El Castillo Complex

Latest Updates

28%

Under budget
San Agustin Construction

73,418

Geos produced at
a cash cost of $889 in 2017(1,2,3)

79,149

Geos produced at
9 MONTHS ENDED SEPTEMBER 30, 2018 (2,3)

$678

CASH COST AT 9 MONTHS ENDED SEPTEMBER 30, 2018 (3)

Including 2,932 GEOs of pre-commercial production from San Agustin.(1)

Gold equivalent ounces (‘GEO” or “GEOs”) are based on a conversion ratio of 70:1 for silver to gold.(2)

See Non-IFRS measures in the Disclaimer.(3)

Key Facts
Location Durango, Mexico
Ownership 100%
Status Operating Mine
Mine Type Open Pit
Metals Gold & Silver
Acquisition El Castillo - December 2009
San Agustin - December 2013

Mineral Reserve and Mineral Resource estimates1

Project Category Tonnes
(millions)
Au Grade
(g/t)
Contained
Au ounces
(000s)
Ag Grade
(g/t)
Contained
Au ounces
(000s)
El Castillo(2) Proven 3.3 0.57 62
El Castillo(2) Probable 33.7 0.39 419
San Agustin(2) Probable 78.4 0.30 768 10.2 25,593
El Castillo
Complex(2)
Proven &
Probable
115.4 0.34 1,249 10.2 25,593
El Castillo(3) Measured 4.1 0.54 70
El Castillo(3) Indicated 54.3 0.36 625
San Agustin(3) Indicated 95.9 0.28 865 9.5 29,466
El Castillo
Complex(3)
Measured &
Indicated
154.3 0.31 1,560 9.6 29,466
El Castillo(3) Inferred 1.5 0.36 17
San Agustin(3) Inferred 11.0 0.21 74 9.0 3,161
El Castillo
Complex(3)
Inferred 12.5 0.23 91 9.0 3.161

(1) Mineral Resources are presented inclusive of Mineral Reserves. Numbers may not sum due to rounding.

(2) The Mineral Reserves for El Castillo and San Agustin, which together form the El Castillo Complex, set out in the above table were taken from the El Castillo Complex Technical Report dated March 27, 2018, including depletion from July 1, 2017 to December 31, 2017 through mining activities, are valid as of January 1, 2018 and used a gold price of $1,200 per ounce and silver price of $17 per ounce. Cut-off grades, depending on rock and ore type, varied from 0.14 g/t AuEq for oxide to 0.57 g/t Au for silicified sulphide.

(3) The M&I Mineral Resources and Inferred Mineral Resources for El Castillo and San Agustin, which together form the El Castillo Complex, set out in the above table were taken from the El Castillo Complex Technical Report dated March 27, 2018, including depletion from July 1, 2017 to December 31, 2017 through mining activities, are valid as of January 1, 2018 and used a gold price of $1,400 per ounce and silver price of $20 per ounce. Cut-off grades, depending on rock and ore type, varied from 0.09 g/t AuEq for oxide to 0.47 g/t Au for silicified sulphide.

Overview

The El Castillo Complex is comprised of the El Castillo Gold Mine and San Agustin Gold/Silver Mine. The El Castillo Complex mining concessions are located in the municipality of San Juan del Rio in the central part of the State of Durango, Mexico approximately 100 km north of the city of Durango.

The El Castillo project, which consists of an open pit gold mine, two crushing facilities, two cyanide heap leach pads, two gold recovery plants, and associated support infrastructure, is located on seven mining concessions totalling approximately 2,045 hectares (ha), and on land where surface rights are owned by Argonaut. The gold mine commenced construction and operations in 2007 with commercial production reported in 2008. With a $15 million investment in the infrastructure of the property, the production profile was brought up to a 72,000 ounce run rate by Q4 2010, within just one year of acquiring ownership of the company.

The San Agustin property consists of four mineral claims totalling 1,065 ha and is located in the northern San Lucas de Ocampo Mining District. The main part of the San Agustin property is composed of two concessions acquired from Silver Standard Resources Inc. (Sliver Standard) in December of 2013. In December of 2013 the San Agustin Project was purchased by Argonaut from Silver Standard. Argonaut began mining operations at the San Agustin property in February of 2017, pouring gold and silver doré in September of 2017, and commencing commercial production in October of 2017.

El Castillo

The El Castillo property lies in the Altiplano Sub-province of the Sierra Madre Occidental (SMO) region of Central Mexico. The SMO represents an island arc assemblage of early Mesozoic age rocks comprised of metamorphosed, deep-water sediments and island arc volcanics. The Mesozoic rocks are overlain in - 13 - places by lower Tertiary andesites and rhyolites. The oldest rocks in the El Castillo Mine area are Cretaceous flysch-sequence sediments that correspond to the upper member of the Mezcalera Group. These consist of arenites, shales and thin-bedded limestone dipping moderate to steeply to the northeast with local zone folding. Mineralization at El Castillo is hosted in both Mezcalera Group sedimentary rocks and porphyry intrusives. Gold occurs in fracture-controlled quartz stockworks and as disseminated mineralization. Alteration consists primarily of quartz-sericite-clay (phyllic) overprinting zones of chlorite-epidote alteration (propylitic). Some secondary biotite – K feldspar alteration (potassic) has been identified in the deeper parts of the system. Mineralization is associated with pyrite and relatively minor chalcopyritesphalertie-galena-arsenopyrite-tetrhedrite. Oxidation has oxidized the sulphide and base metal minerals to depths as deep as 300 metres, leaving free gold in hematitic oxides. The conglomerate and rhyolite have been drilled extensively to the west of the existing El Castillo pit and have been found to be unaltered, unmineralized and exist as post mineral cover to underlying gold mineralization.

San Agustin

The San Agustin property is located approximately 10 kilometres southwest of the El Castillo Mine so the regional geology described at El Castillo is very applicable. The oldest rocks in the San Agustin area are Cretaceous siltstones, sandstones and limestones. These rocks are unconformably overlain by a thick sequence of Tertiary volcanic rocks comprised of older andesites and younger pyroclastic dominated rhyolites. A dacite dome complex and associated hydrothermal breccias host the majority of the Mineral Resources at San Agustin. The dacite is poorly exposed and typically forms areas of low relief. The deposit has an oxide zone from surface that averages approximately 60 metres deep.

El Castillo

The El Castillo Mine, which was formerly called El Cairo, was a grass roots discovery that resulted from a regional exploration program initiated by Battle Mountain Gold while exploring for bulk tonnage, disseminated gold deposits.

Battle Mountain Gold completed 207 RC drill-holes and six diamond core holes (drilled as twins to six of the RC holes) within the El Castillo Mine area. Battle Mountain Gold completed a resource estimate, scoping study, preliminary mine plan and reserve estimate that indicated the potential for a viable mining operation.

Morgain Minerals Inc. took over the project. Its exploration work included completion of six twin diamond drill holes, and 136 RC drill holes.

Castle Gold Corporation, as successor to Morgain Minerals Inc., began its work and changed the project name from "El Cairo" to "El Castillo" in reference to a nearby rock monument of the same name. Castle Gold's work included additional sampling and completion of 21 shallow, close-spaced air-track drill holes in the mining area to up-grade near surface gold resources.

Castle Gold Corporation's work combined with previous work by Morgain Minerals Inc. and Battle Mountain Gold were the basis for a preliminary reserve estimate by A.C.A. Howe International Limited dated January 31, 2008.

The El Castillo Mine sold its first gold in September 2007 from heap leaching begun the previous July. The El Castillo Mine completed the commissioning of commercial production in July 2008 as an open pit/heap leaching operation.

Acquired by Argonaut Gold in December 2009.

Produced an estimated 566,711 ounces of gold as of January 1, 2018. Of this production, Argonaut has produced 520,923 ounces of gold since taking ownership of the El Castillo Mine in 2009.

San Agustin

The immediate area of the San Agustin property has a documented exploration history of about 30 years. A few small adits, shafts and pits focusing on narrow veins are situated throughout the San Agustin Mine area but no commercial production took place prior to Argonaut’s ownership.

Monarch Resources Ltd. ("Monarch") acquired 4,800 hectares in the San Agustin area including the current claims. Its surface work defined a distinct gold anomalous zone over a 1.5 square kilometre area.

Monarch carried out a Phase I drilling program consisting of 35 RC drill holes totaling 3,703 metres and four diamond drill holes totaling 1,002 metres.

An additional 29 RC holes totaling 5,651 metres were completed.

Monarch abandoned the property.

In December, Silver Standard Resources Inc. ("Silver Standard") located the current San Agustin claims.

After an extensive mapping and sampling program, Silver Standard completed an RC drilling program consisting of 23 holes totaling 3,917 metres. Most of this work was focused in better defining mineralized areas originally identified by Monarch.

In August, Silver Standard optioned the San Agustin property to Geologix Explorations Inc. ("Geologix"). Its work included drilling of 40,717 metres in 176 core holes.

In February, Geologix returned the San Agustin property to Silver Standard.

In December, Argonaut purchased the San Agustin property from Silver Standard.

In early 2014, Argonaut initiated a drilling campaign designed to better define the San Agustin resource area that was partially outlined by previous operators. By mid-2014, Argonaut had completed 24,765 metres in 240 RC holes and 999 metres in 13 core holes. The core holes were used for metallurgical testing and twinning of RC holes. Subsequent to this resource drilling a Phase 2 program totaling 5,277 metres in 31 RC holes was completed. This wide-spaced Phase 2 drilling was mainly positioned along the Northwest Trend and was designed to help identify the overall resource potential on the property. Starting in late March and continuing into early July of 2015, an additional 35 RC drill holes totaling 4,179 metres were completed with most of this positioned within the Northwest Trend. The Phase 2 drilling in 2014 and 2015 was successful in expanding the deposit potential.

Argonaut commenced construction on the San Agustin Mine during November.

The San Agustin Mine poured its first gold during September 2017 and achieved commercial production during October 2017.

“Argonaut Gold has a strong operating history of delivering profitable production from low grade, heap leach mines. The grade at the El Castillo Complex often runs 0.3 to 0.4 grams per tonne gold. Yet, due to a relatively low strip ratio and good leach kinetics, we are able to operate efficiently and profitably.”

Bill Zisch, Chief Operating Officer

Technical Reports

El Castillo Complex:

El Castillo:

San Agustin: