Argonaut Gold responds to Mexican decree

Argonaut Gold Inc. [AR-TSX; ARNGF-OTC] on Wednesday April 1 said the Mexican federal government has mandated that all non-essential businesses, including mining, temporary suspend operations until April 30, 2020, due to the COVID-19 virus.

Argonaut said it will work towards an orderly suspension of mining, crushing, and stacking activities. Given that Argonaut operates heap leach mines, the company expects metal production and metal sales to continue during the temporary suspension of mining activities.

Meanwhile, Argonaut said it expects it previously announced friendly merger with Alio Gold Inc. [ALO-TSX, NYSE] will continue. The merger is expected to create an intermediate gold producer with four operations and annual production of 235,000 ounces of gold equivalent annually.

The combined entity expects to benefit from an enhanced asset portfolio and improved geographical diversification with assets in Mexico, Canada and the United States.

“With both companies understanding the unique and unprecedented circumstances surrounding the COVID-19 outbreak, in the plan of arrangement, each of Argonaut and Alio have the option to withdraw from the transaction of the other mining company’s mining operations are suspended for 45 days,” Argonaut said in a press release.

“To date, there are not known or suspected cases of COVID-19 infection at any of the company’s operations, projects or corporate offices,” the company said.

However, Argonaut President and CEO Peter Dougherty indicated that he isn’t taking any chances.  “It is important to recognize the seriousness of the COVID-19 pandemic and while we have not experienced a known or suspected case in the company to date, we have been and will continue to take precautionary measures,” Dougherty said. “The health and safety of our workforce, their families and communities in which we operate is paramount and we continue to be dedicated to maintaining a safe work environment,” he said.

“We must continue to process pregnant solution coming from the heap leach pads for the safety of the environment. Therefore, we expect to continue metal production and sales.”

Under an agreement announced on March 30, 2020, Argonaut Gold said it will acquire all of the issued and outstanding shares of Alio, which will be exchanged on the basis of 0.67 of an Argonaut common share for each Alio common share.

Argonaut has previously said it was aiming to create the next quality mid-tier gold producer in the Americas with a production target this year of 175,000 to 185,000 gold equivalent ounces.  Its 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.

However, on Wednesday, Argonaut said it is withdrawing its full year guidance across all operations until further notice due to the uncertainty with respect to future developments of the COVID-19 outbreak, including severity, and scope of the outbreak, the actions taken to contain or treat the outbreak and potential impact on mining operations.