Argonaut Gold Ltd.

Argonaut Gold Ltd.

May 17, 2010 20:48 ET

Argonaut Gold Ltd. Reports Q1 2010 Financial Results

TORONTO, ONTARIO--(Marketwire - May 17, 2010) - Argonaut Gold (TSX:AR) today announced its full results for the first quarter ended March 31, 2010.

Quarterly Highlights year over year 

  • Total Tonnes mined ↑ + 90%
  • Ore tonnes processed ↑ + 102%
  • Gold Production ↑ +72% 
  • Cash cost per Oz. produced (El Castillo) ↓ -10% 
  • Revenue from Operations ↑ +211% 
  • Cash flow from Operations ↑ +331% 
  • New mining contract & fleet
  • New crushing contract & circuit
  • Cash and short-term investments $35MM

CEO Commentary:

Pete Dougherty, President and CEO, made the following comments in regards to El Castillo's first quarter 2010 results: "El Castillo has shown strong quarterly production results, with significant year-over-year growth in production. Our exploration success has provided a solid foundation for potential resource & reserve expansion. The capital expansion program is well underway with significant progress in the process and plant expansion projects. These improvements provide me with comfort that we will be able to achieve our goal of increasing overall production by 60%+ to 47,000 ounces for 2010."

This press release should be read in conjunction with the Company's unaudited consolidated interim financial statements for the quarter-ended March 31, 2010 and associated Management's Discussion and Analysis ("MD&A") which are available from the Company's website, in the "Investors" section under "Financial Filings", and on SEDAR

Summary of Production Results:

Year over year, total tonnes mined increased by +90%, with approximately 1 million tonnes moved in March. The increase in total tonnes mined is due to a larger more efficient truck fleet, more heap leach capacity and improvements being made to the crushing circuit capacity. We are targeting production of 1.5 million total tonnes per month in the latter part of the year. We will achieve these results by replacing our 40 ton fleet with a new larger 100 ton mining fleet and higher capacity loaders. This fleet will begin to arrive on site during July with commissioning to follow shortly thereafter. Tonnes of ore placed on the pads increased over 100% to 1.3 million tonnes for the quarter. Crushed ore increased to 314,405 tonnes or 58% quarter over quarter. The new crushing equipment has been delivered, installed and is being commissioned. This new equipment is anticipated to increase crushing capacity to 300,000 tonnes per month in the future.

Gold production of 10,242 ounces in the first quarter of 2010 was a 72% increase compared to the first quarter of 2009. This improvement was due to the increased mining and processing capacities at the mine. Key operational metrics and production statistics for the first quarter of 2010 compared to 2009 are presented at the end of this press release in Table 1.

Cash cost of operations decreased 9% to $590 per ounce reflecting increased ore tonnes to the pad and lower operating cost per tonne mined offset by lower grade mined coupled with higher chemical consumption associated with increased production. 

Capital Expansion Program:

The 100x100 meter drill program has been completed ahead of schedule and under budget. To-date we have expanded the mineralization 400 to 500 meters to the south and 300 to 400 meters east of the known pit boundary. We have embarked upon a new 50x50 meter drill program to further define the ore body. Investments to expand crushing capabilities are well underway with all equipment on site. Expansion of our heap leach pads has grown to include pads 5 & 6 being completed and commissioned. Permits to expand the mine including pad 7, the east pad and the new processing facility were granted. Currently, pads 7 and cell 1 of the east pad are under construction. The plant modifications are well in hand with anticipated carbon columns for the existing facility to arrive in May with commissioning in June.

While the expansion improvements provide the framework for meeting current projected production at El Castillo, drilling success will allow for increases in future production by adding to resources and reserves.

Summary of Financial Results:

Financial results for the first quarter of 2010 improved significantly over the first quarter of 2009, as a result of higher ounces of production. Revenue increased 172% to $9.3 million, from increased production and higher gold prices. Cost of goods sold of $9.3 million was high due to purchase price accounting fully valuing all pad and finished goods inventory at the date of acquisition of Castle Gold on December 30, 2009. Actual operating costs were $590 per ounce reflecting lower grades mined and higher chemical consumption associated with increased tonnage. Net loss was $3.2 million reflecting the purchase price allocation and amortization of the initial purchase of the project. 

Looking forward:

Argonaut projects gold production of 47,000 ounces for 2010, with an annualized run rate in December 2010 of 60,000 ounces per year. We anticipate cash cost to be approximately $565 per ounce.

Cash Requirements:

Our original capital expansion program of $10 Million has increased to $15-20 million. After a successful phase 1 drilling program, the company has elected to embark upon an expanded drill program and increase the process facility capacity. The company anticipates funding these capital needs from its operating cash flow and cash on hand.

Reminder of Q1 2010 Financial Results Conference Call and Webcast:

Argonaut Gold will host a conference call on Tuesday, May 18, 2010 at 9:30 am EDT to discuss the first quarter 2010 results and provide an update of the Company's operating, exploration, and development activities.

Participants may join the conference call by dialing 1 (888) 430-8701 or 1 (719) 325-2105 for calls outside of Canada and the United States. The pass code is 8186640. The conference call may also be accessed via webcast by visiting the Company's website,

A recorded playback of the conference call can be accessed after the event until June 2, 2010 by dialing 1 (888) 203-1112 or 1 (719) 457-0820 for calls outside Canada and the United States. The pass code for the conference call playback is 8186640, followed by the # key.

Reminder of Annual General and Special Meeting of Shareholders:

Argonaut invites all shareholders to attend the Annual General and Special Meeting of Shareholders ("AGM") on Wednesday, May 19, 2010. The AGM will begin at 10:00 am EDT and will be held at the Fairmont Royal York Hotel, located at 100 Front Street West, Toronto, Ontario. During the meeting, senior management will provide a general corporate update followed by an informal questions-and-answers session.

Table 1 – Summary of Production Results        
El Castillo Operating Statistics   3/31/2010   3/31/2009*
Total Tonnes mined   2,890,313   1,509,900
Tonnes Ore   1,313,526   651,500
Tonnes Ore-direct to leach pad   999,121   452,900
Tonnes Crushed   314,405   198,500
Gold Grade (grams/tonne)   0.39   0.57
Gold Produced (ounces)   10,242   5,968
Cash cost per ounce produced   $590   $650
*Note: Information obtained from Castle Gold Corporation press release dated May 28, 2009.      

About Argonaut

Argonaut is a Canadian gold company engaged in exploration, mine development and production activities. Its primary assets being the production-stage El Castillo Project and the exploration-stage La Fortuna Project, both located in the State of Durango, Mexico. Argonaut is a new venture created by former executive management team members of Meridian Gold Inc. Creating the Next Quality Mid-Tier Gold Producer in the Americas.

Non-GAAP Measures

"Cash cost" is a non-GAAP measure calculated in accordance with the Gold Institute Production Cost Standard and includes site costs for all mining (excluding deferred stripping costs), processing administration, royalties and production taxes but exclusive of depletion, depreciation, reclamation, financing costs, capital costs and exploration costs. Cash cost is presented as we believe that it represents an industry standard of comparison. 

"Cash cost per ounce" is a non-GAAP measure derived from the cash cost of ounces produced as a measure of total ounces produced. 

Cash cost per ounce is not a term defined under Canadian generally accepted accounting principles, and does not have a standard, agreed upon meaning. As such cash cost per ounce may not be directly comparable to cash cost per ounce reported by similar issuers. 

Cautionary Language Regarding Forward-Looking Information

This news release contains certain forward-looking statements. Forward-looking statements include but are not limited to those with respect to the price of gold, the estimation of mineral resources and reserves, the realization of mineral reserve estimates, the timing and amount of estimated future production, costs of production, capital expenditures, costs and timing of development of new deposits, success of exploration activities, permitting time lines, currency fluctuations, requirements for additional capital, completion of capital projects, availability of financing on acceptable terms, government regulation of mining operations, environmental risks, unanticipated reclamation expenses and title disputes or claims and limitations on insurance coverage. In certain cases, forward-looking statements can be identified by the use of words such as "goal", "targets", "objective", "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates", or "does not anticipate", or "believes" or variations of such words and phrases, or state that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Argonaut Gold to be materially different from any future results, performance or achievement expressed or implied by the forward-looking statements. Such risks and uncertainties include, among others, the actual results of current exploration activities, conclusions of economic evaluations, changes in project parameters, possible variations in grade and ore densities or recovery rates, failure of plant, equipment or processes to operate as anticipated, accidents, labour disputes or other risks of the mining industry, delays in obtaining government approvals or financing or in completion of development or construction activities, risks relating to the integration of acquisitions, to international operations, to the price of gold. Although Argonaut Gold 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 as anticipated, estimated or intended. It is important to note, that: (i) unless otherwise indicated, forward-looking statements indicate the Company's expectations as at the date of this news release; (ii) actual results may differ materially from the Company's expectations if known and unknown risks or uncertainties affect its business, or if estimates or assumptions prove inaccurate; (iii) the Company cannot guarantee that any forward-looking statement will materialize and, accordingly, readers are cautioned not to place undue reliance on these forward-looking statements; and (iv) the Company disclaims any intention and assumes no obligation to update or revise any forward-looking statement even if new information becomes available, as a result of future events or for any other reason. In making the forward-looking statements in this news release, Argonaut Gold has made several material assumptions, including but not limited to, the assumption that: (i) consistent supply of sufficient inputs including power will be available to develop and operate the project as planned; (ii) metal prices and exchange rates experienced match those anticipated; (iii) mineral reserve and resource estimates are accurate; (iv) the technology used to develop and operate its project will and will continue to work effectively; (vi) that labour and materials will be sufficiently plentiful as to not impede the projects or add significantly to the estimated cash costs of operations; and (vii) that the process and plan expansion projects continue to be implemented successfully.

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