TORONTO, July 6, 2020 /CNW/ - Argonaut Gold
Inc. (TSX: AR) (the "Company", "Argonaut Gold" or "Argonaut")
is pleased to provide updated 2020 guidance following the temporary
suspension of guidance due to uncertainties surrounding the
COVID-19 pandemic, including Florida Canyon following the merger
with the Alio Gold Inc. on July 1,
2020. The Company expects to produce between 210,000 and
230,000 gold equivalent ounces1 ("GEO" or "GEOs"), which
is anticipated to generate between $62
million and $87 million in
free cash flow2 ("FCF") at $1,700 gold, including the recently acquired
Florida Canyon mine, during 2020. During the second quarter,
Argonaut's existing Mexican operations generated approximately
$23 million of FCF2 and,
the Company ended June 30, 2020 with
approximately $65 million in cash and
$7 million drawn on its corporate
revolving credit facility. All amounts are US dollars unless
otherwise stated.
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Pete Dougherty, President and
CEO, stated: "Despite the temporary suspension of mining, crushing
and stacking activities during April and May due to COVID-19
restrictions, we still managed to produce 31,531 GEOs from our
Mexican operations and generate approximately $23 million of
FCF2. While we saw daily gold production dip lower
during the months of May and June, we successfully ramped up
operations back up to normal rates in early June and, with new
leach pads available at both El
Castillo and La Colorada,
have begun to see daily gold production increase again. The
strong quarterly free cash flow generation is a testament to the
leverage our operating portfolio of mines provides to the gold
price."
2020 FCF2 Guidance
Argonaut is well positioned to generate significant
FCF2 in 2020. The Company's anticipated
FCF2 is highly leveraged to the gold price.
Between January 1, 2020 and
June 30, 2020, Argonaut has generated
approximately $29 million of
FCF2 from its Mexican operations. Table 1 below
outlines Argonaut's FCF2 leverage to the gold price
(outside of a construction decision on a development stage
project), including Florida Canyon.
Table 1: 2020 FCF2 Guidance Sensitivity to Gold
Price ($M)
$1,500
|
$1,600
|
$1,700
|
$1,800
|
$1,900
|
40 –
62
|
51 –
75
|
62 –
87
|
70 –
97
|
78 -
108
|
Pete Dougherty, continued:
"Argonaut is a company that is perfectly positioned for the gold
market environment we are in today. We offer significant
FCF2 leverage to the gold price, a strong balance sheet
and a superior pipeline of growth assets in Magino, Cerro del Gallo
and Ana Paula with some key decision points within the next three
to 18 months. We believe we are well-poised to transform
Argonaut into a long mine life, lower-cost, intermediate producer
over the next few years, as we harvest the cash from our existing
higher-cost operating asset portfolio and re-invest in our
lower-cost growth asset portfolio."
2020 Production Guidance
Including the anticipated
gold production at the Florida Canyon mine for the full year 2020,
Argonaut expects it will produce between 210,000 and 230,000 GEOs
in 2020. Table 2 below outlines the anticipated 2020 GEO
production estimate.
Table 2: 2020 GEO1 Production Guidance (in
000s)
Mine
|
Q1 Actual
|
Q2 Actual
|
H2 Estimate
|
Full Year 2020
Estimate
|
El
Castillo
|
15
|
9
|
21 – 26
|
45 – 50
|
San
Agustin
|
14
|
14
|
34 – 40
|
62 – 68
|
La
Colorada
|
13
|
8
|
32 – 34
|
53 – 55
|
Florida
Canyon*
|
11
|
13
|
26 – 33
|
50 – 57
|
Consolidated*
|
53
|
44
|
113 –
133
|
210 –
230
|
*Florida Canyon
production during Q1 2020 and Q2 2020 was under Alio Gold Inc.
prior to the closing of the merger between Alio Gold Inc. and
Argonaut on July 1, 2020. 2020 GEO production guidance
estimates the combined full year 2020 production from the El
Castillo Complex, La Colorada and Florida Canyon.
|
2020 Cost and Capital Guidance
Including the
anticipated gold production, cost and capital estimates at the
Florida Canyon mine for the full year 2020, Argonaut estimates it
will produce between 210,000 and 230,000 GEOs at a cash
cost2 between $925 and
$1,025 and all-in sustaining
cost2 ("AISC") between $1,225 and $1,350. Higher AISC2 is largely
driven by the estimated capital requirement at Florida Canyon for
leach pad construction, crushing and stacking optimization projects
and the capitalized leases and maintenance for the mobile mine
fleet, which are all included in the AISC2
calculation. The Company estimates capital spending of
between $64 million and $72 million in 2020, including all 2020 capital
at Florida Canyon. Table 3 below outlines the anticipated 2020
production, cash cost2, AISC2 and capital
estimates.
Table 3: 2020 Cost and Capital Guidance
Ω
|
|
|
|
|
Magino,
Cerro del
Gallo, Ana
Paula &
Other
|
|
|
|
|
|
El Castillo
Complex
|
La
Colorada
|
Florida
Canyon
|
Consolidated
|
GEO
Production
|
|
|
|
|
|
|
In
000s
|
107 –
118
|
53 –
55
|
50 – 57
|
210 –
230
|
Cash
Costs2
|
$ per/oz
Au
|
|
|
|
|
|
850 –
950
|
850 –
950
|
1,150 –
1,250
|
925 –
1,025
|
Capital
|
$M
|
12 –
13
|
10 –
11
|
25 – 30
|
17 – 18
|
64 –
72
|
AISC2
|
$ per/oz
Au
|
|
|
|
|
|
1,225 –
1,350
|
__________________________
|
1
|
GEOs are based on a
conversion ratio of 80:1 for silver to gold. The silver to gold
conversion ratio is based on the three-year trailing average silver
to gold ratio. This is the referenced ratio throughout the
press release.
|
2
|
Please refer to the
"Non-IFRS Measures" section for a description of these non-IFRS
measures.
|
Non-IFRS Measures
The Company has included certain
non-IFRS measures including "Cash cost per gold ounce sold",
"All-in sustaining cost per gold ounce sold" and "Free cash
flow" in this press release, which are presented in accordance with
International Financial Reporting Standards ("IFRS"). Cash
cost per gold ounce sold is equal to production costs plus the
total impact of impairment write downs related to work-in-process
inventory less silver sales divided by gold ounces sold. AISC per
gold ounce sold is equal to production costs plus the total impact
of impairment write downs related to work-in-process inventory less
silver sales plus general and administrative, exploration,
accretion and other expenses and sustaining capital expenditures
divided by gold ounces sold. Free cash flow is equal to the
change in the company's net cash (cash and cash equivalents
less debt), excluding cash increases related to equity
financing. The Company believes that these measures provide
investors with an alternative view to evaluate the performance of
the Company. Non-IFRS measures do not have any standardized
meaning prescribed under IFRS. Therefore they may not be
comparable to similar measures employed by other companies.
The data is intended to provide additional information and
should not be considered in isolation or as a substitute for
measures of performance prepared in accordance with IFRS.
Please see most recent the management's discussion and analysis
("MD&A") for full disclosure on non-IFRS measures.
About Argonaut Gold
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,
USA. Advanced exploration projects include the Magino project
in Ontario, Canada, the Cerro del
Gallo project in Guanajuato,
Mexico and the Ana Paula project in Guerrero, Mexico. The Company continues
to hold the San Antonio advanced
exploration project in Baja California
Sur, Mexico and several other exploration stage projects,
all of which are located in North
America.
For more information, contact:
Argonaut Gold Inc.
Dan
Symons
Vice President, Investor Relations
Phone: 416-915-3107
Email: dan.symons@argonautgold.com
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" or "Argonaut
Gold"). Forward-looking statements and forward-looking
information include, but are not limited to, statements with
respect to the COVID-19 pandemic, the impact of the pandemic on
Argonaut and the impact of government action aimed at ameliorating
the pandemic on the workforce, business and operations of Argonaut;
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, the scope, duration and impact of the
COVID-19 pandemic, the scope, duration and impact of regulatory
responses to the pandemic on the employees, business and operations
of Argonaut and the broader market, 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.
Source: Argonaut Gold Inc.
SOURCE Argonaut Gold Inc.