Argonaut says Magino gold mine is fully funded

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Argonaut Gold Inc. [AR-TSX] on Friday announced terms of a $195 million equity financing that will be used to fund construction of its 100%-owned Magino gold project in Ontario. The company said the project remains on track for a first gold pour by the end of March, 2023.

Argonaut said it has entered into an agency agreement in connection with a marketed offering of 434 million common shares priced at 45 cents per offered share (for gross proceeds of $195 million) with a syndicate of agents led by BMO Capital Markets, Scotiabank and Cormack Securities.

Together with the previously announced binding commitment letter from a syndicate of lenders for the financing of a six-year, US$200 million term loan credit facility and a three-year revolving credit facility of US$50 million, for a total facilities limit of US$250 million, the company believes it is fully funded to completed construction at Magino.

Argonaut shares were active on the news, falling 10.5% or $0.06 to 51 cents on volume of 6.2 million. The shares trade in a 52-week range of $4.09 and 54 cents.

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 2021 Argonaut achieved 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.

Argonaut recently said it 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.

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