Argonaut Gold Cash Flows $8.7M on $37.3M in Revenue in Q3
Adjusting for the oz produced but not sold, Argonaut cash flowed $348/oz. The average sales price in Q3 was $1241/oz. Argonaut lost $1.8M and ended the quarter with $44M in cash.
The full release is below:
Toronto, Ontario – (November 6, 2014) 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, 2014 (“Q3”). All dollar amounts are expressed in United States dollars unless otherwise specified.
| 3 months ended September 30 | Change | 9 months ended September 30 |
Change | |||
| 2014 | 2013 | 2014 | 2013 | |||
| Financial Data (000s except for earnings (loss) per share) | ||||||
| Revenue | $37,310 | $42,447 | ↓12% | $117,307 | $130,457 | ↓10% |
| Gross profit | $4,367 | $12,703 | ↓66% | $19,743 | $50,512 | ↓61% |
| Net income (loss) | ($1,823) | $6,577 | ↓128% | $3,015 | $24,686 | ↓88% |
| Earnings (loss) per share – basic | ($0.01) | $0.04 | ↓125% | $0.02 | $0.17 | ↓88% |
| Cash flow from operating activities before changes in non-cash operating working capital and other items | $8,708 | $16,312 | ↓47% | $35,185 | $52,419 | ↓33% |
| Cash and cash equivalents | $44,585 | $125,253 | ↓64% | |||
| Gold Production and Cost Data | ||||||
| GEOs loaded to the pads 1 | 69,777 | 46,086 | ↑51% | 178,832 | 132,880 | ↑35% |
| GEOs projected recoverable 1,2 | 41,296 | 26,590 | ↑55% | 102,471 | 76,939 | ↑33% |
| GEOs produced1 | 32,122 | 27,893 | ↑15% | 92,395 | 92,346 | ↑ 0% |
| GEOs sold1 | 29,917 | 32,044 | ↓ 7% | 91,805 | 91,053 | ↑ 1% |
| Average realized sales price | $1,251 | $1,331 | ↓ 6% | $1,284 | $1,436 | ↓11% |
| Cash cost per gold ounce sold3 | $786 | $680 | ↑16% | $758 | $642 | ↑18% |
| 1 Gold equivalent ounces (“GEO” or “GEOs”) are based on conversion ratio of 55:1 for silver to gold. 2 Recoverable ounces – see tables titled Third Quarter 2014 El Castillo Operating Statistics and Third Quarter 2014 La Colorada Operating Statistics. 3 Refer to section Non-IFRS Measures. |
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THIRD QUARTER 2014 FINANCIAL HIGHLIGHTS:
- A record 69,777 GEOs loaded to the leach pads, an increase of 51% compared with the third quarter of last year. The record ounces loaded to the pad are expected to result in production improvements in the fourth quarter.
- Production of 32,122 GEOs consisting of 31,677 ounces of gold and 24,499 ounces of silver.
- Cash cost of $786 per gold ounce sold. The nine month cash cost was $758, in line with 2014 guidance of $740 to $760 (cash cost per gold ounce sold is a non-IFRS measure, refer to Non-IRFS Measures section for further detail).
THIRD QUARTER 2014 COMPANY HIGHLIGHTS:
El Castillo
- GEO production of 22,980 ounces consisting of 22,807 gold ounces and 9,541 silver ounces. Production for the third quarter was affected by the rainy season which caused dilution of solution grades.
- A record 44,031 gold ounces were loaded on the leach pads, equating to 27,214 projected recoverable gold ounces. Solution grades have steadily increased in October as a result of drier weather, which is expected to contribute to production improvements during the fourth quarter.
- Mining:
- 7,714,185 total tonnes mined in the quarter, an 18% improvement year over year.
- The gold grade of 0.34 grams per tonne (“g/t”) loaded to the leach pad was a 9% improvement over the previous quarter and slightly better than the mine plan.
- Strip ratio decreased to 0.9:1 for the quarter, consistent with the mine plan expectations.
- Oxidized ore mined in the quarter was 89% of the total ore mined.
- Processing: Operation of the east and west crushing, and conveying systems continued to improve with approximately 1.5 million tonnes moved on both circuits individually.
- Construction: West side leach pad cell 3b construction was finalized.
La Colorada
- GEO production of 9,142 ounces, consisting of 8,870 gold ounces and 14,958 silver ounces.
- A record 21,195 gold ounces and 250,322 silver ounces were loaded to the leach pad, equating to 25,746 GEOs loaded to the pad. This represents a 35% increase in GEOs loaded to the pad versus the previous quarter.
- Crushing/Processing:
- Another quarterly record was set with 1,067,946 tonnes placed on the leach pad, a 21% improvement over the previous quarter and a 94% improvement year over year.
- During September, a record of over 13,700 tonnes of crushed ore per day was loaded to the pad, exceeding the anticipated 12,000 tonnes per day.
- During October, the Company has seen a steady improvement in the grade of the solution from the pad yielding production of more than 150 gold ounces per day.
- The strip ratio of 4.6:1 was in line with the previous quarter and expectations.
Magino
- New targets for future exploration have been identified on ground related to the recently finalized agreement with Richmont Mines Inc.
- Permitting documentation and studies continue to advance on the project; permit applications are expected to be submitted around the end of 2014.
San Antonio
- The Company continues to pursue activities to move forward a project that is mutually beneficial to all stakeholders by engaging in dialogue with the local communities, local and federal agencies, as well as reviewing its legal options.
San Agustín
- A 13,000 metre phase II drilling program is in progress to define the approximate limits of the San Agustín mineral system as it projects to the northwest. The majority of the holes will be positioned on approximately 200 metre spacing with follow-up drilling contingent on results. The current area of exploration focus measures approximately 2 kilometres by 0.5 kilometres.
- The Company released a National Instrument (“NI”) 43-101 Technical Report on the current mineral resource on October 3, 2014 that resulted in an indicated resource of nearly 845 thousand gold ounces and 28 million silver ounces or 1.3 million GEOs (based on a silver to gold ratio of 65:1) contained in 82.2 million tonnes of material at a grade of 0.32 g/t gold and 10.7 g/t silver. The Company anticipates issuing a Preliminary Economic Assessment (“PEA”) by year-end.
- Metallurgical test work being conducted internally by Argonaut has been completed. Initial results from external tests completed at Kappes, Cassiday & Associates (“KCA”) were reported previously in the Press Release dated August 22, 2014. The results of the remaining tests were reported previously in the Press Release dated October 15, 2014. These additional tests were conducted at Argonaut’s El Castillo mine metallurgical testing facilities under the guidance of KCA with two duplicate column tests conducted by KCA in their facilities in Reno, Nevada (refer to October 15, 2014 Press Release).
Summary Table of San Agustín Test Results provided by KCA
| Crush Size, millimetre (“mm”), 100% Passing | Average Results of Test Work Previously Reported in Press Release Dated August 22, 2014 (1) | Average Results of Test Work Previously Reported in Press Release Dated October 15, 2014 (2) | Overall Average of All Argonaut Test Work (3) | |||
| Gold (“Au”) | Silver (“Ag”) | Au | Ag | Au | Ag | |
| ROM (4) | 56% | 11% | 56% | 11% | ||
| 50 | 65% | 16% | 66% | 17% | 65% | 16% |
| 12.5 | 70% | 24% | 72% | 28% | 71% | 26% |
Note(1) – See Argonaut San Agustín Press Release dated August 22, 2014 for previously reported test work results.
Note(2) – See Argonaut San Agustín Press Release dated October 15, 2014 for previously reported test work results.
Note(3) – Overall average is weighted by the number of tests in each group.
Note(4) – Run-of-Mine (“ROM”)
CEO Commentary
Pete Dougherty, President and CEO of Argonaut Gold, stated “I am pleased with the operational improvements made at both mines this quarter. Even though we were impacted by the seasonal rains, we have laid the foundation for strong performance during the fourth quarter and beyond. While operational improvements have been noteworthy, due to seasonal rains Argonaut has adjusted the full year production guidance to the range of 130,000 to 135,000 GEOs.
We achieved record ounces loaded to the leach pads at both operations. We have finished construction of the west cell 3b pad at El Castillo and set a new record for throughput on the west overland conveyor. Furthermore, at La Colorada, crushing throughput reached 13,700 tonnes per day in September, exceeding the target of 12,000 tonnes per day.
We anticipate releasing a PEA by year end based on the recently updated NI 43-101 resource at San Agustín, which resulted in an indicated resource of nearly 1.3 million gold equivalent ounces (consisting of 845,000 gold ounces and 28,263,000 silver ounces contained in 82.2 million tonnes of material at a grade of 0.32 g/t gold and 10.7 g/t silver with gold equivalent ounces calculated at a ratio of 65:1 silver to gold ounces). This advancement of San Agustín along with continued work toward permitting at the Magino and San Antonio projects gives us the potential to unlock significant value for our shareholders as we move forward.”
Financial Results – Third Quarter 2014
During the third quarter of 2014, revenue was $37.3 million from gold sales of 29,410 ounces, compared to $42.4 million from gold sales of 30,792 ounces in the third quarter of 2013. Cash cost per gold ounce sold in the quarter was $786, compared to $680 in the same period of the prior year, with the increase principally due to a decrease in the recovered gold ounces which were impacted by the heavy rains, increased mine operating costs and lower silver sales (cash cost per gold ounce sold is a non-IFRS measure, refer to the Non-IFRS Measures section for further detail).
During the third quarter of 2014, gross profit was $4.4 million, compared to $12.7 million in the third quarter of 2013. The decrease in gross profit is largely reflective of an increase in operating expenses resulting from a reduction in capitalized stripping and lower average realized gold price per ounce. Net loss for the period was $1.8 million, or ($0.01) per basic share, versus net income of $6.6 million, or $0.04 per basic share, in the third quarter of 2013. The $1.8 million net loss was associated with a $2.0 million income tax expense related to the foreign exchange effects of the weakening Mexican peso on the calculation of deferred taxes.
Cash and cash equivalents was $44.6 million at September 30, 2014. Cash spent towards capital expenditures in the third quarter was $12.1 million, primarily spent on leach pad construction, installation of crushing equipment, capitalized stripping, mining equipment purchases and equipment overhauls.
THIRD QUARTER 2014 EL CASTILLO OPERATING STATISTICS
| 3 months ended September 30 |
9 months ended September 30 |
|||||
| 2014 | 2013 | % Change | 2014 | 2013 | % Change | |
| Mining | ||||||
| Tonnes ore (000s) | 4,059 | 3,406 | ↑19% | 11,492 | 9,857 | ↑17% |
| Tonnes waste (000s) | 3,655 | 3,136 | ↑17% | 12,343 | 9,567 | ↑29% |
| Tonnes mined (000s) | 7,714 | 6,542 | ↑18% | 23,835 | 19,424 | ↑23% |
| Tonnes per day (000s) | 84 | 71 | ↑18% | 87 | 71 | ↑23% |
| Waste/ore ratio | 0.90 | 0.92 | ↓2% | 1.07 | 0.97 | ↑10% |
| Heap Leach Pad | ||||||
| Tonnes ore direct to leach pad (000s) | 1,063 | 1,867 | ↓43% | 2,569 | 5,307 | ↓52% |
| Tonnes crushed (000s) | 1,499 | 1,318 | ↑14% | 4,612 | 4,314 | ↑7% |
| Tonnes overland conveyor (000s) | 1,497 | 221 | ↑577% | 4,311 | 221 | ↑1,851% |
| Total tonnes placed | 4,059 | 3,406 | ↑19% | 11,492 | 9,842 | ↑17% |
| Production | ||||||
| Gold grade (g/t)1 | 0.34 | 0.36 | ↓6% | 0.33 | 0.36 | ↓8% |
| Gold loaded to leach pad (oz)2 | 44,031 | 39,120 | ↑13% | 121,307 | 115,312 | ↑5% |
| Projected recoverable gold ounces (oz)3 | 27,214 | 22,829 | ↑19% | 70,916 | 67,766 | ↑5% |
| Gold produced (oz) | 22,807 | 22,756 | ↑0% | 64,824 | 73,957 | ↓12% |
| Gold sold (oz) | 20,527 | 25,840 | ↓21% | 63,725 | 72,054 | ↓12% |
| Silver sold (oz) | 9,541 | 17,823 | ↓47% | 37,752 | 35,550 | ↑6% |
| Cash cost per gold ounce sold | $824 | $697 | ↑18% | $789 | $696 | ↑13% |
| 1 “g/t” refers to grams per tonne. | ||||||
| 2 “oz” refers to troy ounce. | ||||||
| 3 Expected 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 18% for the third quarter 2014, over the third quarter 2013. The gold ounces loaded to the pads in the third quarter 2014 increased by 13% over third quarter 2013 due to increased ore tonnes loaded to the pads, while gold grades slightly decreased. The strip ratio for the third quarter was largely in line with the same period in 2013.
Gold production of 22,807 ounces in the third quarter of 2014 was in line with the third quarter of 2013. Production throughput has steadily increased and ounce production is expected to improve in the fourth quarter as the seasonal rains have passed. Production guidance for 2014 at El Castillo is maintained at 90,000 to 100,000 gold ounces with cash costs between $775 and $800 per gold ounce.
THIRD QUARTER 2014 LA COLORADA OPERATING STATISTICS
| 3 months ended September 30 |
9 months ended September 30 |
||||||
| 2014 | 2013 | % Change | 2014 | 2013 | % Change | ||
| Mining | |||||||
| Tonnes ore (000s) | 757 | 415 | ↑82% | 2,017 | 1,313 | ↑54% | |
| Tonnes waste (000s) | 3,486 | 2,885 | ↑21% | 10,674 | 10,485 | ↑2% | |
| Total tonnes (000s) | 4,243 | 3,300 | ↑29% | 12,691 | 11,798 | ↑8% | |
| Waste/ore ratio | 4.61 | 6.96 | ↓34% | 5.29 | 7.99 | ↓34% | |
| Tonnes rehandled (000s) | 301 | 118 | ↑155% | 616 | 118 | ↑422% | |
| Heap Leach Pad | |||||||
| Tonnes ore direct to leach pad (000s) | 1,068 | 550 | ↑94% | 2,583 | 1,435 | ↑80% | |
| Production | |||||||
| Gold grade mined (g/t)1 | 0.70 | 0.35 | ↑100% | 0.66 | 0.30 | ↑120% | |
| Gold loaded to leach pad (oz)2 | 21,195 | 5,571 | ↑280% | 47,658 | 13,509 | ↑253% | |
| Projected recoverable GEOs loaded (oz)3 | 14,082 | 3,761 | ↑274% | 31,555 | 9,173 | ↑244% | |
| Gold produced (oz) | 8,870 | 4,234 | ↑109% | 24,853 | 15,527 | ↑60% | |
| Silver produced (oz) | 14,958 | 31,717 | ↓53% | 111,761 | 121,914 | ↓8% | |
| GEOs produced (oz) | 9,142 | 4,811 | ↑90% | 26,885 | 17,744 | ↑52% | |
| Gold sold (oz) | 8,883 | 4,952 | ↑79% | 25,146 | 15,935 | ↑58% | |
| Silver sold (oz) | 18,313 | 50,881 | ↓64% | 123,607 | 132,951 | ↓7% | |
| GEOs sold | 9,217 | 5,878 | ↑57% | 27,394 | 18,353 | ↑49% | |
| Cash cost per gold ounce sold | $698 | $591 | ↑18% | $680 | $397 | ↑71% | |
| 1 “g/t” refers to grams per tonne. | |||||||
| 2 “oz” refers to troy ounce. | |||||||
| 3 Expected recovery rates: gold 60% and silver 30%. | |||||||
Summary of Production Results at La Colorada
Total tonnes mined increased by 29% for the third quarter 2014, over third quarter 2013, as we moved away from higher stripping areas into more productive zones. There was a record 21,195 gold ounces placed on the pad in the third quarter of 2014, compared to 5,571 ounces placed on the pad in the third quarter of 2013, representing a 280% increase.
Third quarter production in 2014 of 9,142 GEOs was an increase of 90%, over third quarter 2013 production of 4,811 GEOs. We anticipate gold equivalent ounce production for the full year guidance to be between 35,000 and 45,000 ounces for 2014 (previous guidance for 2014 was between 40,000 and 45,000 ounces). We have completed the expansion of the crushing circuit and expect to recover the record ounces loaded to the pad.
Capital Expenditures for 2014
The Company plans on investing a total of $45 million on capital expenditures and exploration initiatives in 2014. As of the end of the third quarter capital expenditures were $37.4 million. Major capital expenditures in 2014 are projected to include approximately $16 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), $2 million at San Antonio, $1 million at San Agustín and $6 million at Magino. Exploration expenditures in 2014 are expected to amount to approximately $6 million.
Argonaut Gold Q3 Financial Results Conference Call and Webcast:
The Q3 financial results conference call and webcast is scheduled to take place on November 6, 2014 at 8:30 am EST.
Q3 Conference Call Information
| Toll Free (North America): International: Conference ID: Webcast: |
1-877-223-4471 1-647-788-4922 87196199 www.argonautgold.com |
Q3 Conference Call Replay:
| Toll Free Replay Call (North America): International Replay Call: |
1-416-621-4642 1-800-585-8367 |
The conference call replay will be available from 11:30 am EST on November 6, 2014 until November 20, 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 three and nine months ended September 30, 2014 and associated MD&A, for the same periods ended, 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 the supervision of, and has been reviewed and approved by Mr. Thomas H. Burkhart, Argonaut’s Vice President of Exploration, a qualified person as defined by NI 43-101. For further information on the Company’s properties please refer to the reports as listed below on the Company’s website www.argonautgold.com 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 |
| San Agustín Gold Project | NI 43-101 Mineral Resource Estimate on the San Agustín Gold Project, Durango, Mexico dated October 3, 2014 |
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 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; the realization of mineral reserve estimates; the timing and amount of estimated future production; costs of production; 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; 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 variations in ore grade or recovery rates, changes in market conditions, 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.
For more information, contact:
Argonaut Gold Inc.
Curtis Turner
Corporate Development Officer
Tel: (775) 284-4422 x 104
Email: curtis.turner@argonautgold.com
www.argonautgold.com
