Mr. Larry Radford reports
ARGONAUT GOLD ANNOUNCES FIRST QUARTER PRODUCTION OF 55,516 GOLD EQUIVALENT OUNCES, CASH FLOW1 OF $25 MILLION AND PROVIDES MAGINO CONSTRUCTION PROJECT UPDATE
Argonaut Gold Inc. has released its operating and financial results for the first quarter ended March 31, 2022. For the first quarter 2022, the company reports production of 55,516 gold equivalent ounces (GEO or GEOs), revenue of $105.8-million, cash flow from operating activities before changes in non-cash operating working capital and other items of $25.1-million, net income of $5.6-million or earnings per basic share of two cents, and adjusted net income of $8.2-million or adjusted earning per basic share of three cents. All dollar amounts are expressed in United States dollars, unless otherwise specified.
Magino project capital
The company also reports that following the appointment of Larry Radford to the position of president, chief executive officer and director on March 21, 2022, Argonaut initiated a review of the estimated cost to completion (EAC) for the Magino construction project. While this review has not yet been finalized, the company estimates that the updated EAC is likely to be approximately 15 per cent higher than the previously reported EAC of $800-million (Canadian) (see Dec. 14, 2021, press release). At March 31, 2022, Argonaut had committed approximately $605-million (Canadian), had incurred approximately $400-million (Canadian), and estimates the project is approximately 50-per-cent complete.
Magino project schedule
The Magino construction project currently remains on schedule for first gold pour by March 31, 2023. Argonaut has very recently been advised that certain subcontractors at Magino are exposed to current and threatened labour actions, which may give rise to delays should such labour actions continue or commence. While the scope of such delays remain uncertain, these events are developing and to this point have not led to any change to the overall project schedule.
Magino project financing
Since mid-December, 2021, Argonaut has been actively advancing financing and strategic alternatives to finance the previously announced funding shortfall to complete the Magino construction project. Both financing and strategic alternatives continue to advance, and the company is cautiously optimistic it will conclude either a financing or strategic alternative prior to the end of the second quarter 2022 to be able to continue to advance the Magino construction project on schedule. In the event that neither a financing nor a strategic alternative is available promptly and upon acceptable terms, Argonaut may need to amend or adjust its plans for construction of the Magino project.
Larry Radford, president and chief executive officer, stated: "We were generally in line with our operational budget during the first quarter, which yielded over 55,000 GEOs and $25-million in cash flow. My focus since my appointment has been primarily on the Magino construction project. The mining industry is experiencing extraordinary cost pressures and Magino is no exception. We have looked at costs internally and with the assistance of outside experts and are looking at all aspects of the project to understand risks and opportunities. While the updated EAC is not yet finalized, we expect it is likely to be approximately 15 per cent higher than the $800-million (Canadian) estimated prior to my appointment. We continue to advance financing options in parallel with strategic alternatives and, in order to continue to advance the Magino construction project on schedule, our goal is to have a solution in place by the end of the second quarter 2022."
First quarter 2022 results
Key operating and financial statistics for the first quarter ended March 31, 2022, are outlined in the attached table.
First quarter 2022 and recent company highlights:
GEO production of 55,516 GEOs.
- Cash flow before changes in working capital and other items of $25.1-million.
- Strengthened leadership with the appointment of Mr. Radford as president, CEO and director effective March 21, 2022.
- Closed flow-through equity financing of $51.8-million (Canadian), including full exercise of overallotment option (see press release dated March 3, 2022).
- Entered into gold price protection through forward sales contracts for the remainder of the Magino construction phase with 7,500 gold ounces monthly between April, 2022, and March, 2023, for a total of 90,000 gold ounces, at $1,916/oz.
Social and environmental responsibility:
Hosted meetings with the mayors and councillors of the communities of Dubreuilville, Wawa and White River to discuss Magino's construction progress, project status and employment statistics.
- Sponsored local events in the communities near Magino including Wawa's Annual Ice Fishing Derby, the Wawa Minor Hockey Association hockey tournament, The Alzheimer's Society "Walk for Alzheimer's" and made donations to Journee de Femmes in Dubreuilville for International Women's Day.
- Hosted conferences at La Colorada and El Castillo for International Women's Day.
- Delivered educational scholarships to students in the municipality of La Colorada.
- Hosted a mine tour of Florida Canyon for students of the Winnemucca's Albert Lowry High School.
- Partnered with Winnemucca County to ensure maintenance of the county-access road to Florida Canyon during inclement weather.
Production of 11,611 GEOs at a cash cost per gold ounce sold of $1,226.
- Filed updated technical report on Feb. 14, 2022.
Production of 19,902 GEOs at a cash cost per gold ounce sold of $945.
- Filed updated technical report on Feb. 14, 2022.
Production of 13,783 GEOs at a cash cost per gold ounce sold of $957.
- Filed updated technical report on Feb. 14, 2022.
Production of 10,220 GEOs at a cash cost per gold ounce sold of $1,654.
At March 31, 2022, the Magino construction project was estimated at approximately 50-per-cent complete and remains on schedule for first gold pour by March 31, 2023. Recent major milestones included:
Completed process plant building steel erection and roof with wall cladding well advanced;
- Continued installation of the SAG mill rebar and formwork;
- Commenced pouring of concrete for leach tank pads;
- Installed cranes in building;
- Continued backfill in main carbon-in-pulp tank area and south end of process plant;
- Installation of conduit through the grinding area;
- Overburden removal and rock placement in the north, northwest and southwest embankments for the water quality control pond;
- Continued construction of tailings management facility;
- Continued logging initiatives.
Filed updated technical report on March 3, 2022.
Continued to intersect high-grade gold mineralization below the planned Magino open pit including (see February 14, 2022 press release):
4.0 metres at 26.7 grams per tonne Au (gold), including 2.0 m at 53.2 g/t Au;
3.0 m at 11.1 g/t Au, including 1.0 m at 30.0 g/t Au.
Financial results -- first quarter 2022
Revenue for the first quarter of 2022 was $105.8-million, relatively in line with $105.3-million in the first quarter of 2021. During the first quarter of 2022, the company sold 54,107 gold ounces at an average realized price per ounce of $1,874, compared with 56,727 gold ounces sold at an average realized price per ounce of $1,761 during the same period of 2021. Gold ounces sold for the first quarter of 2022 decreased 5 per cent compared with the same period in 2021 primarily due to lower gold grades processed at La Colorada and lower recoveries at Florida Canyon due to an increase in run-of-mine ore, which yields a lower recovery than crushed ore.
Net income for the first quarter of 2022 was $5.6-million or earnings per basic share of two cents, compared with net income of $27.0-million or earnings per basic share of nine cents for the first quarter of 2021, primarily due to a $2.5-million loss on derivatives in the first quarter of 2022 compared with an $18.8-million gain on derivatives in the first quarter 2021 as well as higher operating costs.
Adjusted net income for the first quarter of 2022 was $8.2-million or three cents per basic share, an increase from adjusted net income of $7.0-million or two cents per basic share for the first quarter of 2021.
Cash flows from operating activities before changes in non-cash operating working capital and other items totalled $25.1-million during the first quarter of 2022, a slight decrease from $27.7-million in the first quarter of 2021, primarily due to higher operating costs.
Operational results -- first quarter 2022
During the first quarter of 2022, the company achieved production of 55,516 GEOs at a cash cost per gold ounce sold of $1,153 and all-in sustaining cost per gold ounce sold (AISC) of $1,430 compared with 59,704 GEOs at a cash cost of $1,003 per gold ounce sold and an AISC of $1,318 during the first quarter 2021. The 8-per-cent decrease in GEO production was primarily related to lower gold grades processed at La Colorada and lower recoveries at Florida Canyon due to processing more run-of-mine ore. Higher costs were primarily related to higher mining rates at El Castillo and La Colorada due to higher strip ratios, higher reagent costs across all operations and lower gold ounces sold.
Guidance and outlook
Argonaut maintains its 2022 production and cost guidance as outlined in the attached table. Due to the current inflationary environment, the company will continue to monitor inputs to its cost profile and make adjustments to cost guidance if and when appropriate.
Argonaut gold first quarter 2022 operational and financial results conference call and webcast
The company will host a conference call and webcast to discuss its first quarter ended March 31, 2022, operating and financial results at 9 a.m. ET on May 12, 2022.
The conference call and replay will be available from 12 p.m. ET on May 12, 2022, until 11:59 p.m. ET on May 19, 2022.
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 NI 43-101.
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. 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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