Argonaut Gold Inc. (TSX:AR) (the "Company", "Argonaut Gold" or "Argonaut") is
pleased to announce the results of a prefeasibility study ("PFS") for the Magino
property, located 40 kilometers ("km") northeast of Wawa, Ontario. The study was
completed by JDS Energy & Mining Inc., Vancouver, Canada and is based on a
December 2013 mineral resource estimate. The Magino mine PFS study takes into
consideration the PFS design pit, representing 40% of a larger defined resource.
It does not include any potential expansion from the land or mineral rights
acquisition pending from neighboring landowner Richmont Mines Inc. All amounts
are indicated in US dollars.
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ECONOMIC HIGHLIGHTS OF PRE-FEASIBILITY STUDY ($1250 per ounce gold price)
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Net Present Value ("NPV" After-Tax at a 5% discount
rate) $199 million
Cash Flow (Undiscounted, After-Tax) $350 million
Internal Rate of Return (After-Tax "IRR") 18%
Payback (After-Tax, Years of production) 4.2 years
Capital Cost (pre-production) $356 million
Sustaining and Closure $58 million
Cash Cost (including leasing costs of $78 million) $693 per ounce Au
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CEO Commentary
Pete Dougherty, President and CEO of Argonaut Gold, stated "Magino is a high
quality property that we are very pleased to have in our portfolio. Economics
for the project are strong, and are particularly robust during the first seven
years, when the Company will be processing higher grade material and stockpiling
lower grade material for processing later in the mine life. Potential upside
value exists as the study only takes 40% of the current mineral resource
estimate into consideration and excludes pre-1997 underground and surface
drilling data, included in a previous resource estimate."
Prefeasibility summary
The PFS summarizes financial projections and operational plans for the Magino
property, as a conventional open pit mine and gold leaching processing circuit.
The following tables summarize the results.
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PROJECT LOM PRODUCTION HIGHLIGHTS ($1,250 Gold Price)
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Mine Life (years) 13.2
Life of Mine Strip Ratio (waste: ore) 2.6:1
Gold Grade (average in g/t) 0.90
Gold Recovery (average) 95%
Gold Payable 99%
M&I Gold Ounces Recovered (000's) 1,661
Annual Production (average ounces) 127,000
Capital Costs "CAPEX" (millions): $414
Operating Cost/Ore Tonne (average) $18.94
Cash Cost (including leasing costs of $78 million) $693 per ounce
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PROJECT HIGHLIGHTS (FIRST 7 YEARS)
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Cash Flow (Undiscounted, After-Tax) $268 million
Gold Grade (Average Grams per Tonne "g/t") 1.33
Cash Cost (Including Leasing Costs of $78 million) $650 per ounce
Annual Ounces of Production (Average) 185,000
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Mineral Resource Estimate
The mineral resource estimate used in the PFS was completed in December 2013 by
Garth Kirkham, P.Geo., an independent Qualified Person ("QP") and is summarized
below (inclusive of mineral reserves).
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Cut-off Gold Contained Gold
Deposit Resource Tonnes g/t Grade g/t Au (k ozs)
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Webb Lake Indicated 127.7 0.35 1.01 4,161
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Webb Lake Inferred 30.1 0.35 1.08 1,044
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Mineral resources that are not mineral reserves do not have demonstrated
economic viability. Mineral resource estimates do not account for mineability,
selectivity, mining loss and dilution. These mineral resource estimates include
inferred mineral resources that are normally considered too speculative
geologically to have economic considerations applied to them that would enable
them to be categorized as mineral reserves. There is also no certainty that
these inferred mineral resources will be converted to measured and indicated
categories through further drilling, or into mineral reserves, once economic
considerations are applied.
Mineral Reserve Estimate
The PFS mineral reserve estimate is summarized in the following table.
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Diluted Cut-off Gold Contained Gold
Deposit Reserve Tonnes g/t Grade g/t Au (k ozs)
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Webb Lake Probable 60.2 0.31 0.90 1,746
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Total 60.2 0.31 0.90 1,746
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The reserve estimate does not include any resources within the adjacent Richmont
land even though Argonaut signed a land acquisition agreement with Richmont. The
mineral reserves also do not include resources below Webb Lake which lies along
strike on the southern side of the PFS pit. The potential for a larger pit
exists, which may enhance the overall projects economics, if the land ownership
and lake constraints are removed.
2013 JDS pit compared to 2012 Tetra Tech Historical Resource
The 2013 JDS mineral resource estimate and the 2012 Tetra Tech historic mineral
resource estimate are contained within the same geologic host environment. The
two resources differ, in part, because the JDS resource did not incorporate
pre-1997 underground and surface drill holes that were used in the historical
2012 Tetra Tech mineral resource estimate. JDS concluded that this earlier
drilling, consisting of approximately 750 holes and totaling nearly 95,000
meters, could not be used for their 2013 mineral resource estimate as it is
non-compliant with today's quality assurance and quality control ("QA/QC")
requirements. The absence of the underground data reduced the grades and
contained gold ounces of the 2013 mineral resource estimate when compared to the
historical Tetra Tech estimate.
This can be observed on the attached sections where the limits of the JDS
restricted pit are noted. A comparative review of the block models demonstrates
a loss of grade when the underground drilling was removed. The Magino deposit is
characterized by broad zones of disseminated mineralization hosting pockets of
higher grade material. These possible occurrences of the higher grade gold zones
reported by the underground drilling were not incorporated in the JDS mineral
resource estimate.
The drilling information used in the 2013 JDS and historical 2012 TetraTech
mineral resource estimations are shown below:
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Contained Au
Mineral Resource Cutoff Ounces No. of Drill Drilled
Estimate Grade (Million) Holes Used Meters Used
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JDS - Dec., 2013 0.35 g/t Au 4.1 652 180,000
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Historic Tetra Tech -
Oct., 2012 0.35g/t Au 5.8 1,402 275,000
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Tom Burkhart, Vice-President of Exploration, said "Going forward additional
drilling could potentially expand the known resource base. Furthermore, a more
expanded mining operation is anticipated beyond the current restricted PFS pit
that will address the much larger resource potential of the property."
The Company cautions that the October, 2012, Tetra Tech report provides historic
information only and does not constitute current mineral resources or current
mineral reserves. A qualified person has not done sufficient work to classify
the historic estimate as current mineral resources or reserves.The Company
believes this information continues to be reliable and is relevant as a basis
for a better understanding of the Magino deposit and resources.
To view '2013 JDS Magino Long Section, Block Model', please visit the following
link: http://media3.marketwire.com/docs/argofig11217.pdf
To view '2012 Tetratech Magino Long Section, Block Model', please visit the
following link: http://media3.marketwire.com/docs/argofig21217.pdf
Metallurgy and Mineral Processing
Based on metallurgical test work results, a flow sheet for the processing
facility was developed which includes primary crushing, followed by a grinding
circuit, gravity recovery circuit, leach circuit, carbon in pulp circuit,
electro-winning and smelting to produce gold dore. The flow sheet also includes
cyanide destruction and a conventional wet tailings pond.
The process facility was designed for an average feed of 12,500 tonnes per day
("tpd"). A gold recovery of 95% was estimated based on metallurgical testwork.
Mine Plan and Production Schedule
The Magino deposit is conducive to open pit mining and was planned in the PFS to
utilize conventional mining equipment including 240-tonne haul trucks (ramping
up to 11 over the mine life), three corresponding shovels and front end loaders
and a fleet of standard support equipment such as drills, dozers, graders, water
truck, etc.
The production schedule was developed to supply 12,500 tpd of ore to the mill.
An important element of the production schedule is the accelerated mining rate
in Years 1 to 7 to access the highest grade ore possible to feed the mill early
in the project life. Low grade ore mined and stockpiled in the early years is
planned to be processed later in the project life after the open pit is
exhausted in year 8. The annual production schedule for the project is shown in
the following table.
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Tonnes Gold Grade
Tonnes Ore Tonnes Waste Processed Processed Gold Recovered
Year (M tonnes) (M tonnes) (M tonnes) (g/t) (000's oz)
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1 2.0 10 4.6 1.13 157.1
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2 6.3 14 4.6 1.43 199.7
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3 10.4 27 4.6 0.95 132.9
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4 4.2 33 4.6 1.40 195.0
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5 9.8 27 4.6 1.46 203.5
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6 10.6 26 4.6 1.76 244.7
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7 13.2 17 4.6 1.16 161.9
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8 3.6 4 4.6 0.51 70.8
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9 4.6 0.41 56.9
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10 4.6 0.41 56.9
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11 4.6 0.41 56.9
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12 4.6 0.41 56.9
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13 4.6 0.41 56.9
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14 0.9 0.41 10.9
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Total 60.2 157.3 60.2 0.90 1,661.6
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"M" means millions
Capital Cost Estimate
The capital cost estimate of US$414 million for the project includes all
activities from permitting and development through closure. Costs for the
project include; capitalized pre-stripping, access road improvements, upgrades
to the local power source, sourcing of water for processing, infrastructure for
camp facilities, administrative offices, maintenance shops, warehouses, assay
laboratories, on site electrical distribution and miscellaneous fire, safety and
environmental infrastructure as shown in the following table.
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CAPITAL COST DESCRIPTION ESTIMATE (US$M)
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Site Development 8
Pre-Production Mining Costs and Capitalized leasing 45
Primary Crushing & Stockpile 12
Processing 105
Tailings Management Facility 14
Infrastructure (on and off site) 52
Project Indirects 35
EPCM 35
Owner's Cost 9
Contingency 41
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Total Initial Capital 356
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Sustaining Capital 34
Closure Cost 17
Contingency 7
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Total Capital 414
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Capital cost contingency was estimated by area and averaged 13%.
Operating Cost Estimate
Operating costs were estimated using first principles as per the following summary:
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UNIT OPERATING COST DESCRIPTION UNIT ESTIMATE
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LOM Mining US$/tonne mined 1.86
US$/tonne milled 6.35
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LOM Processing US$/tonne milled 9.55
LOM General and Administration US$/tonne milled 1.57
LOM Re-handle (stockpile to mill) US$/tonne milled 0.22
LOM Leasing US$/tonne milled 1.24
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Total LOM Unit Operating Cost US$/tonne milled 18.94
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Total LOM Unit Operating Cost US$/payable Au oz 693
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Economic Results
In addition to the production plan, capital cost and operating cost estimates
discussed previously, the following assumptions were used in the PFS economic
model.
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Description Unit Value
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ASSUMPTIONS/INPUTS
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Au Price US$/oz 1,250.00
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PRODUCTION
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Total LOM Ore M tonnes 60.2
Total LOM Waste M tonnes 157.3
LOM Strip Ratio w:o 2.6
LOM Au Head Grade g/t 0.90
Au Recovery % 95%
Au Payable % 99%
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Au Refining Charge C$/pay oz 5.00
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Discount Rate % 5%
F/X Rate C$:US$ 0.95
Working Capital No. of months 1.5
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Magino Sensitivity Study
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Au Price US$/oz
Sensitivity After-Tax NPV5% (US$M) After-Tax IRR
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$1,620 $479 33.5%
$1,490 $381 28.2%
$1,400 $313 24.3%
$1,300 $237 19.9%
$1,000 -$5.3 4.6%
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Contribution and Work
The pre-feasibility study was prepared through the collaboration of three
consulting firms as shown below.
Responsibility Area Contributor
Geology, Resource Estimate, Mine Planning, JDS Energy & Mining Inc.
Infrastructure, Power Supply, Execution Plan,
Process flow sheet and Plant Design Financial
Modeling
Geotechnical, Tailings, Hydrogeology, Tailings SLR Consulting
Management Facility
Metallurgical Test work LJB Consulting
Ongoing Development
The Company is working with the community and First Nations groups surrounding
the project and will continue to maintain an open dialogue as the project
advances. As part of the process of making application for approval of the
project, the Magino project description was submitted during mid-year 2013.
Argonaut continues to work through the provincial and federal permitting
agencies to advance the project. The Company aims to build the asset from
internally generated cash flow in an effort to maintain responsible, measured
growth and avoid encumbering the asset.
Technical Information and Mineral Properties Reports
For further information on Argonaut Gold's Magino project please see the report
as listed below on Argonaut Gold's website or on www.sedar.com:
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Magino Gold Project NI 43-101 Technical Report and Mineral Resource
Estimate on the Magino Gold Project, Ontario, Toronto,
Canada dated October 4, 2012
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An updated technical report will be filed within 45 days of the date of this
press release.
Historical tetra Tech Resource table below is solely for reference.
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Resource Domain Tonnes (t) Au g/t Au (oz)
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Indicated Webb Lake Stock 207,268,820 0.87 5,797,550
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Lovell Lake Stock 1,880,830 0.80 48,380
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South Metavolcanics 12,514,080 0.85 341,990
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North Metavolcanics 1,816,060 0.92 53,720
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Total 223,479,790 0.87 6,250,990
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Inferred Webb Lake Stock 7,803,620 0.77 193,190
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Lovell Lake Stock 123,370 0.52 2,060
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South Metavolcanics 5,757,820 0.85 157,350
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North Metavolcanics 124,600 0.56 2,240
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Total 13,809,410 0.80 355,190
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Note: In the above mineral resource table there may be inconsistencies due to
rounding. Estimates are rounded since the figures are not precise calculations.
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 the La Colorada Mine in Sonora,
Mexico, the advanced exploration stage San Antonio project in Baja California
Sur, Mexico, the advanced exploration stage Magino project in Ontario, Canada
and several exploration stage projects, all of which are located in North
America.
Qualified Persons
The Magino Pre-feasibility Study results were reviewed by JDS under the
supervision of Gordon Doerksen, P.Eng., an Independent Qualified Person. The
scientific and technical information in this release has been reviewed and
approved by Mr. Garth Kirkham, P.Geo., Mr. Dino Pilotto, P.Eng., both of whom
are Independent Qualified Persons within the meaning of NI 43-101.
Mr. Thomas Burkhart, Argonaut's Vice President of Exploration is the Company's
Qualified Person responsible for the contents of this press release and has
reviewed the information in the release and confirmed that it is consistent with
that provided by the independent Qualified Person responsible for the Study.
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"). 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 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; the realization of mineral reserve estimates;
the timing and amount of estimated future production; costs of production;
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 changes in market
conditions, variations in ore grade or recovery rates, risks relating to
international operations, fluctuating metal prices and currency exchange rates,
changes in project parameters, 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.
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 FURTHER INFORMATION PLEASE CONTACT:
Argonaut Gold Inc.
Nichole Cowles
Investor Relations Manager
(775) 284-4422 x 101
nichole.cowles@argonautgold.com
www.argonautgold.com
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