Conference Call and Webcast Scheduled:
Leadership Change
The Company announces that
Argonaut would like to thank
Magino Construction Capital Estimate
After a review of the impacts of cost increases, inflation, COVID-19, adjustments to the development plans and contingencies, the updated Magino EAC is approximately
Magino EAC Variance –
Area |
|
|
|
Process Facilities | |||
Tailings Management Facility ("TMF") | |||
Site Infrastructure | ( | ||
Owner Pre-Production G&A | |||
Project Indirects | |||
Sub Total | |||
Contingency | |||
Total EAC |
While the Project has experienced capital increases in several areas, the largest increases have been related to cost increases, inflation and COVID-19 impacts as well as changes in scope for site development, the TMF and permanent power.
In this press release and the subsequent conference call and webcast, Argonaut aims to walk through the main areas of the Project in detail to provide an understanding of where and why capital has increased in those areas.
EAC Variances by Category (CAD $M)
Area | Cost/ | Scope | Quantities | Schedule | Contin- | Total |
Process Facilities | - | - | ||||
TMF | - | - | ||||
- | - | |||||
Site Infrastructure | ( | - | - | - | ( | |
- | - | - | - | |||
Owner Pre-Production G&A | - | |||||
Project Indirects | - | |||||
Contingency | - | - | - | - | ||
There are several areas that have led to the increase in the Project capital estimate. The Company estimates impacts from cost increases, inflation and COVID-19 account for approximately 32% of the capital increase. Changes in scope account for approximately 28% of the capital increase and primarily relate to site development, the TMF and permanent power. Approximately 20% of the increase in capital is related to increases in quantities, primarily in site development and project indirects areas. Due to the initial challenges in civil works, primarily at the process facilities site, this area of the Project is currently behind schedule. Argonaut is able to recover the schedule in this area due to schedule compression where multiple trades will work in parallel; however, there is a cost associated with compressing the schedule. When the Company examined the cost of schedule recovery compared to delaying the entire project, it was more economic to compress and recover the schedule than delay the overall Project. The Company estimates 8% of the increase in capital for the Project is due to schedule recovery to meet first gold pour by the end of
Process Facilities (CAD $M)
Process Facilities | Schedule | Scope | Cost |
|
Argonaut has been largely shielded from cost increases and inflation in the area of process facilities due to its EPC contract with
TMF (CAD $M)
TMF |
| Cost/ |
|
| Deferral to |
|
( |
Increases in capital for the TMF are primarily related to a change in scope to include bedrock cleaning and slush grout and increased quantities along with higher unit cost for sand cement bentonite. There were also increases in both unit cost and quantities for the embankment filter, which was partially offset by a reduction in embankment mine rock fill due to a lower dam elevation plan at construction completion. The remaining embankment mine rock fill to reach the required dam elevation has been reallocated to sustaining capital, as this work can be completed after start up of operations.
Scope | Quantities | Cost/ | Other | Current | |
The largest increases in capital associated with site development were driven by the construction environmental management plan ("CEMP") and permit requirements with respect to site access. As part of the CEMP, the Company was required to construct 11 water dams for water management that were not estimated in the
Site Infrastructure (CAD $M)
Site Infrastructure | Cost/ | Scope | Other | Deferral to |
|
( | ( |
The Company has deferred capital associated with the truck shop and site office complex to sustaining capital. Argonaut has instead purchased and renovated a building in the town of
Scope |
| |
After further study, there was significant risk to the Project on timing and cost for delivery of line power by upgrading the existing system. Therefore, there was a scope change from the
Owner Pre-Production G&A (CAD $M)
Owner Pre-Production | Cost/ | Schedule | Quantities | Scope | Other | Current |
( |
The largest increase in owner pre-production G&A is primarily related to increased labour cost and cost associated with Argonaut's COVID-19 testing programs. Also, in order to maintain Project schedule, additional headcount is required during construction.
Project Indirects (CAD $M)
Project Indirects | Cost/ | Quantities | Scope | Schedule | Current EAC |
The increase in capital in Project indirects is primarily due to additional services required for the main camp and associated with offsite accommodations such as the temporary camp for Argonaut's earthworks contractor as well as housing in both
Magino Technical Report
Argonaut is in the process of preparing an updated National Instrument ("NI") 43-101 Technical Report for the Magino project, which it expects will be published during the first quarter of 2022. In the interest of finalizing the updated technical report in a timely manner, this updated report will be focused on the Project currently under construction and will not include expansion opportunities, including future potential underground mining. The updated report will include the current EAC and other items including, but not limited to, revised gold price assumptions, an updated mineral resource model which includes all grade control drilling data to date, optimizations to equipment sizing and the processing facilities, updated operating cost and sustaining capital. While the updated report will not contemplate expansion potential and future potential underground mining, Argonaut believes that these are future opportunities for Magino.
Remaining Required Investment to Project Completion (CAD $M)
Area | Forecasted | Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Total |
Process Facilities | ||||||||
TMF | - | |||||||
- | - | |||||||
Site Infrastructure | - | - | ||||||
- | - | |||||||
Owner Pre-Production G&A | - | |||||||
Project Indirects | - | |||||||
Contingency | - | |||||||
Argonaut forecasts it will have invested
Liquidity Outlook
The Company forecasts it will end 2021 with approximately
Level of Confidence Going Forward
Argonaut has a much higher level of confidence in the current EAC now that it is a year into the Project, has worked through the process facilities' foundational preparation challenges that were encountered due to rock unevenness, stripped approximately 75% of the TMF area and completed construction of approximately 20% of the TMF. Going forward, many of the unknowns when the Project commenced were in the area of civil works and are now very well known. The bulk of the remaining work is primarily construction-related (i.e. bolting items together). With the remaining civil work is better defined and understood, the Company believes the risk of further significant increases to the EAC are low with a significant contingency in place.
When evaluating the remaining investment required to complete the Project that are critical to schedule and undertaking a detailed risk assessment of all areas that make up the EAC, there were seven areas that accounted for 90% of the risk for variance. It is estimated that these seven areas account for approximately 60% of the remaining capital. Within these seven areas, as detailed below, all have a reasonably high level of confidence after a detailed risk assessment given either the high level of engineering for these Project areas or the low level of complexity for the remaining work.
Critical Areas of
Area | Percentage of Engineering | Level of Confidence in |
Process Facilities | 65% | 90% |
TMF | 100% | 85% |
Power Plant | 2% | 75% |
Site Water Management | 85% | 90% |
Fish | 100% | 85% |
100% | 90% | |
Earthworks Indirects | 100% | 90% |
Argonaut Gold Magino EAC Conference Call and Webcast:
The Company will host conference call and webcast at
Conference Call Information
Toll Free ( | 1-888-664-6392 |
International: | 1-416-764-8659 |
Conference ID: | 63421174 |
Webcast: | www.argonautgold.com |
Conference Call Replay:
Toll Free Replay Call ( | 1-888-390-0541 |
International Replay Call: | 1-416-764-8677 |
Replay Entry Code: | 421174# |
The conference call replay will be available from
Qualified Person, Technical Information and Mineral Properties Reports
Technical information in this release was supervised and approved by
| NI 43-101 Technical Report on Resources and Reserves, |
NI 43-101 Technical Report on Resources and Reserves, La Colorada Gold/Silver | |
NI 43-101 Technical Report on Mineral Resource and Mineral Reserve Florida | |
| Feasibility Study Technical Report on the |
| Pre-Feasibility Study Technical Report on the |
Cautionary Note Regarding Forward-looking Statements
This press release contains certain "forward-looking statements" and "forward-looking information" under applicable Canadian securities laws concerning the business, operations and financial performance and condition of
Factors that could cause actual results to vary materially from results anticipated by such forward-looking statements include the possibility of project cost overruns or unanticipated costs and expenses; variations in ore grade or recovery rates; changes in market conditions; risks relating to the availability and timeliness of permitting and governmental approvals; risks relating to international operations; fluctuating metal prices and currency exchange rates; changes in project parameters; labour disputes and other risks of the mining industry, failure of plant, equipment or processes to operate as anticipated.
These factors are discussed in greater detail in Argonaut's most recent Annual Information Form and in the most recent Management's Discussion and Analysis filed on SEDAR, which also provide additional general assumptions in connection with these statements. Argonaut cautions that the foregoing list of important factors is not exhaustive. Investors and others who base themselves on forward-looking statements should carefully consider the above factors as well as the uncertainties they represent and the risk they entail. Argonaut believes that the expectations reflected in those forward-looking statements are reasonable, but no assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this press release should not be unduly relied upon. These statements speak only as of the date of this press release.
Although Argonaut has attempted to identify important factors that could cause actual actions, events, or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Argonaut undertakes no obligation to update forward-looking statements if circumstances or management's estimates or opinions should change except as required by applicable securities laws. The reader is cautioned not to place undue reliance on forward-looking statements. Statements concerning mineral reserve and resource estimates may also be deemed to constitute forward-looking statements to the extent they involve estimates of the mineralization that will be encountered if the property is developed. Comparative market information is as of a date prior to the date of this document.
About
Vice President, Corporate Development & Investor Relations
Phone: 416-915-3107
Email: dan.symons@argonautgold.com
Source:
SOURCE
© Canada Newswire, source