Argonaut Gold Inc. (TSX:AR) ("Argonaut", "Argonaut Gold" or the
"Company") is pleased to announce the results from an updated
Preliminary Economic Assessment ("PEA") for the 100% owned San
Antonio gold project, located in Baja California Sur, Mexico. The
updated PEA was completed by SRK Consulting Inc. ("SRK") of Denver,
CO; Kappes, Cassidy and Associates ("KCA") of Reno, NV and Argonaut
Gold's management team.
Project and Financial Highlights
-- Pre-tax Net Present Value ("NPV") of $294 million using an 8% discount
rate.
-- After tax NPV of $206 million using an 8% discount rate.
-- After tax Internal Rate of Return ("IRR") of 66%.
-- Life of mine pre-tax cash flow from operations estimated at $729
million.
-- Average annual pre-tax cash flow of $48 million over 15 years (excludes
pre-production years).
-- Initial $84 million capital expenditure ("CAPEX") investment is expected
to be fully funded by internal cash flow and treasury.
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2012(1) 2010(2) % Change
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Life of mine "LOM" (years) 15 9 +66%
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M&I Gold ounces recovered
(000's) 1,037 673 +54%
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Inferred Gold ounces recovered
(000's) 8 - -
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Cash cost per ounce $ 553 $ 513 +8%
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Capital costs: (000's)
Initial $ 84,200(3) $ 79,000
Sustaining $ 13,300 $ 28,000 -9%
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After tax Net Present Value
("NPV")@ 8% discount rate
(000's)(4) 206,000 57,000 +261%
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After tax IRR(4) 66% 26% +154%
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(1)SRK PEA incorporating work by KCA and Argonaut Gold to be filed within
45 days of this release.
(2)AMEC PEA released August 2, 2010
(3)Initial Capital costs of $84 million includes $17.6 million in
contingency and EPCM, as well as $4.5 million in pre-production stripping
costs for the project.
(4)NPV and IRR calculations are based on after tax expectations with a long
term Au price of $1250.
The preliminary economic assessment is preliminary in nature; it includes
inferred mineral resources that are considered too speculative
geologically to have economic considerations applied to them that would
enable them to be categorized as mineral reserves, and there is no
certainty that the preliminary economic assessment will be realized.
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Production Specifications
-- Total processed Measured and Indicated ("M&I") Resource includes 60.1
million tonnes containing 1,643,000 ounces of gold with an average grade
of 0.85 g/t.
-- Total processed Inferred Resource includes 0.5 million tonnes containing
14,000 ounces of gold with an average grade of 0.84 g/t.
-- Total production of 1,037,000 ounces of gold from M&I Resource and 8,000
ounces of gold from Inferred Resource.
-- Average yearly production of 69,700 gold ounces over a 15 year mine
life.
-- Throughput estimate of 4 million tonnes per year from an open-pit mine,
three stage crush and a recovery process using cyanide heap leaching and
carbon adsorption.
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Production Statistics: 2012 2010 % Change
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Life of mine (years) 15 9 +66%
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Total M&I Resource tonnes processed
(000's) 60,100 31,112 +93%
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Total Inferred Resource tonnes processed
(000's) 500 - -
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Total tonnes waste (000's) 173,414 80,943 +114%
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Life of mine strip ratio (waste: ore) 3.1 2.6 +19%
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Overall average gold grade (g/t) 0.85 0.98 -13%
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Overall average recovery 63% 60% +5%
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Gold ounces M&I Resource recovered
(000's) 1,037 673 +60%
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Gold ounces Inferred Resource recovered
(000's) 8 - -
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Average annual production (ozs.) 69,700 82,500 -13%
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Cost / tonne $ 9.86 $ 11.10
Mining $5.95 $6.49
Processing $3.28 $3.80
G&A $0.63 $0.81 -11%
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Cash cost per ounce $ 553 $ 513 -2.5%
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The production mine plan utilizes an in-pit resource at a $1200 Au price.
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Capital Costs (millions) 2012 2010 % Change
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Mine $ 4.5 $ 18.9 -76%
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Process(1) $ 53.6 $ 16.4 +227%
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Infrastructure $ 15.9 $ 27.0 -41%
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Total Capex $ 74.0 $ 70.3 +5%
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Contingency $ 10.2 $ 8.7 +17%
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Sustaining Capital(1) $ 13.3 $ 28.0 -52%
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(1)AMEC estimate for capital provided for Run-of-Mine material processing,
and the addition of a crushing circuit in the third year, which was
included in sustaining capital. Argonaut anticipates constructing the 3-
stage crushing circuit upon commencing operations. SRK sustaining capital
consists mostly of heap leach pad capacity.
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New National Instrument 43-101 ("NI 43-101") Technical Report on
Resources
The updated Canadian NI 43-101 mineral resource estimation from
SRK for Argonaut's San Antonio project shows an updated M&I
resource of 1,735,000 gold ounces, based on 101,894 meters in 590
holes. Recent drilling added approximately 200,000 gold ounces
while the redefining of the high grade Los Planes core reduced the
resource by 150,000 gold ounces, for a net gain of 50,000 ounces.
The total M&I resource now exceeds 1.7 million gold ounces
contained within 65 million tonnes of mineralized material at an
average grade of 0.83 g/t gold.
Updated Mineral Resource Summary of the San Antonio Project as
of May 8, 2012
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Area Product Class Tonnes (000's) Au (g/t) Au Ounces
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Total Oxide/Transition Measured 12,351 0.76 303,000
Indicated 10,961 0.64 227,000
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M&I 23,312 0.71 530,000
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Sulfide Measured 6,649 1.17 250,000
Indicated 35,129 0.85 955,000
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M&I 41,778 0.90 1,205,000
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Oxide/Transition Inferred 4,257 0.27 37,000
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Sulfide Inferred 1,957 0.47 30,000
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All types Measured 19,000 0.91 553,000
Indicated 46,090 0.80 1,182,000
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M&I 65,089 0.83 1,735,000
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Inferred 6,215 0.34 67,000
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(1) Mineral Resources are not Mineral Reserves and do not have demonstrated
economic viability. There is no certainty that all or any part of the
Mineral Resources estimated will be converted into Mineral Reserves.
(2) Resources are stated at cutoff grades of 0.11 g/t Au for oxide and
transition and 0.15 g/t Au for sulfide and are contained within a pit
optimization shell.
(3) Pit optimization is based on an assumed gold price of US$1,500/oz,
metallurgical recovery of 70% for oxide and transition and 50% for sulfide,
mining cost of US$1.45/t of material moved, processing cost of US$3.09/t
processed and G&A cost of US$0.63/t processed.
(4) Mineral Resource tonnage and contained metal have been rounded to
reflect the accuracy of the estimate, and numbers may not add due to
rounding.
(5) Mineral Resource tonnage and grade are reported as diluted.
(6) Gold assays were capped prior to compositing.
The stated Mineral Resources have been prepared in accordance
with the CIM classifications of Canada's NI 43-101 Standards of
Disclosure for Mineral Projects. The Qualified Person, as defined
by NI 43-101, for the mineral resource estimation, is Principal
Resource Geologist Leah Mach of SRK, Denver, Colorado.
Peter Dougherty, President and CEO of Argonaut Gold stated:
"The San Antonio PEA is the culmination of the Company's efforts
over the past two years. The PEA incorporates over 55,000 meters of
drilling, several rounds of metallurgical testing, process
enhancements and refinements. The very robust economics for the
project provide a high return on investment of 66% for our
shareholders. The strong economic viability of the project is
further supported by plans to finance development and construction
of the mine through internal cash flow."
Mr. Dougherty added:
"With the increased resource and improved economics of the
project, we have been able to further refine the ore body. (By
reducing the influence of the higher grade core of the Los Planes
(North Pit) deposit, we have increased our confidence in the
deposit). While the Company is very pleased with where the project
stands today, we recognize that further optimization and
exploration may have the potential to add even greater value to the
project."
Path forward:
Argonaut continues to work towards permitting the project and
has engaged the community, regulators, and various agencies toward
defining a project within the jurisdictional guidelines that will
be acceptable to all parties.
About Argonaut Gold
Argonaut is a Canadian gold company engaged in exploration, mine
development and production activities. Its primary assets are the
production-stage El Castillo Mine in the State of Durango, Mexico,
the La Colorada Mine in the State of Sonora, Mexico, the advanced
exploration stage San Antonio project in the State of Baja
California Sur, Mexico, and several exploration stage projects, all
of which are located in Mexico.
Creating Value Beyond Gold
Cautionary Note Regarding Forward-looking Statements
This press release contains certain "forward-looking statements"
and "forward-looking information" under applicable Canadian
securities laws concerning the proposed transaction and the
business, operations and financial performance and condition of
Argonaut Gold Inc. ("Argonaut"). Forward-looking statements and
forward-looking information include, but are not limited to,
statements with respect to estimated production and mine life of
the various mineral projects of Argonaut; synergies and financial
impact of completed acquisitions; the benefits of the development
potential of the properties of Argonaut; the future price of gold,
copper, silver; the estimation of mineral reserves and resources;
the realization of mineral reserve estimates; the timing and amount
of estimated future production; costs of production; success of
exploration activities; and currency exchange rate fluctuations.
Except for statements of historical fact relating to Argonaut,
certain information contained herein constitutes forward-looking
statements. Forward-looking statements are frequently characterized
by words such as "plan," "expect," "project," "intend," "believe,"
"anticipate", "estimate" and other similar words, or statements
that certain events or conditions "may" or "will" occur.
Forward-looking statements are based on the opinions and estimates
of management at the date the statements are made, and are based on
a number of assumptions and subject to a variety of risks and
uncertainties and other factors that could cause actual events or
results to differ materially from those projected in the
forward-looking statements. Many of these assumptions are based on
factors and events that are not within the control of Argonaut and
there is no assurance they will prove to be correct.
Factors that could cause actual results to vary materially from
results anticipated by such forward-looking statements include
changes in market conditions, variations in ore grade or recovery
rates, risks relating to international operations, fluctuating
metal prices and currency exchange rates, changes in project
parameters, the possibility of project cost overruns or
unanticipated costs and expenses, labour disputes and other risks
of the mining industry, failure of plant, equipment or processes to
operate as anticipated. Although Argonaut 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 anticipated, estimated or
intended. There can be no assurance that forward-looking statements
will prove to be accurate, as actual results and future events
could differ materially from those anticipated in such statements.
Argonaut undertakes no obligation to update forward-looking
statements if circumstances or management's estimates or opinions
should change except as required by applicable securities laws. The
reader is cautioned not to place undue reliance on forward-looking
statements. Statements concerning mineral reserve and resource
estimates may also be deemed to constitute forward-looking
statements to the extent they involve estimates of the
mineralization that will be encountered if the property is
developed. Comparative market information is as of a date prior to
the date of this presentation.
Qualified Persons
Preparation of this press release was supervised by Mr. Thomas
Burkhart, Argonaut's Vice President of Exploration and a "Qualified
Person" as defined by NI 43-101. Mr. Alberto Orozco, Argonaut's
Mexico Exploration Manager, supervised the drill program and
on-site sample preparation procedures at San Antonio. Mr. Richard
Rhoades, Argonaut's Chief Operating Officer and a "Qualified
Person" as defined by NI 43-101 provided contributions in regards
to mining methods, market studies and contracts as well as the
economic analysis. Leah Mach from SRK Consulting, who is an
"Independent Qualified Person" as defined by NI 43-101 and the lead
person responsible for completing the updated San Antonio resource
has reviewed this press release as it relates to the San Antonio
project. Carl Defilippi from KCA, who is an "Independent Qualified
Person" as defined by NI 43-101 has overseen the metallurgical and
recovery methods, infrastructure, operating costs and capital
costs.
For sample analysis the Company utilizes a system of Quality
Assurance/Quality Control that includes insertion and verification
of standards, blanks and duplicates consistent with industry
standards.
Samples from the San Antonio project are shipped by commercial
courier from the city of La Paz to either Inspectorate or ALS
Chemex preparation laboratories in Hermosillo, Sonora, which are
independent of the Company. After preparation in Hermosillo, pulps
are sent to assay in North Vancouver for ALS and to Sparks, NV for
Inspectorate. Samples are analyzed for gold by fire assay with
atomic absorption, method code Au AA-23 for ALS Chemex, and
Au-1AT-AA for Inspectorate; detectability limits for assay methods
in both laboratories are 0.005 to 10ppm. Samples over 10 g/t Au are
assayed with gravimetric finish (Assay code AU-GRA21 for ALS Chemex
and Au-1AT-GV for Inspectorate). All samples are also assayed by
ICP-MS (code ME-ICP41 in ALS Chemex and 30-AR-TR in Inspectorate)
for a suite of 30 to 35 elements.
For further information on the Company's properties, please see
the reports as listed below on the Company's website or on
www.sedar.com:
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El Castillo Mine NI 43-101 Technical Report on Resources and
Reserves, Argonaut Gold Inc., El Castillo Mine,
Durango State, Mexico dated November 6, 2010
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La Colorada Mine NI 43-101 Preliminary Economic Assessment La
Colorada Project, Sonora, Mexico dated December
30, 2011
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San Antonio Gold Project Technical Report and Mineral Resource Estimate on
the San Antonio Gold Project, Baja California Sur,
Mexico dated June 30, 2011
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La Fortuna Property La Fortuna, Durango, Mexico, Technical Report
dated October 21, 2008
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A NI 43-101 technical report will be filed within 45 days of the
date of this press release.
Contacts: Argonaut Gold Inc. Nichole Cowles Investor Relations
Manager (775) 284-4422 x 101nichole.cowles@argonautgoldinc.com
www.argonautgoldinc.com
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