Argonaut Gold Inc.
TSX : AR

Argonaut Gold Inc.

March 16, 2015 08:00 ET

Argonaut Gold Announces 2014 Revenue of $166.3M, $42.5M in Cash Flow from Operations Before Changes in Non-Cash Operating Working Capital and Other Items

TORONTO, ONTARIO--(Marketwired - March 16, 2015) - Argonaut Gold Inc. (TSX:AR) (the "Company", "Argonaut Gold" or "Argonaut") is pleased to announce its financial and operating results for the fourth quarter and full year ended December 31, 2014. All dollar amounts are expressed in United States dollars unless otherwise specified.

3 months ended December 31 Change 12 months ended December 31 Change
2014 2013 2014 2013
Financial Data (000s except for earnings (loss) per share)
Revenue $48,959 $34,604 +41 % $166,266 $165,061 +1 %
Gross profit $2,908 $8,553 -66 % $22,651 $59,065 -62 %
Net income (loss) ($7,205 ) ($20,058 ) +64 % ($4,190 ) $4,628 -191 %
Earnings (loss) per share - basic ($0.05 ) ($0.13 ) +62 % ($0.03 ) $0.03 -200 %
Cash flow from operating activities before changes in non-cash operating working capital and other items $7,329 $9,315
-21
% $42,514 $61,734
-31
%
Cash and cash equivalents $51,446 $81,076 -37 %
Gold Production and Cost Data
GEOs loaded to the pads1 62,823 51,549 +22 % 241,656 183,929 +31 %
GEOs projected recoverable 1,2 38,093 28,542 +33 % 140,563 105,481 +33 %
GEOs produced1 44,312 28,896 +53 % 136,706 121,243 +13 %
GEOs sold1 41,172 27,823 +48 % 132,977 118,877 +12 %
Average realized sales price $1,196 $1,248 -4 % $1,256 $1,392 -10 %
Cash cost per gold ounce sold3 $801 $654 +22 % $771 $644 +20 %
1 Gold equivalent ounces ("GEO" or "GEOs") are based on 55:1 conversion of silver to gold.
2 Recoverable ounces - El Castillo expected recovery rates: ROM oxide 50%, crushed oxide 70%, ROM transition 40%, crushed transition 60%, crushed sulphides argillic 30% and crushed sulphides silicic 17%; La Colorada expected recovery rates: gold 60% and silver 30%.
3 Refer to section Non-IFRS Measures.

2014 Financial Highlights:

  • Revenue of $166.3 million from sales of 132,977 GEOs at an average price of $1,256 per ounce.
  • Net loss of $4.2 million, including loss on foreign exchange of $5.9 million and deferred tax expense of $7.0 million related to foreign exchange rate.
  • Cash flow from operations before changes in non-cash and working capital items of $42.5 million.
  • Capital investments of $47.9 million in 2014.

2014 Company Highlights:

  • A record 136,706 GEOs produced which is an increase of 13% over the previous year.
  • Full year cash cost of $771 per gold ounce sold (cash cost per gold ounce sold is a non-IFRS measure, refer to Non-IFRS Measures section for further detail).
  • Completed an updated NI 43-101 resource on the San Agustin project resulting in an indicated resource of 82 million tonnes at a grade of 0.32 g/t Au and 10.7 g/t silver for 845,000 gold ounces and 28.3 million silver ounces.

Operations:

El Castillo

  • Quarterly production of 27,870 GEOs; full year production of 93,379 GEOs (based on 55:1 conversion of silver to gold ounces).
  • During the quarter, 37,986 gold ounces loaded on the leach pads.
  • 7.4 million tonnes mined and 3.0 million tonnes processed through the crushing circuits during the quarter.
  • Completed construction of leach pad 3B West at El Castillo and began work on VSP pad on the West and 3B on the East.
  • Received award and recognized as an Environmental and Social Responsibility Business.

La Colorada

  • Quarterly production of 15,682 gold ounces and 41,787 silver ounces, for 16,442 GEOs (based on 55:1 conversion of silver to gold ounces).
  • Full year production of 40,535 gold ounces and 153,548 silver ounces, for 43,327 GEOs (based on 55:1 conversion of silver to gold ounces).
  • During the quarter, 19,917 gold ounces and 270,601 silver ounces loaded on the leach pads.
  • Completed the expansion of the crushing circuit at La Colorada during August which led to an average of over 12,000 tonnes per day throughput from that point forward, and resulted in record Q4 production.
  • Announced and began processing material from leach pad 5-6 at La Colorada, adding an additional 4.4 million tonnes of material at an expected grade of 0.42 g/t gold and 11.5 g/t silver.
  • Received notification that La Colorada was voted the number one in the small mines category in Mexico for Environmental and Social Responsibility for its work in the community and on the environment.

Project updates

  • The San Agustin Preliminary Economic Assessment ("PEA") was filed on February 20, 2015 anticipating a 10.5 year mine life with average production of 50,500 GEO at a cash cost of $611 per ounce (calculated as disclosed therein on a by-product basis). The project economics resulted in an after-tax NPV of $70.2 million (at a 5% discount rate) and an IRR of 22%.
  • Drilling program has commenced at Magino, which is designed to test the extension of mineralization onto the land adjacent to the project that is being acquired from Richmont Mines Inc. ("Richmont") during 2014. In addition, this program will further test the potential of the higher grade core of the project, defined as the shadow zone.
  • Completed the additional metallurgical test work related to the heap leach potential of the low grade material for the Magino project.

CEO Commentary

Pete Dougherty, President and CEO of Argonaut Gold, stated, "The team delivered production of 136,706 GEOs in 2014. The Company advanced the projects in our portfolio by acquiring surrounding land for exploration drilling, advancing project permitting and assessing improvements in efficiencies that may impact project development and economics.

In 2015, we anticipate production of 135,000 to 145,000 gold equivalent ounces. In terms of moving projects forward, at San Agustin, an exploration and development program continues as the project advances toward permitting. At San Antonio, we will continue to work on permitting, and at Magino, the Company looks to add more value to the project through an exploration program on the adjacent property under agreement with Richmont and the shadow zone around the old underground workings, as well as assessing aspects of the project layout and processing that may impact the project's economics. The culmination of this work will result in a new PEA on Magino, which is expected to be issued by the end of 2015.

We continue to focus each day on the Company's three main goals: (1) providing a safe working environment for our employees and the communities in which we operate, (2) an increase in ounces produced and (3) a decrease in our overall cash cost profile through focusing on our operating assets and moving forward our development projects."

Financial Results - Fourth Quarter 2014

Revenue for the three months ended December 31, 2014 was $49.0 million, an increase from $34.6 million during the three months ended December 31, 2013. During the fourth quarter of 2014, gold ounces sold totaled 40,277 at an average realized price per ounce of $1,196 compared to 26,918 gold ounces sold at an average price per ounce of $1,248 during the same period of 2013.

Production costs for the fourth quarter of 2014 were $33.1 million, an increase from $18.6 million in the fourth quarter of 2013. Cash cost per gold ounce sold (see Non-IFRS Measures section) increased to $801 in the fourth quarter of 2014 from $654 in the same period of 2013, principally due to an increase in mine operating costs associated with deferred stripping.

Net loss for the fourth quarter of 2014 was $7.2 million or $0.05 per basic share, a decrease from the net loss of $20.1 million or $0.13 per basic share for the fourth quarter of 2013.

Cash and cash equivalents was $51.4 million at December 31, 2014. Cash spent towards capital expenditures in the fourth quarter was $9.2 million, primarily for capitalized stripping, mine equipment overhauls, and leach pad construction.

Financial Results - Year End 2014

Revenue for the year ended December 31, 2014 was $166.3 million, an increase from $165.1 million during the year ended December 31, 2013. Gold ounces sold totaled 129,148 at an average realized price per ounce of $1,256 and silver ounces sold totaled 210,595 at an average realized price per ounce of $19.09 (compared to 114,909 gold ounces sold at an average price per ounce of $1,392 and 218,255 silver ounces sold at an average price of per ounce of $23.45 during the same period of 2013).

Production costs for the year ended December 31, 2014 were $103.6 million, an increase from $79.2 million as compared to 2013. Cash cost per gold ounce sold (see Non-IFRS Measures section) increased to $771 in 2014 from $644 during 2013, principally due to an increase in mine operating costs resulting, in part, from deferred stripping costs along with a decrease in the average gold grade of material placed on the leach pad at El Castillo.

Cash spent on capital expenditures for the year was $47.9 million, primarily for capitalized stripping, equipment purchases and overhauls, leach pad construction, and installation of crushing equipment.

The Company provided guidance in the third quarter of between 130,000 to 135,000 gold equivalent ounces of production at a cash cost per gold ounce sold of $740 to $760 (see Non-IFRS Measures section) with capital spending of $45 million. In 2014, the Company produced 136,706 gold equivalent ounces at a cash cost per gold ounce sold of $771 (see Non-IFRS Measures section) with capital expenditures of $47 million.

FOURTH QUARTER 2014 El CASTILLO OPERATING STATISTICS

3 Months Ended December 31 12 Months Ended December 31
2014 2013 % Change 2014 2013 % Change
Mining (000s)
Total tonnes mined 7,376 7,574 -3 % 31,211 26,997 +16 %
Total ore tonnes mined 3,484 3,764 -7 % 14,976 13,621 +10 %
Heap Leach Pad (000s)
Tonnes ore direct to leach pad 527 1,045 -50 % 3,096 6,352 -51 %
Tonnes crushed 1,556 1,456 +7 % 6,200 5,771 +7 %
Tonnes overland conveyor 1,471 1,312 +12 % 5,750 1,533 +275 %
Production
Gold grade (g/t)1 0.33 0.32 +3 % 0.33 0.35 -6 %
Gold loaded to leach pad (oz)2 37,986 39,269 -3 % 159,294 154,581 +3 %
Gold produced (oz)3 27,676 20,848 +33 % 92,500 94,804 -2 %
GEOs produced4 27,870 21,011 +33 % 93,379 95,614 -2 %
Gold sold (oz) 25,292 20,620 +23 % 89,017 92,675 -4 %
Silver sold (oz) 10,649 8,954 +19 % 48,401 44,504 +9 %
1 "g/t" refers to grams per tonne
2 "oz" refers to troy ounce
3 Produced ounces are calculated as ounces loaded to carbon
4 GEOs are based on a conversion ratio of 55:1 for silver to gold

Summary of Production Results at El Castillo

The gold ounces loaded to the pads in the fourth quarter 2014 were 3% lower compared to fourth quarter 2013 due to a slightly lower amount of ore tonnes loaded to the pads, partially offset by a slight increase in gold grade. The strip ratio for the fourth quarter was slightly higher as compared to the same period in 2013.

Gold production of 27,676 ounces in the fourth quarter of 2014 was a 33% improvement over fourth quarter of 2013. Record production during the fourth quarter was largely due to ounces loaded to the pads in previous periods.

FOURTH QUARTER 2014 LA COLORADA OPERATING STATISTICS
3 Months Ended December 31 12 Months Ended December 31
2014 2013 % Change 2014 2013 % Change
Mining (000s)
Total tonnes mined 4,306 4,515 -5 % 16,997 16,314 +4 %
Total ore tonnes mined 732 413 +77 % 2,748 1,726 +59 %
Total ore tonnes rehandled 392 265 +48 % 1,009 382 +164 %
Heap Leach Pad (000s)
Crushed ore tonnes to pad 1,117 740 +51 % 3,700 2,175 +70 %
Production
Gold grade to leach pad (g/t)1 0.55 0.41 +34 % 0.57 0.33 +73 %
Gold loaded to leach pad (oz)2 19,917 9,799 +103 % 67,576 23,308 +190 %
Gold produced (oz)3 15,682 7,017 +123 % 40,535 22,544 +80 %
Silver produced (oz) 41,787 47,759 -13 % 153,548 169,673 -10 %
GEOs produced4 16,442 7,885 +109 % 43,327 25,629 +69 %
Gold sold (oz) 14,985 6,298 +138 % 40,131 22,234 +80 %
Silver sold (oz) 38,588 40,800 -5 % 162,194 173,751 -7 %
1 "g/t" refers to grams per tonne
2 "oz" refers to troy ounce
3 Produced ounces are calculated as ounces loaded to carbon
4 GEOs are based on a conversion ratio of 55:1 for silver to gold

Summary of Production Results at La Colorada

Total ore tonnes mined increased by 77% for the fourth quarter 2014 over fourth quarter 2013, as we moved away from higher stripping areas into more productive zones with a higher grade. As a result, fourth quarter production in 2014 of 16,442 GEOs was an increase of 109% over fourth quarter 2013 production of 7,885 GEOs.

Chief Operating Officer Comments

Richard Rhoades, commenting on 2014, stated, "While 2014 was a challenging year, we completed several key projects including the expansion of the crushing circuit at La Colorada, and an expansion to the West heap leach pads at El Castillo. With these expansions completed, we showed increased throughput during the second half of the year and have established a basis for the operations going forward. We will continue to focus on managing costs and improving efficiencies to enable us to meet the Company's objectives and deliver value to our shareholders."

Expansion Projects for 2015

The Company plans on investing approximately $37 million on capital expenditures and exploration initiatives in 2015. Major capital expenditures in 2015 are expected to include approximately $16 million at El Castillo (including $4 million in leach pad expansion, $6 million in sustaining capital and $6 million on capitalized stripping), $11 million at La Colorada (including $3 million in leach pad expansion, $2 million in sustaining capital and $6 million on capitalized stripping), $2 million at Magino, $2 million at San Antonio and $2 million at San Agustin. Exploration expenditures in 2015 are expected to amount to approximately $4 million.

Company Progress

Peter Dougherty added "The Company is providing guidance for 2015 of 135,000 to 145,000 gold equivalent ounces with an overall cash cost of $700 to $750 per gold ounce (including 85,000 to 90,000 GEOs at El Castillo at $750 to $800 per gold ounce and 50,000 to 55,000 GEOs at $600 to $650 per gold ounce at La Colorada).

The Company continues with the necessary initiatives to unlock shareholder value at San Agustin, Magino and San Antonio. These projects are expected to provide future production growth toward our goal of becoming a 300,000 to 500,000 ounce a year producer."

Argonaut Gold Q4 and Full Year Financial Results Conference Call and Webcast:

The Full Year 2014 financial results conference call and webcast is scheduled to take place on March 16, 2015 at 8:30 AM EDT.

Full Year 2014 Conference Call Information

Toll Free (North America): 1-877-223-4471

International: 1-647-788-4922

Conference ID: 60998177

Webcast: www.argonautgold.com

Q4 Conference Call Replay:

Toll Free Replay Call (North America): 1-416-621-4642

International Replay Call: 1-800-585-8367

The conference call replay will be available from 11:30 AM (EDT) on March 16, 2015 to March 30, 2015.

Non-IFRS Measures

The Company has included a non-IFRS measure for "Cash cost per gold ounce sold" in this press release to supplement its financial statements which are presented in accordance with International Financial Reporting Standards ("IFRS"). Cash cost per gold ounce sold is equal to production costs less silver sales divided by gold ounces sold. The Company believes that this measure provides investors with an improved ability to evaluate the performance of the Company. Non-IFRS measures do not have any standardized meaning prescribed under IFRS. Therefore they may not be comparable to similar measures employed by other companies. The data is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. Please see the management's discussion and analysis ("MD&A") for full disclosure on non-IFRS measures.

This press release should be read in conjunction with the Company's audited consolidated financial statements for the year ended December 31, 2014 and associated MD&A, for the same year ended, which are available from the Company's website, www.argonautgold.com, in the "Investors" section under "Financial Filings", and under the Company's profile on SEDAR at www.sedar.com.

Technical Information and Mineral Properties Reports

The technical information contained in this document has been prepared under the supervision of, and has been reviewed and approved by, Mr. Thomas H. Burkhart, Argonaut's Vice President of Exploration, a qualified person as defined by National Instrument 43-101 ("NI 43-101"). For further information on the Company's properties please refer to the reports as listed below on the Company's website www.argonautgold.com or on www.sedar.com:

El Castillo Mine NI 43-101 Technical Report on Resources and Reserves, Argonaut Gold Inc., El Castillo Mine, Durango State, Mexico dated February 24, 2011 and with an effective date of November 6, 2010
La Colorada Mine NI 43-101 Preliminary Economic Assessment La Colorada Project, Sonora, Mexico dated December 30, 2011and with an effective date of October 15, 2011
Magino Gold Project Preliminary Feasibility Study Technical Report for the Magino Project, Wawa, Ontario, Canada dated January 30, 2014 and with an effective date of December 17, 2013
San Antonio Gold Project NI 43-101 Technical Report on Resources, San Antonio Project, Baja California Sur, Mexico dated October 10, 2012 and with an effective date of September 2, 2012
San Agustin Project NI 43-101 Technical Report and Preliminary Economic Assessment on the San Agustin Heap Leach Project, Durango, Mexico dated February 19, 2015 and with an effective date of October 3, 2014

About Argonaut Gold

Argonaut Gold is a Canadian gold company engaged in exploration, mine development and production activities. Its primary assets are the production stage El Castillo mine in Durango, Mexico, and La Colorada mine in Sonora, Mexico. Advanced exploration stage projects include the San Antonio project in Baja California Sur, Mexico, the Magino project in Ontario, Canada and the San Agustin project in Durango, Mexico. The Company also has several exploration stage projects, all of which are located in North America.

Creating Value Beyond Gold

Cautionary Note Regarding Forward-looking Statements

This press release contains certain "forward-looking statements" and "forward-looking information" under applicable Canadian securities laws concerning the proposed transaction and the business, operations and financial performance and condition of Argonaut Gold Inc. ("Argonaut" or "Argonaut Gold"). Forward-looking statements and forward-looking information include, but are not limited to, statements with respect to estimated production and mine life of the various mineral projects of Argonaut; synergies; the realization of mineral reserve estimates; the timing and amount of estimated future production; costs of production; and financial impact of completed acquisitions; the benefits of the development potential of the properties of Argonaut; the future price of gold, copper, and silver; the estimation of mineral reserves and resources; success of exploration activities; and currency exchange rate fluctuations. Except for statements of historical fact relating to Argonaut, certain information contained herein constitutes forward-looking statements. Forward-looking statements are frequently characterized by words such as "plan," "expect," "project," "intend," "believe," "anticipate", "estimate" and other similar words, or statements that certain events or conditions "may" or "will" occur. Forward-looking statements are based on the opinions and estimates of management at the date the statements are made, and are based on a number of assumptions and subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking statements. Many of these assumptions are based on factors and events that are not within the control of Argonaut and there is no assurance they will prove to be correct.

Factors that could cause actual results to vary materially from results anticipated by such forward-looking statements include variations in ore grade or recovery rates, changes in market conditions, risks relating to international operations, fluctuating metal prices and currency exchange rates, changes in project parameters, the possibility of project cost overruns or unanticipated costs and expenses, labour disputes and other risks of the mining industry, failure of plant, equipment or processes to operate as anticipated.

These factors are discussed in greater detail in Argonaut's most recent Annual Information Form and in the most recent Management Discussion and Analysis filed on SEDAR, which also provide additional general assumptions in connection with these statements. Argonaut cautions that the foregoing list of important factors is not exhaustive. Investors and others who base themselves on forward-looking statements should carefully consider the above factors as well as the uncertainties they represent and the risk they entail. Argonaut believes that the expectations reflected in those forward-looking statements are reasonable, but no assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this press release should not be unduly relied upon. These statements speak only as of the date of this press release.

Although Argonaut has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Argonaut undertakes no obligation to update forward-looking statements if circumstances or management's estimates or opinions should change except as required by applicable securities laws. The reader is cautioned not to place undue reliance on forward-looking statements. Statements concerning mineral reserve and resource estimates may also be deemed to constitute forward-looking statements to the extent they involve estimates of the mineralization that will be encountered if the property is developed. Comparative market information is as of a date prior to the date of this document.

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