Argonaut raising $15 million for Ontario gold mine

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Argonaut Gold Inc. [AR-TSX] has announced details of a $15 million bought deal private placement of flow-through shares with proceeds earmarked for the company’s Magino gold project in northern Ontario.

The company said the underwriters have agreed to buy, on a bought deal basis, 6.6 million common shares to be issued as flow-through shares with respect to Canadian exploration expenses at 75.6 cents per flow through share (generating $5.0 million).

The deal also includes 14.9 million shares of the company to be issued as flow-through shares with respect to Canadian development expenses at 67 cents per share (gross proceeds of $10 million).

On April 26, 2023, Argonaut shares closed at 61 cents and currently trade in a 52-week range of $2.29 and 32.5 cents. The offering is expected to close around May 24, 2023, subject to approval by the Toronto Stock Exchange.

Argonaut, Chief Financial Officer David Ponczoch recently described 2022 as a challenging year for the company after Argonaut reported a 2022 net loss of $152.2 million and a 31% decline in fourth quarter gold equivalent ounce (GEO) production.

An increase in construction costs at the Magino project required a large capital raise, including debt, equity and the sale of a royalty. Also, inflationary pressures had a significant impact on operating results of our low-grade heap leach operations, resulting in an impairment of the company’s Mexican assets and Florida Canyon mine [in Nevada]

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.

Argonaut is targeting the first gold pour at Magino by mid-May followed by commercial production in the third quarter. “The commissioning of Magino will be the first step in transforming the company as it enters a pivotal growth stage,’’ said Argonaut CEO Richard Young.

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.

By the end of 2022, the company had incurred approximately $583 million on Magino construction, and estimated that the 10,000 tonne-per-day project was 80% complete.

According to a recent 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.

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