Argonaut Gold Announces Updated Pre-Feasibility Study Results For The Magino Project
76% increase in reserves, a pre-tax Internal Rate of Return “IRR” of 28%, a pre-tax Net Present Value “NPV” of US$610 million, an average annual gold production of nearly 300,000 ounces and a payback period of 2.6 years
Toronto, Ontario – (January 18, 2016) Argonaut Gold Inc. (TSX: AR) (the “Company”, “Argonaut Gold” or “Argonaut”) is pleased to announce the results of an updated pre-feasibility study (“PFS”) for its 100% owned Magino property, located 40 kilometers (“km”) northeast of Wawa, Ontario. The study was completed by JDS Energy & Mining Inc. (“JDS”), Vancouver, Canada and is based on an updated resource estimate with an effective date of December 18, 2015. The Magino project PFS more fully utilizes the resource and builds upon the study completed in January 2014. All amounts are indicated in US dollars unless otherwise stated.
| Comparison of 2016 PFS vs 2014 PFS using $1,200 gold price (1) | |||
| 2016 | 2014-Adj.(2) | % change | |
| Processing rate (tonnes per day) | 30,000 | 12,500 | ↑140% |
| Ounces to be recovered (000s) | 2,823 | 1,662 | ↑70% |
| Payback period (years) | 2.6 | 4.2 | ↓38% |
| Average gold ounces produced (years 1 -3) | 370,000 | 163,000 | ↑127% |
| Cash cost per ounce | $582 | $693 | ↓16% |
| Initial Capital Cost | $540 | $356 | ↑52% |
| Sustaining Capital and Closure Cost | $196 | $58 | ↑238% |
| Pre-tax NPV @ 5% ($ millions) | $610 | $241 | ↑153% |
| Pre-tax IRR | 27.6% | 18.2% | ↑52% |
(1) In Canadian dollars the PFS gold price is C$1,540
(2) 2014 PFS adjusted to $1200 per ounce gold price, it was originally done at $1,250 per ounce
CEO Commentary
Pete Dougherty, President and CEO of Argonaut Gold, stated “Since increasing our property position and completing additional drilling, we were able to re-assess the deposit in its entirety, including considering many alternative development approaches for the project, such as processing rates ranging from 10,000 tonnes per day (“tpd”) up to 30,000 tpd. We have determined that this PFS presents the best alternative for development. Not only have the NPV and IRR increased since the previous PFS (based on a Canadian dollar denominated gold price of C$1,538/oz., which is below the current spot gold price of C$1,580/oz.), but the ounces to be produced have increased by 70% and the cash costs have decreased by 16%. Magino is a unique project – there are few gold projects of this scale and quality located in Canada, and the project’s economics continue to benefit from a strong Canadian dollar denominated gold price. On an ongoing basis, we will consider alternatives to finance and develop the project in order to efficiently realize the full potential of this asset.”
The sensitivities to gold price on the project are found in the table below, all using a USD:CAD exchange rate (“FX”) of 0.78:
Magino Sensitivity Study
| Au Price $/oz Sensitivity | Pre-Tax NPV5%($M) | Pre-Tax IRR | After-Tax NPV5%($M) | After-Tax IRR |
| $1,300 $1,250 $1,200 $1,150 $1,100 $1,000 | $811 $711 $610 $510 $410 $209 | 34.4% 31.0% 27.6% 24.2% 20.7% 13.3% | $551 $483 $414 $346 $278 $137 | 28.4% 25.6% 22.9% 20.1% 17.2% 11.1% |
Pre-feasibility Summary
The PFS summarizes financial projections and operational plans for the Magino property, as a conventional open pit mine and gold leaching processing circuit. The following tables summarize the results.
| PROJECT LIFE OF MINE (“LOM”) PRODUCTION AND ECONOMIC HIGHLIGHTS ($1,200 gold price, 0.78 FX rate) | |
| MINE HIGHLIGHTS | |
| Mine life (years) | 10 |
| LOM strip ratio (waste:ore) | 3.8:1 |
| Diluted gold grade (average in g/t) | 0.89 |
| Average mining dilution factored (%) | 23% |
| Gold recovery (average) | 93.5% |
| Gold payable | 99.9% |
| M&I gold ounces recovered | 2,823,000 |
| Average annual production (ounces, LOM) | 295,000 |
| CAPITAL AND OPERATING HIGHLIGHTS | |
| Capital cost – pre-production(millions) | $540 |
| Capital cost – sustaining and closure (millions) | $196 |
| Total capital cost – LOM(millions) | $736 |
| Operating cost/ore tonne (average) | $15.44 |
| Cash cost per ounce | $582 |
| All-in sustaining cost per ounce | $640 |
| All-in cost per ounce | $842 |
| ECONOMIC HIGHLIGHTS | |
| Pre-tax cash flow (undiscounted) (millions) | $1,016 |
| Pre-tax NPV (at a 5% discount rate) (millions) | $610 |
| Pre-tax IRR | 27.6% |
| After-tax cash flow (undiscounted) (millions) | $715 |
| After-tax NPV (at a 5% discount rate) | $415 |
| After-tax IRR | 22.9% |
Note: All-in sustaining cost is calculated as cash cost plus sustaining capital (not including closure cost) divided by ounces produced. All-in cost is calculated as cash cost per ounce plus total capital and closure cost divided by ounces produced
The full press release can be found here:
http://www.argonautgold.com/news_events/index.php?&content_id=207