Argonaut Gold (TSX: AR) today announced its full results for the
first quarter ended March 31, 2010.
Quarterly Highlights year over year
-- Total Tonnes mined up + 90%
-- Ore tonnes processed up + 102%
-- Gold Production up +72%
-- Cash cost per Oz. produced (El Castillo) down -10%
-- Revenue from Operations up +211%
-- Cash flow from Operations up +331%
-- New mining contract & fleet
-- New crushing contract & circuit
-- Cash and short-term investments $35MM
CEO Commentary:
Pete Dougherty, President and CEO, made the following comments
in regards to El Castillo's first quarter 2010 results: "El
Castillo has shown strong quarterly production results, with
significant year-over-year growth in production. Our exploration
success has provided a solid foundation for potential resource
& reserve expansion. The capital expansion program is well
underway with significant progress in the process and plant
expansion projects. These improvements provide me with comfort that
we will be able to achieve our goal of increasing overall
production by 60%+ to 47,000 ounces for 2010."
This press release should be read in conjunction with the
Company's unaudited consolidated interim financial statements for
the quarter-ended March 31, 2010 and associated Management's
Discussion and Analysis ("MD&A") which are available from the
Company's website www.argonautgoldinc.com, in the "Investors"
section under "Financial Filings", and on SEDAR www.sedar.com.
Summary of Production Results:
Year over year, total tonnes mined increased by +90%, with
approximately 1 million tonnes moved in March. The increase in
total tonnes mined is due to a larger more efficient truck fleet,
more heap leach capacity and improvements being made to the
crushing circuit capacity. We are targeting production of 1.5
million total tonnes per month in the latter part of the year. We
will achieve these results by replacing our 40 ton fleet with a new
larger 100 ton mining fleet and higher capacity loaders. This fleet
will begin to arrive on site during July with commissioning to
follow shortly thereafter. Tonnes of ore placed on the pads
increased over 100% to 1.3 million tonnes for the quarter. Crushed
ore increased to 314,405 tonnes or 58% quarter over quarter. The
new crushing equipment has been delivered, installed and is being
commissioned. This new equipment is anticipated to increase
crushing capacity to 300,000 tonnes per month in the future.
Gold production of 10,242 ounces in the first quarter of 2010
was a 72% increase compared to the first quarter of 2009. This
improvement was due to the increased mining and processing
capacities at the mine. Key operational metrics and production
statistics for the first quarter of 2010 compared to 2009 are
presented at the end of this press release in Table 1.
Cash cost of operations decreased 9% to $590 per ounce
reflecting increased ore tonnes to the pad and lower operating cost
per tonne mined offset by lower grade mined coupled with higher
chemical consumption associated with increased production.
Capital Expansion Program:
The 100x100 meter drill program has been completed ahead of
schedule and under budget. To-date we have expanded the
mineralization 400 to 500 meters to the south and 300 to 400 meters
east of the known pit boundary. We have embarked upon a new 50x50
meter drill program to further define the ore body. Investments to
expand crushing capabilities are well underway with all equipment
on site. Expansion of our heap leach pads has grown to include pads
5 & 6 being completed and commissioned. Permits to expand the
mine including pad 7, the east pad and the new processing facility
were granted. Currently, pads 7 and cell 1 of the east pad are
under construction. The plant modifications are well in hand with
anticipated carbon columns for the existing facility to arrive in
May with commissioning in June.
While the expansion improvements provide the framework for
meeting current projected production at El Castillo, drilling
success will allow for increases in future production by adding to
resources and reserves.
Summary of Financial Results:
Financial results for the first quarter of 2010 improved
significantly over the first quarter of 2009, as a result of higher
ounces of production. Revenue increased 172% to $9.3 million, from
increased production and higher gold prices. Cost of goods sold of
$9.3 million was high due to purchase price accounting fully
valuing all pad and finished goods inventory at the date of
acquisition of Castle Gold on December 30, 2009. Actual operating
costs were $590 per ounce reflecting lower grades mined and higher
chemical consumption associated with increased tonnage. Net loss
was $3.2 million reflecting the purchase price allocation and
amortization of the initial purchase of the project.
Looking forward:
Argonaut projects gold production of 47,000 ounces for 2010,
with an annualized run rate in December 2010 of 60,000 ounces per
year. We anticipate cash cost to be approximately $565 per
ounce.
Cash Requirements:
Our original capital expansion program of $10 Million has
increased to $15-20 million. After a successful phase 1 drilling
program, the company has elected to embark upon an expanded drill
program and increase the process facility capacity. The company
anticipates funding these capital needs from its operating cash
flow and cash on hand.
Reminder of Q1 2010 Financial Results Conference Call and
Webcast:
Argonaut Gold will host a conference call on Tuesday, May 18,
2010 at 9:30 am EDT to discuss the first quarter 2010 results and
provide an update of the Company's operating, exploration, and
development activities.
Participants may join the conference call by dialing 1 (888)
430-8701 or 1 (719) 325-2105 for calls outside of Canada and the
United States. The pass code is 8186640. The conference call may
also be accessed via webcast by visiting the Company's website,
www.argonautgoldinc.com.
A recorded playback of the conference call can be accessed after
the event until June 2, 2010 by dialing 1 (888) 203-1112 or 1 (719)
457-0820 for calls outside Canada and the United States. The pass
code for the conference call playback is 8186640, followed by the #
key.
Reminder of Annual General and Special Meeting of
Shareholders:
Argonaut invites all shareholders to attend the Annual General
and Special Meeting of Shareholders ("AGM") on Wednesday, May 19,
2010. The AGM will begin at 10:00 am EDT and will be held at the
Fairmont Royal York Hotel, located at 100 Front Street West,
Toronto, Ontario. During the meeting, senior management will
provide a general corporate update followed by an informal
questions-and-answers session.
Table 1 - Summary of Production Results
El Castillo Operating Statistics 3/31/2010 3/31/2009(i)
------------------------------------ -------------- --------------
Total Tonnes mined 2,890,313 1,509,900
Tonnes Ore 1,313,526 651,500
Tonnes Ore-direct to leach pad 999,121 452,900
Tonnes Crushed 314,405 198,500
Gold Grade (grams/tonne) 0.39 0.57
Gold Produced (ounces) 10,242 5,968
Cash cost per ounce produced $590 $650
(i)Note: Information obtained from Castle Gold Corporation press release
dated May 28, 2009.
About Argonaut
Argonaut is a Canadian gold company engaged in exploration, mine
development and production activities. Its primary assets being the
production-stage El Castillo Project and the exploration-stage La
Fortuna Project, both located in the State of Durango, Mexico.
Argonaut is a new venture created by former executive management
team members of Meridian Gold Inc. Creating the Next Quality
Mid-Tier Gold Producer in the Americas.
Non-GAAP Measures
"Cash cost" is a non-GAAP measure calculated in accordance with
the Gold Institute Production Cost Standard and includes site costs
for all mining (excluding deferred stripping costs), processing
administration, royalties and production taxes but exclusive of
depletion, depreciation, reclamation, financing costs, capital
costs and exploration costs. Cash cost is presented as we believe
that it represents an industry standard of comparison.
"Cash cost per ounce" is a non-GAAP measure derived from the
cash cost of ounces produced as a measure of total ounces
produced.
Cash cost per ounce is not a term defined under Canadian
generally accepted accounting principles, and does not have a
standard, agreed upon meaning. As such cash cost per ounce may not
be directly comparable to cash cost per ounce reported by similar
issuers.
Cautionary Language Regarding Forward-Looking Information
This news release contains certain forward-looking statements.
Forward-looking statements include but are not limited to those
with respect to the price of gold, the estimation of mineral
resources and reserves, the realization of mineral reserve
estimates, the timing and amount of estimated future production,
costs of production, capital expenditures, costs and timing of
development of new deposits, success of exploration activities,
permitting time lines, currency fluctuations, requirements for
additional capital, completion of capital projects, availability of
financing on acceptable terms, government regulation of mining
operations, environmental risks, unanticipated reclamation expenses
and title disputes or claims and limitations on insurance coverage.
In certain cases, forward-looking statements can be identified by
the use of words such as "goal", "targets", "objective", "plans",
"expects" or "does not expect", "is expected", "budget",
"scheduled", "estimates", "forecasts", "intends", "anticipates", or
"does not anticipate", or "believes" or variations of such words
and phrases, or state that certain actions, events or results
"may", "could", "would", "might" or "will" be taken, occur or be
achieved. Forward-looking statements involve known and unknown
risks, uncertainties and other factors which may cause the actual
results, performance or achievements of Argonaut Gold to be
materially different from any future results, performance or
achievement expressed or implied by the forward-looking statements.
Such risks and uncertainties include, among others, the actual
results of current exploration activities, conclusions of economic
evaluations, changes in project parameters, possible variations in
grade and ore densities or recovery rates, failure of plant,
equipment or processes to operate as anticipated, accidents, labour
disputes or other risks of the mining industry, delays in obtaining
government approvals or financing or in completion of development
or construction activities, risks relating to the integration of
acquisitions, to international operations, to the price of
gold.
Although Argonaut Gold has attempted to identify important
factors that could cause actual actions, events or results to
differ materially from those described in forward-looking
statements, there may be other factors that cause actions, events
or results not to be as anticipated, estimated or intended. It is
important to note, that: (i) unless otherwise indicated,
forward-looking statements indicate the Company's expectations as
at the date of this news release; (ii) actual results may differ
materially from the Company's expectations if known and unknown
risks or uncertainties affect its business, or if estimates or
assumptions prove inaccurate; (iii) the Company cannot guarantee
that any forward-looking statement will materialize and,
accordingly, readers are cautioned not to place undue reliance on
these forward-looking statements; and (iv) the Company disclaims
any intention and assumes no obligation to update or revise any
forward-looking statement even if new information becomes
available, as a result of future events or for any other reason. In
making the forward-looking statements in this news release,
Argonaut Gold has made several material assumptions, including but
not limited to, the assumption that: (i) consistent supply of
sufficient inputs including power will be available to develop and
operate the project as planned; (ii) metal prices and exchange
rates experienced match those anticipated; (iii) mineral reserve
and resource estimates are accurate; (iv) the technology used to
develop and operate its project will and will continue to work
effectively; (vi) that labour and materials will be sufficiently
plentiful as to not impede the projects or add significantly to the
estimated cash costs of operations; and (vii) that the process and
plan expansion projects continue to be implemented
successfully.
Contacts: Argonaut Gold Nichole Cowles Investor Relations
Manager (775) 284-4422 x 101 nichole.cowles@argonautgoldinc.com
www.argonautgoldinc.com
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