Argonaut Gold to run Florida Canyon

Argonaut Gold to run Florida Canyon

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Florida Canyon Mine is changing ownership with the merger of Alio Gold Inc. and Argonaut Gold Inc., but employees will continue with business as usual, according to Alio Chief Executive Officer Mark Backens.

“There will be no layoffs in Nevada,” he said.

The mine is adjacent to Interstate 80 about 45 miles southwest of Winnemucca.

Backens said the merger with a larger, stronger company offers “a very good benefit for workers” and benefits the communities where they live as Argonaut brings more investment capital to the mine. Most of the 225 employees live in Winnemucca.

High gold prices that have risen above $1,700 an ounce will be another benefit for Alio now and Argonaut soon.

“Gold prices are very strong, so obviously that helps our profitability greatly,” Backens said in a telephone interview.

In the merger, Argonaut is acquiring all Alio’s shares, and Alio shares will then represent 24 percent of Argonaut’s ownership. The companies expect the merger to close in June, pending shareholder and regulatory approval. The boards of both companies recommended the at-market merger.

“It’s a share exchange, not a purchase,” Backens said.

Argonaut’s president and CEO, Pete Dougherty, said in the March 30 announcement of the planned merger that “this is a transaction which makes sense for both sets of shareholders. Combining complementary assets into one larger, more relevant company generates significant synergies.

“With a solid production base of over 235,000 gold equivalent ounces expected this year, a strong balance sheet and strong cash flow generation at current gold prices, we will be well positioned to evaluate and execute on growth opportunities from within the combined company’s development asset portfolio,” Dougherty said.

Backens and senior leadership in Vancouver will be losing their jobs, and the Vancouver office will shut down. There are eight people in the Vancouver office. The Argonaut team will manage the merged company. Argonaut is Toronto-based but corporate headquarters are in Reno.

“They only need one head office, so the Alio head office will close,” Backens said. “Alio Gold goes away. I think I will retire.”

Two Alio board members will join the Argonaut board, however.

Florida Canyon is the key holding for Alio Gold, and Backens said the company “has invested a lot of money into the operation,” including purchasing a new mining fleet and developing a new leach pad. He said new leadership over the past nine years “have been doing a wonderful job.”

The new heap leach pad is scheduled for completion in the second quarter of 2020.

Shana Blakeley is the general manager at the mine, which expects to produce 60,000 to 70,000 gold ounces this year.

Backens said Florida Canyon is following COVID-19 pandemic recommendations from health authorities, including altering shift times so fewer crew members are around each other, providing masks and hand sanitizing. Haul trucks and heavy equipment are sanitized between operators, as well.

There had been no cases at Florida Canyon as of early May.

“The company has gone the extra mile on support and training to ensure maximum safety and a safe environment,” Backens said. “So far, we have dodged the bullet.”

Employees who can work from home have been doing so, he said. That includes those who work in Vancouver.

Alio has been operating the mine roughly two years, acquiring it in a merger with Rye Patch Gold Corp. in mid-2018. Rye Patch restarted production at Florida Canyon in 2017, after acquiring the mine in July 2016.

Pegasus Gold, which later went into bankruptcy, developed Florida Canyon in Pershing County in 1986, and the mine has changed ownership at least a handful of times since then. Prior owners included Apollo Gold, Jipangu International and Rye Patch.

Florida Canyon is a straightforward open pit and heap leaching operation. The mine has produced over 2.4 million ounces of gold since its inception.

As the merger with Argonaut was in progress, Alio was completing the sale of its San Francisco Mine in Mexico to Magna Gold Corp. That deal was expected to close before the merger is completed, according to Backens.

Argonaut owns three operating mines in Mexico—the El Castillo, San Agustin and La Colorada mines – as well as advanced exploration projects in Mexico and Canada and other exploration sites in North America.

The merger with Alio means Argonaut will own all Alio properties, including the small Standard Mine site near Florida Canyon that is no longer in operation. Alio also owns the Ana Paul development-stage project in Mexico.

Argonaut had to shut down its mines in Mexico because of the pandemic. The company announced on April 23 that the Mexican government has relaxed restrictions in areas with little or no COVID-19, so the mines were prepared to reopen May 18.

Leaching on the pads continued, as well as metal production, during closure.

“It is important to recognize the seriousness of the COVID-19 pandemic, and while we have not experienced a known case in the company to date, we have been and will continue to take precautionary measures as we begin restarting operations,” Argonaut’s CEO Dougherty said.

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