Mining News

Argonaut Gold sees Magino capex rise 57%; CEO departs

Argonaut Gold (TSX: AR) has taken another look at the cost of putting the former Magino gold mine in Ontario back into production and found capex has risen 57% to C$800 million. The previous capex estimate of C$510 million was released only one year ago, in October 2020.

The company also announced that its founder, president and CEO Pete Dougherty is no longer with the company and says it is searching for someone to fill the role on an interim basis. No details about Dougherty’s departure were released except to note that he took Argonaut from a small company to a diversified gold producer operating in three countries, and to thank him for his contributions during his tenure.

Argonaut has invested about C$342 million into Magino so far, leaving about C$459 million needed to complete the project.

Increases have been seen in all but one (site infrastructure) areas of the project, but Argonaut says the largest increases are related to higher cost of goods, inflation, Covid-19 impacts, changes to the scope of the project, the tailings management facility (TMF), and permanent power.

The cost of the TMF is up 69% to C$130 million and adding natural gas power generation for the site comes in 140% higher at C$41 million. Site development costs are up 120% to C$138 million, and the owner’s pre-production G&A is also up 120% to C$55 million. Even the amount set aside for contingencies is up 118% to C$33 million. That makes the 13% rise in process plant costs, to C$219 million, look modest.

Looked at another way, Argonaut says impacts from cost increases, inflation and Covid-19 amount to 32% of the capital increase. Changes in scope account for about 28% of the uptick, and increased quantities for material for site development and project indirects amount to about 20% of the increase.

The suspended mine is 195 km north of Sault Ste Marie, Ontario, and 100% owned by Argonaut.

With the exception of the process plant, most of the Magino project is on schedule. Initially there were challenges in civil works at the mill site that led to its being behind schedule. Argonaut has decided to spend extra to get the mill back on schedule rather than delay the entire project awaiting its completion. However, the company said its EPC contract with Ausenco Engineering Canada has shielded it from most of the cost increases and inflation for the plant.

Argonaut is preparing an updated 43-101 report for Magino which is to be published during the first quarter next year. It will focus on the project currently under construction rather than expansion opportunities.

The Magino project currently has measured and indicated resources of 144 million tonnes grading 0.91 g/t gold for 4.2 million contained oz. and an inferred resources of 33.2 million tonnes at 0.83 g/t gold for 886,000 contained oz. of gold. A gold price of $1,200 per ounce was used in these calculations.

Open pit mining and carbon-in-pulp gold recovery are planned. Production is anticipated in the first half of 2023.

(This article first appeared in the Canadian Mining Journal)

Share this article