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Argonaut Gold Announces Updated Life of Mine Plan for Florida Canyon, Which Generates Approximately $326 Million of Mine Site After-Tax Free Cash Flow at $1,700 Gold

July 03, 2020

TORONTO, July 3, 2020 /CNW/ - Argonaut Gold Inc.(TSX: AR) (the "Company", "Argonaut Gold" or "Argonaut") is pleased to announce the results of an updated life of mine ("LOM") plan for the Florida Canyon mine in Nevada, USA, which is now 100% owned by Argonaut following the closing of the merger with Alio Gold Inc. on July 1, 2020.  A National Instrument ("NI") 43-101 technical report will be filed within 45 days.  All amounts are US dollars unless otherwise stated.   

Pete Dougherty, President & CEO stated: "We have updated the LOM plan for Florida Canyon to reflect the way we propose to run the mine to deliver the most value to shareholders.  We envision Florida Canyon will produce an average of approximately 77,000 gold ounces per annum at all-in sustaining cost per gold ounce sold1 under $1,050 over 9.5 years, which yields a net present value at a 5% discount rate of over $232 million and generates mine site after-tax free cash flow of approximately $326 million at $1,700 gold.  The second half of 2020 will be dedicated to making the additional capital investments in the crushing and stacking system and ancillary equipment to ensure we can to reap the benefits of lower operating costs in 2021 onward.  Beyond the current 9.5 year LOM plan, we continue to see opportunities where investment in exploration at both the Florida Canyon mine and the nearby Standard mine has the potential to add oxide ore, as well as the longer term potential of evaluating transitional and sulphide ores."

Key LOM plan highlights:

  • Average annual production of approximately 77,000 gold ounces.
  • Average cash cost of per gold ounce sold1 of $880.
  • Average all-in sustaining cost per gold ounce sold1 of $1,040.
  • Total capital expenditures of approximately $108 million.
  • After-tax net present value at a 5% discount rate ("NPV5%") of approximately:
    • $85 million at $1,350 gold;
    • $148 million at $1,500 gold;
    • $232 million at $1,700 gold;
    • $357 million at $2,000 gold.
  • Mine site after-tax free cash flow ("FCF") of approximately:
    • $133 million at $1,350 gold;
    • $216 million at $1,500 gold;
    • $326 million at $1,700 gold;
    • $491 million at $2,000 gold.
  • Mining cost per tonne of $1.59.
  • Processing cost per tonne of $2.78.
  • Mine G&A cost per tonne of $0.49.
  • Gold recoveries of 70%.
  • Waste to ore ratio of 1.74:1.



1

Please refer to the section below entitled "Non-IFRS Measures" for a discussion of these Non-IFRS Measures.

 

Florida Canyon LOM Sensitivities to Gold Price

The Company evaluated the LOM plan's sensitivity to gold prices ranging from $1,000 to $2,000 per ounce.  Table 1 below illustrates the NPV5% and FCF of the Florida Canyon mine under the assumptions and parameters of the LOM plan.

Table 1: NPV5% and FCF Sensitivities to Gold Price

Florida Canyon Mineral Resource Estimate

A conceptual pit was generated in order to constrain the estimate of Mineral Resources.  A gold price of $1,600 per ounce was used along with other cost, recovery and slope parameters.  Mineral Resources were estimated in the conceptual pit using cutoff grades between 0.147 g/t and 0.175 g/t depending on mineralized zone.  Table 2 outlines undiluted Indicated Mineral Resources and Inferred Mineral Resources at June 1, 2020.

Table 2: Mineral Resource Estimate (inclusive of Mineral Reserves)

Resource Category

Tonnes
(Mt)

Au
(g/t)

Contained Au Ounces
(koz)

Inferred

24.7

0.34

276

Indicated

137.0

0.38 

1,667 

 

Florida Canyon Mineral Reserve Estimate

The Mineral Resource block model was used to determine optimal mining shells and pit phasing.  Indicated Mineral Resources were included in the pit optimization process.  Inferred Mineral Resources within the designed pit were treated as waste.

Detailed pit and phase designs were created based on the pit optimization results.  These designs incorporated geotechnical parameters as well as ramp accesses and formed the basis of the Mineral Reserve estimate.

Mineral Reserves were estimated based on a practical mine plan using the design price of $1,350 per ounce gold.  That practical pit was designed with guidance from pit optimization software that applied $1,100 per ounce gold in order to maximize the return on investment at the design price.

Gold cutoff grades between 0.171 g/t and 0.206 g/t were used, depending on mineralized zone, to estimate the Mineral Reserve estimate at June 1, 2020, which is summarized in Table 3.

Table 3: Mineral Reserve Estimate

Reserve Class

Diluted Tonnage (Mt)

Diluted Grade
g/t Au

Contained Gold
Au (koz)

Probable

74.5

0.43

1,019

 

Qualified Persons, Technical Information

The information in the press release for the Florida Canyon LOM plan was reviewed and verified by Independent Mining Consultants Inc. ("IMC") and its sub-contractors.  Technical information included in this press release was supervised and approved by John Marek, P.E. of IMC and James Arnold, P.E, an independent consultant working as a sub-contractor to IMC.

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", which are presented in accordance with International Financial Reporting Standards ("IFRS").  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, exploration, accretion and other expenses and sustaining capital expenditures divided by gold ounces sold.  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 the most recent 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 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 and resource 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.

SOURCE Argonaut Gold Inc.

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