Argonaut advancing Mexico gold projects

Argonaut Gold expects to more than double production while reducing costs by developing its two Mexican projects, CEO Pete Dougherty said.

The San Agustín project in Durango state will deliver 50,000-60,000oz/y gold equivalent at cash costs of US$610/oz, with San Antonio in Baja California Sur state producing 70,000-125,000oz/y gold at US$550/oz, Dougherty said during the company's Q4 earnings call.

The Toronto-based company produced 136,700oz gold equivalent in 2014 at its two operating mines, El Castillo and La Colorada, both in Mexico, at cash costs of US$771/oz, according to its earnings release.

Development of the two projects will cost about US$150mn, and Argonaut already has about US$50mn in cash, the CEO said.

"For an additional investment of about US$100mn we believe we can be in a situation where the company can double the size of our operations to about 300,000oz/y gold production at lower operating costs and higher margins than we're seeing at existing operations," he said.

This lower cost profile will enable the company to endure lower gold price environments, he added.

2015 PROGRESS

Argonaut plans to use cash flow from its operations to advance the projects in 2015 and to pay a final installment of US$20mn to Silver Standard for San Agustín, acquired in 2013.

The company expects to file permit applications and release drilling results at San Agustín in Q2, with a construction decision in Q4. An update on San Antonio, which has been delayed because of permitting issues, is expected in Q3, Dougherty said.

EARNINGS

Argonaut reported a net loss of US$7.20mn in Q4 and US$4.19mn in 2014, compared to a net loss of US$20.1mn and net earnings of US$4.63mn in the corresponding periods of 2013.

Results were impacted by a foreign exchange loss of US$5.9mn and US$7.0mn in deferred tax expenses related to foreign exchange rates in Q4.

Revenues reached US$49.0mn in Q4 and US$166mn for 2014, up from US$34.6mn and US$165mn, respectively, reflecting increased gold equivalent ounces sold at lower prices. In the meantime, cash costs were up 22% in Q4 at US$801/oz gold and up 20% for the full year.

The company, which also has the Magino exploration project in Canada, expects to produce 135,000-145,000oz gold equivalent in 2015.