Argonaut Gold hits commercial production at Magino, Ontario

Argonaut Gold Inc. [TSX-AR] has declared commercial production at its Magino gold project in northern Ontario.

“The commissioning of Magino will be the first step in transforming the company as it enters a pivotal growth stage,’’ President and CEO Richard Young has said.

However, as a result of the slower-than-planned ramp-up of Magino to commercial production, the company will bolster its balance sheet through the sale to Franco Nevada Mining Corp. [TSX, NYSE-FNV] and certain of its subsidiaries an additional 1.0% net smelter return royalty on the Magino mine and its non-core royalty holdings in Canada and Mexico for an aggregate purchase price of US$29.5 million.

Upon closing of this transaction, Franco-Nevada will hold an aggregate 3.0% NSR on the Magino mine.

The Magino update was released after the close of trading on November 2, 2023 when Argonaut Gold shares rose 5.9% to 54 cents. The shares are trading in a 52-week range of 77 cents and 32.5 cents.

Magino is a past-producing underground gold mine located 40 kilometres northeast of Wawa, Ontario, approximately 14 kilometres 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.

“Plant commissioning and ramp-up proceeded largely on plan from June through August, ramping up from approximately 50% of nameplate capacity to 80%, placing the plant on track for commercial production in September,” the company said.  “However, 20 days of unplanned downtime in September delayed the ramp-up. This was the result of two events: the first centred on the ball mill motor drive and inching system, and the second involved the SAG mill motor.

Third quarter consolidated production was 53,911 gold equivalent ounces, including precommercial production of 10,693 GEOs from the Magino mine.  Full-year production for the Magino mine will not meet the guidance set out at the beginning of the year due to the slower than planned ramp up to commercial production. However, the company remains on track to meet its full year consolidated production and all-in sustaining cost guidance set out at the beginning of the year.

Argonaut is targeting 215,000 GEOs this year.

In addition to Magino, Argonaut also has three additional operating mines, including Florida Canyon in Nevada, where it is pursuing potential for redevelopment and additional growth, La Colorada in Sonora, Mexico, and San Agustin mine in Durango, Mexico. Magino is expected to become Argonaut’s larges and lowest-cost mine.

Argonaut emerged as a Canadian intermediate gold producer by completing a friendly merger deal with Alio Gold Inc. 

By combining with Alio Gold, Argonaut expected to benefit from an enhanced asset portfolio and improved geographical diversification with assets in Mexico, Canada and the United States.

In 2022, the company achieved its production targets by producing 203,155 gold equivalent ounces (GEOS). However, GEO sales were down 17% to 207,158 ounces.