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ARGO GO
North America’s next m
ONAUT OLD
mid-tier gold producer
MINING | ARGONAUT GOLD
Over the last decade, Canadian gold explorer and producer Argonaut Gold has built a reputation for operating a cluster of simple, low risk gold assets across North America. The recent acquisition of NYSElisted Alio Gold at the end of March has been a long time in the offing and adds a couple more attractive pearls to Argonaut’s ‘necklace’ of assets, to borrow a metaphor used by president and CEO Peter Dougherty.
“Consolidation is healthy for
natural synergies. Firstly,
the sector because we’ll get
Florida Canyon is an open pit
better capitalisation, we’ll
heap leach mine – the type
be able to coalesce the best
of operation that Argonaut
talent in the industry and
has excelled in previously,
hopefully produce more vibrant
particularly at low grades.
Talking to RGN, Argonaut’s chief describes the deal as typical of the current gold space, with momentum released from M&A activity among the majors gradually trickling down to the mid-tier and below during the last 18 months. Consolidation has been the name of the game in the gold sector and this is only likely to continue as the global economy prepares for a brutal downturn in the midst of the ongoing COVID-19 crisis.
companies that can survive challenging conditions,” says
Dougherty describes Florida
Dougherty.
Canyon as a low grade, 0.4 g/t operation, but notes that
“For Argonaut in particular,
Argonaut has run 0.3 g/t
the Alio deal allows us to
orebodies and made money on
have another producing asset
them. “There are similarities
in a great jurisdiction,” he
between the two companies in
continues.
the processes that we deploy
Natural synergies
and the way that we execute those, and we think we can add
Alio’s only current producing
to and enhance those things at
gold asset is the Florida Canyon
Florida Canyon.”
Mine in Nevada, which is located 200 km from Argonaut’s
Secondly, Argonaut will use
corporate office in Reno – a 1.5
the acquisition to restructure
hours’ drive on a good day. In
its corporate departments.
comparison to the company’s
There will be a natural
other producing mines in
reduction in overall general
Mexico, La Colorada is half a
and administrative (G&A)
day of travel from Reno and the
costs following the closure
operations in Durango are four
of the company’s Vancouver
hours on top of La Colorada.
office. Instead Argonaut will pool its key talent in Reno,
Besides Florida Canyon being
with the existing team in
right in Argonaut’s backyard,
Mexico remaining in place and
the deal was also attractive to
overseeing the integration of
both parties based on several
the Ana Paula development
MINING | ARGONAUT GOLD
project in Guerrero from Alio’s
things all bode well and really
Turning Florida Canyon from
portfolio.
set this project up to bloom
a cash consumer to a cash
from where it is now.”
producer will be a significant
From an operational
result for the company ahead
adds immediate long-life
Distinctly North American
growth to the portfolio and
Argonaut’s portfolio is now
memory, as the world slowly
will effectively replace the El
comprised of four producing
emerges out of lockdown
Castillo mine in Durango when
assets in Mexico and the
to contain the spread of
it reaches maturity in 2022.
US and three development
coronavirus.
However, the asset will require
projects in Canada and
some TLC from Argonaut in
Mexico. Dougherty describes
Indeed, having diversified
the short to mid-term.
the company’s model as
sources of gold production
North American-centric and
could provide unyielding
“Florida Canyon has been
is resolute in his belief of the
value during a period of
starved of the proper cash
world class nature of all three
unprecedented government
investment and we think that
jurisdictions.
stimulus packages aimed
perspective, Florida Canyon
because of the strength of the
of perhaps the steepest decline to the global economy in living
at propping up groaning
balance sheet we have, we can
“We like to play in playgrounds
economies. The addition of
really bring to the forefront
where we think we can
more debt load will only have
that ability. The first thing we
win. We think Mexico has
a positive impact on the gold
will do is unlock the Sprott
an attractive profile for
market in the longer term,
debt and replace it with our
investors, but we were looking
according to Dougherty.
revolving credit facility which
for diversification. The US
is carrying a 2.25% rate.
happens to be one of the best
“I expect to see gold rise over
jurisdictions in the world after
the next several years and
“Secondly, we will look to
you get your permits in and it’s
also bring along with it the
make a further investment in
the same in Canada. Once you
gold equities. It’s a matter of
the crushing circuits of less
overcome the infrastructure
economics. If we continue to
than $10 million, something
hurdle you have access to one
turn on the debt and printing
we can do out of the cash flows
of the best jurisdictions in the
presses as we have, at some
that we are generating as a
world.”
point in time we are going to
strong company today. Those
need that back-end commodity
MINING | ARGONAUT GOLD
Peter Dougherty, Argonaut Gold president and CEO to shore up that currency we
Argonaut quickly complied
are printing. As we look over
with the mandate and ceased
the long term, I am quite
mining, crushing and stacking
bullish about what this is going
activities at its operations, but
to do for gold.�
given that it operates heap
Coping with COVID-19
AT A G L A N C E
leach mines, the company has been able to continue metal production and metal
Following the outbreak of
sales during the temporary
COVID-19 in Mexico earlier
suspension of mining
this year, mining was deemed
activities.
a non-essential business by the Mexican federal government
In fact, the impact on actual
on March 31st and all
metal production during the
operations were suspended
first 30 days of the suspension
at the beginning of April to
order was non-consequential,
prevent the spread of the virus.
ARGONAUT GOL D
STOCK TICKER TSX:AR
MARKET CAPITALISATION
US$233 million (as of May 11, 2020)
ajbr
says Dougherty. “When we
Colorada and El Castillo on
The company has gone above
think about it over the next
May 18th.
and beyond in its efforts to
30-60 days, I would expect us
tackle coronavirus in the
to recover 80% of what we
At the time of writing, the
community surrounding La
normally would’ve seen.”
region that hosts La Colorada
Colorada, offering sanitation
has had 0 cases recorded in
services to 253 local homes
Fortunately, the areas in which
that small community, and in
and providing face masks and
Argonaut operates in Mexico
the state of Durango – where
personal sanitiser to grateful
have received only very small
the El Castillo Complex is
residents.
outbreaks of COVID-19 and
found - there have been
on May 12th the government
two cases identified in the
“We also took it one step
reclassified mining as an
municipality of San Juan del
further and have acquired
essential business, paving
Rio.
COVID-19 test kits for
the way for Argonaut to recommence operations at La
our people. We’ve done
MINING | ARGONAUT GOLD
this because we think it’s
The Magino project in Ontario,
now deploy the assets of the
important. If it turns out
Canada is envisioned to be
company in two different
that we didn’t need the tests,
built by an EPC contractor
functions.”
then so be it. We decided to
at a fixed construction cost
get out in front of this in our
expected to be close to the
Following the acquisition of
communities and whilst this
$320 million outlined in the
Alio, Argonaut’s total gold
doesn’t preclude you from
Magino feasibility study, with
production rate would be
having a case show up, we are
the financing strategy set
around 235-250,000 ounces
now more prepared for when
to be put in place by Q3 this
(oz) per year at full capacity.
it does.”
year. Meanwhile, Argonaut
While achieving this rate in
is progressing through the
2020 may be difficult following
final stages of securing an
the COVID-19 outbreak, clearly
operating permit for Magino,
this is no longer a small fry
Despite the incredibly difficult
having already received
gold firm.
conditions that Argonaut
environmental permits.
A packed pipeline (and the world) is navigating
In fact, Argonaut has the
through, Dougherty remains
“I think the unique thing
makings of a dynamic mid-tier
content with the position the
about the EPC approach is that
North American producer and
company currently finds itself
somebody else is building the
has set itself a transformation
in, chiefly due to the presence
car for you. They’re carrying
strategy with the goal of 300-
of three exploration projects in
out all those activities so we
500,000 oz per year, which
the portfolio.
can leverage our team to work on more than one project. We
“As a matter of fact, now is an
are not overburdening our
amazing time for the company
team and we’ve transferred
given we are still a relatively
the risk for overruns to the
small junior with three
contractor.
development assets that are all poised by the end of the year
“While overseeing the EPC
to be in a decision-making
contract at Magino in Canada,
process as to how we advance
our team can also be working
them,” he proclaims.
on Cerro del Gallo or Ana Paula in Mexico. We can
We like to play in playgrounds where we think we can win. Mexico has an attractive profile for investors, but we were looking for diversification and The US happens to be one of the best jurisdictions in the world” Peter Dougherty, Argonaut Gold president and CEO
MINING | ARGONAUT GOLD
“We add to it Florida Canyon. Here’s another mine that is going to be operating for at least the next eight to 10 years, one of our longest life operating mines. Then the big pendant in the Argonaut scenario is Magino. We’ve already identified 5 million oz and started underground exploration last year to expand the resource. “Magino currently has a 17year mine life based on the first two million oz, but it’s probably going to have a 30year life. Then at Cerro del Gallo we have also identified a 14-year life that likely will PETER DOUGHERTY, ARGONAUT GOLD PRESIDENT AND CEO
extend to 20 years with further exploration. These longer life assets also have significantly
will involve upgrades to both
individual pearls (the smaller
lower operating costs and
the production rate and cost
operations in Mexico) that are
they are the pendants we are
profile.
unique and unto themselves
transitioning towards.”
Polishing the Argonaut necklace “When I formed the company back in 2010, I had a simple concept in mind. Take these
able generate some cash. “But they’re relatively short life, with smaller production profiles and relatively high cost profiles.
Published by Anderson Murray Media Ltd
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