Argonaut Gold Inc.
TSX : AR

Argonaut Gold Inc.

November 12, 2013 07:34 ET

Argonaut Gold Announces 3rd Quarter 2013 Revenue of $42.4M and Net Income of $6.6M

TORONTO, ONTARIO--(Marketwired - Nov. 12, 2013) - Argonaut Gold Inc. (TSX:AR) (the "Company", "Argonaut Gold" or "Argonaut") is pleased to announce its financial and operating results for the third quarter ended September 30, 2013. All dollar amounts are expressed in United States dollars unless otherwise specified.

3rd Quarter 9 months
2013 2012 Change 2013 2012 Change
Financial Data (in millions except per earnings per share)
Revenue $ 42.4 $ 72.9 -42 % $ 130.5 $ 134.8 -3 %
Gross profit $ 12.7 $ 38.0 -67 % $ 50.5 $ 68.6 -26 %
Net income (loss) $ 6.6 $ 27.2 -76 % $ 24.7 $ 45.8 -61 %
Earnings per share - basic $ 0.04 $ 0.29 -86 % $ 0.17 $ 0.49 -65 %
Cash flow from operating activities before changes in non-cash operating working capital and other items $ 16.3 $ 34.7 -53 % $ 52.4 $ 59.2 -11 %
Cash and cash equivalents $ 125.3 $ 42.8 +193 %
Gold Production and Cost Data
Gold ozs. loaded to the pad 44,691 53,906 -17 % 127,442 143,468 -11 %
Gold ozs. produced 26,990 31,074 -13 % 89,484 76,081 +17 %
Gold ozs. sold 30,792 42,534 -28 % 87,989 80,279 +10 %
Average realized sales price $ 1,331 $ 1,666 -20 % $ 1,436 $ 1,649 -13 %
Cash cost per gold oz sold $ 680 $ 577 +18 % $ 642 $ 601 +7 %

THIRD QUARTER 2013 & RECENT HIGHLIGHTS

  • El Castillo operations:
    • West Side Pad 8 construction is ongoing
    • West Side crusher and overland conveyor project was completed and is operational
    • Permits were received for the new south waste dump
  • La Colorada operations:
    • Pre-stripping continues at the La Colorada pit
    • New crushing circuit installation was completed and is operational
  • San Antonio and Magino permitting process continues
  • Capital expenditures of $28.1 million on mineral properties, plant and equipment

SUBSEQUENT EVENTS

  • Subsequent to quarter-end, the Company entered into a surface and mining rights exchange agreement with Richmont Mines Inc. ("Richmont"). Pursuant to this agreement, Argonaut has expanded its surface and mining rights associated with its Magino project. The terms of this agreement provide a CA$2 million payment from Argonaut to Richmont. See additional information in the October 16, 2013 press release available under the Company's profile on the SEDAR website.

  • On November 5, 2013, the Company entered into an agreement to acquire the San Agustin project from Silver Standard Resources Inc. ("Silver Standard") for $75 million in shares and cash. The San Agustin project hosts an indicated resource of 1.6 million ounces of gold and 48 million ounces of silver within 121 million tonnes of material grading 0.41 g/t gold and 12.5 g/t silver. It is located 10 kilometers from our operating El Castillo mine in Durango, Mexico.

CEO Commentary

Pete Dougherty, President and CEO of Argonaut Gold, stated "The team has accomplished many strategic goals during the quarter, successfully completing construction on two major crusher initiatives aimed at future production increases and cost reductions for both mines. The gold grades processed at El Castillo came in line with life of mine grades, a reduction year over year of 8%, while year over year we had a 9% increase in gold production. At La Colorado, we continue to open the pit. Although our contractors experienced a difficult quarter, they have acquired additional equipment to make up the tonnage shortfall (36K tonnes per day vs. the budget of 51K tonnes per day). Despite this, the Company produced 4,000 ounces of gold at $400 per ounce. On the corporate front, we have been successful in negotiating two significant transactions. The first with Richmont, expands our land package and allows for further exploration and exploitation of our full resources at Magino. The second, with Silver Standard for the San Agustin project, provides a nearby project, ripe for synergies with the El Castillo mine. We believe this project hosts significant upside exploration potential."

The Company is on track to meet production guidance established at the beginning of the year. Company guidance is maintained for 120,000 to 130,000 ounces of gold production at a cash cost per gold ounce sold of $650 to $660 (cash cost per gold ounce sold is a non-IFRS measure, see note below).

Financial Results - Third Quarter 2013

During the third quarter of 2013, revenue was $42.4 million from gold sales of 30,792 ounces, compared to $72.9 million from gold sales of 42,534 ounces in the third quarter of 2012. Cash cost per gold ounce sold in the quarter was $680, compared to $577 in the same period of the prior year.

During the third quarter of 2013, gross profit was $12.7 million, compared to $38.0 million in the third quarter of 2012. During the quarter, profit from operations was $8.8 million, compared to $35.7 million in the same period of the prior year. Net income for the period was $6.6 million, or $0.04 per basic share, versus $27.2 million, or $0.29 per basic share, in the third quarter of 2012.

Cash and cash equivalents was $125.3 million at September, 30, 2013. Capital expenditures in the third quarter were $28.1 million, primarily as a result of infrastructure improvements at the El Castillo and La Colorada mines, as well as pre-stripping.

Financial Results - Nine months ended September 30, 2013

During the nine months ended September 30, 2013, revenue was $130 million from gold sales of 87,989 ounces, compared to $134.8 million from gold sales of 80,279 ounces in the first nine months of 2012. Cash cost per gold ounce sold in the nine months ended September 30, 2013 was $642, compared to $601 in the same period of the prior year.

During the first nine months of 2013, gross profit was $50.5 million, compared to $68.5 million in the first nine months of 2012. During the nine months ended September 30, 2013, profit from operations was $38.9 million, compared to $61.3 million in the same period of the prior year. Net income for the period was $24.7 million, or $0.17 per basic share, versus $45.8 million, or $0.49 per basic share, in the nine months ended September 30, 2012.

This press release should be read in conjunction with the Company's unaudited interim condensed consolidated financial statements for the three and nine months ended September 30, 2013 and associated management's discussion and analysis ("MD&A"), 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.

El CASTILLO OPERATING STATISTICS

3 Months Ended
September 30
9 Months Ended
September 30
2013 2012 % Change 2013 2012 % Change
Mining (Tonnes 000's)
Tonnes ore 3,406 3,083 +11 % 9,857 8,640 +14 %
Tonnes waste 3,315 3,272 +1 % 9,566 8,717 +9 %
Tonnes mined 6,542 6,355 +3 % 19,424 17,358 +12 %
Waste / ore ratio 0.92 1.06 -13 % 0.97 1.01 -4 %
Heap Leach Pad (Tonnes)
Tonnes ore direct to leach pad 1,868 1,811 +3 % 5,307 5,528 -4 %
Tonnes crushed 1,539 1,270 +21 % 4,535 3,273 +39 %
Production
Gold grade (g/t) 0.36 0.42 -15 % 0.36 0.40 -8 %
Gold loaded to leach pad (oz) 39,120 41,630 -6 % 115,312 112,133 +3 %
Gold produced (oz) 22,756 24,575 -7 % 73,957 61,907 +20 %
Gold ounces sold 25,840 33,839 -24 % 72,054 66,286 +9 %
Silver ounces sold 17,923 11,719 +53 % 35,550 15,539 +129 %
Cash cost per gold ounce sold $ 697 $ 617 +13 % $ 695 $ 635 +9 %
(1) "g/t" is grams per tonne
(2) "oz" means troy ounce

Summary of Production Results at El Castillo

Total tonnes mined in the third quarter 2013 were up 3 percent, compared to the third quarter of 2012. 1.6 million tonnes were crushed tonnes during the third quarter, representing a 21 percent increase over the third quarter of 2012. The total ounces loaded to the leach pad were 39,120 in the third quarter of 2013, a 6 percent decrease over the third quarter of 2012. The stripping ratio of waste to ore decreased 13% from the third quarter of 2012.

The 2013 production guidance is expected to be approximately 100,000 ounces with a cash cost between $700 and $725 per gold ounce sold.

LA COLORADA OPERATING STATISTICS

3 Months Ended
September 30
9 Months Ended
September 30
2013 2012 % Change 2013 2012 % Change
Mining (Tonnes 000's)
Tonnes ore 414 - +100 % 1,313 - +100 %
Tonnes waste 2,885 - +100 % 10,485 - +100 %
Tonnes mined 3,299 - +100 % 11,798 - +100 %
Waste / ore ratio 6.96 - +100 % 7.99 - +100 %
Tonnes moved 3,299 2,707 +22 % 11,798 4,226 +180 %
Heap Leach Pad (Tonnes 000's)
Crushed ore tonnes to pad 535 848 -37 % 1,250 2,272 -45 %
Production
Gold grade (g/t) 0.33 0.43 -23 % 0.31 0.43 -29 %
Gold loaded to leach pad (oz) 5,571 12,276 -53 % 12,130 31,335 -61 %
Gold produced (oz) 4,234 6,499 -35 % 15,527 14,174 +10 %
Gold ounces sold 4,952 8,695 -43 % 15,935 13,993 +14 %
Silver produced (oz) 31,717 41,937 -24 % 121,914 84,915 +44 %
Silver ounces sold 50,881 52,861 -4 % 132,951 62,609 +112 %
Cash cost per ounce sold $ 391 $ 578 -32 % $ 309 $ 578 -47 %
(1) "g/t" is grams per tonne
(2) "oz" means troy ounce

Summary of Production Results at La Colorada

Production from La Colorada was hampered due to low mining productivity from the contractor. The contractor has taken necessary actions to increase productivity by adding more equipment which should result in an increase in ore tonnes for processing, and higher grades as we open the pit more fully. We expect a rise in production during the fourth quarter and further improvement into 2014.

The 2013 production guidance is approximately 24,000 ounces with a cash cost, net of by-product credits, between $450 and $475 per gold ounce sold.

Capital Expenditures for 2013

The Company plans on investing $91 million on capital expenditures and exploration initiatives in 2013 including $3.6 million for the purchase of the royalty at La Colorada and CA$2 million the surface and mining agreement with Richmont. Major capital expenditures, excluding exploration, in 2013 are expected to include approximately $36 million at El Castillo (including mining service company expenditures), $28 million at La Colorada (including $16 million for pre-strip), $12 million at Magino and $3 million at San Antonio. Exploration expenditures in 2013 are expected to amount to $6 million.

Argonaut Gold Q3 Financial Results Conference Call and Webcast:

The Q3 financial results call is scheduled to take place on November 12, 2013 at 8:30 am ET. Details for the call in participation are:

Q3 Conference Call Information
Toll Free (North America): 1-866-223-7781
International: 1-416-340-8018
Webcast: www.argonautgold.com
Q3 Conference Call Replay:
Toll Free Replay Call (North America): 1-905-694-9451
International Replay Call: 1-800-408-3053
Passcode: 7979249

The conference call replay will be available from 10:30 a.m. ET on November 12 - 19, 2013.

Non-IFRS Measures

The Company included the non-IFRS measure "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 MD&A for full disclosure on non-IFRS measures.

Technical Information and Mineral Properties Reports

For further information on the Company's properties please see the reports as listed below on the Company's website 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 November 6, 2010
La Colorada Mine NI 43-101 Preliminary Economic Assessment La Colorada Project, Sonora, Mexico dated December 30, 2011
Magino Gold Project NI 43-101 Technical Report and Mineral Resource Estimate on the Magino Gold Project, Ontario, Toronto, Canada dated October 4, 2012
San Antonio Gold Project NI 43-101 Technical Report and Mineral Resource Estimate on the San Antonio Gold Project, Baja California Sur, Mexico dated October 10, 2012

Preparation of the technical information in this release was supervised by Thomas Burkhart, Argonaut Gold's Vice President of Exploration, and a Qualified Person under NI 43-101.

For further information on the San Agustin project, please see the technical report titled "San Agustin Resource Estimate" dated March 2009 and available under Silver Standard's profile at www.sedar.com. Both gold ounces and silver ounces have been reported by Silver Standard per their Mineral Resources statement. Per Silver Standard, their Mineral Resource estimate was completed by Gilles Arseneau, Ph.D., P.Geo., a Qualified Person pursuant to NI 43-101, in a technical report completed by Wardrop, a TetraTech company, entitled "San Agustin Resource Estimate" dated March 2009.

This report was reviewed by Thomas Burkhart on behalf of Argonaut Gold. To the best of Argonaut Gold's knowledge, information and belief, there is no new material, scientific or technical information that would make the disclosure of the mineral resources inaccurate or misleading.

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 the La Colorada Mine in Sonora, Mexico, the advanced exploration stage San Antonio project in Baja California Sur, Mexico, the advanced exploration stage Magino project in Ontario, Canada and 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"). 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 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; the realization of mineral reserve estimates; the timing and amount of estimated future production; costs of production; 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 changes in market conditions, variations in ore grade or recovery rates, 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. 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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