Argonaut Gold Inc. (TSX: AR) is pleased to announce its operating and financial results for the second quarter ended June 30, 2022.  For the second quarter 2022, the Company reports production of 59,192 gold equivalent ounces², revenue of $111.4 million, cash flow from operating activities before changes in non-cash operating working capital and other items of $23.3 million, net income of $18.4 million or earnings per basic share of $0.06, and adjusted net income³ of $7.3 million or adjusted earning per basic share³ of $0.02.  All dollar amounts are expressed in United States dollars, unless otherwise specified (C$ refers to Canadian dollars).

Larry Radford, President & CEO stated: “We were slightly ahead of our operational budget in terms of GEO production during the second quarter, which yielded over 59,000 GEOs, albeit at a slightly higher cost than budgeted due to inflationary pressures on input costs.  We recently put a financing package together that we believe fully finances the Magino construction project.  We are also tracking well against our most recent Magino capital estimate to completion of C$920 million. With the financing behind us and what I believe to the right team now in place, I feel Argonaut is in a much better position to execute on our business plan.”

Second Quarter 2022 Results

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

Second Quarter 2022 and Recent Company Highlights:

• Corporate Highlights:
  • GEO production of 59,192 GEOs.
  • Cash flow before changes in working capital and other items of $23.3 million.
  • Executed a binding commitment with a syndicate of lenders for a $250 million debt facility, which is expected to close by the end of Q3 2022. Completed a C$195 million equity offering to fund the Magino construction project (see press release dated July 5, 2022).
  • Entered into gold price protection through forward sales contracts at a price of $1,860/oz during the life of the term loan debt facility under the following terms:
    • Beginning Q3 2023, 25,000 gold ounces per quarter for the first six quarters; and
    • 15,000 gold ounces per quarter for the remaining 10 quarters over the life of the term loan.
• Social and Environmental Responsibility
  • Hosted Magino site tours including a visit from Bishop Dowd and Father Asorgoe from Dubreuilville, and Maskwa Aviation, a joint venture partner of Missanabie Cree First Nation (MCFN).
  • Participated in regular monthly meetings with Indigenous groups to provide project and environmental updates for Magino. Argonaut also provided sponsorships and donations to Métis Nation of Ontario and MCFN for their Annual General Meeting and Annual Gathering.
  • Provided community funding including sponsorships and donations for the Wawa Music Festival, Wawa Golf Club, Wawa Public Library Summer Youth Program and Dubreuilville Magpie Walleye.
  • Hosted a course in Durango for local small suppliers and entrepreneurs to provide resources and training for requirements to work in Mexico’s mining industry.
  • Collaborated with Coordinación Estatal de Protección Civil Durango to host a children’s course on safety in the community of San Jan del Rio.
  • Installed a new chlorinator for a main pipeline in La Colorada to provide improved water quality for the community.
  • La Colorada Mine has been included into a pilot plan to be implemented by the United Nations (“UN”) Economic Commission for Europe’s Center of Excellence of the Extractive and Energies Sectors to align our sector to the UN standards and methodologies in coordination with the Federal Ministry of Economy.
  • Hosted the health campaigns in the Cerro del Gallo communities of San Antón de las Minas and Las Lozas.
  • Sponsored a local softball team in Winnemucca, Nevada.
• El Castillo
  • Production of 12,178 GEOs at a cash cost per gold ounce sold of $1,513 (This is a Non-IFRS Measure. Please see “Non-IFRS Measures” section).
• San Agustin
  • Production of 19,135 GEOs at a cash cost per gold ounce sold of $1,009 (This is a Non-IFRS Measure. Please see “Non-IFRS Measures” section).
• La Colorada
  • Production of 13,390 GEOs at a cash cost per gold ounce sold of $1,003 (This is a Non-IFRS Measure. Please see “Non-IFRS Measures” section).
• Florida Canyon
  • Production of 14,489 GEOs at a cash cost per gold ounce sold of $1,585 (This is a Non-IFRS Measure. Please see “Non-IFRS Measures” section).
• Magino
  • Construction
    • At June 30, 2022, the Magino construction project was estimated at approximately 54.8% complete. In Argonaut received a delay claim from Ausenco (process facility EPC contractor) that the substantial completion milestone will be delayed by 23 days due to the province-wide strike of several trades, including crane operators and carpenters, lasting 23 days. The actual impact of this delay claim on project completion has not yet been assessed. To date, this delay claim has neither been accepted nor captured in a definitive schedule, the estimated first gold pour has not yet been determined; however, indications are that first gold is expected to be delayed from March 2023 to April 2023.
    • At June 30, 2022, of the C$920 million estimated cost to completion, C$510.1 million and C$688.1 million had been spent and committed at the Magino construction project. Recent major milestones included:
      • Completed process plant building roof and wall cladding;
      • Completed primary steel for gravity tower in the process plant;
      • Completed baffle installation and structural steel for carbon in pulp tanks;
      • Completed crusher foundation concrete;
      • Completed upgrade of the access road to the air monitoring station;
      • Completed installation of the building heaters;
      • Continued hydro vac cleaning for liner placement at the Water Quality Control Pond;
      • Completed hydro seeding at the Fish Habitat Compensation Area; commissioning has commenced;
      • Completed construction of the bat hibernaculum;
      • Continued construction of the Tailings Management Facility; and
      • Continued surface water, groundwater and effluent sampling and monitoring.
    • For recent highlights and photos of the Magino project, visit the Company’s website at: https://www.argonautgold.com/English/assets/development/magino/default.aspx

Financial Results – Second Quarter 2022

Revenue for the second quarter of 2022 was $111.4 million, a decrease from $120.2 million in the second quarter of 2021.  During the second quarter of 2022, the Company sold 57,344 gold ounces at an average realized price per ounce of $1,884, compared to 63,000 gold ounces sold at an average realized price per ounce of $1,812 during the same period of 2021.  Gold ounces sold for the first quarter of 2022 decreased compared to the same period in 2021 primarily due to fewer ounces produced and sold at the La Colorada and El Castillo mines.

Net income for the second quarter of 2022 was $18.4 million or earnings per basic share of $0.06, compared with net income of $21.8 million or earnings per basic share of $0.07 for the second quarter of 2021.

Adjusted net income for the second quarter of 2022 was $7.3 million or $0.02 per basic share, a decrease from adjusted net income of $22.7 million or $0.07 per basic share for the second quarter of 2021 (This is a Non-IFRS Measure.  Please see “Non-IFRS Measures” section).

Cash flows from operating activities before changes in non-cash operating working capital and other items totaled $23.3 million during the second quarter of 2022, a decrease from $39.3 million in the second quarter of 2021, primarily due to fewer gold ounces sold and higher operating costs.

Financial Results – First Half 2022

Revenue for the six months ended June 30, 2022 was $217.2 million, a decrease from $225.5 million for the six months ended June 30, 2021. During the first half of June 30, 2022, gold ounces sold totaled 111,450 at an average realized price per ounce of $1,879, compared to 119,727 gold ounces sold at an average realized price per ounce of $1,788 during the same period of 2021. Gold ounces sold for the six months ended June 30, 2022 decreased compared to the same period of 2021 primarily due to the reduction in gold ounces sold from the La Colorada and El Castillo mines.

Net income for the first half of 2022 was $24.0 million or $0.07 per basic or diluted share for the first half of 2022 compared to net income of $48.8 million or $0.16 per basic or diluted share in the six months ended June 30, 2021.

Adjusted net income for the first half of 2022 was $15.5 million or $0.05 per basic share, a decrease from adjusted net income of $29.7 million or $0.10 per basic share for the first half of 2021 (This is a Non-IFRS Measure.  Please see “Non-IFRS Measures” section).

Cash flows from operating activities before changes in non-cash operating working capital and other items totaled $48.4 million during the first half of 2022, a decrease from $67.0 million in the first half of 2021, primarily due to fewer gold ounces sold and higher operating costs.

Operational Results – Second Quarter 2022

During the second quarter of 2022, the Company achieved production of 59,192 GEOs at a cash cost per gold ounce sold of $1,248 and all-in sustaining cost per gold ounce sold of $1,474 compared to 63,750 GEOs at a cash cost of $876 per gold ounce sold and an AISC of $1,203 during the second quarter 2021 (These are Non-IFRS Measures.  Please see “Non-IFRS Measures” section).  The 7% decrease in GEO production was primarily related to lower ore tonnes mined, lower grades in both gold and silver, and lower gold recoveries at the La Colorada mine.  Higher cash costs were primarily related to higher mining rates at El Castillo, La Colorada and Florida Canyon due to higher strip ratios, higher key consumable costs across all operations and lower gold ounces sold.

SECOND QUARTER 2022 EL CASTILLO COMPLEX OPERATING STATISTICS

Summary of Production Results at the El Castillo Complex

During the second quarter of 2022, the El Castillo Complex produced 4% fewer GEOs at a cash cost per gold ounce sold 31% higher than during the second quarter of 2021 (This is a Non-IFRS Measure.  Please see “Non-IFRS Measures” section).  El Castillo produced 6% fewer GEOs at a cash cost per gold ounce sold 36% higher (This is a Non-IFRS Measure.  Please see “Non-IFRS Measures” section), primarily due to the El Castillo mine having a remaining mine life of less than one year, so mining waste is no longer capitalized as capitalized stripping but is included in production cost, along with increased maintenance and key consumable costs. San Agustin produced 3% fewer GEOs, at a cash cost per gold ounce sold 26% higher (This is a Non-IFRS Measure.  Please see “Non-IFRS Measures” section), primarily due to lower gold grades processed and higher key consumable costs.

SECOND QUARTER 2022 LA COLORADA OPERATING STATISTICS

Summary of Production Results at La Colorada

During the second quarter of 2022, the La Colorada mine produced 23% fewer GEOs at a cash cost per gold ounce sold 65% more than during the second quarter of 2021 (This is a Non-IFRS Measure.  Please see “Non-IFRS Measures” section).  Lower GEO production and higher costs were primarily due to lower ore tonnes mined, lower grade and recoveries, and higher key consumable costs.

SECOND QUARTER 2022 FLORIDA CANYON OPERATING STATISTICS

Summary of Production Results at Florida Canyon

During the second quarter of 2022, the Florida Canyon mine produced 5% more GEOs at a cash cost per gold ounce sold 43% higher than during the second quarter of 2021 (This is a Non-IFRS Measure.  Please see “Non-IFRS Measures” section). Higher GEO production was primarily related to higher recoveries and higher costs were primarily related to lower ore tonnes and ounces mined and placed in previous months and higher key consumable costs.

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

Following the Magino construction, equity raise and Committed Credit Facilities, Argonaut is providing 2022 capital guidance.  Through June 30, 2022, Argonaut had invested approximately $207 million in capital expenditures or approximately 46% of its estimated 2022 capital spend.

2022 Capital Guidance by Project and Category ($M)¹

Management Changes

Argonaut advises that Dan Symons, Vice President, Corporate Development & Investor Relations has resigned from his position to pursue other opportunities. A search for a replacement is in progress. Larry Radford, President & CEO commented “With more than six years of service, we want to thank Dan for his contributions to the growth of Argonaut Gold.”

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”, “Adjusted 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 (“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, exploration, accretion and other expenses 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 (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 earnings per share – basic is equal to adjusted net 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 income and adjusted 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 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 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 six months ended June 30, 2022 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.

Qualified Person, Technical Information and Mineral Properties Reports

Technical information included in this release was supervised and approved by Brian Arkell, Argonaut’s Vice President, Exploration and a Qualified Person under 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:

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.