Argonaut Gold unveils Magino forward sales contracts
Argonaut Gold Inc. [AR-TSX] on Friday announced details of a gold price protection plan for the remainder of the construction phase of its Magino property in northern Ontario.
The company said it has entered into monthly unsecured forward gold sales contracts of 7,500 gold ounces between April, 2022 and March 2023 at US$1,916 per ounce. The company said these forward sales contracts total 90,000 ounces over the next 12 months and provide certainty of cash flow during the final year of Magino project construction.
The contracts represent 40%-45% of Argonaut’s expected annual gold production, based on the company’s most recently projections.
“The company believes these forward gold sales contracts will be helpful for a potential future debt financing, which Argonaut is working to finalize during the second quarter of 2022,” the company said in a press release.
Argonaut Gold shares closed at 2.30 on March 3, 2022 and currently trade in a 52-week range of $4.09 and $1.90.
Friday’s announcement comes afte Argonaut raised $51.8 million from a bought deal private placement of 3.9 million Canadian exploration expense (CEE) and 15.8 million Canadian development expense (CDE) flow-through common shares for $2.95 per CEE flow-through common share and $2.54 per CDE flow-through common share.
The amount raised include the full-exercise of an over-allotment option available to the underwriters of 2.58 million flow through shares. Proceeds are earmarked for exploration and development at Magino.
Argonaut recently emerged as a Canadian intermediate gold producer by completing a friendly merger deal with Alio Gold Inc. [ALO-TSX, NYSE].
The combined entity expects to benefit from an enhanced asset portfolio and improved geographical diversification with assets in Mexico, Canada and the United States.
In a March 1, 2022 press release, Argonaut announced record annual production of 244,156 gold equivalent ounces (AuEq), leading to record annual revenue of $437 million and record cash flow of $125 million.
The Magino mine property 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.
Dan Symons, Vice-President, Corporate Development and Investor Relations has said Argonaut is approximately half way through the construction of a 10,000-tonne-per-day project, and continues to believe that an expansion, including the existing high-grade underground exploration targets, has the potential to meaningfully increase production.
According to the latest technical report, Magino is expected to produce 142,000 gold ounces during the first five years following ramp up to full run rate. The report envisages a mine life of 19 years and a life of mine all in sustaining cost of US$963 an ounce.
Under an environmental assessment, Magino is authorized to permit for up to 35,000 tonnes per day.
The current 10,000 tonnes per day project was chosen to manage initial capital costs. However, studies have been conducted that contemplate an expansion of the processing facility to 20,000 tonnes per day.