Magino Project remains on track for first gold pour in the second half of May and
commercial production in the third quarter

Argonaut Gold Inc. (TSX: AR) reported financial and operating results for the three months ended March 31, 2023, as well as a development update for its Magino Project. All dollar amounts are expressed in United States dollars, unless otherwise specified (CA$ refers to Canadian dollars).

FIRST QUARTER HIGHLIGHTS

Three months ended March 31, 2023 compared to three months ended March 31, 2022

• Consolidated production of 38,585 gold equivalent ounces¹, was 30% lower compared to 55,516 GEOs from the first quarter of 2022, due to lower ore tonnes mined and lower grades placed on the leach pads at the Company’s three Mexican operations as part of the wind down of those operations.
• Cost of sales² per ounce of $1,977, cash cost² per ounce of $1,660 and all-in-sustaining costs ²” per ounce of $1,947 were between 27% and 44% higher than the prior year period; however, they were largely in line with 2023 full-year guidance. With the planned first gold pour of the Magino mine in the second half of May, cost of sales², cash cost², and AISC² are expected to be in-line with full year 2023 guidance.
• Revenue of $69.0 million was 35% lower than $105.8 million from the first quarter of 2022, due to lower planned production from the Company’s three Mexican mines – El Castillo, La Colorada and San Agustin. El Castillo ceased mining activities in the fourth quarter of 2022 and is now in residual leaching and reclamation.
• Gross loss of $2.5 million was $24.2 million lower than gross profit of $21.7 million from the first quarter of 2022, due to planned lower revenues from lower production, higher costs at the Mexican operations and inventory impairment related to the inability to apply fuel tax credits, net realizable value, and inventory obsolescence write downs.
• Generated cash flow from operating activities before changes in non-cash working capital and other items totaling $10.5 million, a reduction of 58% due to lower gross profit.
• Net loss of $10.4 million, or $0.01 per basic and diluted share, compared to net income of $5.6 million, or $0.02 per share largely due to lower gross profit.
• Adjusted net loss² of $2.8 million, or $0.00 per basic share, compared to adjusted net income² of $8.2 million, or $0.03 per share.
• Cash and cash equivalents of $58.4 million and net debt² of $83.3 million.
• Undrawn debt capacity of $104.0 million at quarter-end.
• On March 28, 2023, the Company completed the sale of the Ana Paula project for $10 million cash at closing and contingent consideration totaling $20 million subject to achievement of certain milestones.
• Construction of the Company’s largest and lowest cost gold mine, the Magino Project is on track for first gold pour in the second half of May, with commercial production expected during the third quarter of 2023.

“The year is off to a solid start with our four operating mines tracking well to plan, as well as Magino, our new flagship mine.  We believe Magino has the potential to be one of the largest and lowest cost gold mines in Canada. To achieve that goal, we are embarking on a 12-to-15-month drill program, leveraging off of the 2022 drill program that significantly increased our open pit resource base.  A portion of the drill program is designed to convert open pit resources to reserves to determine the optimal processing rates for the mine based on an expected larger reserve base. The balance of the program will test the high-grade deep potential as well as the potential west along strike,” said Richard Young, President and Chief Executive Officer.

First Quarter Financial & Operating Highlights
Three months ended March 31, 2023 and 2022

“Argonaut’s first quarter financial results were in line with plan and reflect the transformation of our production base as we continue winding down our high-cost, low-grade Mexican mines, while preparing for first gold pour at our new flagship Canadian operation. Argonaut is in a solid financial position to complete the construction and ramp up of  Magino with a quarter-end cash balance of $58.4 million, $104 million in undrawn debt, and approximately $103 million left to spend on project construction,” stated David Ponczoch, Chief Financial Officer.

Growth Highlights

Magino Project Update

• As at March 31, 2023, the Company had incurred approximately $652 million of the $755 million (CA$980 million) estimate at completion.
• Operational readiness activities continue to advance rapidly with the focus on preparing for first gold pour in the second half of May 2023.
• Workforce buildup continues but sourcing labour remains a challenge.
• Mining operations have commenced and ore is being stockpiled but at a lower rate than planned.
• Magino resources were updated based on exploration drilling in 2022; the deposit now contains 4.6 million ounces of gold in the Measured and Indicated category, with a further 0.9 million ounces contained in the inferred resource category, inclusive of 2.4 million ounces of reserves.³

“Major components critical to commissioning Magino’s mill are coming together as we prepare for first gold pour, which is now expected during the second half of May, which is marginally behind the May 15th target date. The project’s capital costs remain unchanged from our year-end update. The only operational areas behind schedule include our manpower build up and mining rates, however, we have put recovery plans in place, which are putting us back on track,” stated Marc Leduc, Chief Operating Officer.

Consolidated Financial Statements

Argonaut’s consolidated financial statements and related management’s discussion & analysis for the three months ended March 31, 2023, are available on Argonaut’s website at www.argonautgold.com and on under the Company’s issuer profile on SEDAR at www.sedar.com.

Non-IFRS Measures

The Company provides certain non-IFRS measures as supplementary information that management believes may be useful to investors to explain the Company’s financial results.

“Cost of sales per ounce sold” and “Cash cost per ounce sold” are common financial performance measures in the gold mining industry but have no standard meaning under IFRS. The Company reports cost of sales and cash cost per ounce on a sales basis. We believe that, in addition to conventional measures prepared in accordance with IFRS, certain investors use this information to evaluate the Company’s performance and ability to generate cash flow. Accordingly, it 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. These measures, along with sales, are considered to be key indicators of a Company’s ability to generate operating profits and cash flow from its mining operations.

Cash cost figures are calculated in accordance with a standard developed by The Gold Institute, which was a worldwide association of suppliers of gold and gold products and included leading North American gold producers. The Gold Institute ceased operations in 2002, but the standard is considered the accepted standard of reporting cash cost of production in North America. Adoption of the standard is voluntary and the cost measures presented may not be comparable to other similarly titled measures of other companies.

The World Gold Council definition of AISC seeks to extend the definition of cash cost by adding corporate, and site general and administrative costs, reclamation and remediation costs (including accretion and amortization), exploration and study costs (capital and expensed), capitalized stripping costs and sustaining capital expenditures and represents the total costs of producing gold from current operations. AISC excludes income tax payments, interest costs, costs related to business acquisitions and items needed to normalize profits. Consequently, this measure is not representative of all of the Company’s cash expenditures. In addition, the calculation of AISC does not include depreciation expense as it does not reflect the impact of expenditures incurred in prior periods. Therefore, it is not indicative of the Company’s overall profitability.

“Adjusted net (loss) income” and “adjusted net (loss) income per basic share” exclude a number of temporary or one-time items, which management believes not to be reflective of the underlying operations of the Company, including the impacts of: unrealized losses (gains) on derivatives, non-operating income, foreign exchange losses (gains), impacts of foreign exchange on deferred income taxes, inventory impairments (reversals), mineral properties, plant and equipment impairments (reversals), and other unusual or non-recurring items. Adjusted net (loss) income per basic share is calculated using the weighted average number of shares outstanding under the basic calculation of earnings per share as determined under IFRS.

“Net (debt) cash” is calculated as the sum of the cash and cash equivalents balance net of debt as at the statement of financial position date. “Net (debt) cash” calculation includes unamortized transaction costs, but excludes Convertible Debentures and equipment loans which are currently included in total debt, in order to show the nominal undiscounted debt. This measure has no standard meaning under IFRS and other companies may calculate this measure differently.

1. The following tables provide reconciliations of production costs per the financial statements to cost of sales per ounce, cash cost per ounce, and AISC per ounce for each mine:

2. Adjusted net (loss) income and adjusted net (loss) income per basic share exclude a number of temporary or one-time items detailed in the following table:

3. A reconciliation of net debt is detailed in the following table:

This press release should be read in conjunction with the Company’s unaudited interim condensed consolidated financial statements for the three months ended March 31, 2023 and associated MD&A for the same period, which are available on the Company’s website at www.argonautgold.com, in the “Investors” section under “Financial Filings”, and under the Company’s issuer profile on SEDAR at www.sedar.com.

About Argonaut Gold

Argonaut Gold is a Canadian gold company with a portfolio of operations and multi-stage assets in North America. Focused on becoming a low-cost mid-tier gold producer, the Company is in the final stages of construction at its Magino Project, located in Ontario, Canada. Magino is expected to achieve commercial production in the third quarter of 2023 and become Argonaut’s largest and lowest cost mine. The commissioning of Magino will be the first step in transforming the Company as it enters a pivotal growth stage. The Company also has three operating mines including the Florida Canyon mine in Nevada, USA, where it is pursuing additional growth,  La Colorada mine in Sonora, Mexico and San Agustin mine in Durango, Mexico.