CANADA-US-MEXICO
Argonaut Gold LOOKS TO LEVEL UP
Junior believes Magino project in Ontario has Tier 1 potential By Alisha Hiyate
A
rgonaut Gold may be known as an open pit, heap-leach gold miner, based on its decade-long history successf ully operating several such mines in Mexico. But the junior miner has been carefully putting in place a strategy to take it to the next level. Eyeing a transf ormation f rom a junior miner with higher-cost, shorter-life assets to an intermediate producer with lower-cost, longer-lif e, diversif ied gold operations, Argonaut greenlit construction of its Magino project in Ontario in October. The project located 40 km northwest of Wawa, Ont., is expected to produce 115,000 oz. of gold per year over a 17year mine life, and Argonaut believes it has potential for much more. As it is, Magino will become the junior’s cornerstone asset. For comparison, Argonaut produced more than 186,600 gold-equivalent oz. at its three openpit heap leach operations in Mexico last year. While Magino has long been seen as a core asset in Argonaut’s portfolio, the US$360-380 million price tag was a bit too hefty for the junior – until recently. “A year ago, the biggest question was: ‘How do you move Magino f orward?’” said Dan Symons, Argonaut’s vice-president of corporate development and investor relations, in a recent presentation. “Everyone recognized it’s the most strategic asset in our portf olio – it’s in Canada, it’s right next to Alamos 12 | CANADIAN
MINING JOURNAL
Gold’s Island gold mine, it has great inf rastructure in place – but the capital commitment of between US$360 and US$380 million – how is a company like Argonaut going to fund that?” The company provided a partial answer to that question with an at-market acquisition of Alio Gold that was announced in March and closed in July. The merger brings a new open pit, heap-leach mine into Argonaut’s portf olio, but one that’s located in Nevada and has a longer lif e than its assets in Mexico. Themine, Florida Canyon, will also replace production from Argonaut’s El Castillo mine, slated to close in 2022. Florida Canyon and Argonaut’s other operations are expected to generate cash flow of at least US$142 million through 2022, assuming gold stays at or above US$1,600 per oz. Combined with the company’s existing cash balance of US$172 million (including a boughtdeal equity raise of $126.5 million that closed in July), that will go a long way to paying the tab for Magino. To f ill the gaps, Argonaut closed a US$57.5-million of f ering of senior unsecured convertible debentures in October. And bef ore the end of the year, it expects to close a US$30-million sale of a non-core asset – Ana Paula, in Guerrero, Mexico, which was part of the Alio portfolio. In total, that’s more than US$400 million available for Magino. Lastly, as a saf ety net, Argonaut recently expanded its revolving credit facility
to US$125 million from US$75 million. In addition to the f inancing, other critical elements of the project have also come together in the past year – permitting (including its Schedule 2 f ederal permit this year), First Nations agreements (the company signed impact benef it agreements with f ive groups in March) and detailed engineering. www.canadianminingjournal.com
