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Argonaut Gold searches for financing to finish Dubreuilville-area mine construction

Company continues to search for high-grade gold and a new CEO
Magino site photos 1
Construction of the processing plant at the Magino Mine Project (Argonaut Gold photo)

Dubreuilville mine builder Argonaut Gold has a lot on its plate with its Magino Project this year.

The Toronto-based mining company is not only scrounging for capital financing while construction continues for its open-pit mine, but the search is on for high-grade gold and a new CEO.

In a March 2 webcast to talk about the 2021 fourth-quarter and year-end results, Dan Symons, Argonaut's vice president of corporate development and investor relations, said they intend to make good on the first gold pour at Magino at the end of the first quarter in 2023.

"We're making good progress and we have 13 months to go."

However costs have escalated at the site, 14 kilometres southeast of Dubreuilville.

The company announced in December that the price tag to build Magino had ballooned from $510 million to $800 million, attributing the bump to inflation and the impact of COVID-19. At the same time, Argonaut founder and CEO Pete Dougherty left the company.

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Argonaut spent $236.8 million at Magino in 2021. This year's construction spending forecast is $424 million.

To raise the money to finish the mine, Argonaut is going the debt financing route. There's some urgency to do this, as they want the funds in place by the second quarter of this year.

If financing is "not available promptly and upon acceptable terms," the construction schedule may need to be adjusted," the company cautioned in a recent news release.

Symons explained Argonaut is also evaluating other "strategic alternatives" without elaborating if that means a joint venture partnership or an outright sale.

Back in 2017, when Argonaut pushed out a positive feasibility study for Magino, the company signalled that they would entertain a partner to expand the scale of the operation and boost production beyond 10,000 tonnes per day. 

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With Alamos Gold and its high-grade Island Gold Mine as a next door neighbour, Argonaut has high hopes for Magino.

It's on the site of the former underground gold mine of the same name. It went into production after the First World War and operated sporadically over the decades, yielding 114,319 ounces of gold at 4.43 grams per tonne.

Despite the cash crunch, Argonaut views Magino as an "economically robust asset."

Through exploration drilling this year and last, high-grade gold has been discovered below and besides where contractors are digging out the pit shell. The mineralization tracks to the east toward the property boundary line with Alamos, suggesting that this could be part of a larger deposit.

To test those mineral extensions, Argonaut has successfully raised $51.8 million through a flow-through share offering, which can only be used for exploration purposes. .

To date, Magino has a 19-year estimated mine life based on 2.4 million ounces in reserve within 4 million ounces of a measured and indicated gold resources

Magino will be Toronto-based Argonaut's first Canadian operation. The company has three mines in Mexico and one in Nevada with a number of exploration plays in North America. 

Argonaut's stock was trading at close to $4 per share in mid-November before taking a steep plunge down close to the $2 mark around Christmas, then settling around $2.30 last week.

On the hunt for a successor to Pete Dougherty, Symons would only say the search process was "very well advanced."

To help with future debt financing, Argonaut entered into gold sales contracts on March 4 at a fixed price of $1,916 per gold ounce, covering 7,500 ounces over the next 12 months as they extract gold during the pit construction. The company said the agreement reduces the risk of gold price fluctuations over the next year and delivers "greater certainty in operating cash shows" as they finish construction.