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Argonaut reports third-quarter profit

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Argonaut Gold Inc. announced adjusted net income of $17.4 million, or 6 cents per share, in the third quarter, up 43% over the 2020 quarter, and the company reported increased gold equivalent ounces at the Florida Canyon Mine in Nevada, as well as companywide.

“It was another strong quarter both operationally and financially for Argonaut,” Pete Dougherty, president and chief executive officer, said in the earnings call.

Argonaut’s total production for the third quarter was 58,777 gold equivalent ounces, up from 48,951 gold equivalent ounces in the 2020 quarter, while Florida Canyon produced 14,103 gold equivalent ounces, according to the earnings report. That was up 11,289 GEOs from the 2020 quarter.

Argonaut acquired Florida Canyon Mine at Imlay on July 1, 2020, from Alio Gold Inc., and the company attributed the increased production to a 17% increase in gold grade and operational and productivity improvements made since the acquisition.

The new stack conveyor system went into operation in the third quarter at Florida Canyon, and Lowe Billingsley, senior vice president of operations for Argonaut, said in the Nov. 15 call that the system in still ramping up and “will continue to push productivity up in the next couple of quarters.”

The adjusted net income for the third quarter compared with $12.2 million, or 4 cents per share, in the 2020 quarter, and net income was $15 million, or 5 cents per share, compared with $13.4 million, or 5 cents per share, in last year’s quarter. Cash flow totaled $39.6 million in the quarter.

“We generated nearly $40 million in cash flow during the third quarter despite the usual productivity challenges we typically experience due to the rainy season in Mexico. With $107 million in cash flow generated in the first nine months of the year, we have already surpassed our target of generating $100 million cash flow in 2021,” Dougherty said in the announcement.

He said the cash flow is key for the company as it continues construction of the Magino mining project in Ontario, and the higher cash flow was achieved despite a 7% drop in the gold price from the 2020 quarter.

The realized gold price was $1,789 per ounce, compared with $1,915 per ounce in the third quarter of last year.

Argonaut, which is based in Toronto with headquarters in Reno, reported all-in sustaining cost per gold ounce sold was $1,207 per ounce, down from $1,401 per ounce in the 2020 quarter.

At Magino, plant site construction is under way, as is construction of the tailings impoundment facility, and Argonaut reported work completed included the final section of pre-shear drilling in the open pit, the main haul road section and access roads to the tailings facility.

A ground-breaking ceremony was held in the quarter, and Argonaut expects the first gold pour at Magino in the first quarter of 2023.

Dougherty said the company is planning to complete an updated cost estimate for Magino by the end of the year, taking into consideration cost pressures that Argonaut is experiencing “just like everyone else.” Magino’s costs in the first nine months of this year totaled $171.2 million.

Argonaut also reported that in the quarter the company acquired key mineral concessions surrounding the San Agustin Mine in Mexico for $5.75 million, which more than quadruples the mineral tenure in that mining district and provides a chance to expand the open pit.

“We feel like this deal more than pays for itself,” Dougherty said.

At the El Castillo Complex in Mexico, production in the third quarter totaled 28,872 gold equivalent ounces, up 8% from the 2020 quarter. El Castillo Complex includes San Agustin.

At La Colorada in Mexico, the company produced 15,802 GEOs, up 44% from the third quarter of last year and exploration continues to discover high-grade gold mineralization below the El Creston open pit. La Colorada and the other mines in Mexico were impacted by temporary shutdowns due to COVID-19 last year.

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