Issue link: http://resourceworld.uberflip.com/i/712968
32 www.resourceworld.com a u g u s t / s e p t e m b e r 2 0 1 6 Argonaut Gold [AR-TSX] has set its sights on becoming the next mid-tier gold pro- ducer in the Americas with the goal of reaching 300,000-500,000 ounces produc- tion annually. "This is not our first rodeo," said Peter Dougherty, President and CEO. "We ran two successful companies before in FMC Gold and Meridian Gold and we did very well for our shareholders. Argonaut Gold is our third launch." Currently, the company is producing gold from its two wholly-owned primary assets, the El Castillo heap-leach mine in Durango, Mexico and La Colorada heap- leach mine in Sonora, Mexico. Argonaut recently posted Q1 revenues for the com- bined operations of US $35.3 million and net income of US $4.3 million. Cash cost/ gold ounce sold was US $757 and all-in sustaining cost/gold ounce sold was US $871. The average realized sale price was US $1,181/oz gold. This year the company plans to produce 130,000-140,000 gold equivalent ounces at cash costs between US $750 and US $800/ oz produced. Dougherty pointed out that "if you look at a snapshot of Argonaut Gold today, spe- cifically at three of its current assets; our cash, our GST-type receivables, and inven- tory on the leach pad, and add those three numbers together you get about CDN $150 million." That represents about 25% of the mar- ket capitalization of the company. In most producing companies this ratio is signifi- cantly lower. With US $47 million in cash, Argonaut has a strong balance sheet and will use this money to finance the San Agustin Project located just 10 km from its Castillo Mine. "We envision that project will produce anywhere from 80,000 to 100,000 ounces per year at a lower cash cost than we see at our Castillo operation," said Dougherty. Measured and indicated resources at San Agustin are 845,000 oz gold averaging 0.32 g/t gold and 28.2 million ounces sil- ver averaging 10.7 g/t silver. According to a recent PEA, the project has a low initial capital requirement of US $43 million. Cash costs are estimated at US $648/gold equiv- alent ounce and the after-tax NPV (5%) is US $89.9 million with an internal rate of return of 50%. Based on widely spaced step-out drill holes, Dougherty believes Argonaut may potentially double the size of San Agustin in the coming years. The company also has two other advanced exploration stage projects in its production pipeline. These include the San Antonio Project in Baja California Sur, Mexico and the Magino Project in Ontario, Canada. The San Antonio Project has measured and indicated resources of 1.7 million ounces averaging 0.83 g/t gold. The PEA estimates an after-tax NPV (5%) of US $166 million and an IRR of 39% with a Capex of US $88 million. The Magino Project hosts measured and indicated resources of 4.1 million ounces averaging 0.88 g/t gold, with an after-tax NPV (5%) of US $415 million and an IRR of 22% with a Capex of US $540 million. The company intends to look for a partner to help bring this project into production to minimize shareholder dilution. Argonaut Gold has 157 million shares outstanding and a market capitalization of CDN $628 milllion. n Argonaut Gold targets mid-tier status miNiNg Argonaut gold's La Colorada open pit, heap leach gold-silver mine located 53 km southeast of Hermasillo, Sonora State, northwestern mexico. photo courtesy Argonaut gold Inc.