and webcast to discuss second quarter highlights with a question-and-answer session.

Date and time:  Tuesday, Nov. 14, 2023, at 10 a.m. ET

Telephone:  1-888-664-6392 (toll-free North America) or 1-416-764-8659 (international)

Conference ID:  30870297

Webcast:  access on-line

Presentation:  available for download at the company's website

Conference call replay

Telephone:  1-888-390-0541 (toll-free North America) or 1-416-764-8677 (international)

Entry code:  870297 followed by the pound key

The conference call replay will be available from 12 p.m. ET on Nov. 14, 2023, until 11:59 p.m. ET on Nov. 21, 2023.

Qualified persons, technical information and mineral properties reports

The technical information contained in this press release has been prepared under the supervision of, and has been reviewed and approved by, Marc Leduc, PEng, chief operating officer -- a qualified person as defined by National Instrument 43-101 -- Standards of Disclosure for Mineral Projects. For further information on the Magino mine, please see the technical report titled "Magino Gold Project, Ontario, Canada, NI 43-101 Technical Report, Mineral Resource and Mineral Reserve Update," dated March 3, 2022 (effective date of Feb. 14, 2022), on the company's website.

About Argonaut Gold Inc.

Argonaut is a Canadian-based gold producer with a portfolio of operations in North America. Focused on becoming a low-cost, mid-tier gold producer, the company has the newest gold mine, Magino, expected to become Argonaut's largest and lowest-cost mine. Commercial production at Magino is the first step in transforming the company as it enters a pivotal growth stage. The company also has three additional operating mines, including the Florida Canyon mine in Nevada, United States, where it is pursuing potential for redevelopment and additional growth, La Colorada mine in Sonora, Mexico, and the San Agustin mine in Durango, Mexico. Argonaut trades on the Toronto Stock Exchange under the ticker symbol AR.

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