Argonaut Gold Announces Three-Year Production Outlook; Provides Updated Mineral Reserves and Resources
TORONTO, Feb. 16, 2017 /CNW/ - Argonaut Gold Inc. (TSX: AR) (the "Company", "Argonaut Gold" or "Argonaut") is pleased to provide its three-year production outlook, updated mineral reserves and resources at its operating mines and a general corporate update. All dollar amounts are expressed in United States dollars unless otherwise specified.
Three-Year Production Outlook
Based on life-of-mine planning at December 31, 2016, the Company anticipates it will achieve production growth on a gold equivalent ounce1 ("GEO") basis as its San Agustin and La Colorada projects ramp up and lower the overall cost profile. The Company's goal is to achieve annual all-in sustaining costs per gold ounce sold2 at or below $950. Table 1 below illustrates the Company's three-year GEO production outlook:
| Table 1 – Three-Year GEO Production Outlook | |||
| Year | El Castillo/San | La Colorada | Consolidated |
| 2017 | 70 – 80 | 45 – 50 | 115 – 130 |
| 2018 | 90 – 100 | 65 – 70 | 155 – 170 |
| 2019 | 115 – 125 | 55 – 60 | 170 – 185 |
| (1) San Agustin 2017 guidance includes all expected production during the year. 2017 revenues and costs prior to declaration of commercial production will be capitalized. |
Mineral Reserve and Resource Estimates
Table 2 below outlines the Company's Mineral Reserve and Resource estimates at December 31, 2016. Mineral Resources are presented inclusive of Mineral Reserves and do not have demonstrated economic viability. There is no certainty that all or any part of the Mineral Resources will be converted into Mineral Reserves.
| Table 2 – Consolidated Mineral Reserve and Resource Estimates(1) | ||||||
| Project | Category | Tonnes | Au | Contained | Ag | Contained |
| El Castillo(2) | Proven & Probable | 22.4 | 0.42 | 0.30 | ||
| Magino(3) | Proven & Probable | 105.4 | 0.89 | 3.02 | ||
| Consolidated Mineral Reserves | Proven & Probable | 127.8 | 0.81 | 3.32 | ||
| El Castillo(4) | Measured & Indicated | 39.3 | 0.38 | 0.49 | ||
| San Agustin(5) | Indicated | 82.2 | 0.32 | 0.85 | 10.7 | 28.26 |
| La Colorada(6) | Indicated | 29.7 | 0.59 | 0.56 | 10.4 | 9.93 |
| Magino(7) | Indicated | 143.8 | 0.88 | 4.07 | ||
| San Antonio(8) | Measured & Indicated | 65.1 | 0.83 | 1.74 | ||
| Consolidated Mineral Resources | Measured & Indicated | 360.1 | 0.66 | 7.71 | 10.6 | 38.19 |
| El Castillo(4) | Inferred | 1.0 | 0.37 | 0.01 | ||
| San Agustin(5) | Inferred | 7.0 | 0.29 | 0.06 | 11.0 | 2.46 |
| La Colorada(6) | Inferred | 2.4 | 0.82 | 0.06 | 12.0 | 0.93 |
| Magino(7) | Inferred | 43.3 | 0.76 | 1.06 | ||
| San Antonio(8) | Inferred | 6.2 | 0.34 | 0.07 | ||
| Consolidated Mineral Resources | Inferred | 59.9 | 0.66 | 1.26 | 11.3 | 3.39 |
| (1) | Mineral Resources are presented inclusive of Mineral Reserves. |
| (2) | The Mineral Reserves for El Castillo set out in the above table were updated internally, are valid as of December 31, 2016 and reviewed by Mike Lechner and Richard Rhoades, each of whom is a "qualified person" for purposes of National Instrument 43-101 ("NI 43-101"). The reserve update used a gold price of $1,200. Cut-off grades, depending on rock and ore type, varied from 0.15 g/t for oxide to 0.44 g/t for silicified sulphide. |
| (3) | The Mineral Reserves for Magino set out in the table above were taken from the Magino Technical Report dated February 22, 2016 (effective January 18, 2016). The Mineral Reserve was estimated at a gold price of $1,200. The Probable Reserve study used a gold cutoff of 0.35 g/t. These amounts have been reviewed and confirmed by Thomas Burkhart, who is a "qualified person" for purposes of NI 43-101. |
| (4) | The M&I Resource and Inferred Resource for El Castillo in the above table were updated internally, are valid as of December 31, 2016 and reviewed Mike Lechner and Richard Rhoades, each of whom is a "qualified person" for purposes of NI 43-101. The Mineral Resource update used a gold price of $1,400. Cut-off grades, depending on rock and ore type, varied from 0.091 g/t for oxide to 0.374 g/t for silicified sulphide. |
| (5) | The Mineral Resources for the San Agustin Gold-Silver Project set out in the table above were taken from the San Agustin Technical Report dated June 10, 2016 (effective date of April 29, 2016). The Mineral Resource was estimated at a gold price of $1,300 and silver price of $20. A gold equivalent cutoff of 0.18 g/t was utilized for the resource. These amounts have been reviewed and confirmed by Thomas Burkhart, who is a "qualified person" for purposes of NI 43-101. |
| (6) | The M&I Resource and Inferred Resource used for La Colorada in the above table were updated internally, are valid as of December 31, 2016 and reviewed by Mike Lechner and Richard Rhoades, each of whom is a "qualified person" for purposes of NI 43-101. The Mineral Resource update used a gold price of $1,400 and a silver price of $20. The gold equivalent cutoff grade varied depending on deposit and ranged from 0.086 to 0.13 g/t. |
| (7) | The Mineral Resources for the Magino Project set out in the table above were taken from the Magino Technical Report dated February 22, 2016 (effective date of January 18, 2016). The Mineral Resource was estimated at a gold price of $1,300. The Indicate Resource study used a cutoff of 0.25 g/t gold. These amounts have been reviewed and confirmed by Thomas Burkhart, who is a "qualified person" for purposes of NI 43-101. |
| (8) | The Mineral Resources for the San Antonio Project set out in the table above were taken from the San Antonio Technical Report dated October 10, 2012 (effective date of September 1, 2012). The gold resource was estimated at a gold price of $1,500 using a cutoff grade of 0.11 g/t Au for oxide and transition and 0.15 g/t Au for sulphide. These amounts have been reviewed and confirmed by Thomas Burkhart, who is a "qualified person" for purposes of NI 43-101. |
San Agustin Construction Progress
The Company is pleased to report its San Agustin project is currently tracking on schedule and budget with construction approximately 26% complete and first gold production anticipated during the third quarter of 2017. The crusher pad, leach pad and pond construction are well underway and the Company anticipates it will commence laying leach pad liner and begin relocating the west crusher from El Castillo prior to the end of the first quarter. The San Agustin project has an initial capital budget of $43 million and is expected to produce an average of approximately 80,000 GEOs per year at a cash cost per gold ounce sold of approximately $650 (see Non-IFRS Measures section). To view photos of the San Agustin construction progress, please visit: http://www.argonautgold.com/gold_operations/san_agustin/construction_progress/
Currency Hedging
The Company has entered into a $30 million Mexican peso/United States zero-cost collar program with the purchase of call options at an average strike price of 20.00 Mexican pesos per US dollar and sale of put options at an average strike price of 24.58 Mexican pesos per US dollar. The contracts settle on a monthly basis between February and November 2017. There was no cost exposure to put this program in place. This hedging strategy safeguards the Company to currency volatility during the construction of its San Agustin project. The Company's 2017 budget assumed a 19:1 MXN:USD exchange rate and its San Agustin capital guidance assumed a 16:1 MXN:USD exchange rate.
Management Departure
Curtis Turner, the Company's former Corporate Development Officer, left the Company at the end of January 2017. The Company thanks Mr. Turner for his contributions during his tenure with Argonaut Gold and extends its best wishes to Mr. Turner in his future endeavours.
Argonaut Gold Fourth Quarter and Year End Financial Results Conference Call and Webcast
The Company anticipates releasing its fourth quarter and year end financial results before market open on March 13, 2017 and will host a conference call and webcast on March 13, 2017 at 8:30 am EDT to discuss the results.
Fourth Quarter and Year End Conference Call Information for March 13, 2017:
| Toll Free (North America): | 1-888-231-8191 |
| International: | 1-647-427-7450 |
| Webcast: | www.argonautgold.com |
Fourth Quarter and Year End Conference Call Replay:
| Toll Free Replay Call (North America): | 1-855-859-2056 |
| International Replay Call: | 1-416-849-0833 |
| Passcode: | 54191629 |
The conference call replay will be available from 11:30 am EDT on March 13, 2017 to March 27, 2017.
Non-IFRS Measures
The Company has included certain non-IFRS measures including "Cash cost per gold ounce sold" and "All-in sustaining cost per gold ounce sold" in this press release. Cash cost per gold ounce sold is equal to production costs less silver sales divided by gold ounces sold. All-in sustaining cost per gold ounce sold is equal to production costs less silver sales plus general and administrative expenses, exploration expenses, accretion of reclamation provision and sustaining capital expenditures divided by gold ounces sold. The Company believes that these measures provide investors with an improved ability 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 the management's discussion and analysis ("MD&A") for full disclosure on non-IFRS measures.
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 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.
Qualified Person, Technical Information and Mineral Properties Reports
Technical information included in this release was supervised and approved by Thomas Burkhart, Argonaut Gold's Vice President of Exploration, and a Qualified Person under NI 43-101. For further information on the Company's material properties, please see the reports as listed below on the Company's website or on www.sedar.com:
| El Castillo Mine | NI 43-101 Technical Report on Resources and Reserves, Argonaut Gold Inc., El Castillo Mine, Durango State, Mexico dated February 24, 2011 (effective date of November 6, 2010) |
| La Colorada Mine | NI 43-101 Preliminary Economic Assessment La Colorada Project, Sonora, Mexico dated December 30, 2011 (effective date of October 15, 2011) |
| San Agustin Project | NI 43-101 Technical Report and Preliminary Economic Assessment San Agustin Heap Leach Project, Durango, Mexico dated June 10, 2016 (effective date of Resources April 29, 2016) |
| Magino Gold Project | Preliminary Feasibility Study Technical Report on the Magino Project, Wawa, Ontario, Canada dated February 22, 2016 (effective date January 18, 2016) |
| San Antonio Gold Project | NI 43-101 Technical Report on Resources, San Antonio Project, Baja California Sur, Mexico dated October 10, 2012 (effective date of September 1, 2012) |
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 and the construction stage San Agustin project in Durango, Mexico and the production stage La Colorada mine in Sonora, Mexico. Advanced exploration stage projects include the San Antonio project in Baja California Sur, Mexico, and the Magino project in Ontario, Canada. The Company also has several exploration stage projects, all of which are located in North America.
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1 GEO is based on a conversion ratio of 70:1 for silver to gold ounces and is the referenced ratio throughout the press release.
2 Please refer to the section "Non-IFRS Measures" below for a discussion of this non-IFRS measure.
SOURCE Argonaut Gold Ltd.
Contact
Argonaut Gold Inc., Dan Symons, Vice President, Investor Relations, Phone: 416-915-3107, Email: dan.symons@argonautgold.com