Toronto’s Argonaut Gold Inc. (TSX: AR) declared commercial production at its Magino gold mine in northern Ontario on Thursday, an open-pit operation expected to last until 2041.
The company also announced that it would be providing an additional 1 per cent net smelter royalty (NSR) on the project to Franco-Nevada Corporation (TSX: FNV) for US$29.5 million. Argonaut says it made this move to bolster its balance sheet due to a slower-than-planned ramp-up to commercial production at the mine.
Franco will hold a 3 per cent NSR at Magino and on Argonaut’s non-core royalty holdings in Canada and Mexico once the transaction closes.
Argonaut says its management considered several factors prior to declaring commercial production. These include completing construction and development in adherence to the site’s design and ramping up production while meeting specific design criteria. The design criteria include the capability to deliver an adequate amount of ore to the plant and other metrics like recovery rates and tonnes per operating hour in the crushing and grinding circuits.
“Plant commissioning and ramp-up proceeded largely on plan from June through August, ramping up from approximately 50 per cent of nameplate capacity to 80 per cent, placing the plant on track for commercial production in September,” said Argonaut’s Chief Operating Officer Marc Leduc.
However, the company says 20 days of unexpected downtime in September due to mechanical issues and ensuing equipment repairs caused delays in starting commercial production. Argonaut will not be meeting its guidance set out for Magino at the beginning of this year due to the delayed ramp-up.
“The plant has been largely operating at nameplate capacity since the beginning of the quarter,” added Leduc.
Construction underway at Magino in January last year. Photo via Argonaut Gold
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Argonaut acquired the Magino property in 2012, which spans over 2,200 hectares. The company had its first gold pour at the mine in June this year.
Magino contains approximately 4.5 million ounces of measured and indicated gold and 2.36 million proven and probable gold ounces, as of December 2022. It is located 40 kilometres northeast of Wawa and 14 kilometres southeast of the town of Dubreuilville.
As of September, Argonaut had a $566 million market capitalization.
The majority of Canada’s gold is produced in Ontario and Quebec. Sixteen of the 35 active mining operations in Ontario are gold mines.
A total of $989 million was spent on approximately 300 mineral exploration projects in the province last year.
rowan@mugglehead.com
