19:03:33 EDT Fri 16 Apr 2021
Enter Symbol
or Name
USA
CA



Argonaut Gold Inc
Symbol AR
Shares Issued 304,175,002
Close 2021-02-25 C$ 2.20
Recent Sedar Documents

Argonaut earns $14.2-million (U.S.) in 2020

2021-02-25 17:50 ET - News Release

Mr. Pete Dougherty reports

ARGONAUT GOLD ANNOUNCES RECORD QUARTERLY AND ANNUAL REVENUE AND CASH FLOW FROM OPERATING ACTIVITIES; PROVIDES FOURTH QUARTER AND FULL YEAR FINANCIAL AND OPERATING RESULTS

Argonaut Gold Inc. has released its financial and operating results for the fourth quarter and year ended Dec. 31, 2020. For the fourth quarter 2020, the company reports record quarterly revenue of $100.8-million, adjusted net income (1) of $20.8-million or adjusted earnings per basic share (1) of seven cents, and net income of $18.0-million or earnings per basic share of six cents, derived from the sale of 53,478 gold equivalent ounces (2) (GEOs), which generated record quarterly cash flow before changes in working capital of $39.5-million. For full-year 2020, the company reports record annual revenue of $319.7-million, adjusted net income (1) of $48.3-million or adjusted earnings per basic share (1) of 21 cents, and net income of $14.2-million or earnings per basic share of six cents, derived from the sale of 179,169 GEOs, which generated record annual cash flow from operations before working capital changes of $95.0-million. All dollar amounts are expressed in U.S. dollars unless otherwise specified.

(1) A non-international financial reporting standard measure.

(2) GEOs are based on a conversation ratio of 80 to 1 for silver to gold for 2020 and 75 to 1 for 2019. The silver to gold conversation ratio is based on the three-year trailing average silver to gold ratio.

Chief executive officer commentary

Pete Dougherty, president and chief executive officer, stated: "During 2020, we put the company in a fantastic position to execute on our transition strategy from a short-mine-life, high-cost, junior producer to a long-mine-life, lower-cost, intermediate producer through the permitting and financing achievements for the Magino project in Ontario, Canada, leading to a construction decision and the acquisition of the Florida Canyon mine in Nevada, USA. As we look to 2021, we are focused on continuing to execute on this strategy now that the pieces are in place to do so, as well as the exploration upside at the Magino and the Florida Canyon districts."

The attached full-year guidance table outlines the company's performance compared with updated full-year guidance.

                                     FULL-YEAR GUIDANCE 

                                                        Full-year 2020                     Guidance (1)

GEO production (2)                                             203,483              200,000 to 215,000
Cash cost per gold ounce sold (2, 3)                              $936                  $925 to $1,025
AISC per gold ounce sold (2, 3)                                 $1,244                $1,225 to $1,350
Capital (including exploration and excluding Magino
construction capital) (2)                                  $60-million      $58-million to $64-million
Magino construction capital                                $19-million      $35-million to $40-million

(1) As presented in the third quarter 2020 financial and operating results press release dated 
Nov. 5, 2020.
(2) Florida Canyon production during first quarter 2020 and second quarter 2020 was under Alio 
Gold Inc. prior to the closing of the merger between Alio Gold and Argonaut on July 1, 2020. 
Two thousand twenty GEO production and capital guidance estimated the combined full-year 2020 
production from El Castillo, San Agustin, La Colorada and Florida Canyon. Cash cost and 
AISC guidance does not include costs associated with Florida Canyon prior to Argonaut's 
ownership.
(3) A non-international financial reporting standard measure.

The company achieved its updated GEO production, cash cost, all-in sustaining cost and capital guidance. The Magino project was approved for construction in October, 2020, and a fixed-bid contract covering approximately 40 per cent of the initial project capital was announced early January, 2021. Fourth quarter 2020 spending on Magino construction capital was approximately $19.3-million, with the balance of the estimated 2020 spend, primarily related to the timing of procurement of long-lead-time equipment, shifting from December, 2020, to January, 2021, given the timing of execution of the fixed-bid contract.

Key financial statistics for the three months and year ended Dec. 31, 2020, are outlined in the attached financial results table.

                                         FINANCIAL RESULTS 

                                               Three months ended Dec. 31,         Year ended Dec. 31,
                                                       2020          2019       2020 (1)         2019
Financial data
(in millions except for earnings
(loss) per share)
Revenue                                              $100.8         $72.1        $319.7        $268.9
Net income (loss)                                     $18.0       ($107.5)        $14.2        ($93.1)
Earnings (loss) per share                             $0.06        ($0.60)        $0.06        ($0.52)
Adjusted net income (2)                               $20.8          $2.7         $48.3         $13.0
Adjusted earnings per share -- basic (2)              $0.07         $0.01         $0.21         $0.07
Cash flow from operating activities
before changes in non-cash operating
working capital                                       $39.5         $27.2         $95.0         $73.8
Cash and cash equivalents                                                        $214.2         $38.8
Net cash (2)                                                                     $214.2         $28.8
Gold production and cost data
GEOs loaded to the pads (3)                         113,463       101,348       371,344       361,599
GEOs projected recoverable (3, 4)                    65,426        46,608       191,039       199,436
GEOs produced (3, 5)                                 56,985        47,521       179,003       186,615
GEOs sold (3)                                        53,478        48,843       179,169       194,269
Average realized sales price                         $1,882        $1,484        $1,789        $1,390
Cash cost per gold ounce sold (2)                      $910        $1,441          $936        $1,041
All-in sustaining cost per gold ounce sold (2)       $1,189        $1,690        $1,244        $1,299

(1) Year ended Dec. 31, 2020, reflects Florida Canyon operations for the period of Argonaut 
ownership from July 1, 2020, to Dec. 31, 2020.
(2) Please note the non-IFRS measure.
(3) GEOs are based on a conversion ratio of 80 to 1 for silver to gold for 2020 and 75 to 1 
for 2019. The silver to gold conversion ratio is based on the three-year trailing average 
silver to gold ratio.
(4) Expected recoverable GEOs are based on the assumptions set forth in El Castillo complex 
technical report dated March 27, 2018, La Colorada gold/silver mine technical report dated 
March 27, 2018, and the Florida Canyon technical report dated July 8, 2020. In periods 
where the company mines material not specifically defined in a technical report (for 
example: run-of-mine ore or low-grade stockpile material), management uses its best 
estimate of recovery based on the information available.
(5) Produced ounces are calculated as ounces loaded to carbon.

2020 and recent company highlights:

  • Corporate highlights:
    • Full-year 2020:
      • Record annual revenue of $319.7-million;
      • Record annual cash flow from operating activities before changes in non-cash operating working capital of $95.0-million;
      • Completed at-market merger with Alio Gold creating a North American, diversified intermediate gold producer;
      • Closed $126.5-million (Canadian) bought deal equity financing to finance Magino construction.
    • Fourth quarter 2020:
      • Closed $57.5-million bought deal convertible debenture financing to finance Magino construction;
      • Extended and expanded corporate revolving credit facility for up to $125-million, which is fully undrawn;
      • Set new record for quarterly GEO production during the fourth quarter 2020;
      • Entered into a contingent agreement to sell the Ana Paula project;
      • Closed an $11.5-million (Canadian) bought deal private placement of flow-through shares to finance further exploration at Magino.
    • Subsequent to year-end 2020:
      • Closed a $26.5-million (Canadian) bought deal of flow-through shares to finance qualifying development expenditures at Magino.
    • Social and environmental responsibility:
      • Received nationally awarded environmental socially responsible company recognition for the ninth consecutive year at both El Castillo complex and La Colorada mine;
      • La Colorada mine recognized as a leader in social responsibility by Cluster Minero de Sonora AC;
      • Commenced and continued COVID-19 support for communities in Mexico, including sanitization of homes and businesses and donations of hygiene supplies;
      • Year-round voluntary support for Safe Haven Wildlife Sanctuary in Imlay, Nev.;
      • High school student scholarship donations for the Mining Industry Foundation in Winnemucca, Nev.
    • El Castillo complex:
      • Produced 110,049 GEOs despite a two-month suspension of mining, crushing and stacking operations due to the Mexican federal government decree at the onset of the COVID-19 pandemic;
      • Reduced cash cost per gold ounce sold by 24 per cent and cost per tonne of ore processed by 34 per cent at El Castillo compared with 2019;
      • Reduced cash cost per gold ounce sold by 10 per cent and cost per tonne of ore processed by 10 per cent at San Agustin compared with 2019.
    • La Colorada:
      • Produced 46,371 GEOs despite a two-month suspension of mining, crushing and stacking operations due to the Mexican federal government decree at the onset of the COVID-19 pandemic;
      • Reduced cash cost per gold ounce sold by 11 per cent and cost per tonne of ore processed by 4 per cent compared with 2019.
    • Florida Canyon:
      • Filed updated life-of-mine plan National Instrument 43-101 technical report, demonstrating over $325-million of mine-site, after-tax, free cash flow at $1,700 per ounce gold.
    • Magino:
      • Made decision to advance Magino into construction;
      • Executed a fixed-bid contract for a significant portion of the Magino project initial capital;
      • Continued to intersect high-grade gold mineralization below and adjacent to the planned pit and identified multiple new high-grade structures hosting multiple veins:
        • Elbow and Central zones showing promising high-grade gold continuity;
        • Intersected high-grade gold mineralization in new zones Scotland, No. 42, Sandy and South;
        • South zone strike length extended to 1.5 kilometres and remains open to the west and at depth;
      • Completed pivotal permitting milestone with the federal cabinet decision to authorize Schedule 2 amendment;
      • Obtained key species at risk permit for bat conservation;
      • Completed a major permitting milestone with the Magino closure plan filing;
      • Accommodation agreement framework agreed to with Garden River First Nation;
      • Completed and received authorization for Fisheries & Oceans Canada fish habitat compensation plan.
    • Cerro del Gallo:
      • Submitted and advanced an updated permit application for the project.

Financial results -- fourth quarter 2020

Record quarterly revenue was $100.8-million for the fourth quarter of 2020, an increase from $72.1-million for the fourth quarter of 2019. During the fourth quarter of 2020, gold ounces sold totalled 51,497 at an average realized price per ounce of $1,882, compared with 47,073 gold ounces sold at an average price per ounce of $1,484 during the same period of 2019. Gold ounces sold for the fourth quarter of 2020 increased compared with the same period in 2019 primarily due to the addition of the gold ounces sold from the Florida Canyon mine offset by decreases in gold ounces produced and sold at El Castillo mine mostly related to the change from processing crushed ore to run-of-mine ore and the San Agustin mine related to lower gold grades.

Income from continuing operations for the fourth quarter of 2020 was $20.3-million or seven cents per basic or diluted share compared with a loss from continuing operations of $107.5-million or 60 cents per share in the fourth quarter of 2019. Loss from discontinued operations for the fourth quarter of 2020 was $2.3-million as a result of the Ana Paula project being classified as a held-for-sale asset as at Dec. 31, 2020, and as a discontinued operation for 2020. Net income for the fourth quarter of 2020 was $18.0-million or six cents per basic or diluted share compared with a net loss of $107.5-million or 60-cent loss per share for the fourth quarter of 2019. The increase in net income is primarily related to record quarterly revenue of $100.8-million during the fourth quarter 2020 and the impact of the non-cash impairment of $111.0-million associated with the San Antonio project during the fourth quarter 2019.

Record quarterly cash flow from operating activities before changes in non-cash operating working capital was $39.5-million. During the fourth quarter of 2020, cash increased by $36.3-million due primarily to $31.5-million of cash flows from operations (including changes in non-cash operating capital and other items), $54.0-million net proceeds from the convertible debentures and $8.2-million from issuance of flow-through shares, partially offset by $34.8-million of capital expenditures incurred and the repayment of $22.1-million of debt, as compared with the fourth quarter of 2019, in which cash increased by $3.2-million due primarily to $17.7-million of cash flows from operations, partially offset by $11.2-million of capital expenditures incurred and the repayment of $4.0-million of debt.

Financial results -- 2020

Record annual revenue for 2020 was $319.7-million, an increase from $268.9-million for 2019. Gold ounces sold totalled 172,024 at an average realized price per ounce of $1,789 (compared with 187,802 gold ounces sold at an average price per ounce of $1,390 for 2019). Gold ounces sold for 2020 decreased compared with the same period in 2019, primarily as a result of the temporary suspension of mining, crushing and stacking activities in response to the Mexican federal government decree related to the COVID-19. Other factors include a decrease in gold ounces sold at La Colorada and San Agustin mines due to a reduction in ore grades and a decrease in gold ounces sold at El Castillo mine due to the change from processing crushed ore to run-of-mine ore, offset by an addition of the gold ounces sold from the Florida Canyon mine.

Income from continuing operations for 2020 was $17.9-million or eight cents per basic or diluted share compared with a loss from continuing operations of $93.1-million or 52 cents per share in 2019. Loss from discontinued operations for 2020 was $3.7-million as a result of the Ana Paula project, which has been classified as a held-for-sale asset as at Dec. 31, 2020, and as a discontinued operation for 2020. Net income for 2020 was $14.2-million or six cents per basic or diluted share compared with a net loss of $93.1-million or 52-cent loss per share for the fourth quarter of 2019. The increase in net income is primarily related to record annual revenue of $319.7-million in 2020 and the impact of the non-cash impairment of $111.0-million associated with the San Antonio project in 2019.

Record annual cash flow from operating activities before changes in non-cash operating working capital was $95.0-million. During 2020, cash increased by $175.5-million due primarily to $111.7-million of cash flows from operations (including changes in non-cash operating working capital and other items), $89.4-million from the public offering of shares, $54.0-million from the convertible debentures and $8.2-million from the issuance of flow-through shares, partially offset by $28.7 of debt repayments and $63.9-million of capital expenditures incurred, as compared with 2019, in which cash increased by $23.4-million due primarily to $74.8-million of cash flows from operations, partially offset by $51.8-million of capital expenditures incurred.

Operating results -- fourth quarter 2020

During the fourth quarter of 2020, the company achieved record quarterly production of 56,985 GEOs at a cash cost per gold ounce sold of $910 and an all-in sustaining cost per gold ounce sold of $1,189, compared with 47,521 GEOs at a cash cost of $1,441 per gold ounce sold and an AISC per gold ounce sold of $1,690 during the fourth quarter of 2019. Higher GEO production is primarily related to the addition of the Florida Canyon mine following the acquisition of Alio on July 1, 2020. Lower cash cost per gold ounce sold and AISC per gold ounce sold were primarily due to an impairment of work-in-progress inventory of $20.1-million at El Castillo complex and $12.1-million at La Colorada mine in the fourth quarter of 2019, which increased the cash cost and AISC during the fourth quarter of 2019.

Operating results -- 2020

During 2020, the company achieved production of 179,003 GEOs at a cash cost per gold ounce sold of $936 and an AISC per gold ounce sold of $1,244, compared with 186,615 GEOs at a cash cost per gold ounce sold of $1,041 and AISC per gold ounce sold of $1,299 in 2019. Lower GEO production in 2020 is primarily related to the change from processing crushed ore to run-of-mine ore at El Castillo mine and the two-month suspension of mining, crushing and stacking activities at all Mexican operations due to COVID-19. Lower production was partially offset by the addition of the Florida Canyon mine following the Alio acquisition on July 1, 2020. Lower cash cost per gold ounce sold was primarily related to the inventory adjustment recorded during the fourth quarter of 2019.

Mr. Dougherty commented: "I'm very pleased with how our organization worked with the various levels of the Mexican government to assist in the development of COVID-19 protocols for the Mexican mining industry that prioritize the safety and well-being of our work forces and the communities in which we operate. While the two-month temporary suspension of mining, crushing and stacking operations we experienced in 2020 clearly had an impact on all Mexican operations, we successfully and safely restarted operations, and have experienced very minimal COVID-19 infections throughout our Mexican work force due to our strict protocols."

Mr. Dougherty commented: "Since closing the acquisition of the Florida Canyon mine on July 1, 2020, the first three months was spent by the Argonaut team getting to know the Florida Canyon team to gain a better understanding of the challenges and opportunities at the mine. The second three months were spent initiating changes to allow for a more efficient and lower-cost operation, such as completing the permitting to allow solution to the newly constructed leach pad, upgrading equipment, adding the drop box at the primary crusher, and preparing and submitting the minor modification to the existing permit to allow us to automate transportation of crushed ore to the leach pads through a conveying and stacking system. Two thousand twenty-one will be about finalizing the changes necessary to take Florida Canyon to a larger production profile at lower operating costs."

Argonaut Gold fourth quarter and year-end 2020 financial results conference call and webcast

The company will host a conference call and webcast on Feb. 26, 2021, at 9 a.m. EST, to discuss the fourth quarter and year ended 2020 financial and operating results.

Fourth quarter and year-end 2020 conference call information for Feb. 26, 2021

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

International:  1-647-427-7450

Webcast:  at the Argonaut Gold website

Fourth quarter and year-end 2020 conference call replay

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

International replay call:  1-416-849-0833

Passcode:  8346749

The conference call replay will be available from 12 p.m. EST on Feb. 26, 2021, to 11:59 p.m. EST on March 4, 2021.

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.

El Castillo complex: NI 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)

Florida Canyon gold mine: NI 43-101 technical report on mineral resource and mineral reserve, Florida Canyon gold mine, Pershing county, Nevada, United States, dated July 8, 2020 (effective date June 1, 2020)

Magino gold project: feasibility study technical report on the Magino project, Ontario, Canada, dated Dec. 21, 2017 (effective date Nov. 8, 2017)

Cerro del Gallo project: prefeasibility study technical report on the Cerro del Gallo project, Guanajuato, Mexico, dated Jan. 31, 2020 (effective date of Oct. 24, 2019)

About Argonaut Gold Inc.

Argonaut Gold is a Canadian gold company engaged in exploration, mine development and production. Its primary assets are El Castillo mine and San Agustin mine, which together form El Castillo complex in Durango, Mexico, La Colorada mine in Sonora, Mexico, and the Florida Canyon mine in Nevada, United States. The company also holds the construction-stage Magino project, the advanced-exploration-stage Cerro del Gallo project and several other exploration-stage projects, all of which are located in North America.

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