Argonaut Gold Inc. (TSX: AR) is pleased to announce that it has entered into a binding purchase agreement dated December 5, 2022 with Heliostar Metals Limited for the sale of all of the issued and outstanding shares of Aurea Mining Inc. a wholly owned subsidiary of Argonaut, which through Aurea Mining’s wholly owned subsidiary Minera Aurea S.A. de C.V. holds a 100% indirect interest in and to the Ana Paula Gold Project. Heliostar has also entered into an option agreement with Argonaut and its wholly owned subsidiary, Compañía Minera Pitalla S.A. de CV, pursuant to which Heliostar has been granted an option to acquire a 100% interest in the San Antonio Gold Project. Both projects are located in Mexico.

“Argonaut’s focus at this time is our cornerstone asset, the Magino mine in Ontario Canada that will transform the Company to a low-cost, intermediate producer.  This agreement allows Argonaut to potentially unlock value in two non-core Mexican assets and provides Argonaut with a very attractive upside for its shareholders,” said Larry Radford, President and CEO of Argonaut Gold.

Purchase Agreement

Under the terms of the Purchase Agreement, Heliostar has agreed to acquire all the issued and outstanding shares of Aurea Mining, which through its wholly-owned subsidiary Minera Aurea, indirectly holds the title and permit to mine the Ana Paula Gold Project, in consideration for:

• A cash payment to Argonaut US$10,000,000 at closing;
• On the earlier of receiving an extension to the existing Ana Paula open-pit mining permit and the granting of a new underground mining permit, the issuance to Argonaut of such number of common shares in the capital of Heliostar as have an aggregate value of US$5,000,000 divided by the volume weighted average closing price of the Heliostar Shares for the ten trading days ending on the last trading day immediately prior to the date of the Purchase Agreement;
• On the earlier of (a) the date of completion of a feasibility study for the Ana Paula Gold Project and (b) July 1, 2024, a cash payment to Argonaut of US$2,000,000;
• On the date that Heliostar announces a construction decision for the Ana Paula Gold Project, it will pay to Argonaut an additional cash payment of US$3,000,000 and US$2,000,000 in cash or Heliostar Shares at a deemed price equal to the VWAP of the Heliostar Shares for the ten trading days immediately prior to announcement of the construction decision; and
• On the date that Heliostar commences commercial production at the Ana Paula Gold Project, it will pay to Argonaut an additional US$5,000,000 in cash and US$3,000,000 in cash or Heliostar Shares at a deemed price equal to the VWAP of the Heliostar Shares for the ten trading days immediately prior to announcement of commercial production.

Option Agreement

The Company also entered into the Option Agreement with Heliostar and Compañía Minera Pitalla, which holds the title to the San Antonio Gold Project. Under the terms of the Option Agreement, Heliostar has the Option to earn a 100% interest in and to the San Antonio Gold Project as follows:

• Making a cash payment to Argonaut of:
  • US$80,000,000 in the event the average gold price is below US$1,800 per ounce for the six months preceding Heliostar exercising the Option;
  • US$120,000,000 in the event the average gold price is above US$1,800 per ounce but below US$2,000 per ounce for the six months preceding Heliostar exercising the Option; or
  • US$150,000,000 in the event the average gold price is above US$2,000 per ounce for the six months preceding Heliostar exercising the Option; and
• Granting Argonaut a 2.0% net smelter return (“NSR”) royalty in the event of exercise of the Option (capped at 2.0% for claims with existing NSR considerations).

The term of the Option is for a three year period, provided, however, that the Term may be extended for an additional 18 months in the event Heliostar is able to successfully acquire an environmental permit from Secretaría del Medio Ambiente y Recursos Naturales to advance the San Antonio Gold Project.

Further, Heliostar may elect, in its sole discretion, to pay up to 50% of the Option Exercise Price by way of issuance of Heliostar Shares, in accordance with and subject to applicable securities laws and the policies of the TSX Venture Exchange. In the event of such election, the number of Heliostar Shares to be issued to Argonaut will be determined by dividing the dollar amount of the portion of the Option Exercise Price to be satisfied by the issuance of Heliostar Shares by the closing price of the Heliostar Shares on the TSXV for the 10 trading days ending on the day before the effective date of the Option Agreement.

The grant of the Option to Heliostar pursuant to the Option Agreement is subject to concurrent completion of the transactions under the Purchase Agreement.

The closing of the proposed transactions under the Purchase Agreement and the Option Agreement are subject to regulatory approval and customary conditions of closing in favour of the parties, including completion of a proposed financing by Heliostar and Heliostar obtaining the conditional approval of the TSXV. Closing of the proposed transactions is anticipated to occur during the first quarter of 2023.

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.

About Heliostar Metals Ltd.

Heliostar is a junior exploration and development company with a portfolio of high-grade gold projects in Alaska and Mexico.  The company’s flagship asset is the 100% controlled Unga Gold Project on Unga and Popof Islands in Alaska.  The project hosts an intermediate sulfidation epithermal gold deposit, located within the district-scale property that encompasses 240 km across the two islands. Additional targets on the property include porphyry, high sulphidation and intermediate sulphidation epithermal veins. On Unga Island, priority targets include: the SH-1 and Aquila, both on the Shumagin Trend, the former Apollo-Sitka mine, which was Alaska’s first underground gold mine and the Zachary Bay porphyry gold-copper prospect.  Gold mineralization at the Centennial Zone is located on neighbouring Popof Island within four kilometres of infrastructure and services at Sand Point.

In Mexico, Heliostar owns 100% of three early stage epithermal projects in Sonora that are highly prospective for gold and silver.  Cumaro forms part of the El Picacho district, while the Oso Negro and La Lola projects are also prospective for epithermal gold-silver mineralization.