Argonaut Gold Inc. [AR-TSX; ARNGF-OTC] said Friday October 30 it has raised US$57.5 million from a bought deal offering of 4.625% senior unsecured convertible debentures. The offering is part of a financial package the company will use to fund construction of its 100%-owned Magino property in northern Ontario where construction is expected to start in January, 2021.
In connection with the debenture offering, Argonaut said the underwriters have exercised an option to purchase an additional 15% of the offering to cover any overallotments at a price of US$1,000 per debenture.
The debentures will mature on November 30, 2025 and will bear interest at an annual rate of 4.625%, payable semi-annually in arrears on May 31, and November 30 of each year, commencing on May 31, 2021. At the holder’s option, prior to the maturity date, the debentures may be converted to common shares at a conversion rate of US$2.86 per common share.
Argonaut shares advanced on the news, rising 2.5% or $0.06 to $2.47 on volume of 672,331. The shares are currently trading in a 52-week range of $3.42 and 76 cents.
Argonaut recently emerged as a Canadian intermediate gold producer with annual production of 235,000 ounces of gold equivalent annually by completing a friendly merger deal with Alio Gold Inc.
The combined entity expects to benefit from an enhanced asset portfolio and improved geographical diversification with assets in Mexico, Canada and the U.S. Argonaut’s Mexican portfolio includes the 100%-owned La Colorada Mine in Sonora, and El Castillo Complex in Durango. The company’s advanced development stage projects include the Cerro del Gallo Project, Guanajuato, Mexico and Magino Project, Canada.
The Magino property is a past-producing underground gold mine 40 km northeast of Wawa, Ontario. Proven and Probable Reserves are 58.9 million tonnes grading 1.13 g/t gold, or 2.13 million ounces.
A 2017 feasibility study indicated the project could yield 2 million oz gold over a 17-year mine life. The study envisaged an all-in-sustaining cost of US$711 per gold ounce sold.
Argonaut anticipates two years of construction with the first gold pour expected by the first half of 2023.
The FS estimated initial capital at US$321 million and has recently been estimated at between US$360 million and US$380 million. Therefore, the company has provided an allowance for a total financing plan in excess of US$400 million.