The company also said it has received a fixed-bid pricing proposal for a significant portion of the initial capital requirement for the Magino Project. The package includes a secured debt financing of up to US$175 million by way of a US$50 million bought deal offering of senior unsecured convertible debentures at US$1,000 per debenture as well as the extension/expansion of its existing revolving credit facility for up to US$125 million.
Argonaut shares were active on the news, easing 2.9% or $0.08 to $2.70 on volume of 1.5 million shares traded. 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 United States.
Argonaut’s portfolio of Mexican operations, include 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 in Guanajuato, Mexico and Magino project in Canada.
The Magino Mine property is a past-producing underground gold mine located 40 km northeast of Wawa, Ontario, approximately 14 km southeast of Dubreuilville. It is estimated to host proven and probable reserves of 58.9 million tonnes, grading 1.13 g/t gold or 2.13 million ounces.
A feasibility study released in November, 2017, indicates that the project could yield 2.0 million ounces of gold over a 17-year mine life with average production of 150,000 ounces during the first five years. The study envisaged an all-in-sustaining cost of US$711 per gold ounce sold.
In a press release that was issued after the close of trading on October 14, 2020, Argonaut said it anticipates a two-year construction period, starting in January 2021, with the first gold pour expected by the first half of 2023.
In the feasibility study, initial capital was estimated at US$321 million and has recently been estimated at between US$360 million and US$380 million, including contingency and inflation. Therefore, the company has provided an allowance for a total financing plan in excess of US$400 million.
Argonaut said the financing announced on October 14 is expected to fully satisfy its financing requirements.
Meanwhile, in connection with the US$50 million debenture offering, the underwriters have been granted an option, exercisable at the offering price to purchase an additional 15% of the offering to cover any overallotments. That option will remain open for 30 days following the closing of the offering, which is expected to occur by October 30, 2020.
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.