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Argonaut Gold Announces Record Quarterly and Annual Revenue and Cash Flow from Operating Activities; Provides Fourth Quarter and Full Year Financial and Operating Results

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Argonaut Gold Announces Record Quarterly and Annual Revenue and Cash Flow from Operating Activities; Provides Fourth Quarter and Full Year Financial and Operating Results

 

 

 

 

 

Argonaut Gold Inc. (TSX: AR) is pleased to announce its financial and operating results for the fourth quarter and year ended December 31, 2020.  For the fourth quarter 2020, the Company reports record quarterly revenue of $100.8 million, adjusted net income1 of $20.8 million or adjusted earnings per basic share1 of $0.07 and net income of $18.0 million or earnings per basic share of $0.06, derived from the sale of 53,478 gold equivalent ounces2 (“GEO” or “GEOs”), which generated record quarterly cash flow before changes in working capital of $39.5 million.  For the full year 2020, the Company reports record annual revenue of $319.7 million, adjusted net income1 of $48.3 million or adjusted earnings per basic share1 of $0.21 and net income of $14.2 million or earnings per basic share of $0.06, derived from the sale of 179,169 GEOs, which generated record annual cash flow from operations before working capital changes of $95.0 million.  All dollar amounts are expressed in United States dollars unless otherwise specified.

 

______________
1 See “Non-IFRS Measures” section.
2 GEOs are based on a conversation ratio of 80:1 for silver to gold for 2020 and 75:1 for 2019.  The silver to gold conversation ratio is based on the three-year trailing average silver to gold ratio.

 

CEO Commentary

 

Pete Dougherty, President and CEO stated: “During 2020, we put the Company in a fantastic position to execute on our transition strategy from a short mine life, high-cost junior producer to a long mine life, lower cost intermediate producer through the permitting and financing achievements for the Magino project in Ontario, Canada, leading to a construction decision, and the acquisition of the Florida Canyon mine in Nevada, USA.  As we look to 2021, we are focused on continuing to execute on this strategy now that the pieces are in place to do so, as well as the exploration upside at the Magino and the Florida Canyon districts.”

 

 

The table below outlines the Company’s performance compared to updated full-year guidance:

 


Full Year 2020

Guidance1
GEO production2 203,483 200,000 – 215,000
Cash cost per gold ounce sold2,3 $936 $925 – $1,025
AISC per gold ounce sold2,3 $1,244 $1,225 – $1,350
Capital (including exploration
and excluding Magino
construction capital)2
$60 million $58 million – $64 million
Magino construction capital $19 million $35 million – $40 million
1 As presented in the third quarter 2020 financial and operating results press release dated November 5, 2020.
2 Florida Canyon production during Q1 2020 and Q2 2020 was under Alio Gold Inc. prior to the closing of the merger between Alio Gold Inc. and Argonaut on July 1, 2020.  2020 GEO production and capital guidance estimated the combined full year 2020 production from the El Castillo, San Agustin, La Colorada and Florida Canyon.  Cash cost and AISC guidance do not include costs associated with Florida Canyon prior to Argonaut’s ownership.
3 See “Non-IFRS Measures” section.

 

The Company achieved its updated GEO production, cash cost, AISC and capital guidance. The Magino project was approved for construction in October 2020 and a fixed-bid contract covering approximately 40% of the initial project capital was announced early January 2021.  Fourth quarter 2020 spending on Magino construction capital was approximately $19.3 million, with the balance of the estimated 2020 spend, primarily related to the timing of procurement of long-lead time equipment, shifting from December 2020 to January 2021 given the timing of execution of the fixed-bid contract.

 

Key operating and financial statistics for the three months and year ended December 31, 2020 are outlined in the following table:

 

 

3 months ended  
December 31
%
Change
Year ended
December 31
%
Change
2020 2019    20201 2019
Financial Data (in millions except for earnings (loss) per share)
Revenue $100.8 $72.1 40% $319.7 $268.9 19%
Net income (loss) $18.0 ($107.5) 117% $14.2 ($93.1) 115%
Earnings (loss) per share $0.06 ($0.60) 110% $0.06 ($0.52) 112%
Adjusted net income2 $20.8 $2.7 670% $48.3 $13.0 236%
Adjusted earnings per share – basic2 $0.07 $0.01 600% $0.21 $0.07 171%
Cash flow from operating activities
before changes in non-cash operating
working capital
$39.5 $27.2 45% $95.0 $73.8 29%
Cash and cash equivalents $214.2 $38.8 452%
Net cash2 $214.2 $28.8 644%
Gold Production and Cost Data
GEOs loaded to the pads3 113,463 101,348 12% 371,344 361,599 3%
GEOs projected recoverable3,4 65,426 46,608 40% 191,039 199,436 (4%)
GEOs produced3,5 56,985 47,521 20% 179,003 186,615 (4%)
GEOs sold3 53,478 48,843 9% 179,169 194,269 (8%)
Average realized sales price $1,882 $1,484 27% $1,789 $1,390 29%
Cash cost per gold ounce sold2 $910 $1,441 (37%) $936 $1,041 (10%)
All-in sustaining cost per gold ounce sold2 $1,189 $1,690 (30%) $1,244 $1,299 (4%)
1 Year ended December 31, 2020 reflects Florida Canyon operations for the period of Argonaut ownership from July 1, 2020 to December 31, 2020.
2 Please refer to the section below entitled “Non-IFRS Measures” for a discussion of these Non-IFRS Measures.
3GEOs are based on a conversion ratio of 80:1 for silver to gold for 2020 and 75:1 for 2019. The silver to gold conversion ratio is based on the three-year trailing average silver to gold ratio.
4Expected recoverable GEOs are based on the assumptions and parameters as set forth in the El Castillo Complex Technical Report dated March 27, 2018, the La Colorada Gold/Silver Mine Technical Report dated March 27, 2018 and the Florida Canyon Technical Report dated July 8, 2020.  In periods where the Company mines material not specifically defined in a technical report (for example: run-of-mine ore or low grade stockpile material), management uses its best estimate of recovery based on the information available.
5Produced ounces are calculated as ounces loaded to carbon.

 

2020 and Recent Company Highlights:

 

  • Corporate Highlights:
    • Full year 2020:
      • Record annual revenue of $319.7 million.
      • Record annual cash flow from operating activities before changes in non-cash operating working capital of $95.0 million.
      • Completed at-market merger with Alio Gold Inc. (“Alio”) creating a North American, diversified intermediate gold producer.
      • Closed C$126.5 million bought deal equity financing to fund Magino construction.
    • Fourth quarter 2020
      • Closed $57.5 million bought deal convertible debenture financing to fund Magino construction.
      • Extended and expanded corporate revolving credit facility for up to $125 million, which is fully undrawn.
      • Set new record for quarterly GEO production during the fourth quarter 2020.
      • Entered into a contingent agreement to sell the Ana Paula project.
      • Closed a C$11.5 million bought deal private placement of flow-through shares to fund further exploration at Magino.
    • Subsequent to year end 2020:
      • Closed a C$26.5 million bought deal of flow-through shares to fund qualifying development expenditures at Magino.
  • Social and Environmental Responsibility:
    • Received nationally awarded Environmental Socially Responsible Company recognition for the ninth consecutive year at both the El Castillo Complex and La Colorada mine.
    • La Colorada mine recognized as a leader in Social Responsibility by Clúster Minero de Sonora A.C.
    • Commenced and continued COVID-19 support for communities in Mexico, including sanitization of homes and businesses and donations of hygiene supplies.
    • Year-round voluntary support for Safe Haven Wildlife Sanctuary in Imlay, Nevada.
    • High school student scholarship donations for the Mining Industry Foundation in Winnemucca, Nevada.
  • El Castillo Complex:
    • Produced 110,049 GEOs despite a two-month suspension of mining, crushing and stacking operations due to the Mexican Federal government decree at the onset of the COVID-19 pandemic.
    • Reduced cash cost per gold ounce sold by 24% and cost per tonne of ore processed by 34% at El Castillo compared to 2019 (see “Non-IFRS Measures” section).
    • Reduced cash cost per gold ounce sold by 10% and cost per tonne of ore processed by 10% at San Agustin compared to 2019 (see “Non-IFRS Measures” section).
  • La Colorada:
    • Produced 46,371 GEOs despite a two-month suspension of mining, crushing and stacking operations due to the Mexican Federal government decree at the onset of the COVID-19 pandemic.
    • Reduced cash cost per gold ounce sold by 11% and cost per tonne of ore processed by 4% compared to 2019 (see “Non-IFRS Measures” section).
  • Florida Canyon:
    • Filed updated life-of-mine plan National Instrument (“NI”) 43-101 Technical Report demonstrating over $325 million of mine site, after-tax free cash flow at $1,700 per ounce gold.
  • Magino:
    • Made decision to advance Magino into construction.
    • Executed a fixed-bid contract for a significant portion of the Magino project initial capital.
    • Continued to intersect high-grade gold mineralization below and adjacent to the planned pit and identified multiple new high-grade structures hosting multiple veins:
      • Elbow and Central zones showing promising high-grade gold continuity.
      • Intersected high-grade gold mineralization in new zones Scotland, #42, Sandy and South.
      • South zone strike length extended to 1.5 kilometers and remains open to the west and at depth.
    • Completed pivotal permitting milestone with the Federal Cabinet Decision to Authorize Schedule 2 amendment.
    • Obtained key Species at Risk permit for bat conservation.
    • Completed a major permitting milestone with the Magino Closure Plan filing.
    • Accommodation agreement framework agreed to with Garden River First Nation.
    • Completed and received authorization for Fisheries & Oceans Canada Fish Habitat Compensation Plan.
  • Cerro del Gallo:
    • Submitted and advanced an updated permit application for the project.

 

Financial Results – Fourth Quarter 2020

Record quarterly revenue was $100.8 million for the fourth quarter of 2020, an increase from $72.1 million for the fourth quarter of 2019.  During the fourth quarter of 2020, gold ounces sold totaled 51,497 at an average realized price per ounce of $1,882, compared to 47,073 gold ounces sold at an average price per ounce of $1,484 during the same period of 2019.  Gold ounces sold for the fourth quarter of 2020 increased compared to the same period in 2019 primarily due to the addition of the gold ounces sold from the Florida Canyon mine offset by decreases in gold ounces produced and sold at the El Castillo mine mostly related to the change from processing crushed ore to run-of-mine ore and the San Agustin mine related to lower gold grades.

 

Income from continuing operations for the fourth quarter of 2020 was $20.3 million or $0.07 per basic or diluted share compared to a loss from continuing operations of $107.5 million or $0.60 per share in the fourth quarter of 2019.  Loss from discontinued operations for the fourth quarter of 2020 was $2.3 million as a result of the Ana Paula project being classified as a held-for-sale asset as at December 31, 2020 and as a discontinued operation for 2020.  Net income for the fourth quarter of 2020 was $18.0 million or $0.06 per basic or diluted share compared to a net loss of $107.5 million or $0.60 loss per share for the fourth quarter of 2019.  The increase is net income is primarily related to record quarterly revenue of $100.8 million during the fourth quarter 2020 and the impact of the non-cash impairment of $111.0 million associated with the San Antonio project during the fourth quarter 2019.

 

Record quarterly cash flow from operating activities before changes in non-cash operating working capital was $39.5 million.  During the fourth quarter of 2020, cash increased by $36.3 million due primarily to $31.5 million of cash flows from operations (including changes in non-cash operating capital and other items), $54.0 million net proceeds from the convertible debentures, and $8.2 million from issuance of flow-through shares, partially offset by $34.8 million of capital expenditures incurred and the repayment of $22.1 million of debt, as compared to the fourth quarter of 2019 in which cash increased by $3.2 million due primarily to $17.7 million of cash flows from operations, partially offset by $11.2 million of capital expenditures incurred and the repayment of $4.0 million of debt.

 

Financial Results – 2020

Record annual revenue for 2020 was $319.7 million, an increase from $268.9 million for 2019.  Gold ounces sold totaled 172,024 at an average realized price per ounce of $1,789 (compared to 187,802 gold ounces sold at an average price per ounce of $1,390 for 2019).  Gold ounces sold for 2020 decreased compared to the same period in 2019, primarily as a result of the temporary suspension of mining, crushing and stacking activities in response to the Mexican Federal Government decree related to the COVID-19.  Other factors include a decrease in gold ounces sold at the La Colorada and San Agustin mines due to a reduction in ore grades and a decrease in gold ounces sold at the El Castillo mine due to the change from processing crushed ore to run-of-mine ore, offset by an addition of the gold ounces sold from the Florida Canyon mine.

 

Income from continuing operations for 2020 was $17.9 million or $0.08 per basic or diluted share compared to a loss from continuing operations of $93.1 million or $0.52 per share in 2019.  Loss from discontinued operations for 2020 was $3.7 million as a result of the Ana Paula project, which has been classified as a held-for-sale asset as at December 31, 2020 and as a discontinued operation for 2020.  Net income for 2020 was $14.2 million or $0.06 per basic or diluted share compared to a net loss of $93.1 million or $0.52 loss per share for the fourth quarter of 2019.  The increase is net income is primarily related to record annual revenue of $319.7 million in 2020 and the impact of the non-cash impairment of $111.0 million associated with the San Antonio project in 2019.

 

Record annual cash flow from operating activities before changes in non-cash operating working capital was $95.0 million.  During 2020, cash increased by $175.5 million due primarily to $111.7 million of cash flows from operations (including changes in non-cash operating working capital and other items), $89.4 million from the public offering of shares, $54.0 million from the convertible debentures, and $8.2 million from issuance of flow-through shares, partially offset by $28.7 of debt repayments and $63.9 million of capital expenditures incurred, as compared to 2019 in which cash increased by $23.4 million due primarily to $74.8 million of cash flows from operations, partially offset by $51.8 million of capital expenditures incurred.

 

Operating Results – Fourth Quarter 2020

 

During the fourth quarter of 2020, the Company achieved record quarterly production of 56,985 GEOs at a cash cost per gold ounce sold of $910 and an all-in sustaining cost (“AISC”) per gold ounce sold of $1,189, compared to 47,521 GEOs at a cash cost of $1,441 per gold ounce sold and an AISC per gold ounce sold of $1,690 during the fourth quarter of 2019 (see “Non-IFRS Measures” section).  Higher GEO production is primarily related to the addition of the Florida Canyon mine following the acquisition of Alio on July 1, 2020.  Lower cash cost per gold ounce sold and AISC per gold ounce sold was primarily due to an impairment of work-in-progress inventory of $20.1 million at the El Castillo Complex and $12.1 million at the La Colorada mine in the fourth quarter of 2019, which increased the cash cost and AISC during the fourth quarter of 2019.

 

Operating Results – 2020

 

During 2020, the Company achieved production of 179,003 GEOs at a cash cost per gold ounce sold of $936 and an AISC per gold ounce sold of $1,244, compared to 186,615 GEOs at a cash cost per gold ounce sold of $1,041 and AISC per gold ounce sold of $1,299 in 2019 (see “Non-IFRS Measures” section).  Lower GEO production in 2020 is primarily related to the change from processing crushed ore to run-of-mine ore at the El Castillo mine and the two month suspension of mining, crushing and stacking activities at all Mexican operations due to COVID-19.  Lower production was partially offset by the addition of the Florida Canyon mine following the Alio acquisition on July 1, 2020.  Lower cash cost per gold ounce sold was primarily related to the inventory adjustment recorded during the fourth quarter of 2019.

 

Pete Dougherty commented: “I’m very pleased with how our organization worked with the various levels of the Mexican government to assist in the development of COVID-19 protocols for the Mexican mining industry that prioritize the safety and well-being of our workforces and the communities in which we operate.  While the two month temporary suspension of mining, crushing and stacking operations we experienced in 2020 clearly had an impact on all Mexican operations, we successfully and safely re-started operations and have experienced very minimal COVID-19 infections throughout our Mexican workforce due to our strict protocols.”

 

 

FOURTH QUARTER AND FULL YEAR 2020 EL CASTILLO COMPLEX OPERATING STATISTICS

 

 

3 Months Ended Dec 31 Year Ended Dec 31
2020 2019 %
Change
2020 2019 %
Change
Mining (in 000s except
waste/ore ratio)
Tonnes ore El Castillo 2,910 1,890 54% 8,608 8,914 (3%)
Tonnes ore San Agustin 2,807 2,460 14% 9,261 8,453 10%
Tonnes ore 5,717 4,350 31% 17,869 17,367 3%
Tonnes waste El Castillo 3,107 3,052 2% 9,531 13,293 (28%)
Tonnes waste San Agustin 1,904 1,808 5% 6,171 6,166 0%
Tonnes waste 5,011 4,860 3% 15,702 19,459 (19%)
Tonnes mined El Castillo 6,017 4,942 22% 18,139 22,207 (18%)
Tonnes mined San Agustin 4,711 4,268 10% 15,432 14,619 6%
Tonnes mined 10,728 9,210 16% 33,571 36,826 (9%)
Tonnes per day El Castillo 65 54 20% 50 61 (18%)
Tonnes per day San Agustin 51 46 11% 42 40 5%
Tonnes per day 116 100 16% 92 101 (9%)
Waste/ore ratio El Castillo 1.07 1.61 (34%) 1.11 1.49 (26%)
Waste/ore ratio San Agustin 0.68 0.73 (7%) 0.67 0.73 (8%)
Waste/ore ratio 0.88 1.12 (21%) 0.88 1.12 (21%)
Leach Pads (in 000s)
Tonnes crushed to East leach pads El Castillo 0 714 (100%) 337 3,876 (91%)
Tonnes crushed to West leach pads El Castillo 0 755 (100%) 3 4,311 (100%)
Tonnes direct to leach pads El Castillo 2,911 306 851% 8,420 680 1138%
Tonnes crushed to leach pads San Agustin 2,888 2,382 21% 9,428 8,291 14%
Tonnes to leach pads 5,799 4,157 39% 18,188 17,158 6%
Production
Gold grade loaded to leach pads El Castillo (g/t)1 0.25 0.52 (52%) 0.37 0.41 (10%)
Gold grade loaded to leach pads San Agustin (g/t)1 0.31 0.35 (11%) 0.32 0.38 (16%)
Gold grade loaded to leach pads (g/t)1 0.28 0.42 (33%) 0.35 0.40 (13%)
Gold loaded to leach pads El Castillo (oz)2 23,148 29,584 (22%) 105,286 118,092 (11%)
Gold loaded to leach pads San Agustin (oz)2 28,778 26,815 7% 98,431 100,363 (2%)
Gold loaded to leach pads (oz)2 51,926 56,399 (8%) 203,717 218,455 (7%)
Projected recoverable GEOs loaded El Castillo4 11,852 11,642 2% 43,731 66,140 (34%)
Projected recoverable GEOs loaded San Agustin4 21,349 20,933 2% 72,430 72,981 (1%)
Projected recoverable GEOs loaded4 33,201 32,575 2% 116,161 139,121 (17%)
Gold produced El Castillo (oz)2,3 12,390 13,616 (9%) 45,305 65,145 (30%)
Gold produced San Agustin (oz)2,3 17,265 19,864 13% 59,695 61,842 (3%)
Gold produced (oz)2,3 29,655 33,480 (11%) 105,000 126,987 (17%)
Silver produced El Castillo (oz)2,3 14,213 20,988 (32%) 70,180 102,282 (31%)
Silver produced San Agustin (oz)2,3 108,553 85,449 27% 333,713 219,463 52%
Silver produced (oz)2,3 122,766 106,437 15% 403,893 321,745 26%
GEOs produced El Castillo3 12,568 13,896 (10%) 46,183 66,509 (31%)
GEOs produced San Agustin3 18,621 21,003 (11%) 63,866 64,768 (1%)
GEOs produced3 31,189 34,899 (11%) 110,049 131,277 (16%)
Gold sold El Castillo (oz)2 9,863 14,132 (30%) 43,815 68,971 (36%)
Gold sold San Agustin (oz)2 16,124 20,708 (22%) 58,189 65,273 (11%)
Gold sold (oz)2 25,987 34,840 (25%) 102,004 134,244 (24%)
Silver sold El Castillo (oz)2 14,213 20,988 (32%) 70,180 102,282 (31%)
Silver sold San Agustin (oz)2 98,029 76,599 28% 324,576 221,429 47%
Silver sold (oz)2 112,242 97,587 15% 394,755 323,711 22%
GEOs sold El Castillo 10,041 14,412 (30%) 44,692 70,335 (36%)
GEOs sold San Agustin 17,349 21,729 (20%) 62,246 68,225 (9%)
GEOs sold 27,390 36,141 (24%) 106,939 138,560 (23%)
Cash cost per gold ounce sold El Castillo5 $875 $2,095 (58%) $908 $1,201 (24%)
Cash cost per gold ounce sold San Agustin5 $765 $894 (14%) $780 $863 (10%)
Cash cost per gold ounce sold5 $806 $1,381 (42%) $835 $1,036 (19%)
1“g/t” is grams per tonne.
2“oz” means troy ounce.
3Produced ounces are calculated as ounces loaded to carbon.
4Expected recoverable GEOs are based on the assumptions and parameters as set forth in the El Castillo Complex Technical Report dated March 27, 2018.  In periods where the Company mines material not specifically defined in a technical report (for example: run-of-mine ore or low grade stockpile material), management uses its best estimate of recovery based on the information available.
5Please refer to the section below entitled “Non-IFRS Measures” for a discussion of this Non-IFRS Measure.

 

Summary of Production Results at the El Castillo Complex – Fourth Quarter 2020

 

During the fourth quarter of 2020, the El Castillo Complex produced 11% fewer GEOs at a cash cost per gold ounce sold 42% less than during the fourth quarter of 2019.  Lower GEO production was primarily due to a 33% reduction in gold grades loaded to the leach pads associated with the change from crushed ore to run-of-mine ore, which lowered unit costs and allowed for lower grade ore to become economic.  This was partially offset by a 21% reduction in overall waste to ore strip ratio.  Lower cash cost per gold ounce sold was primarily related to an inventory write-down in the fourth quarter of 2019.

 

El Castillo produced 10% fewer GEOs at a cash cost per gold ounce sold 58% less than during the fourth quarter of 2019.  At El Castillo, 54% more ore tonnes were mined compared to the fourth quarter of 2019, partially to offset the 52% reduction in gold grade during this period, as lower grades became economic with the change from crushed ore to run-of-mine ore due to the associated reduction in unit costs, and also because during the fourth quarter of 2019, productivity was slowed due to water in the pit.

 

San Agustin produced 11% fewer GEOs at a cash cost per gold ounce sold 14% less than during the fourth quarter of 2019.  At San Agustin, ore tonnes mined increased by 14% compared to the fourth quarter of 2019, primarily due to crusher throughput averaging better than 31,000 tonnes per day following the ramp up of the crusher expansion from 20,000 tonnes per day to 30,000 tonnes per day, which was completed in 2019, partially offset by 11% lower gold grade.

 

Summary of Production Results at the El Castillo Complex – 2020

 

During 2020, the El Castillo Complex produced 16% fewer GEOs at a cash cost per gold ounce sold 19% less compared to 2019.  Lower GEO production was primarily due to the two-month suspension of mining, crushing and stacking activities and lower production at El Castillo associated with the change from processing crushed ore to run-of-mine ore.

 

El Castillo produced 31% fewer GEOs at a cash cost per gold ounce sold 24% less compared to 2019.  El Castillo experienced a 34% reduction in cost per tonne processed compared to 2019 by eliminated crushing early in 2020 and switching to run-of-mine ore processing.

 

San Agustin produced 1% fewer GEOs at a cash cost per gold ounce sold 10% less compared to 2019.  San Agustin experienced a 10% reduction in cost per tonne processed compared to 2019, primarily due to optimizing crushing and stacking rates to available solution capacity following the crusher expansion from 20,000 tonnes per day to 30,000 tonnes per day, which was completed by the end of 2019.

 

 

FOURTH QUARTER AND FULL YEAR 2020 LA COLORADA OPERATING STATISTICS

 

3 Months Ended Dec 31 Year Ended Dec 31
2020 2019 %
Change
2020 2019 %
Change
Mining (in 000s except for waste/ore ratio)
Tonnes ore 1,363 1,115 22% 4,019 4,626 (13%)
Tonnes waste 3,974 5,778 (31%) 14,303 23,445 (39%)
Total tonnes 5,337 6,893 (23%) 18,322 28,071 (35%)
Tonnes per day 58 75 (23%) 50 77 (35%)
Waste/mineralized material ratio 2.92 5.18 (44%) 3.56 5.07 (30%)
Leach Pads (in 000s)
Tonnes crushed to leach pads 1,332 1,141 17% 4,058 4,478 (9%)
Tonnes direct to leach pads 44 5 780% 44 239 (82%)
Production
Gold grade loaded to leach pads (g/t)1 0.45 0.49 (8%) 0.43 0.51 (16%)
Gold loaded to leach pads (oz)2 19,872 17,872 11% 56,274 76,969 (27%)
Projected recoverable GEOs loaded4 16,929 14,033 21% 45,514 60,315 (25%)
Gold produced (oz)2,3 14,045 12,144 16% 44,340 53,208 (17%)
Silver produced (oz)2,3 36,570 35,863 2% 162,499 159,737 2%
GEOs produced3 14,502 12,622 15% 46,371 55,338 (16%)
Gold sold (oz)2 14,049 12,233 15% 44,820 53,558 (16%)
Silver sold (oz)2 39,105 35,213 11% 161,644 161,344 0%
GEOs sold 14,538 12,702 14% 46,841 55,709 (16%)
Cash cost per gold ounce sold5 $756 $1,613 (53%) $937 $1,051 (11%)
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 Expected recoverable GEOs are based on the assumptions and parameters as set forth in the La Colorada Gold/Silver Mine Technical Report dated March 27, 2018.  In periods where the Company mines material not specifically defined in a technical report (for example: run-of-mine ore or low grade stockpile material), management uses its best estimate of recovery based on the information available.
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 – Fourth Quarter 2020

 

During the fourth quarter of 2020, the La Colorada mine produced 15% more GEOs at a cash cost per gold ounce sold 53% less than during the fourth quarter of 2019.  Higher GEO production was primarily due to a 17% increase in crushed tonnes to the leach pads, as La Colorada experienced productivity challenges during the fourth quarter of 2019 due to water in the pit.  Lower cash cost per gold ounce sold was primarily due to an inventory write-down during the fourth quarter of 2019.  Total tonnes mined decreased 23% compared to 2019, as the waste to ore strip ratio was 44% lower, and ore tonnes mined were set at the optimal rate to meet crusher throughput and solution capacity.

 

Summary of Production Results at La Colorada – 2020

During 2020, the La Colorada mine produced 16% less GEOs at a cash cost per gold ounce sold 11% less compared to 2019.  Lower GEO production was primarily due to the two-month suspension of mining, crushing and stacking activities.  La Colorada experienced a 4% reduction in cost per tonne processed compared to 2019, primarily due to higher daily crusher throughput rates and better productivity after experiencing challenges with water in the pit during the second half of 2019.

 

FOURTH QUARTER AND FULL YEAR 2020 FLORIDA CANYON OPERATING STATISTICS

 

 

3 Months
Ended Dec 31
Year Ended
Dec 31
2020 20201
Mining (in 000s except for waste/ore ratio)
Tonnes ore 2,251 4,346
Tonnes waste 3,060 5,907
Total tonnes 5,311 10,253
Tonnes per day 57 55
Waste/ore ratio 1.36 1.36
Leach Pads (in 000s)
Tonnes crushed to leach pads 1,965 3,890
Tonnes direct to leach pads 302 530
Production
Gold grade loaded to leach pads (g/t)2 0.29 0.29
Gold loaded to leach pads (oz)3 21,484 41,241
Projected recoverable GEOs loaded4 15,296 29,363
Gold produced (oz)3,4 11,202 22,406
Silver produced (oz)3,4 7,356 14,154
GEOs produced4 11,294 22,583
Gold sold (oz)3 11,461 25,199
Silver sold (oz)3 7,109 15,176
GEOs sold 11,550 25,389
Cash cost per gold ounce sold6 $1,335 $1,345
1 Includes operating statistics for the period of Argonaut ownership from July 1, 2020 to December 31, 2020.
2 “g/t” refers to grams per tonne.
3 “oz” refers to troy ounce.
4 Produced ounces are calculated as ounces loaded to carbon.
5 Expected recoverable GEOs are based on the assumptions and parameters as set forth in the Florida Canyon Mine Technical Report dated July 8, 2020.  In periods where the Company mines material not specifically defined in a technical report (for example: run-of-mine ore or low grade stockpile material), management uses its best estimate of recovery based on the information available.
6 Please refer to the section below entitled “Non-IFRS Measures” for a discussion of this Non-IFRS Measure.

 

Summary of Production Results at Florida Canyon

 

As the Company’s has only two quarters of operating history at Florida Canyon following the acquisition of Alio, the Company is not making comparisons to previous periods.  Florida Canyon produced 11,294 GEOs at a cash cost of $1,335 per gold ounce sold during the fourth quarter of 2020 (see “Non-IFRS Measures” section).

 

During the fourth quarter 2020, the Company eliminated a re-handle of ore prior to the primary crusher by adding a drop box to the design.  Haul trucks can now dump ore directly into a box that feeds into the primary crusher.  Prior to the addition of the drop box, the primary crusher had to be loader fed, which required haul trucks to dump ore on the ground, a dozer to push the ore into a pile and a loader to feed to the primary crusher.  Currently, once ore goes through the primary and secondary crushers, it is loaded into haul trucks with a front-end loader and delivered to the leach pads via haul trucks.

 

Argonaut has identified potentially significant operating cost savings once it can eliminate the re-handle on the back end of the secondary crushing by switching to a conveying and stacking system to transport crushed ore to the leach pads.  To achieve this, a minor modification to the Air Quality permit (Plan of Operations) is required.  While Argonaut views this to be a minor modification, the current US Federal administration has recently signed an executive order that requires all modifications, however minor, to be approved by one of four positions located in Washington, D.C.  Argonaut is currently working to determine how the current signing authority process will impact all minor permit modifications, including the modification required to optimize the Florida Canyon mine.  Argonaut believes the modification it is seeking will reduce greenhouse gas emissions at Florida Canyon, as the conveying and stacking system would be operated on grid power thus eliminating the need to run diesel haul trucks from the crusher to the leach pads.

 

Pete Dougherty commented: “Since closing the acquisition of the Florida Canyon mine on July 1, 2020, the first three months was spent by the Argonaut team getting to know the Florida Canyon team to gain a better understanding of the challenges and opportunities at the mine.  The second three months were spent initiating changes to allow for a more efficient and lower cost operation, such as completing the permitting to allow solution to the newly constructed leach pad, upgrading equipment, adding the drop box at the primary crusher and preparing and submitting the minor modification to the existing permit to allow us to automate transporation of crushed ore to the leach pads through a conveying and stacking sytem.  2021 will be about finalizing the changes necessary to take Florida Canyon to a larger production profile at lower operating costs.”

 

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.

 

Posted February 26, 2021

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