Argonaut Gold Ltd. (TSX:AR) today announced its financial results for the 2nd
quarter, ended on June 30, 2010. (All dollar amounts expressed are in US
dollars.) In addition, positive results from the capital expansion program
support our outlook for production for the remainder of the year.
Second Quarter Highlights
-- 2010 Q2 compared to 2009 Q2
-- Total Tonnes mined up +85%
-- Ore tonnes processed up + 141%
-- Gold Production up +57%
-- $600 Cash cost per oz. produced
-- Revenue $12.5 million
-- Operating income $3.5 million
-- Net income $1.2 million
-- Cash flow from Operations $2.7 million
-- Amended loan agreement on $6.9 million of long-term debt to reduce the
interest rate from 12% to LIBOR plus 3%
-- Four 100 ton trucks and a 992 front loader belonging to the mining
contractor were delivered to the site and placed in production
July Highlights
-- 1.5 million total tonnes moved in July 2010
-- Over 4,500 ounces of production in July 2010
-- 13,000 meters of the Phase II drill program complete by the end of July
CAPEX Program Updates
West Side Improvements
-- Pad 7 is scheduled for 3rd quarter completion
-- New West Side Carbon Plant for gold recovery was completed and
commissioned in early July with a nominal flow of 740 cubic meters/hr,
approximately a 100% improvement to the existing carbon plant
-- New crushing circuit providing 250,000 tonnes per month (TPM) capacity
vs. 68,000 tonnes previously
East Side Additions
-- 5 million tonnes of heap leach pad capacity scheduled for 3rd quarter
completion
-- New East Side carbon plant with columns already in place is scheduled
for 3rd quarter completion and will be commissioned in the 4th quarter
after completion of processing ponds
El Castillo processing capacities will increase to 1 million ore tonnes per month
CEO Commentary:
Pleased with progress made in the second quarter, Argonaut Gold's President and
CEO Pete Dougherty noted, "El Castillo's growth is directly attributable to the
extensive capital expansion plans budgeted and implemented in 2010. Many of the
capital expansion initiatives scheduled have been completed ahead of time.
July ramp up in production included 1.5 million total tonnes moved, already
achieving the September goal, due to the early delivery of four new 100 ton
trucks and a corresponding loader. El Castillo production growth continued with
July production of more than 4,500 ounces of gold. In addition, with more than
20,000 ounces added on the pad during the 2nd quarter, production looks to
improve for the third consecutive quarter. This provides us with strong support
to achieve our projection of 47,000 ounces in 2010".
This press release should be read in conjunction with the Company's unaudited
consolidated interim financial statements for the quarter-ended June 30, 2010
and associated Management's Discussion and Analysis ("MD&A") which are available
from the Company's website www.argonautgoldinc.com, in the "Investors" section
under "Financial Filings", and on SEDAR www.sedar.com.
Summary of Production Results:
Year over year, total tonnes mined increased by 85% for the quarter. The larger,
more efficient truck fleet continued to produce higher total tonnes mined. The
40 ton fleet is currently being replaced by the mining contractor with a 100 ton
mining fleet and higher capacity loaders. Four trucks and a corresponding loader
have already arrived on site and were added into operation. 20,112 ounces were
placed on the pad during the 2nd quarter of 2010 representing a 22% increase
over 1st quarter 2010. In June, the Company loaded 7,988 of the 20,112 ounces
loaded on the pad for the quarter.
A newly installed crushing circuit replaced equipment on the west side in order
to meet the 250,000 tonnes per month crushing capacity for the west circuit at
El Castillo. The downtime during the replacement resulted in lower crushing
totals for the second quarter and impacted average grade.
Gold production of 10,066 ounces in the second quarter of 2010 was a 57%
increase compared to the second quarter of 2009. Key operational metrics and
production statistics for the second quarter of 2010 compared to 2009 are
presented below in Table 1.
Table 1 - Summary of Q2 2010 Production Results
El Castillo Operating Q2 2010 Q2 2009 6 Months 6 Months
Statistics 6/30/2010 6/30/2009(i) 6/30/2010 6/30/2009(i)
------------ ----------- --------- -----------
Total Tonnes mined 3,450,572 1,862,200 6,343,906 3,372,100
Tonnes Ore 1,867,191 775,100 3,183,738 1,426,600
Tonnes Ore-direct to
leach pad 1,562,907 573,200 2,562,028 1,026,100
Tonnes Crushed 270,879 201,900 585,284 400,400
Gold Grade (grams/tonne) 0.34 0.47 0.36 0.52
Gold Ounces to Leach Pad
(ounces) 20,112 11,712 36,542 23,712
Gold Produced (ounces) 10,066 6,421 20,308 12,389
(i)Note: Information obtained from Castle Gold Corporation press release
dated August 26, 2009 and are prior to the acquisition of Castle Gold by
the Company.
Financial Results - Second Quarter 2010
During the second quarter of 2010, revenue was $12.5 million compared to $5.9
million in Q2 of 2009 as reported by Castle Gold Corporation ("Castle Gold") for
the El Castillo Mine in its Management's Discussion and Analysis for the Quarter
ended June 30, 2009 posted on August 26th to Sedar.com. The increase in revenue
is due to 3,961 more gold ounces sold and higher gold prices. During the second
quarter of 2010, cost of sales was $7.4 million. Cost of sales included 2,634
gold ounces, of the 10,387 gold ounces sold, that were fair valued at
acquisition of Castle Gold at market price of gold less cost to process units.
Cash cost per ounce of gold produced was approximately $600. During the quarter,
operating income was $3.5 million and net income was $1.2 million.
During the six months ended June 30, 2010, revenue was $21.9 million compared to
$11.1 million reported by Castle Gold. The increase in revenue is due to 6,661
more gold ounces sold and higher gold prices. During the first half of 2010,
cost of sales was $16.7 million. Cost of sales included 11,032 gold ounces, of
the 18,785 gold ounces sold, that were fair valued at acquisition of Castle Gold
at market price of gold less cost to process units. During the first half of
2010, cash cost per ounce of gold produced was approximately $594. During the
first half of 2010, operating income was $3.5 million and net loss was $1.9
million.
Looking Forward - 3rd Quarter Milestones:
-- Remaining nine 100 ton trucks scheduled for September delivery
-- East side processing facility scheduled for Q4 completion
-- Current production rate on target to achieve 47,000 ounces in 2010
Cash Requirements:
The cash balance as at June 30, 2010 was $27.6 million. Cash flow from operating
activities was $2.7 million in the second quarter and $3.1 million in the first
half of 2010. The 2010 capital expansion program is anticipated to be $15 - $20
million. As at June 30, 2010, $12.7 million was recorded as capital
expenditures. The capital expansion program will be funded by cash on hand and
operating cash flow.
Q2 2010 Financial Results Conference Call and Webcast:
Argonaut Gold will host a conference call on Monday, August 16th, 2010 at 9:30
am EDT to discuss the second 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(877)240-9772 or
1(416)340-8530 for calls outside of Canada and the United States. The conference
call may also be accessed via webcast by visiting the Company's website,
www.argonautgoldinc.com.
A recorded playback of the conference call can be accessed after the event until
August 23, 2010 by dialing 1(800)408-3053 or 1(416)695-5800 for calls outside
Canada and the United States. The pass code for the conference call playback is
6778610 followed by the # key.
About Argonaut Gold
Argonaut Gold 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 Gold 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 divided by 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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