Exploration of Argonaut’s Magino project yields exciting results
Approximately four months after the start of the planned two-year construction of Argonaut Gold‘s (TSX: AR) New Magino Cornerstone Project in Northeastern Ontario, smooth progress and encouraging new exploration results put CEO Peter Dougherty in a forward-thinking mood.
As Argonaut hits early mine construction milestones of $ 480-510 million, the company continues to report high-grade gold interceptions from ongoing exploration initiatives below and alongside defined boundaries of the surface mine.
Dougherty says the more the company breaks through in Magino, the better the grades. Drilling in progress at 2.14 million ounces. the reserve property increasingly finds evidence of common characteristics with the closest analogues to the deposit, Alamos Goldthe Island Gold mine of (TSX: AGI) immediately adjacent (1.22 million ounces of reserves), and Wesdome Gold Mines(TSX: WDO) Eagle River (581,000 ounces of reserves), about 70 km to strike west.
The Magino property is located in the Goudreau-Lochalsh gold district of the Wawa gold camp, itself located in the Michipicoten greenstone belt of the Archean Superior province. The Michipicoten greenstone belt is described as a structurally and stratigraphically complex collection of volcanic, sedimentary and intrusive rocks that have been metamorphosed into green schist and amphibolite facies.
The Elbow and Central zones near the pit are emerging as new priority exploration zones with promising high grade gold continuity.
“In a perfect world, we want to continue to undertake infill drilling at denser fences on these deposits to incorporate them into any conceptual economic study that considers a 20,000 tonne per day scenario as soon as possible,” Dougherty said in an interview. “As we press the green button for Magino production, we want to simultaneously press the feasibility study for the extension.”
The company is working to bring together initial resource estimates for the central and elbow areas by the end of the year.
The Central and Elbow deposits are at the nearest point, just 120 meters from the Island Gold yards. The critical difference is that where previous exploration only went up to 300 meters at Magino, Alamos and Wesdome are now drilling to depths of 1500 meters, approaching 2000 meters. “The proximity of analogs and shallow drilling to date bodes exceptionally well for the valuable opportunity that further drilling at Magino could open. We want to put a mineralized envelope around the open pits, and that can give us assurance that one day we may be looking at an underground mine, ”says Dougherty.
“We already see a clear path to doubling Magino’s throughput to 20,000 tonnes per day, which equates to approximately 300,000 ounces. per year. He has potential as a business creator for us, ”says Dougherty. “Magino is truly a valuable and strategic asset. By moving Magino forward, we are executing our vision to transform Argonaut. “
Meanwhile, on the back of the company’s successful exploration in the Elbow and Central areas last summer, the exploration team has asked management to secure more funding to monitor results. exciting in the west. “In all my years in this business, I have never seen anything happen like what happened with our geologists. We gave them extra funding, and they drilled and hit the new Scotland, 42, Sandy and South zones, ”says Dougherty.
During the March quarter, the Company completed an additional 4,895 meters of drilling at Magino and 936 meters of first pass exploration drilling on these newly defined district targets.
Recent drilling in the South Zone returned convincing intersections such as 10 meters grading an average of 19 grams of gold per tonne, of which 6.3 meters at 30.2 grams of gold per tonne and 3.1 meters at 47, 1 grams of gold per tonne, which itself includes a higher grade range of 1.3 meters at 112 grams of gold.
“We’re very happy with the grades, and when we look at our neighbors we realize that these are the types of grades they see in depth. So given that we haven’t even come close to those depths, we’re extremely excited to be back there for some follow-up work, ”he says.
Exploration work has succeeded in extending the lateral length of the South Zone to 1.5 km, and it remains widely open to the west and at depth.
Argonaut has earmarked $ 11.5 million for the exploration of Magino this year. He expects four drilling rigs to target the deeper horizons, with another working in the surface mine.
The Argonaut board of directors approved construction in October last year, followed by the filing of the first phase of financial assurance with the province of Ontario and the plan to close the Magino project in January. .
The company awarded an engineering, procurement, construction and commissioning contract (EPC contract) to Ausenco, a construction engineering and management company. The EPC contract covers the construction of the Magino processing plant and other parts of the pre-development project. It also covers about 40% of the project’s capital expenditure of carbon in the pulp of 10,000 tonnes per day.
Magino’s surface milling operation is expected to reach first production on time and on budget by early 2023 at a rate of 150,000 ounces. per year at an all-inclusive sustaining cost (AISC) of US $ 711 per ounce. for 17 years. Total production is expected to reach approximately 2 million ounces. out of the entire current resource base of approximately 5 million ounces.
Calculated at an assumed gold price of US $ 1,250 per ounce, a 2017 feasibility study estimated Magino’s after-tax net present value at US $ 288 million and an internal rate of return of 19.5%.
Dougherty points out that the brownfield project’s massive exploration potential underpins Argonaut’s strategic ascent to coveted mid-level status.
The company is emerging as a result of a three year metamorphosis from a relatively high cost junior producer with a short mine life to a lower cost intermediate producer with a long mine life. And given its excellent results in the March quarter, Argonaut is moving forward to achieve these strategic goals.
The company recently posted a record quarterly gold equivalent production of 59,704 ounces, primarily driven by successful turnarounds at its Mexico-based El Castilo Complex and La Colorada mines. Together, the record production and high prices of gold and silver generated operating cash flow of US $ 27.7 million and net profit of US $ 27 million, the latter of which was in up from a loss of US $ 9.5 million a year ago.
The performance is evidence of the successful execution of the company’s three-pronged turnaround strategy, the first being to harvest cash from existing and improved operations.
The company also announced a resource and reserve update in March. Total reserves increased 46% to 6.8 million ounces. gold, mainly due to its acquisition in July 2020 of Alio Gold and the Ana Paula project, in Guerrero, Mexico. With that, management crossed the second item off the to-do list, which was to replace the depleted ounces.
The third component of the plan is to increase the development pipeline, hence continued exploration investments in Magino and La Colorada in Sonora, Mexico, where the Canadian company is also experiencing exploration success.
Recent drilling has targeted high-grade gold veins beneath the El Crestón pit, yielding “outstanding” results. Highlights included interceptions of 12.2 meters grading 98.9 grams of gold and 30.3 grams of silver, and another 21.3 meters at 44.6 grams of gold and 274.9 grams of ‘silver.
“It has always been our intention to drill tests under the El Crestón pit to determine if the La Colorada mine has the potential to go from an open pit to an underground mine in the future. These high grade gold and silver results far exceeded our expectations and obviously warrant follow-up drilling, ”he says.
The results could help Argonaut chart a course to extend the life of the mine.
Cerro del Gallo in Guanajuato, Mexico is Argonaut’s next development project and is in the process of obtaining permits. The project harbors approximately 453 million ounces. gold in probable reserves.
Dougherty expects the low-cost project to hit the critical milestone at any time, followed by a short-term development decision. The mining plan for the pre-feasibility stage project currently captures approximately 1.6 million ounces. almost 3 million ounces. resource and adds about 77,000 ounces. per year at an AISC of about US $ 667 per ounce. over a 15-year mine life with an overall production profile.
“These projects maintain a strong influence on the rise in the price of gold. Magino and Cerro del Gallo offer a combined NPV (at a 5% discount rate) of over $ 1.2 billion for $ 1,900 in gold, ”says Dougherty. “I’m here to tell you that I think we have the opportunity to live even much longer on both.”
Management is also evaluating other opportunities to value Ana Paula’s assets at the initial stage after a failed sale deal at the end of March.
Shares of Argonaut in Toronto have gained around 4% so far this year and closed at $ 2.85 a share on May 14. With nearly 295 million common shares outstanding, the company has a market capitalization of $ 884 million.