Argonaut Gold Inc. (TSX: AR) is pleased to announce today its operating and financial results for the third quarter ended September 30, 2022. For the third quarter 2022, the Company reports production of 45,939 gold equivalent ounces, revenue of $75.3 million, cash flow from operating activities before changes in non-cash working capital and other items of $13.6 million, net loss of $1.3 million or loss per share of $0.00, and adjusted net loss³ of $0.2 million or adjusted loss per share³ of $0.00. All dollar amounts are expressed in United States dollars, unless otherwise specified (C$ refers to Canadian dollars).

“We made significant progress on the completion and construction of the Magino Project. We remain focused on the long-term strategic objective to generate increasing cash flow through low-cost production growth. Magino is a key driver of our future growth with a production potential of 142,000 ounces per year for the first five years of production at significantly lower life-of-mine cash costs³ of approximately $907 per ounce,” said Larry Radford, Argonaut President and CEO.

“Year-to-date, our production results are in-line with our expectations. We had a challenging third quarter at our La Colorada and Florida Canyon mines that was mostly offset by the consistent performance of our El Castillo Complex. The challenge at these two mines were due to the block model performance and seasonal rains at La Colorada that are expected but were heavier than normal. With infill programs ongoing in support of revised block models, we expect improved reconciliations in the future.”

Q3 2022 and RECENT HIGHLIGHTS  

• Corporate Highlights
  • Produced 45,939 gold equivalent ounces;
  • Delivered cash flow before changes in working capital and other items of $13.6 million;
• Following due diligence by the banking syndicate and meeting the conditions precedent, closed a $250 million debt facility;
• Closed the sale of a 2% net smelter returns royalty agreement on Magino with Franco-Nevada Corporation (“Franco-Nevada”) for proceeds of US$52.5 million;
• Completed a $10 million equity private placement with Franco-Nevada;
• Argonaut has entered into gold price protection through forward gold contracts
  • Beginning in Q3 2023, 25,000 gold ounces per quarter at $1,860 per ounce for the first six quarters; and
  • 15,000 gold ounces per quarter at $1,860 per gold ounce and 10,000 gold ounces per quarter at $1,763 per gold ounce for the next 10 quarters starting in Q1 2025;
• Argonaut has entered into foreign exchange forward contracts for the Canadian dollar for the next 24 months with the average rate of 1.334 Canadian dollars per US dollar.
• Magino Construction
  • At September 30, 2022, of the C$920 million estimated cost to completion, C$626.0 million had been spent and C$726.0 million had been committed.
  • At September 30, 2022, the Magino construction project was estimated at approximately 70% complete.
  • Key leadership roles filled.
    • Advancing Stage 1A of the TMF and starting Stage 1B.
    • Received major process equipment for the mill – the mills and tanks are in place.
    • Pumping, piping, and electrical systems being installed – enclosed and winter ready.
    • All four permanent generators have been received and are in place.
    • Formal Operations Readiness Initiative and commissioning progressing – +72% of the action items are completed.
• Social and Environmental Responsibility
  • At El Castillo, authorization was received from the Ejido Board for the closure plan;
  • At San Agustin, the CFE powerline was commissioned in October, reducing future diesel consumption by approximately 300,000 liters per month;
  • At La Colorada, the Summer Argonauta 2022 course was completed.  The course was provided to young people in the community and included courses in dance, singing, and Environmental Care. The event closing was attended by a representative from the Sonora Secretary of Education and Culture and the Secretary of the City Council of La Colorada;
  • At Florida Canyon, the mine sponsored several different fall youth sports programs, and
  • At Cerro de Gallo, we hosted weeklong summer camps in the local communities.  Held at public schools and in collaboration with the university, we hosted over 150 children with activities focused on arts and crafts, physical education, and a focus on the benefits of mining, water conservation, and environmental awareness.

Third Quarter 2022 Results

Key operating and financial statistics for the third quarter ended September 30, 2022 are outlined in the following table:

The Company sold fewer ounces than it produced in the third quarter 2022 due to timing of gold sales. Those ounces in finished goods inventory were sold in October 2022.  The average realized gold price was $1,895 per gold ounce as compared with the average price of $1,728 for the third quarter 2022. This higher price was realized by delivering into the gold forward pricing contracts for the quarter and into future forward contracts.

Guidance and Outlook

Argonaut maintains its 2022 GEO production guidance and, primarily due to inflationary pressures on key consumable costs, is adjusting its cost guidance higher as outlined in the table below.

2022 GEO Production and Cost Guidance

Argonaut’s condensed interim consolidated financial statements and management’s discussion & analysis (“MD&A”), for the three and nine month periods ended September 30, 2022, are available via Argonaut’s website at https://www.argonautgold.com/English/investors/financial-reports/default.aspx and will be available on SEDAR at www.sedar.com.

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 (loss) income”, “Adjusted (loss) earnings per share – basic” and “Net cash” in this press release to supplement its financial statements, which are presented in accordance with International Financial Reporting Standards.  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.  Adjusted net (loss) income is equal to net (loss) income less foreign exchange impacts on deferred income taxes, foreign exchange (gains) losses, non-cash impairment write down (reversal) of work-in-process inventory, non-cash impairment write down (reversal) of mineral properties, plant and equipment, unrealized (gains) losses on derivatives and care and maintenance expenses.  Adjusted (loss) earnings per share – basic is equal to adjusted net (loss) income divided by the basic weighted average number of common shares outstanding.  Net cash is calculated as the sum of the cash and cash equivalents balance net of debt as at the statement of financial position date. The net debt calculation excludes the convertible debentures and lease liabilities, due to the nature of the obligations, in order to show the nominal undiscounted debt. 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.

The following table provides a reconciliation of production costs per the financial statements to cash cost per gold ounce sold:

AISC includes net cost of sales at the Company’s mining operations, which forms the basis of the Company’s cash cost per gold ounce sold. Additionally, the Company includes general and administrative, exploration, accretion and other expenses, and sustaining capital expenditures. Sustaining capital expenditures exclude all expenditures at the Company’s pre-production, development stage, and advanced exploration stage projects and certain expenditures at the Company’s operating sites that are deemed expansionary in nature.

The following table provides a reconciliation of AISC per gold ounce sold to the consolidated financial statements:

Adjusted net (loss) income and adjusted (loss) earnings per share – basic exclude a number of temporary or one-time items described in the following table, which provides a reconciliation of adjusted net income to the consolidated financial statements:

Net cash or debt is calculated as the sum of the cash and cash equivalents balance net of debt as at the statement of financial position date. The net debt calculation excludes the convertible debentures and lease liabilities, due to the nature of the obligations, in order to show the nominal undiscounted debt.

A reconciliation of net cash (debt) is provided below:

This press release should be read in conjunction with the Company’s unaudited interim condensed consolidated financial statements for the three and nine months ended September 30, 2022 and associated MD&A for the same periods, 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.

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.  The Company also holds the construction stage Magino project, the advanced exploration stage Cerro del Gallo project and several other exploration stage projects, all of which are located in North America.