
Ramp Up Underway at Magino Mine – On Track for Commercial Production in Q3
Argonaut Gold Inc. (TSX: AR) reported financial and operating results for the three and six months ended June 30, 2023, as well as a progress update for the Magino Mine. All dollar amounts are expressed in United States dollars, unless otherwise specified (CA$ refers to Canadian dollars).
“Argonaut delivered solid financial and operational results for the quarter, generating strong cash flows to help fund the completion of our newest mine, Magino. During the quarter, the Magino mill began ramping up, putting the mine on track for commercial production in the third quarter. We believe Magino could be one of the largest and lowest cost gold mines in Canada. To that end, during the third quarter, while commissioning the Magino mill, we are commencing a reserve development drilling program intended to increase reserves in combination with engineering studies to increase mill throughput. At the Florida Canyon Mine in Nevada, we are commencing a drill program during the third quarter as part of a proof-of-concept program on the sulphide material. We believe organic growth through mineral resource expansion will deliver significant value within the Company’s asset base and lays the long-term foundation to grow our current production profile as we seek to become a low-cost, mid-tier North American gold producer,” stated Richard Young, President and Chief Executive Officer of Argonaut Gold.
SECOND QUARTER HIGHLIGHTS
Financial Highlights
“Production and per ounce costs are largely on plan for the first half of the year, placing the Company on track to meet its full year production and cost guidance targets set at the beginning of the year. We continue to ramp up the mill at Magino to steady-state and are expecting to achieve commercial production in the third quarter of this year. The plant has been running at or above nameplate throughput capacity when operating,” stated Marc Leduc, Chief Operating Officer of Argonaut Gold.
Growth Highlights
Magino Mine
Florida Canyon Mine
Mexico
Second Quarter Financial & Operating Highlights
Three months ended
June 30, |
Six months ended
June 30, |
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Financial Data | 2023 | 2022 | % Change | 2023 | 2022 | % Change | |
Revenues1 | $000s | 83,111 | 111,405 | (25) % | 152,078 | 217,207 | (30) % |
Cost of sales1 | $000s | 67,649 | 91,596 | (26) % | 139,159 | 175,735 | (21) % |
Gross profit | $000s | 15,462 | 19,809 | (22) % | 12,919 | 41,472 | (69) % |
Net income | $000s | 21,186 | 18,412 | 15 % | 10,810 | 24,030 | (55) % |
Per basic share | $/share | 0.03 | 0.06 | (50) % | 0.01 | 0.07 | (86) % |
Per diluted share | $/share | 0.02 | 0.06 | (67) % | 0.01 | 0.07 | (86) % |
Adjusted net income2 | $000s | 5,685 | 7,265 | (22) % | 2,927 | 15,498 | (81) % |
Per basic share2 | $/share | 0.01 | 0.02 | (50) % | 0.00 | 0.05 | (100) % |
Operating cash flow before changes in working capital and other items |
$000s | 17,427 | 23,250 | (25) % | 27,911 | 48,398 | (42) % |
Operating cash flow | $000s | 4,349 | 13,360 | (67) % | (7,503) | 17,395 | N/A |
Sustaining capital expenditures | $000s | 6,221 | 12,194 | (49) % | 9,967 | 21,440 | (54) % |
Magino construction capital | $000s | 99,672 | 94,695 | 5 % | 173,232 | 184,190 | (6) % |
Cash and cash equivalents | $000s | 71,799 | 75,816 | (5) % | 71,799 | 75,816 | (5) % |
Net debt2 | $000s | (151,608) | (4,184) | 3524 % | (151,608) | (4,184) | 3524 % |
1In the three and six months ended June 30, 2023, these balances include $0.1 million of revenues and $0.1 million of cost of sales related to the pre-commercial production phase of the Magino mine. | |||||||
2This is a Non-IFRS Measure; please see “Non-IFRS Measures” section. |
Three months ended
June 30, |
Six months ended
June 30, |
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Operating Data | 2023 | 2022 | % | 2023 | 2022 | % | |
Gold produced1 | oz | 42,482 | 57,409 | (26) % | 79,980 | 110,674 | (28) % |
Gold equivalent ounces (“GEOs”) produced1,2 |
oz | 43,492 | 59,190 | (27) % | 82,077 | 114,706 | (28) % |
Gold sold1 | oz | 42,546 | 57,343 | (26) % | 78,714 | 111,450 | (29) % |
Average realized price | $/oz | 1,903 | 1,884 | 1 % | 1,883 | 1,879 | — % |
Cost of sales3 | $/oz | 1,590 | 1,597 | — % | 1,768 | 1,577 | 12 % |
Cash cost3 | $/oz | 1,304 | 1,248 | 4 % | 1,467 | 1,200 | 22 % |
All-in sustaining costs3 (“AISC”) | $/oz | 1,594 | 1,553 | 3 % | 1,756 | 1,492 | 18 % |
1In the three and six months ended June 30, 2022, 3,295 gold ounces were produced and 72 gold ounces were sold from the pre-commercial production phase of the Magino mine. | |||||||
2Based on a silver to gold ratio of 80:1 in 2023 and 2022. | |||||||
3This is a Non-IFRS Measure; please see “Non-IFRS Measures” section. |
2023 Outlook Analysis
Production and per ounce costs are largely on plan for the first half of the year, placing the Company on track to meet its full year production and cost guidance targets set at the beginning of the year. The Magino mine achieved first gold pour in mid-June, 2023, approximately 30 days behind schedule. The Magino mine is currently ramping up to commercial production, which is expected in the third quarter. Production is expected to increase and consolidated cost of sales per ounce1, cash cost per ounce1, and AISC1 per ounce are expected to decline once the Magino mine reaches commercial production.
The only significant change in guidance relates to exploration costs which are expected to be approximately $10 million higher than planned due to exploration and reserve development programs underway at the Magino and Florida Canyon mines.
Consolidated 2023 production and cost guidance remains unchanged at 200,000 to 230,000 GEOs and an all-in sustaining cost of $1,625 – $1,725 per ounce.
This press release should be read in conjunction with the Company’s unaudited interim condensed consolidated financial statements for the three and six months ended June 30, 2023 and associated Management’s Discussion and Analysis 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.sedarplus.ca.
1This is a Non-IFRS Measure; please see “Non-IFRS Measures” section. |
Endnotes | |
1. | Based on a silver to gold ratio of 80:1 in 2023 and 2022. |
2. | This is a Non-IFRS Measure; please see “Non-IFRS Measures” section below. |
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 income” and “adjusted net 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” 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” 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.
Magino Mine | Three months ended
June 30, |
Six months ended June 30, |
|
2023 | 2023 | ||
Gold sold | oz | 72 | 72 |
Cost of sales | $000s | 82 | 82 |
Cost of sales per ounce sold | $/oz | 1,139 | 1,139 |
Production costs | $000s | 80 | 80 |
Cash Cost | $000s | 80 | 80 |
Cash cost per ounce sold | $/oz | 1,111 | 1,111 |
Cash Cost | $000s | 80 | 80 |
AISC | $000s | 80 | 80 |
AISC per gold ounce sold | $/oz | 1,111 | 1,111 |
Florida Canyon Mine | Three months ended June 30, |
Six months ended June 30, |
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2023 | 2022 | % Change | 2023 | 2022 | % Change | ||
Gold sold | oz | 18,518 | 13,902 | 33 % | 30,751 | 24,157 | 27 % |
Cost of sales | $000s | 28,993 | 25,458 | 14 % | 50,476 | 44,658 | 13 % |
Cost of sales per ounce sold | $/oz | 1,566 | 1,831 | (14) % | 1,641 | 1,849 | (11) % |
Production costs | $000s | 24,599 | 22,235 | 11 % | 43,254 | 39,388 | 10 % |
Less silver sales | $000s | (376) | (193) | 95 % | (573) | (380) | 51 % |
Cash Cost | $000s | 24,223 | 22,042 | 10 % | 42,681 | 39,008 | 9 % |
Cash cost per ounce sold | $/oz | 1,308 | 1,586 | (18) % | 1,388 | 1,615 | (14) % |
Cash Cost | $000s | 24,223 | 22,042 | 10 % | 42,681 | 39,008 | 9 % |
Exploration expenses | $000s | 823 | – | N/A | 823 | – | N/A |
Sustaining capital expenditures | $000s | 5,735 | 6,644 | (14) % | 9,226 | 10,567 | (13) % |
AISC | $000s | 30,781 | 28,686 | 7 % | 52,730 | 49,575 | 6 % |
AISC per gold ounce sold | $/oz | 1,662 | 2,063 | (19) % | 1,715 | 2,052 | (16) % |
La Colorada Mine | Three months ended June 30, |
Six months ended June 30, |
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2023 | 2022 | % Change | 2023 | 2022 | % Change | ||
Gold sold | oz | 5,680 | 13,322 | (57) % | 10,766 | 26,402 | (59) % |
Cost of sales | $000s | 8,095 | 17,090 | (53) % | 20,836 | 33,937 | (39) % |
Cost of sales per ounce sold | $/oz | 1,425 | 1,283 | 11 % | 1,935 | 1,285 | 51 % |
Production costs | $000s | 6,282 | 14,212 | (56) % | 17,821 | 27,593 | (35) % |
Less silver sales | $000s | (265) | (850) | (69) % | (468) | (1,708) | (73) % |
Cash Cost | $000s | 6,017 | 13,362 | (55) % | 17,353 | 25,885 | (33) % |
Cash cost per ounce sold | $/oz | 1,059 | 1,003 | 6 % | 1,612 | 980 | 64 % |
Cash Cost | $000s | 6,017 | 13,362 | (55) % | 17,353 | 25,885 | (33) % |
General and administrative expenses | $000s | 455 | 304 | 50 % | 764 | 614 | 24 % |
Accretion and other expenses | $000s | 61 | 61 | — % | 122 | 194 | (37) % |
Sustaining capital expenditures | $000s | 377 | 5,089 | (93) % | 536 | 6,213 | (91) % |
AISC | $000s | 6,910 | 18,816 | (63) % | 18,775 | 32,906 | (43) % |
AISC per gold ounce sold | $/oz | 1,217 | 1,412 | (14) % | 1,744 | 1,246 | 40 % |
San Agustin Mine | Three months ended June 30, |
Six months ended June 30, |
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2023 | 2022 | % Change | 2023 | 2022 | % Change | ||
Gold sold | oz | 12,774 | 18,656 | (32) % | 24,265 | 35,859 | (32) % |
Cost of sales | $000s | 21,933 | 27,041 | (19) % | 44,681 | 51,822 | (14) % |
Cost of sales per ounce sold | $/oz | 1,717 | 1,449 | 18 % | 1,841 | 1,445 | 27 % |
Production costs | $000s | 19,126 | 20,899 | (8) % | 38,252 | 40,159 | (5) % |
Less silver sales | $000s | (1,415) | (2,083) | (32) % | (2,639) | (5,083) | (48) % |
Cash Cost | $000s | 17,711 | 18,816 | (6) % | 35,613 | 35,076 | 2 % |
Cash cost per ounce sold | $/oz | 1,386 | 1,009 | 37 % | 1,468 | 978 | 50 % |
Cash Cost | $000s | 17,711 | 18,816 | (6) % | 35,613 | 35,076 | 2 % |
General and administrative expenses | $000s | 997 | 745 | 34 % | 1,682 | 1,412 | 19 % |
Accretion and other expenses | $000s | 9 | 8 | 13 % | 18 | 17 | 6 % |
Sustaining capital expenditures | $000s | 109 | 138 | (21) % | 205 | 608 | (66) % |
AISC | $000s | 18,826 | 19,707 | (4) % | 37,518 | 37,113 | 1 % |
AISC per gold ounce sold | $/oz | 1,474 | 1,056 | 40 % | 1,546 | 1,035 | 49 % |
El Castillo Mine | Three months ended June 30, |
Six months ended June 30, |
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2023 | 2022 | % Change | 2023 | 2022 | % Change | ||
Gold sold | oz | 5,502 | 11,463 | (52) % | 12,860 | 25,032 | (49) % |
Cost of sales | $000s | 8,546 | 22,007 | (61) % | 23,084 | 45,318 | (49) % |
Cost of sales per ounce sold | $/oz | 1,553 | 1,920 | (19) % | 1,795 | 1,810 | (1) % |
Production costs | $000s | 7,521 | 17,584 | (57) % | 19,976 | 34,398 | (42) % |
Less silver sales | $000s | (76) | (251) | (70) % | (203) | (614) | (67) % |
Cash Cost | $000s | 7,445 | 17,333 | (57) % | 19,773 | 33,784 | (41) % |
Cash cost per ounce sold | $/oz | 1,353 | 1,512 | (11) % | 1,538 | 1,350 | 14 % |
Cash Cost | $000s | 7,445 | 17,333 | (57) % | 19,773 | 33,784 | (41) % |
Accretion and other expenses | $000s | – | 1 | (100) % | – | 3 | (100) % |
Sustaining capital expenditures | $000s | – | 323 | (100) % | – | 4,052 | (100) % |
AISC | $000s | 7,445 | 17,657 | (58) % | 19,773 | 37,839 | (48) % |
AISC per gold ounce sold | $/oz | 1,353 | 1,540 | (12) % | 1,538 | 1,512 | 2 % |
All Mines | Three months ended June 30, |
Six months ended June 30, |
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2023 | 2022 | % Change | 2023 | 2022 | % Change | ||
Gold sold | oz | 42,546 | 57,343 | (26) % | 78,714 | 111,450 | (29) % |
Cost of sales | $000s | 67,649 | 91,596 | (26) % | 139,159 | 175,735 | (21) % |
Cost of sales per ounce sold | $/oz | 1,590 | 1,597 | – % | 1,768 | 1,577 | 12 % |
Production costs | $000s | 57,608 | 74,930 | (23) % | 119,383 | 141,538 | (16) % |
Less silver sales | $000s | (2,132) | (3,377) | (37) % | (3,883) | (7,785) | (50) % |
Cash Cost | $000s | 55,476 | 71,553 | (22) % | 115,500 | 133,753 | (14) % |
Cash cost per ounce sold | $/oz | 1,304 | 1,248 | 4 % | 1,467 | 1,200 | 22 % |
Cash Cost | $000s | 55,476 | 71,553 | (22) % | 115,500 | 133,753 | (14) % |
Mine site general and administrative expenses |
$000s | 1,452 | 1,051 | 38 % | 2,446 | 2,028 | 21 % |
Corporate general and administrative expenses |
$000s | 2,541 | 2,802 | (9) % | 6,105 | 5,678 | 8 % |
Share-based compensation expense | $000s | 664 | 718 | (8) % | 1,079 | 1,886 | (43) % |
Exploration expenses | $000s | 823 | 425 | 94 % | 1,843 | 792 | 133 % |
Accretion and other expenses | $000s | 70 | 70 | — % | 140 | 214 | (35) % |
Corporate accretion and others | $000s | 572 | 220 | 160 % | 1,168 | 439 | 166 % |
Sustaining capital expenditures | $000s | 6,221 | 12,194 | (49) % | 9,967 | 21,440 | (54) % |
AISC | $000s | 67,819 | 89,033 | (24) % | 138,248 | 166,230 | (17) % |
AISC per gold ounce sold | $/oz | 1,594 | 1,553 | 3 % | 1,756 | 1,492 | 18 % |
Three months ended June 30, |
Six months ended June 30, |
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2023 | 2022 | % Change | 2023 | 2022 | % Change | ||
Net income | $000s | 21,186 | 18,412 | 15 % | 10,810 | 24,030 | (55) % |
Unrealized gain on derivatives | $000s | (4,892) | (13,525) | (64) % | (5,121) | (12,060) | (58) % |
Other non-operating expense, net of tax | $000s | – | 1,653 | (100) % | – | 2,151 | (100) % |
Foreign exchange (gain) loss, net of tax | $000s | (7,912) | 870 | N/A | (5,536) | 1,825 | N/A |
Impact of foreign exchange on deferred income taxes |
$000s | (242) | (137) | 77 % | (537) | (855) | (37) % |
Inventory (reversal) impairment, net of tax |
$000s | (2,455) | (8) | 30588 % | 3,606 | (127) | N/A |
Sale of marketable securities | $000s | – | – | N/A | – | 534 | (100) % |
Reversal of mineral properties, plant and equipment, net of tax |
$000s | – | – | N/A | (295) | – | N/A |
Adjusted net income | $000s | 5,685 | 7,265 | (22) % | 2,927 | 15,498 | (81) % |
Weighted average number of common shares outstanding |
000s shares |
864,464 | 332,787 | 160 % | 843,879 | 325,417 | 159 % |
Adjusted net income per basic share | $/share | 0.01 | 0.02 | (50) % | 0.00 | 0.05 | (100) % |
June 30, 2023 |
December 31, 2022 |
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Cash and cash equivalents | $000s | 71,799 | 73,254 |
Debt | $000s | (274,809) | (127,793) |
Convertible Debentures | $000s | 49,730 | 48,404 |
Magino mine equipment loan | $000s | 1,672 | 1,807 |
Net debt | $000s | (151,608) | (4,328) |
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. Argonaut Gold trades on the Toronto Stock Exchange.
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