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Argonaut secures required land to build San Augustin openpit, Mexico

14th June 2016

By: Henry Lazenby

Creamer Media Deputy Editor: North America

  

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TORONTO (miningweekly.com) – Precious metals producer Argonaut Gold has acquired the necessary land to develop the San Agustin openpit and heap leach gold/silver project, located about 10 km south-west of its flagship El Castillo mine, the company reported on Monday.

The Toronto-based company advised that the land agreement allowed it to file for the required ‘change in use of soil’ permit, which it expected to receive without difficulty by the third quarter, paving the way for a construction decision before year-end.

According to Desjardins Capital Markets, Argonaut had previously stated that El Castillo was expected to produce only 38 000 oz of gold in 2017, down from guidance of 75 000 oz to 80 000 oz this year, making the San Agustin development critical for the company to maintain its guidance of 74 000 oz of gold equivalent from the El Castillo complex for 2017, comprising both operations.

Assuming a positive construction decision, San Agustin could see first gold production in the third quarter of 2017, Argonaut advised.

“We now assume a six-month earlier start for San Agustin based on the new guidance and believe this will greatly reduce the drop-off in production next year. We now call for company-wide gold production of 118 000 oz in 2017, up from 94 000 oz previously, versus 132 000 oz this year,” analysts stated in a note to clients.

Based on Desjardins estimates, San Agustin offered an internal rate of return of 57.7%, compared with the company’s preliminary economic assessment, completed in December 2015, which calculated an after-tax internal rate of return of 50% and an after-tax net present value, at 5% discount, of $89.9-million.

Argonaut also operates the La Colorada mine, in Mexico, which was expected to produce 57 000 oz of gold equivalent this year, and 55 000 oz of gold equivalent in 2017.

Edited by Samantha Herbst
Creamer Media Deputy Editor

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