Argonaut Gold Announces Pre-Feasibility Study Results for the
Magino Project With After-Tax IRR of 18% and Total Cash Flow of
US$350 Million
TORONTO, ONTARIO--(Marketwired - Dec 17, 2013) - Argonaut Gold
Inc. (TSX:AR) (the "Company", "Argonaut Gold" or "Argonaut") is
pleased to announce the results of a prefeasibility study ("PFS")
for the Magino property, located 40 kilometers ("km") northeast of
Wawa, Ontario. The study was completed by JDS Energy & Mining
Inc., Vancouver, Canada and is based on a December 2013 mineral
resource estimate. The Magino mine PFS study takes into
consideration the PFS design pit, representing 40% of a larger
defined resource. It does not include any potential expansion from
the land or mineral rights acquisition pending from neighboring
landowner Richmont Mines Inc. All amounts are indicated in US
dollars.
ECONOMIC HIGHLIGHTS OF PRE-FEASIBILITY STUDY ($1250 per
ounce gold price) |
|
Net
Present Value ("NPV" After-Tax at a 5% discount rate) |
|
$199 million |
|
Cash Flow (Undiscounted, After-Tax) |
|
$350 million |
|
Internal Rate of Return (After-Tax "IRR") |
|
18% |
|
Payback (After-Tax, Years of production) |
|
4.2 years |
|
Capital Cost (pre-production) |
|
$356 million |
|
|
Sustaining and Closure |
|
|
$58
million |
|
Cash Cost (including leasing costs of $78 million) |
|
$693 per ounce Au |
CEO Commentary
Pete Dougherty, President and CEO of Argonaut Gold, stated
"Magino is a high quality property that we are very pleased to have
in our portfolio. Economics for the project are strong, and are
particularly robust during the first seven years, when the Company
will be processing higher grade material and stockpiling lower
grade material for processing later in the mine life. Potential
upside value exists as the study only takes 40% of the current
mineral resource estimate into consideration and excludes pre-1997
underground and surface drilling data, included in a previous
resource estimate."
Prefeasibility summary
The PFS summarizes financial projections and operational plans
for the Magino property, as a conventional open pit mine and gold
leaching processing circuit. The following tables summarize the
results.
PROJECT LOM PRODUCTION HIGHLIGHTS ($1,250 Gold
Price) |
Mine Life (years) |
13.2 |
Life of Mine Strip Ratio (waste: ore) |
2.6:1 |
Gold Grade (average in g/t) |
0.90 |
Gold Recovery (average) |
95% |
Gold Payable |
99% |
M&I Gold Ounces Recovered (000's) |
1,661 |
Annual Production (average ounces) |
127,000 |
Capital Costs "CAPEX" (millions): |
$414 |
Operating Cost/Ore Tonne (average) |
$18.94 |
Cash Cost (including leasing costs of $78 million) |
$693 per ounce |
|
PROJECT HIGHLIGHTS (FIRST 7 YEARS) |
Cash Flow (Undiscounted, After-Tax) |
$268 million |
Gold Grade (Average Grams per Tonne "g/t") |
1.33 |
Cash Cost (Including Leasing Costs of $78 million) |
$650 per ounce |
Annual Ounces of Production (Average) |
185,000 |
Mineral Resource Estimate
The mineral resource estimate used in the PFS was completed in
December 2013 by Garth Kirkham, P.Geo., an independent Qualified
Person ("QP") and is summarized below (inclusive of mineral
reserves).
Deposit |
Resource |
Tonnes |
Cut-off g/t |
Gold Grade g/t |
Contained Gold Au (k ozs) |
Webb Lake |
Indicated |
127.7 |
0.35 |
1.01 |
4,161 |
Webb Lake |
Inferred |
30.1 |
0.35 |
1.08 |
1,044 |
Mineral resources that are not mineral reserves do not have
demonstrated economic viability. Mineral resource estimates do not
account for mineability, selectivity, mining loss and dilution.
These mineral resource estimates include inferred mineral resources
that are normally considered too speculative geologically to have
economic considerations applied to them that would enable them to
be categorized as mineral reserves. There is also no certainty that
these inferred mineral resources will be converted to measured and
indicated categories through further drilling, or into mineral
reserves, once economic considerations are applied.
Mineral Reserve Estimate
The PFS mineral reserve estimate is summarized in the following
table.
Deposit |
Reserve |
Diluted Tonnes |
Cut-off g/t |
Gold Grade g/t |
Contained Gold Au (k ozs) |
Webb Lake |
Probable |
60.2 |
0.31 |
0.90 |
1,746 |
Total |
|
60.2 |
0.31 |
0.90 |
1,746 |
The reserve estimate does not include any resources within the
adjacent Richmont land even though Argonaut signed a land
acquisition agreement with Richmont. The mineral reserves also do
not include resources below Webb Lake which lies along strike on
the southern side of the PFS pit. The potential for a larger pit
exists, which may enhance the overall projects economics, if the
land ownership and lake constraints are removed.
2013 JDS pit compared to 2012 Tetra Tech Historical Resource
The 2013 JDS mineral resource estimate and the 2012 Tetra Tech
historic mineral resource estimate are contained within the same
geologic host environment. The two resources differ, in part,
because the JDS resource did not incorporate pre-1997 underground
and surface drill holes that were used in the historical 2012 Tetra
Tech mineral resource estimate. JDS concluded that this earlier
drilling, consisting of approximately 750 holes and totaling nearly
95,000 meters, could not be used for their 2013 mineral resource
estimate as it is non-compliant with today's quality assurance and
quality control ("QA/QC") requirements. The absence of the
underground data reduced the grades and contained gold ounces of
the 2013 mineral resource estimate when compared to the historical
Tetra Tech estimate.
This can be observed on the attached sections where the limits
of the JDS restricted pit are noted. A comparative review of the
block models demonstrates a loss of grade when the underground
drilling was removed. The Magino deposit is characterized by broad
zones of disseminated mineralization hosting pockets of higher
grade material. These possible occurrences of the higher grade gold
zones reported by the underground drilling were not incorporated in
the JDS mineral resource estimate.
The drilling information used in the 2013 JDS and historical
2012 TetraTech mineral resource estimations are shown below:
Mineral Resource Estimate |
Cutoff Grade |
Contained Au Ounces (Million) |
No. of Drill Holes Used |
Drilled Meters Used |
JDS - Dec., 2013 |
0.35 g/t Au |
4.1 |
652 |
180,000 |
Historic Tetra Tech - Oct., 2012 |
0.35g/t Au |
5.8 |
1,402 |
275,000 |
Tom Burkhart, Vice-President of Exploration, said "Going forward
additional drilling could potentially expand the known resource
base. Furthermore, a more expanded mining operation is anticipated
beyond the current restricted PFS pit that will address the much
larger resource potential of the property."
The Company cautions that the October, 2012, Tetra Tech report
provides historic information only and does not constitute current
mineral resources or current mineral reserves. A qualified person
has not done sufficient work to classify the historic estimate as
current mineral resources or reserves.The Company believes this
information continues to be reliable and is relevant as a basis for
a better understanding of the Magino deposit and resources.
To view '2013 JDS Magino Long Section, Block Model', please
visit the following link:
http://media3.marketwire.com/docs/argofig11217.pdf
To view '2012 Tetratech Magino Long Section, Block Model',
please visit the following link:
http://media3.marketwire.com/docs/argofig21217.pdf
Metallurgy and Mineral Processing
Based on metallurgical test work results, a flow sheet for the
processing facility was developed which includes primary crushing,
followed by a grinding circuit, gravity recovery circuit, leach
circuit, carbon in pulp circuit, electro-winning and smelting to
produce gold doré. The flow sheet also includes cyanide destruction
and a conventional wet tailings pond.
The process facility was designed for an average feed of 12,500
tonnes per day ("tpd"). A gold recovery of 95% was estimated based
on metallurgical testwork.
Mine Plan and Production Schedule
The Magino deposit is conducive to open pit mining and was
planned in the PFS to utilize conventional mining equipment
including 240-tonne haul trucks (ramping up to 11 over the mine
life), three corresponding shovels and front end loaders and a
fleet of standard support equipment such as drills, dozers,
graders, water truck, etc.
The production schedule was developed to supply 12,500 tpd of
ore to the mill. An important element of the production schedule is
the accelerated mining rate in Years 1 to 7 to access the highest
grade ore possible to feed the mill early in the project life. Low
grade ore mined and stockpiled in the early years is planned to be
processed later in the project life after the open pit is exhausted
in year 8. The annual production schedule for the project is shown
in the following table.
Year |
Tonnes Ore (M tonnes) |
Tonnes Waste (M tonnes) |
Tonnes Processed (M tonnes) |
Gold Grade Processed (g/t) |
|
Gold Recovered (000's oz) |
1 |
2.0 |
10 |
4.6 |
1.13 |
|
157.1 |
2 |
6.3 |
14 |
4.6 |
1.43 |
|
199.7 |
3 |
10.4 |
27 |
4.6 |
0.95 |
|
132.9 |
4 |
4.2 |
33 |
4.6 |
1.40 |
|
195.0 |
5 |
9.8 |
27 |
4.6 |
1.46 |
|
203.5 |
6 |
10.6 |
26 |
4.6 |
1.76 |
|
244.7 |
7 |
13.2 |
17 |
4.6 |
1.16 |
|
161.9 |
8 |
3.6 |
4 |
4.6 |
0.51 |
|
70.8 |
9 |
|
|
4.6 |
0.41 |
|
56.9 |
10 |
|
|
4.6 |
0.41 |
|
56.9 |
11 |
|
|
4.6 |
0.41 |
|
56.9 |
12 |
|
|
4.6 |
0.41 |
|
56.9 |
13 |
|
|
4.6 |
0.41 |
|
56.9 |
14 |
|
|
0.9 |
0.41 |
|
10.9 |
Total |
60.2 |
157.3 |
60.2 |
0.90 |
|
1,661.6 |
"M" means millions
Capital Cost Estimate
The capital cost estimate of US$414 million for the project
includes all activities from permitting and development through
closure. Costs for the project include; capitalized pre-stripping,
access road improvements, upgrades to the local power source,
sourcing of water for processing, infrastructure for camp
facilities, administrative offices, maintenance shops, warehouses,
assay laboratories, on site electrical distribution and
miscellaneous fire, safety and environmental infrastructure as
shown in the following table.
CAPITAL COST DESCRIPTION |
ESTIMATE (US$M) |
Site Development |
8 |
Pre-Production Mining Costs and Capitalized leasing |
45 |
Primary Crushing & Stockpile |
12 |
Processing |
105 |
Tailings Management Facility |
14 |
Infrastructure (on and off site) |
52 |
Project Indirects |
35 |
EPCM |
35 |
Owner's Cost |
9 |
Contingency |
41 |
Total Initial Capital |
356 |
Sustaining Capital |
34 |
Closure Cost |
17 |
Contingency |
7 |
Total Capital |
414 |
Capital cost contingency was estimated by area and averaged
13%.
Operating Cost Estimate
Operating costs were estimated using first principles as per the
following summary:
UNIT OPERATING COST DESCRIPTION |
UNIT |
ESTIMATE |
LOM Mining |
US$/tonne mined |
1.86 |
US$/tonne milled |
6.35 |
LOM Processing |
US$/tonne milled |
9.55 |
LOM General and Administration |
US$/tonne milled |
1.57 |
LOM Re-handle (stockpile to mill) |
US$/tonne milled |
0.22 |
LOM Leasing |
US$/tonne milled |
1.24 |
Total LOM Unit Operating Cost |
US$/tonne milled |
18.94 |
Total LOM Unit Operating Cost |
US$/payable Au oz |
693 |
Economic Results
In addition to the production plan, capital cost and operating
cost estimates discussed previously, the following assumptions were
used in the PFS economic model.
Description |
Unit |
Value |
ASSUMPTIONS/INPUTS |
|
|
Au Price |
US$/oz |
1,250.00 |
PRODUCTION |
|
|
|
|
|
Total LOM Ore |
M tonnes |
60.2 |
Total LOM Waste |
M tonnes |
157.3 |
LOM Strip Ratio |
w:o |
2.6 |
LOM Au Head Grade |
g/t |
0.90 |
Au Recovery |
% |
95% |
Au Payable |
% |
99% |
Au Refining Charge |
C$/pay oz |
5.00 |
Discount Rate |
% |
5% |
F/X Rate |
C$:US$ |
0.95 |
Working Capital |
No. of months |
1.5 |
Magino Sensitivity Study
Au Price US$/oz Sensitivity |
After-Tax NPV5% (US$M) |
After-Tax IRR |
$1,620 |
$479 |
33.5% |
$1,490 |
$381 |
28.2% |
$1,400 |
$313 |
24.3% |
$1,300 |
$237 |
19.9% |
$1,000 |
-$5.3 |
4.6% |
Contribution and Work
The pre-feasibility study was prepared through the collaboration
of three consulting firms as shown below.
Responsibility Area |
Contributor |
|
|
Geology, Resource Estimate, Mine Planning, Infrastructure, Power
Supply, Execution Plan, Process flow sheet and Plant Design
Financial Modeling |
JDS
Energy & Mining Inc. |
|
|
Geotechnical, Tailings, Hydrogeology, Tailings Management
Facility |
SLR
Consulting |
|
|
Metallurgical Test work |
LJB
Consulting |
|
|
Ongoing Development
The Company is working with the community and First Nations
groups surrounding the project and will continue to maintain an
open dialogue as the project advances. As part of the process of
making application for approval of the project, the Magino project
description was submitted during mid-year 2013. Argonaut continues
to work through the provincial and federal permitting agencies to
advance the project. The Company aims to build the asset from
internally generated cash flow in an effort to maintain
responsible, measured growth and avoid encumbering the asset.
Technical Information and Mineral Properties Reports
For further information on Argonaut Gold's Magino project please
see the report as listed below on Argonaut Gold's website or on
www.sedar.com:
Magino Gold Project |
NI 43-101 Technical Report and Mineral Resource Estimate on the
Magino Gold Project, Ontario, Toronto, Canada dated October 4,
2012 |
An updated technical report will be filed within 45 days of the
date of this press release.
Historical tetra Tech Resource table below is solely for
reference.
Resource |
Domain |
Tonnes (t) |
Au g/t |
Au (oz) |
Indicated |
Webb Lake Stock |
207,268,820 |
0.87 |
5,797,550 |
|
Lovell Lake Stock |
1,880,830 |
0.80 |
48,380 |
|
South Metavolcanics |
12,514,080 |
0.85 |
341,990 |
|
North Metavolcanics |
1,816,060 |
0.92 |
53,720 |
|
Total |
223,479,790 |
0.87 |
6,250,990 |
Inferred |
Webb Lake Stock |
7,803,620 |
0.77 |
193,190 |
|
Lovell Lake Stock |
123,370 |
0.52 |
2,060 |
|
South Metavolcanics |
5,757,820 |
0.85 |
157,350 |
|
North Metavolcanics |
124,600 |
0.56 |
2,240 |
|
Total |
13,809,410 |
0.80 |
355,190 |
Note: In the above mineral resource table there may be
inconsistencies due to rounding. Estimates are rounded since the
figures are not precise calculations.
About Argonaut Gold
Argonaut Gold is a Canadian gold company engaged in exploration,
mine development and production activities. Its primary assets are
the production stage El Castillo Mine in Durango, Mexico and the La
Colorada Mine in Sonora, Mexico, the advanced exploration stage San
Antonio project in Baja California Sur, Mexico, the advanced
exploration stage Magino project in Ontario, Canada and several
exploration stage projects, all of which are located in North
America.
Qualified Persons
The Magino Pre-feasibility Study results were reviewed by JDS
under the supervision of Gordon Doerksen, P.Eng., an Independent
Qualified Person. The scientific and technical information in this
release has been reviewed and approved by Mr. Garth Kirkham,
P.Geo., Mr. Dino Pilotto, P.Eng., both of whom are Independent
Qualified Persons within the meaning of NI 43-101.
Mr. Thomas Burkhart, Argonaut's Vice President of Exploration is
the Company's Qualified Person responsible for the contents of this
press release and has reviewed the information in the release and
confirmed that it is consistent with that provided by the
independent Qualified Person responsible for the Study.
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, and 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 document.
Argonaut Gold Inc.Nichole CowlesInvestor Relations Manager(775)
284-4422 x
101nichole.cowles@argonautgold.comwww.argonautgold.com
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