Production of 37,707 Gold Equivalent Ounces
and Earnings per Share of $0.07
TORONTO, May 9, 2017 /CNW/ - Argonaut Gold Inc.
(TSX: AR) (the "Company", "Argonaut Gold" or "Argonaut") is
pleased to announce its financial and operating results for the
first quarter ended March 31,
2017. The Company reports quarterly net income of $12.0 million or earnings per share of
$0.07, adjusted net
income1 of $4.9 million or
adjusted earnings per share1 of $0.03 and production of 37,707 gold equivalent
ounces2 ("GEO" or "GEOs"). All dollar amounts are
expressed in United States
dollars, unless otherwise specified (C$ refers to Canadian
dollars).
Key operating and financial statistics for the first quarter of
2017 are outlined in the following table:
|
|
|
(in millions except
for earning per share)
|
3 months
ended
March 31
|
Change
|
2017
|
2016
|
Revenue
|
$44.5
|
$35.3
|
26%
|
Gross
profit
|
$10.1
|
$8.9
|
13%
|
Net income
|
$12.0
|
$4.3
|
179%
|
Earnings per share –
basic
|
$0.07
|
$0.03
|
133%
|
Adjusted net
income1
|
$4.9
|
$1.8
|
172%
|
Adjusted earnings per
share – basic1
|
$0.03
|
$0.01
|
200%
|
Cash flow from
operating activities before changes in non-cash operating working
capital
|
$14.9
|
$9.0
|
66%
|
Cash and cash
equivalents
|
$55.2
|
$46.6
|
18%
|
GEOs loaded to the
pads2
|
55,447
|
51,002
|
9%
|
GEOs projected
recoverable2,3
|
32,712
|
27,856
|
17%
|
GEOs
produced2,4
|
37,707
|
32,154
|
17%
|
GEOs
sold2
|
36,173
|
30,012
|
21%
|
Average realized
sales price
|
$1,228
|
$1,181
|
4%
|
Cash cost per gold
ounce sold1
|
$751
|
$757
|
(1%)
|
All-in sustaining
cost per gold ounce sold1
|
$870
|
$871
|
0%
|
|
|
1 Please
refer to the section below entitled "Non-IFRS Measures" for a
discussion of these Non-IFRS Measures.
|
2 Gold
equivalent ounces ("GEO" or "GEOs") are based on a conversion ratio
of 70:1 for silver to gold for 2017 and 65:1 for 2016. This is the
referenced ratio for each year throughout the press
release.
|
3
Recoverable ounces - El Castillo expected recovery rates: ROM oxide
50%, crushed oxide 70%, ROM transition 40%, crushed transition 60%,
crushed sulphides argillic 30% and crushed sulphides silicic 17%;
La Colorada expected recovery rates: gold 60% and silver
30%.
|
4 Produced
ounces are calculated as ounces loaded to carbon.
|
First Quarter 2017 and Recent Company
Highlights:
- Corporate Highlights
-
- Acquisition of San Juan
("Fresnillo") mineral concession adjacent to El Castillo, increasing the mineral concession
footprint from 200 hectares to 620 hectares (see press release
dated February 23, 2017).
- Successful C$45.0 million equity
financing, including the over-allotment option, primarily allocated
toward the Fresnillo mineral
concession acquisition and subsequent infill drill program.
- Received Environmental Socially Responsible Company award at
both El Castillo and La Colorada for the fifth consecutive
year.
- El Castillo
-
- First quarter production of 22,226 GEOs.
- Initiated 21,000 metre drill program on recently acquired
Fresnillo mineral concession.
- Disassembled and removed west crusher and overland conveyor
systems for relocation to San
Agustin.
- La Colorada
-
- First quarter production of 15,481 GEOs.
- Completed 5,139 metre drill program at the El Creston deposit
that indicated potential for open pit expansion (see press release
dated March 20, 2017).
- Continued stripping of El Creston pit.
- Completed construction of northeast leach pad phase three.
- San Agustin
-
- Completed detailed design work.
- Commenced construction of heap leach pad and was 65% complete
at May 5, 2017.
- Received west crusher and overland conveyor systems from
El Castillo and began
reassembling.
- New secondary crushing equipment arriving and is being
erected.
- At May 5, 2017, construction was
50% complete with $19.8 million spent
or committed, which remains on schedule and budget.
- San Antonio
-
- Initiated legal process for review of recent permit decision
(see press release dated December 16,
2016).
- Magino
-
- Filed Environmental Impact Statement and advanced Environmental
Assessment process (federal and provincial).
- Advanced feasibility study.
- Advanced First Nations impact benefit agreements.
CEO Commentary
Pete
Dougherty, President and CEO stated: "The production results
during the first quarter were outstanding and speak to the success
our team has made in improving operational efficiencies. I
commend the team on its continued focus on safety, their commitment
to the environment and improving our operations. The
operations, construction and exploration teams are firing on all
cylinders right now at El
Castillo, La Colorada and
San Agustin."
Financial Results – First Quarter 2017
Revenue for the
three months ended March 31, 2017 was
$44.5 million, an increase from
$35.3 million for the three months
ended March 31, 2016. During
the first quarter of 2017, gold ounces sold totaled 34,962 at an
average realized price per ounce of $1,228 (compared to 29,178 gold ounces sold at an
average price per ounce of $1,181
during the same period of 2016).
Production costs for the first quarter of 2017 were $27.8 million, an increase from $22.9 million in the first quarter of 2016
primarily due to the increase in gold ounces sold. Cash cost per
gold ounce sold (see Non-IFRS Measures section) was $751 in the first quarter of 2017, comparable to
$757 in the same period of 2016.
General and administrative expenses for the first quarter of
2017 were $3.2 million, an increase
from $2.3 million in the same period
of 2016 primarily due to one-time employee transition costs.
Gains on foreign exchange derivatives for the first quarter of
2017 were $1.7 million, an increase
from nil in the first quarter of 2016, due to gains on the
Company's zero-cost collar contracts.
Other income for the first quarter of 2017 was $1.7 million, an increase from other expense of
$1.2 million in the first quarter of
2016, primarily due to differences in foreign currency translation
effects.
Income tax recovery for the first quarter of 2017 was
$2.1 million compared to income tax
expense of $0.9 million in the same
period of 2016. The change is primarily due to the foreign exchange
effects of the strengthening Mexican peso on the calculation of
deferred taxes, partially offset by higher taxable income during
the first quarter of 2017.
Net income for the first quarter of 2017 was $12.0 million or $0.07 per basic share, an increase from
$4.3 million or $0.03 per share for the first quarter of
2016.
Adjusted net income for the first quarter of 2017 was
$4.9 million or $0.03 per basic share, an increase from
$1.8 million or $0.01 per basic share for the first quarter of
2016 primarily due to the increase of gold ounces sold (see
Non-IFRS Measures section).
Operational Results – First Quarter 2017
The
San Agustin project construction
plan originally called for the west crusher at the El Castillo mine to be disassembled and
relocated in early February 2017. The Company reviewed this
plan and determined there would be no impact to the overall
San Agustin construction schedule
by delaying this relocation until early March 2017. As a
result, crushed tonnes placed on the leach pad at El Castillo exceeded the original plan by
approximately 132,000 tonnes. These additional tonnes, along
with improved operating efficiencies at El Castillo and mineralized material grades at
La Colorada that exceeded planned
levels, led to strong first quarter production.
The Company planned and continues to expect that the first and
fourth quarters of 2017 will contribute higher quarterly production
than the second and third quarters. Relocation of the west
crusher to San Agustin during the
first quarter reduces overall crushing capacity at El Castillo in the second quarter by
approximately 45%. The re-start, commissioning and ramp-up of
the west crusher at San Agustin
during the second quarter and third quarter will mean that crushing
capacity is expected to be fully restored by the end of the third
quarter.
Bill Zisch, Chief Operating
Officer, commented: "By re-evaluating our plan and delaying the
relocation of the west crusher from El
Castillo to San Agustin, we
saw placement of ore on the pad at El
Castillo above the budget for the quarter. We
initiated changes with our crusher maintenance program at
El Castillo, which led to less
downtime, and also made modifications to our blasting practices to
increase rock fragmentation at both El
Castillo and La Colorada,
which aided crusher throughput. All of these improvements
contributed to higher than budgeted throughput and ore placement
during the quarter."
FIRST QUARTER 2017
EL CASTILLO OPERATING STATISTICS
|
|
3 Months Ended
March 31
|
|
2017
|
2016
|
%
Change
|
Mining
|
|
|
|
Tonnes ore
(000s)
|
2,467
|
2,747
|
(10%)
|
Tonnes waste
(000s)
|
3,389
|
4,163
|
(19%)
|
Tonnes mined
(000s)
|
5,856
|
6,910
|
(15%)
|
Tonnes per day
(000s)
|
65
|
76
|
(14%)
|
Waste/ore
ratio
|
1.37
|
1.52
|
(10%)
|
Heap Leach
Pads
|
|
|
|
Tonnes crushed East
(000s)
|
1,301
|
1,262
|
3%
|
Tonnes crushed CR2
(000s)
|
451
|
0
|
-
|
Tonnes overland
conveyor (000s)
|
769
|
1,491
|
(48%)
|
Production
|
|
|
|
Gold grade loaded to
the pads (g/t)1
|
0.39
|
0.26
|
50%
|
Gold loaded to leach
pads (oz)2
|
31,956
|
23,259
|
37%
|
Projected recoverable
gold ounces (oz)4
|
19,359
|
13,078
|
48%
|
Gold produced
(oz)3
|
22,085
|
17,359
|
27%
|
Gold sold
(oz)
|
20,063
|
15,406
|
30%
|
Cash cost per gold
ounce sold5
|
885
|
850
|
4%
|
1 "g/t"
refers to grams per tonne
|
2 "oz"
refers to troy ounce
|
3 Produced
ounces are calculated as ounces loaded to carbon
|
4 Recovery
rates: ROM oxide 50%, crushed oxide 70%, ROM transition 40%,
crushed transition 60%, crushed sulphides argilic 30%, crushed
sulphides silicic 17%
|
5 Please
refer to the section below entitled "Non-IFRS Measures" for a
discussion of this Non-IFRS Measure.
|
Summary of Production Results at El Castillo
First quarter production
surpassed expectations as run-of-mine material placed close to the
leach pad liner but not fully leached during the last two months of
2016 was put back under leach leading to an increase in solution
grades from the east leach pad. Additionally, higher recovery
oxide materials constituted over 80% of the quarter's material
loaded onto the leach pads versus a budgeted level of approximately
65%. Tonnes crushed after delaying the disassembling and
relocation of the west crusher from El
Castillo to San Agustin
also contributed to higher production. During March, the
first month that El Castillo
crushing operations consisted of the east and CR2 crushers alone, a
focus on uptime optimization and blending softer, stockpiled ore
resulted in the east and CR2 crushers sending approximately 74,000
more tonnes to the leach pads versus budget.
FIRST QUARTER 2017
LA COLORADA OPERATING STATISTICS
|
|
|
|
3 Months Ended
March 31
|
|
2017
|
2016
|
%
Change
|
Mining
|
|
|
|
Mineralized material
tonnes (000s)
|
1,065
|
1,163
|
(8%)
|
Tonnes waste
(000s)
|
5,197
|
3,400
|
53%
|
Total tonnes
(000s)
|
6,262
|
4,563
|
37%
|
Tonnes per day
(000s)
|
70
|
50
|
40%
|
Waste/mineralized
material ratio
|
4.88
|
2.92
|
67%
|
Tonnes rehandled
(000s)
|
0
|
50
|
(100%)
|
Heap Leach
Pads
|
|
|
|
Crushed tonnes to
pads (000s)
|
1,108
|
1,213
|
(9%)
|
Tonnes direct to pads
(000s)
|
80
|
0
|
-
|
Production
|
|
|
|
Gold grade loaded to
the pads (g/t)1
|
0.55
|
0.55
|
0%
|
Gold loaded to leach
pads (oz)2
|
21,018
|
21,519
|
(2%)
|
Projected recoverable
GEOs loaded (oz)4
|
13,353
|
14,778
|
(10%)
|
Gold produced
(oz)3
|
14,401
|
13,894
|
4%
|
Silver produced
(oz)3
|
75,599
|
49,370
|
53%
|
GEOs produced
(oz)3
|
15,481
|
14,654
|
6%
|
Gold sold
(oz)
|
14,899
|
13,772
|
8%
|
Silver sold
(oz)
|
74,897
|
45,031
|
66%
|
GEOs sold
|
15,969
|
14,465
|
10%
|
Cash cost per gold
ounce sold5
|
570
|
654
|
(13%)
|
1 "g/t"
refers to grams per tonne
|
2 "oz"
refers to troy ounce
|
3 Produced
ounces are calculated as ounces loaded to carbon
|
4 Recovery
rates: gold 60% and silver 30%
|
5 Please
refer to the section below entitled "Non-IFRS Measures" for a
discussion of this Non-IFRS Measure.
|
Summary of Production Results at La Colorada
First quarter production
benefited from an area of higher than expected mineralized material
grade in the Grand Central/La
Colorada pit that was loaded onto the leach pads.
Leach solution grades were also raised by a scheduled re-leach
program during the quarter. Stripping at the El Creston pit
began in the fourth quarter of 2016 with mineralized material
encountered slightly ahead of schedule. Positive drill
results at the El Creston deposit have confirmed mineralized and
non-mineralized locations and quantities that are expected to be
incorporated into updated mine plans during the year.
San Agustin
The
San Agustin project represents the
next leg of the Company's growth. The Company envisions the
San Agustin deposit to be a
significant contributor within the El
Castillo mining complex. The project is located
approximately 10 kilometres from the nearby El Castillo mine and will share
infrastructure. San Agustin
boasts a short construction period and modest initial capital
investment of $43 million. At
May 5, 2017, approximately
$19.8 million had been spent or
committed and construction was approximately 50% complete, with
first gold pour expected during the third quarter of 2017. To
view recent photos of construction progress, please visit:
http://www.argonautgold.com/gold_operations/san_agustin/construction_progress/.
Magino
On January 23,
2017, the Company submitted the Environmental Impact
Statement for the project and continues to engage all stakeholders
during the environmental assessment process. The Company
continues to advance a feasibility study, which is expected to be
completed during the second half of 2017. The Company has also
made good progress in advancing First Nations impact benefit
agreements.
2017 Guidance
The Company reiterates its 2017
production guidance and cost guidance:
- Production between 115,000 and 130,000 GEOs
- Cash cost between $725 and $775
per gold ounce sold (see Non-IFRS measures section).
- All-in sustaining cost between $910 and
$960 per gold ounce sold (see Non-IFRS measures
section).
Capital Expenditures for 2017
In addition to the
original plan of approximately $76
million on capital expenditures and exploration initiatives,
the Company will spend approximately $28
million to acquire the Fresnillo mineral concession adjacent to the
El Castillo mine and to complete
an associated infill drill program during 2017 (see press release
dated February 23, 2017).
During the first quarter of 2017, the Company spent approximately
$32 million on capital expenditures
and exploration initiatives.
Management Change
Tom
Burkhart, Vice President of Exploration retired on
March 31, 2017. The Company and
Mr. Burkhart have executed a consulting agreement. Mr.
Burkhart's career as a professional geologist spans over 35
years. Early in his career, Mr. Burkhart's work was primarily
focused in Nevada where he was
part of the team that discovered the Hill Top gold deposit.
He also ran successful exploration programs at Florida Canyon and
Relief Canyon. During his career, Mr. Burkhart spent several
years abroad leading exploration teams in Argentina and Peru where he was directly responsible for the
discovery of several economic gold deposits before joining Argonaut
Gold in 2010. While with Argonaut, Mr. Burkhart has been
responsible for the expansion of mineral resources at the Company's
active mine sites where there has been considerable exploration
success. Mr. Burkhart was heavily involved with the
evaluation of the San Agustin
project, which is currently in construction.
Pete Dougherty, President and CEO
commented: "We will miss the passion and energy Tom brings to the
office and into the field on a daily basis and are grateful that he
has agreed to a consulting contract. He has been a valued
member of our executive team since 2010 and his geological
knowledge and expertise has greatly contributed to Argonaut's
success. Tom's impressive body of work throughout his career speaks
for itself. We wish him the best in his well-earned
retirement."
Argonaut Gold Q1 Operating and Financial Results Conference
Call and Webcast:
The Company anticipates releasing results
after the close of market on May 9,
2017 and will host the Q1 financial results call on
May 10, 2017 at 8:30 am EDT.
Q1 Conference Call
Information
|
|
Toll Free (North
America):
|
1-888-231-8191
|
|
International:
|
1-647-427-7450
|
|
Conference
ID:
|
3127426
|
|
Webcast:
|
www.argonautgold.com
|
|
Q1 Conference Call
Replay:
|
|
Toll Free Replay Call
(North America):
|
1-855-859-2056
|
|
International Replay
Call:
|
1-416-849-0833
|
The conference call replay will be available from 11:30 am EDT on May 10,
2017 until 11:59 pm EDT on
May 24, 2017.
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", "Adjusted net income"
and "Adjusted earnings per share – basic" in this press release to
supplement its financial statements 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 expenses,
exploration expenses, accretion of reclamation provision and
sustaining capital expenditures divided by gold ounces sold.
Adjusted net income is equal to net income less foreign exchange
impacts on deferred income taxes, foreign exchange losses, reversal
of non-cash impairment write down related to the net realizable
value of the work-in-process inventory and recognition of
previously unrecognized Mexican deferred tax assets. Adjusted
earnings per share – basic is equal to adjusted net income divided
by the basic weighted average number of common shares outstanding.
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.
This press release should be read in conjunction with the
Company's unaudited consolidated financial statements for the three
months ended March 31, 2017 and
associated MD&A, for the same period, which are available from
the Company's website, www.argonautgold.com, in the "Investors"
section under "Financial Filings", and under the Company's profile
on SEDAR at www.sedar.com.
Creating Value Beyond Gold
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 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; the ability to obtain
permits for operations; synergies; the realization of mineral
reserve estimates; the timing and amount of estimated future
production; costs of production; 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;
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", "should" 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
variations in ore grade or recovery rates, changes in market
conditions, risks relating to the availability and timeliness of
permitting and governmental approvals; risks relating to
international operations, fluctuating metal prices and currency
exchange rates, changes in project parametres, 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.
These factors are discussed in greater detail in Argonaut's most
recent Annual Information Form and in the most recent Management
Discussion and Analysis filed on SEDAR, which also provide
additional general assumptions in connection with these statements.
Argonaut cautions that the foregoing list of important factors is
not exhaustive. Investors and others who base themselves on
forward-looking statements should carefully consider the above
factors as well as the uncertainties they represent and the risk
they entail. Argonaut believes that the expectations reflected in
those forward-looking statements are reasonable, but no assurance
can be given that these expectations will prove to be correct and
such forward-looking statements included in this press release
should not be unduly relied upon. These statements speak only as of
the date of this press release.
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, a Qualified Person under
National Instrument 43-101 ("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.
SOURCE Argonaut Gold Ltd.