Argonaut Gold Inc T.AR

The potential for PROFIT at Magino

[Wolverine2024]

The calculations are based on the data provided in the interview with Richard Young on Dec 5 2023 titled
“5 Gold Mines, +$400M Revenue Potential, $333M Market Cap | Argonaut Gold CEO Interview”
(you can watch it on YouTube.)

I wanted to discuss the tremendous opportunity for PROFIT at Magino, and that I don't understand any logic of going forward with the sale to Alamos. I'll unpack some of the other issues from that and other videos in subsequent posts, but I want to focus on profit right now

I want to unpack 3 scenarios, particularly tpd throughput at Magino
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Scenario 1, Magino runs at 10,000 tpd (2023)
Nov 1, 2023, Magino reaches commercial production 
Magino processing roughly 10,000 tons/day at 1.2 gpt equals 148,000 oz per year.
At 92% recovery Magino will be producing 136,000 oz 
At 10,000 tpd the cost per oz at Magino was roughly $1,750/oz
At today’s gold price of (USD$2,400/oz)
PROFIT per oz = USD $650/oz or
PROFIT per year (at 10,000 tpd) = USD $88.5 Million
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Scenario 2: let’s consider 17,500 tpd
IMPORTANT POINT, according to RY the cost per oz at 17,000 tpd drops to around USD$1,000 to $1,100/oz (10:25 into video)
I will use the higher cost of the two, so USD $1,100
At 92% recovery Magino will be producing 238,000 oz/year
At today’s gold price of ($2,400/oz)
PROFIT per oz = USD $1,300/oz
PROFIT per year = USD $309.7 Million
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Scenario 3, Magino increases to 20,000 tpd (2024)
(The financing for expanding to 20,000 tpd has been in place since Dec 4^th 2023. (Recall the CDN $80 million equity raise, 50% allocated for FC and 50% allocated for Magino)) ( also 8:30 to 14:00 of video, and 37:30 of video)
Roughly at 20,000 tpd at 1.2 gpt equals 296,000 oz/year
At 92% recovery that’s 272,000 oz of AU at Magino per year
HOWEVER
At 20,000 tpd the cost per oz drops to between $1,000 and $1,100 per oz. (according to RY at 10:25 into the video)
At today’s gold price of ($2,400/oz)
PROFIT per oz = USD $1,350/oz or
PROFIT per year = USD $367.6 Million
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It seems apparent to me that Magino alone is a cash cow capable of delivering massive profits, and with FC delivering 70,000 to 85,000 oz per year, why are they selling?
 
 
What am I missing, please someone explain or correct my math

IMO, it makes no sense to vote yes to this deal

[Lifexprt]

You are missing a lot, grades which aren't anywhere near what you are posting, actually 0.9 grams, mill performance as its oscillating around 6-8k TPD and hedges, all production from Magino is sold at $1,860 Florida Canyon isn't being sold, just shows you haven't done much research into this 

[psych01]

Florida Canyon isn't being sold.  or, Florida Canyon isn't being bought, amazing how one word can change our perceptions.  Can we hear Richard begging Alamos buddies--'yes, by all means you can have Magino at a steal of a price, but please please let us keep our amazing Florida Canyon'. nope, but can we hear Alamos fellow golfers saying 'Magino for sure, I mean we'

[Lifexprt]

Alamos did throw $10M for a 20% stake in SpinCo  They couldn't have bought it all as AISC at FC does not fit their low cost criteria hence exposure to it through SpinCo  What do you think Alamos decides to dump $10M into end of life mine in Nevada? I doubt it, technical report will show us why they decided to partake 

[Wolverine2024]

Lifexprt - you said "...hedges, all production from Magino is sold at $1,860" No it's not, the point is the hedges have very little impact on the profitability of Magino. Yet you are trying to present it as if 100% of the gold produced at Magino ("all production from Magino") will be sold at $1,860 (till 2041). If you do the numbers, it's apparent that the hedges

[Lifexprt]

Magino is profitable over Ionger term, short term it's a money pit  Argonaut just doesn't have the resources to toss at Magino until issues are resolved and hedges satisfied come 2027 which is why they had to sell it Other option was to dilute by another billion shares at a significant discount What would you have preferred? Creditors were circling, closer than anyone anticipated&

[Wolverine2024]

Here is the table indicating the impact of Hedges versus NO Hedges on profitability at Magino, not sure why  it didn't appear in my previous post Assume 230,000 oz of gold Produced at Magino in 2025         Total Oz Cost/oz Price/oz Profit/oz Total Profit

[Lifexprt]

No that's great and I fully agree once Magino is pumping 15-20k TPD post expansion, and grades are higher it will be a fine operation.  Issue is next 1-2 years which is where management ran out of runway squeezed by debt hedges, lower than anticipated grades and subpar mill performance, amongst many other issues 

[crazytimes]

Life... you keep forgetting that FC and Mexico were supposed to be throwing off enough ounces to feed the hedges at least at break even with Magino supposed to be printing money and paying down debt! Remember the story! The trucks modifications were being delivered! Deep juicy drill holes being found? Mill expansion? Stop blaming the grade and the mill. The grade is higher than many profitable

[Wolverine2024]

crazytimes - Agreed, I feel the same sentiment. 

[Lifexprt]

Yeah but what you guys are referring to is called napkin math, theoretical calculations based on optimal project  Reality is much different and unfortunately reality did not cooperate at Magino which is why we are where we are 

[Wolverine2024]

At least we agree on Magino's long term potential.  I'm curious, what is your basis for the claim of "lower than anticipated grades". What does this mean? What was anticipated? Anybody, please feel free to provide guidance on this question. I think this question of grade is key to constructive dialogue moving forward

[crazytimes]

The grade was barely off by maybe 5 - 10% for the first 3 years than planned. But would match up with mine plan over it's extremely long mine life. Not to mention which if drill results hit, of course it's apparently now up to alamos to release them.... could one day include insane high grade like it's neighbor who is now getting us and the rest of the ore body for peanuts. This 5 or

[Lifexprt]

Run the next 2 years with AISC at $2,000-$2,500 and see how it goes when you are selling at $1,860 and still expanding  tailings dam which was not completed or budgeted for in the original construction plan Either way it's water under the bridge now, it was the best case scenario and hopefully SpinCo does make up some of what many have lost  Note that SpinCo is debt and hedge free