Mr. Richard Young reports

ARGONAUT GOLD ANNOUNCES FOURTH QUARTER AND YEAR END FINANCIAL AND OPERATING RESULTS

Argonaut Gold Inc. has released financial and operating results for the fourth quarter (Q4) and year ended Dec. 31, 2023. All dollar amounts are expressed in United States dollars, unless otherwise specified.

"In fiscal 2023, we set clear objectives for our operations. These included commissioning the Magino mine on schedule, stabilizing Florida Canyon, which had underperformed for several years, and reviewing and optimizing our Mexican operations. Presently the Magino mine is steadily progressing through the ramp-up period. Both the Florida Canyon mine and our Mexican mines had a strong year, exceeding the upper end of production guidance on a combined basis by 9 per cent. Notably, Florida Canyon achieved its highest production total in 19 years.

"Looking ahead to 2024, we consider Magino to be our future and the key driver for per-share growth. Our immediate focus remains on production optimization and unlocking the significant potential at Magino through reserve expansion. Additionally, we are diligently working on optimizing mining operations at the Florida Canyon mine with the sulphide redevelopment plan. Furthermore, we plan to finalize a debt refinancing agreement to enhance liquidity and flexibility, enabling us to achieve our expansion goals. These objectives align with our mission statement, emphasizing asset growth and operational excellence," stated Richard Young, president and chief executive officer of Argonaut Gold.

2023 company highlights

Financial highlights:

• Revenues for the year ended Dec. 31, 2023, of $372.5-million were 4 per cent lower than the $388.3-million from the prior year as a result of the planned lower production from the company's three Mexican mines -- La Colorada, San Agustin and El Castillo, partially offset by the initial production at the Magino mine and higher production at the Florida Canyon mine.
• Revenues included $60-million from the Magino mine, of which $26.1-million was precommercial production ounces. The Magino mine achieved commercial production effective Nov. 1, 2023.
• Gross profit of $40.2-million was 69 per cent higher than $23.8-million from the prior year due to lower production costs and depreciation and depletion expense.
• Generated cash flow from operating activities before changes in working capital and other items totalling $67.4-million, comparable with the prior-year amount of $70.6-million.
• Net income of $38.3-million, or four cents per basic and diluted share, compared with a net loss in 2022 of $152.2-million, or (28 cents) per basic and diluted share, with the increase largely due to $24-million of impairment reversals recorded for mineral properties, plant and equipment in the current year compared with $135.5-million of impairments recorded in the prior year. Higher gross profit and higher income tax recovery also contributed to the increase in net income year over year.
• Adjusted net loss of $2.5-million, or $nil per share, compared with an adjusted net loss of $22.4-million, or (four cents) per share in the previous year, a reduction in the loss of $19.9-million primarily due to higher gross profit as a result of lower depreciation, depletion and amortization in 2023.
• Cash and cash equivalents of $83.8-million and net debt of $128.7-million as at Dec. 31, 2023.
• Consolidated production of 197,511 GEOs (gold equivalent ounces) was 3 per cent lower compared with 203,155 GEOs from the prior year. The decrease in production was largely due to lower production from the company's Mexican mines, partially offset by the initial production from the Magino mine, and higher production from the Florida Canyon mine.
• Cost of sales per gold ounce sold of $1,722, cash cost per ounce of $1,434 and AISC (all-in sustaining cost) per ounce of $1,722 were all lower than the prior-year comparative driven primarily due to lower unit costs at El Castillo and La Colorada.
• During November, 2023, the company closed the sale of an additional 1-per-cent net smelter return (NSR) royalty on its Magino mine for $28-million to a subsidiary of Franco-Nevada Corp. Franco-Nevada holds an aggregate 3-per-cent NSR royalty on the Magino mine.
• On Dec. 12, 2023, the company completed a bought deal public offering, through a syndicate of underwriters, under which the company sold a total of 223,685,000 common shares of the company at a price of 38 Canadian cents per common share, for gross proceeds of $62.5-million ($85-million (Canadian)) and net proceeds to the company of $59.6-million ($81.1-million (Canadian)).
• On Dec. 15, 2023, the company obtained a waiver on certain financial covenants on its $250-million financing package. It was anticipated the company would not be in compliance with certain financial covenants as at Dec. 31, 2023, and accordingly obtained the waiver to prevent a default event which could trigger the loan facilities becoming immediately due and payable. On Feb. 28, 2024, the company received a further waiver on financial and nonfinancial covenants until March 8, 2024. The company continues to work through its refinancing plans with both current and prospective lenders. The company will require an additional waiver from its current lenders on or about March 8, 2024, to avoid a breach of covenants, and anticipates the current constructive refinancing process to continue thereafter. An unremedied breach of covenants can have an adverse impact on the company's liquidity and solvency.

Growth highlights

Magino:

• Effective Nov. 1, 2023, the Magino mine achieved commercial production.
• Plant throughput has averaged 8,970 tonnes per day (tpd) during the fourth quarter.
• During the fourth quarter, the daily mining rates increased sequentially month over month from an average of 40,400 tpd in the third quarter to 40,800 tpd in October, to 45,400 tpd in November and 50,500 tpd in December. Over all, there was a 25-per-cent increase in December compared with the third quarter average.
• With additional mobile equipment scheduled to arrive in the first half of 2024, along with the installation of the fleet management system, management expects daily mining rates to increase into the 65,000 tpd range by the second half of 2024. This is in line with the current National Instrument 43-101 technical report for the Magino mine.
• Magino gold grades mined have increased, resulting in the average grade milled, on a monthly basis, increasing from 0.69 gram per tonne (gpt) in October to 1.02 gpt in November and to 1.07 gpt in December.
• Mill throughput rates remained below planned capacity in December averaging 9,240 tpd; however, a scheduled mill shutdown in January, 2024, is expected to support the continued increase in tonnes per operating hour (tpoh) to the planned capacity of 453 tpoh which equates to 10,000 tpd through design improvements. Plant availability is expected to remain a challenge into the second quarter.
• During the three and 12 months ended Dec. 31, 2023, the Magino mine produced 22,059 and 36,015 gold ounces and sold 19,535 and 31,061 gold ounces, respectively. Production was lower than expected in part due to challenges as it transitioned into a steady feed of higher-grade ore. Since improved mining practices were implemented in November, the operations have delivered an increase in feed grade to the mill.
• The infill drill program under way to convert mineral resources to mineral reserves is proceeding well, having completed approximately 27,000 metres through the end of 2023, constituting 43 per cent of the planned program. The program is expected to be completed on time in June, 2024. The goal of the drill program is to add between 500,000 and one million ounces to mineral reserves, based on the conversion of existing mineral resources. A second-phase program is expected to continue through the end of 2024. Mill optimization and expansion studies are well under way to determine the most cost-effective path to expand the process facilities to between a target of 17,500 and 20,000 tpd.
• An NI 43-101 technical report including the balance of the 63,000-metre drill program and detailed mill optimization and expansion plans is expected to be completed for the second half of 2024.

Florida Canyon:

• In 2023, Florida Canyon reported its highest production total in 19 years.
• For 2024 production, material movement and grades are expected to be similar to 2023.
• All permits to construct phase III of the south heap leach pad, which include bulk earthworks and expansion of the leach pumping and gold recovery systems, have now been received. Site bulk earthworks were initiated in December, 2023. Construction of these facilities is expected to be completed in 2024.
• Ore placed on the leach pad is expected to be approximately 20 per cent lower than last year but ounce production is expected to be only marginally lower, benefiting from the additional process capacity being added in 2024 as part of the construction of the third leach pad, which will allow the drawdown of inventory which built up in 2023 due to limited processing capacity.
• Drilling concluded on the 1,250-metre west sulphide program in mid-2023.
• Drilling concluded on the 7,520-metre east sulphide program in late 2023.
• A 3,760-metre infill drill program was also conducted in the oxide resources in late 2023.
• Analysis and modelling of the drilling results are continuing and expected to be complete in early 2024.

This press release should be read in conjunction with the company's consolidated financial statements for the year ended Dec. 31, 2023, and associated management's discussion and analysis (MD&A) 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 the fourth quarter and fiscal year highlights with a question-and-answer session as follows:

Date and time: Wednesday, March 6, 2024, at 10 a.m. ET

Telephone:

Toll-free (North America): 1-888-664-6392

International: 1-416-764-8659

Conference ID: 98243619

Presentation: available for download on Argonaut Gold website

Conference call replay

Telephone:

Toll-free replay (North America): 1-888-390-0541

International replay: 1-416-764-8677

Entry code: 243619 followed by pound key

The conference call replay will be available until March 13, 2024, at 11:59 p.m. ET.

Technical information and qualified persons

The technical information contained in this press release has been prepared under the supervision of, and has been reviewed and approved by, Owen Nicholls, CPG, Argonaut's vice-president of exploration, and Marc Leduc, PEng, chief operating officer; both are qualified persons as defined by NI 43-101.

About Argonaut Gold Inc.

Argonaut Gold 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's flagship asset, the Magino mine, in Ontario, Canada, is expected to become Argonaut's largest and lowest-cost mine. The company is pursuing potential for redevelopment and additional growth at the Florida Canyon mine in Nevada, United States. Together, the Magino and Florida Canyon mines are the company's cornerstone assets that will drive Argonaut through this pivotal growth stage. The company also has one additional operating mine in Mexico, the San Agustin mine in Durango. Residual production is expected from two additional mines located in Mexico. The La Colorada mine in Sonora was placed on care and maintenance at the end of 2023 pending a decision on strategic options for the mine, while mining activities ceased at the El Castillo mine in Durango in 2022. The San Agustin mine and the El Castillo mine together form the El Castillo mining complex. Argonaut is listed on the Toronto Stock Exchange under the ticker symbol AR.

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