TORONTO, ONTARIO--(Marketwired - Aug. 14, 2014) - Argonaut Gold Inc. (TSX:AR) (the "Company", "Argonaut Gold" or "Argonaut") is pleased to announce its financial and operating results for the second quarter ended June 30, 2014. All dollar amounts are expressed in United States dollars unless otherwise specified.
| 3 months ended June 30 | 6 months ended June 30 | |||||||||||
| 2014 | 2013 | Change | 2014 | 2013 | Change | |||||||
| Financial Data (000s except for earnings per share) | ||||||||||||
| Revenue | $ | 40,943 | $ | 44,930 | -9 | % | $ | 79,997 | $ | 88,010 | -9 | % |
| Gross profit | $ | 7,358 | $ | 16,850 | -56 | % | $ | 15,376 | $ | 37,809 | -59 | % |
| Net income | $ | 2,022 | $ | 6,494 | -69 | % | $ | 4,838 | $ | 18,109 | -73 | % |
| Earnings per share - basic | $ | 0.01 | $ | 0.04 | -75 | % | $ | 0.03 | $ | 0.12 | -75 | % |
| Cash flow from operating activities before changes in non-cash operating working capital and other items | $ | 13,543 | $ | 16,756 | -19 | % | $ | 26,477 | $ | 36,107 | -27 | % |
| Cash and cash equivalents | $ | 52,655 | $ | 139,752 | -62 | % | ||||||
| Gold Production and Cost Data | ||||||||||||
| GEOs loaded to the pads1 | 56,451 | 43,843 | +29 | % | 109,056 | 86,294 | +26 | % | ||||
| GEOs projected recoverable 1,2 | 31,849 | 25,344 | +26 | % | 61,174 | 50,348 | +22 | % | ||||
| GEOs produced1 | 30,310 | 34,572 | -12 | % | 61,273 | 64,453 | -5 | % | ||||
| GEOs sold1 | 31,723 | 32,424 | -2 | % | 61,888 | 59,010 | +5 | % | ||||
| Average realized sales price | $ | 1,296 | $ | 1,388 | -7 | % | $ | 1,300 | $ | 1,492 | -13 | % |
| Cash cost per gold ounce sold3 | $ | 756 | $ | 643 | +18 | % | $ | 744 | $ | 621 | +20 | % |
| 1 Gold equivalent ounces ("GEOs") are based on conversion ratio of 55:1 for silver to gold 2 Recoverable ounces - see tables titled Second Quarter 2014 El Castillo Operating Statistics and Second Quarter 2014 La Colorada Operating Statistics 3 Non-IFRS measure, see note below |
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SECOND QUARTER 2014 FINANCIAL HIGHLIGHTS:
- Gold equivalent ounces loaded to the pads increased by 29% quarter over quarter.
- Cash cost per gold ounce sold of $756. The 6 month cash cost is $744, below original 2014 guidance of $750 to $775 (cash cost per gold ounce sold is a non-IFRS measure, see note below).
SECOND QUARTER 2014 COMPANY HIGHLIGHTS:
El Castillo
- GEO production of 21,359 ounces consisting of 21,041 gold ounces and 17,474 silver ounces (GEOs at 55:1 conversion rate).
- 37,352 gold ounces loaded on the leach pads equating to 21,424 projected recoverable gold ounces.
- Mining:
- The daily mining rate for the quarter increased from 87 thousand tonnes per day ("ktpd") in the first quarter to 91 ktpd in the second quarter, an increase of 5% quarter over quarter (23% year over year). The mine plan incorporated mostly oxidized ore, increasing from 75% to 87% of total ore placed on the pads for the second quarter over the first quarter. This is expected to result in improved recoveries in the coming quarter.
- Strip ratio increased slightly in the quarter to 1.2:1 which is consistent with mine plan expectations.
- Crushing and conveying:
- West crusher conveyor moved a record 1,468,000 tonnes to the pads.
- East crusher conveyor moved a record 1,616,000 tonnes to the pads.
- West side pad expansion:
- Construction of Cell 2a was completed in May and over liner placement is nearly complete, well ahead of schedule.
- Cell 3b the rock fill was completed in June and the cell construction is expected to be finalized in the third quarter, which is also ahead of schedule.
La Colorada
- GEO production of 8,951 ounces, consisting of 8,420 gold ounces and 29,224 silver ounces (GEOs at 55:1 conversion rate).
- 15,651 gold ounces and 189,621 silver ounces loaded on the pad; equating to 10,425 projected recoverable GEOs to leach pad.
- The Company is ahead on stripping for the year. The strip ratio of 4.49:1 fell in comparison to the 7.22:1 strip ratio realized during the first quarter, as ore shipments to the crusher increased.
- Record 880,000 tonnes of crushed ore was loaded to the leach pad which is an increase of 182% year over year. A new rate of 10 ktpd of crushed ore to the pads has now been established. Since first quarter of this year we have achieved nearly a 40% improvement in crushing.
- An additional tertiary crusher was added to the crushing circuit and commissioned at the beginning of July in an effort to further increase crushing capacity.
Magino
- The purchase agreement with Richmont Mines Inc. was finalized in June 2014; an operating agreement covering all land transfers has been put in place allowing full access while the title recording process proceeds.
- The Company is developing a budget and detailed exploration plan for these additional lands.
- Argonaut has identified additional material for further heap leach column test work to be performed, and expects to begin this metallurgical test work in the third quarter.
- The Company continues to advance the permitting studies on the project.
San Antonio
The Company continues to work on advancing the permitting process. The activities are focused on creating a mutually beneficial project for all stakeholders by working with local and federal agencies and officials, local communities and also pursuing legal alternatives which are available to the Company.
San Agustín
- The Phase I drill program of 22,114 metres has been completed as of July 15, 2014, including 21,115 metres of reverse circulation ("RC") in 217 drill holes and 999 metres of PQ core in 13 drill holes. For further information on these drilling results, please see our press release dated July 15, 2014.
- Initiated Phase II drill program, to date 3,050 meters of the 16,000 metres planned have been completed.
- Metallurgical test work continues with column tests being run by independent laboratory Kappes, Cassiday & Associates in Reno, Nevada and bulk run of mine column tests at El Castillo.
- Argonaut Gold purchased Geologix Explorations Inc. claims for the Nuestra Senora del Carmen II property, and has an agreement to acquire the Consejo 1 title.
- These concessions total 489 hectares immediately to the west and east of the current drill program for the Company.
- A cash payment of $10.0 million was made to Silver Standard Resources Inc. ("Silver Standard"), as well as a $1.6 million value added tax payment, related to the transaction to acquire San Agustin.
CEO Commentary
Pete Dougherty, President and CEO of Argonaut Gold, stated, "Improvements made by the operations teams quarter over quarter have positioned the projects for a stronger second half of the year. Operationally, the increase of the tonnes hauled and crushed has led to more GEOs loaded to the pad to date; it is anticipated that our production ounces will improve during the second half of the year and that we will meet the lower end of our guidance of 135,000 to 150,000 GEOs for the year at a updated cash cost of $740 to $760 per gold ounce sold, net of silver credits.
On the exploration front, we are very pleased with the drilling done as well as the project development work at the newly acquired San Agustin project. The team continues to work towards a resource statement for the project for the third quarter and a preliminary economic assessment by year end.
"The team is focused on delivering on the 2014 goals. In terms of our three development projects (San Antonio, San Agustín and Magino), we are advancing these projects towards permitting and construction decisions."
Financial Results - Second Quarter 2014
During the second quarter of 2014, revenue was $40.9 million from gold sales of 30,822 ounces, compared to $44.9 million from gold sales of 31,756 ounces in the second quarter of 2013. Cash cost per gold ounce sold in the quarter was $756, compared to $643 in the same period of the prior year reflecting a decrease in capitalized stripping and higher mining costs (cash cost per gold ounce sold is a non-IFRS measure, see note below).
During the second quarter of 2014, gross profit was $7.4 million, compared to $16.9 million in the second quarter of 2013. The decrease in gross profit is largely reflective of an increase in operating expenses resulting from a decrease in capitalized stripping, and lower gold price. During the quarter, profit from operations was $4.5 million, compared to $12.8 million in the same period of the prior year. Net income for the period was $2.0 million, or $0.01 per basic share, versus $6.5 million, or $0.04 per basic share, in the second quarter of 2013.
Cash and cash equivalents was $52.7 million at June 30, 2014. Cash spent towards capital expenditures in the second quarter was $13.0 million, primarily spent on capitalized stripping, mining equipment purchases and equipment overhauls.
| SECOND QUARTER 2014 EL CASTILLO OPERATING STATISTICS | ||||||||||||
| 3 Months Ended June 30 | 6 Months Ended June 30 | |||||||||||
| 2014 | 2013 | % Change | 2014 | 2013 | % Change | |||||||
| Mining | ||||||||||||
| Tonnes ore (000s) | 3,767 | 3,278 | +15 | % | 7,433 | 6,450 | +15 | % | ||||
| Tonnes waste (000s) | 4,524 | 3,418 | +32 | % | 8,688 | 6,431 | +35 | % | ||||
| Tonnes mined (000s) | 8,291 | 6,695 | +24 | % | 16,120 | 12,882 | +25 | % | ||||
| Tonnes per day (000s) | 91 | 74 | +23 | % | 89 | 71 | +25 | % | ||||
| Waste/ore ratio | 1.20 | 1.04 | +15 | % | 1.17 | 1.00 | +17 | % | ||||
| Heap Leach Pad | ||||||||||||
| Tonnes ore direct to leach pad (000s) | 683 | 1,710 | -60 | % | 1,506 | 3,440 | -56 | % | ||||
| Tonnes crushed (000s) | 1,616 | 1,565 | +3 | % | 3,113 | 2,996 | +4 | % | ||||
| Tonnes overland conveyor (000s) | 1,468 | N/A | +100 | % | 2,814 | N/A | +100 | % | ||||
| Production | ||||||||||||
| Gold grade (g/t)1 | 0.31 | 0.38 | -18 | % | 0.32 | 0.37 | - 14 | % | ||||
| Gold loaded to leach pad (oz)2 | 37,352 | 40,169 | -7 | % | 77,276 | 76,192 | +1 | % | ||||
| Projected recoverable gold ounces (oz)3 | 21,424 | 23,403 | -8 | % | 43,702 | 44,937 | -3 | % | ||||
| Gold produced (oz) | 21,041 | 28,075 | -25 | % | 43,017 | 51,200 | -16 | % | ||||
| Gold sold (oz) | 22,292 | 26,705 | -17 | % | 43,198 | 46,214 | -7 | % | ||||
| Silver sold (oz) | 17,474 | 8,940 | +95 | % | 28,211 | 17,627 | +60 | % | ||||
| Cash cost per gold ounce sold (see Non-IFRS Measures section) | $ | 790 | $ | 691 | +14 | % | $ | 772 | $ | 695 | +11 | % |
| 1 "g/t" is grams per tonne | ||||||||||||
| 2 "oz" means troy ounce | ||||||||||||
| 3 Recovery rates: ROM oxide 50%, crushed oxide 70%, ROM transition 40%, crushed transition 60%, crushed sulphides argillic 30%, and crushed sulphides silicic 17%. | ||||||||||||
Summary of Production Results at El Castillo
Total tonnes mined increased by 24% for the second quarter 2014 over second quarter 2013. The gold ounces loaded to the pads in the second quarter 2014 decreased by 7% over second quarter 2013 due to lower mined grades (-18%).
Gold production of 21,041 ounces in the second quarter of 2014 was 25% lower compared to the second quarter of 2013 due to lower ore grades; production rates are improving and expected to increase in the second half of the year. 2014 production guidance at El Castillo is maintained at 90,000 to 100,000 gold ounces.
The strip ratio of waste to ore increased in the second quarter of 2014 to 1.20 compared to 1.04 in the second quarter of 2013, reflecting the push back on the north side of the pit and in line with expectations for the mine plan this year.
SECOND QUARTER 2014 LA COLORADA OPERATING STATISTICS
| 3 Months Ended June 30 | 6 Months Ended June 30 | |||||||||||
| 2014 | 2013 | % Change | 2014 | 2013 | % Change | |||||||
| Mining | ||||||||||||
| Tonnes ore (000s) | 700 | 342 | +105 | % | 1,260 | 898 | +40 | % | ||||
| Tonnes waste (000s) | 3,145 | 3,802 | -17 | % | 7,188 | 7,600 | -5 | % | ||||
| Total tonnes (000s) | 3,845 | 4,143 | -7 | % | 8,448 | 8,499 | -1 | % | ||||
| Waste/ore ratio | 4.49 | 11.12 | -60 | % | 5.70 | 8.46 | -33 | % | ||||
| Tonnes rehandled (000s) | 245 | 0 | +100 | % | 315 | 0 | +100 | % | ||||
| Heap Leach Pad | ||||||||||||
| Tonnes ore direct to leach pad (000s) | 880 | 312 | +182 | % | 1,515 | 886 | +71 | % | ||||
| Production | ||||||||||||
| Gold grade mined (g/t)1 | 0.68 | 0.29 | +134 | % | 0.63 | 0.28 | +125 | % | ||||
| Gold loaded to leach pad (oz)2 | 15,651 | 2,796 | +460 | % | 26,463 | 7,938 | +233 | % | ||||
| Projected recoverable GEOs loaded (oz)3 | 10,425 | 1,941 | +437 | % | 17,473 | 5,412 | +223 | % | ||||
| Gold produced (oz) | 8,420 | 5,511 | +53 | % | 15,983 | 11,293 | +42 | % | ||||
| Silver produced (oz) | 29,224 | 45,318 | -36 | % | 96,803 | 90,197 | +7 | % | ||||
| GEOs produced (oz) | 8,951 | 6,335 | +41 | % | 17,743 | 12,933 | +37 | % | ||||
| Gold sold (oz) | 8,530 | 5,051 | +69 | % | 16,263 | 10,983 | +48 | % | ||||
| Silver sold (oz) | 32,083 | 27,801 | +15 | % | 105,294 | 82,070 | +28 | % | ||||
| GEOs sold | 9,113 | 5,556 | +64 | % | 18,177 | 12,475 | +46 | % | ||||
| Cash cost per gold ounce sold (see Non-IFRS Measures section) | $ | 666 | $ | 391 | +70 | % | $ | 670 | $ | 309 | +117 | % |
| 1 "g/t" is grams per tonne | ||||||||||||
| 2 "oz" means troy ounce | ||||||||||||
| 3 Recovery rates: Gold 60% and Silver 30% | ||||||||||||
Summary of Production Results at La Colorada
Total tonnes mined decreased by 7% for the second quarter 2014 over second quarter 2013 as we began stripping of antenna hill area. There were 15,651 gold ounces placed on the pad in the second quarter of 2014, compared to 2,796 ounces placed on the pad in the second quarter of 2013 (an increase of 460%).
Second quarter production in 2014 of 8,951 GEOs was an increase of 41% over second quarter 2013 production of 6,335 GEOs. We anticipate gold equivalent ounce production for the full year guidance to be 40,000 to 45,000 ounces for 2014, as we continue to ramp up crushing capacity and mine higher grade ore.
Capital Expenditures for 2014
The Company plans on investing a total of between $50 million and $70 million on capital expenditures and exploration initiatives in 2014. Major capital expenditures in 2014 are expected to include approximately $17 million at El Castillo (including mining service company expenditures and capitalized stripping of $6 million), $14 million at La Colorada (predominately capitalized stripping of $11 million), $4 million at San Agustín, $6 million at Magino, and $3 to $23 million at San Antonio, depending on permitting. Exploration expenditures in 2014 are expected to amount to approximately $6 million.
Argonaut Gold Second Quarter Financial Results Conference Call and Webcast:
The second quarter financial results call is scheduled to take place on August 14, 2014 at 8:30 am EDT.
| Second Quarter Conference Call Information: | ||
| Toll Free (North America): | 1-877-223-4471 | |
| International: | 1-647-788-4922 | |
| Webcast: | www.argonautgold.com | |
| Second Quarter Conference Call Replay: | ||
| Toll Free Replay Call (North America): | 1-416-621-4642 | |
| International Replay Call: | 1-800-585-8367 | |
| Passcode: | 67705385 | |
The conference call replay will be available from 10:30 am EDT on August 14, 2014 until August 28, 2014.
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 unaudited consolidated financial statements for the quarter ended June 30, 2014 and associated 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.
Technical Information and Mineral Properties Reports
The technical information contained in this document has been prepared under supervision of, and reviewed and approved by Mr. Thomas H. Burkhart, Argonaut's Vice President of Exploration, and a qualified person as defined by National Instrument 43-101. For further information on the Company's properties please refer to 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 February 24, 2011 | |
| 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, Wawa, Ontario, Canada dated January 30, 2014 | |
| 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 |
The San Agustín project is not a material property of Argonaut. For further information on the San Agustín project, please see the historic estimates disclosed in the technical report title "San Agustín Resource Estimate" dated March 2009 and available under Silver Standard at www.sedar.com. Per Silver Standard, the historic mineral reserves 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 Agustín Resources Estimate" dated March, 2009. The report was reviewed by Thomas Burkhart on behalf of Argonaut Gold, who has concluded that it continues to be relevant and reliable as a basis for understanding the potential resources at the property. 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. Argonaut Gold has not done sufficient work to classify the historic estimate as current mineral resources or mineral reserves and is not treating the historical estimate as current mineral resources or mineral reserves. The Company has begun a 44,000 metre drill program to update the resource model and verify or upgrade the historic work to support the development of a current estimate.
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. Advanced exploration stage projects include the San Antonio project in Baja California Sur, Mexico, and the Magino project in Ontario, Canada. The recently acquired San Agustín project is the primary exploration target for Argonaut in 2014. 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 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 parametres, 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.
Contact Information:
Nichole Cowles
Investor Relations Manager
(775) 284-4422 x 101
nichole.cowles@argonautgold.com
www.argonautgold.com