Antero Resources
Annual Report 2018

Plain-text annual report

ANNUAL REPORT ANNUAL REPORT FOR THE YEAR ENDED DECEMBER 31, 2018 ABOUT ARGONAUT GOLD INC. Argonaut Gold Inc. (the “Company”, “Argonaut Gold” or “Argonaut”) is a Canadian gold company engaged in exploration, mine development and production activities. Its primary assets are the production stage El Castillo mine and San Agustin mines, which together form the El Castillo Complex in Durango, Mexico and the production stage La Colorada mine in Sonora, Mexico. Advanced exploration stage projects include the San Antonio project in Baja California Sur, Mexico, the Cerro del Gallo project in Guanajuato, Mexico and the Magino project in Ontario, Canada. The Company also has several exploration stage projects, all of which are located in North America. HIGHLIGHTS & OVERVIEW 2018 HIGHLIGHTS ARGONAUT AT A GLANCE LETTER FROM THE PRESIDENT & CEO MEETING EXPECTATIONS STRATEGY & PERFORMANCE OUR CORPORATE STRATEGY OUR THREE-YEAR GROWTH PLAN 2019 GOALS KEY PERFORMANCE STATISTICS MANAGING RISKS OPERATIONS & PROJECTS OPERATIONS & PROJECTS OVERVIEW EL CASTILLO COMPLEX LA COLORADA SAN ANTONIO CERRO DEL GALLO MAGINO CORPORATE SOCIAL RESPONSIBILITY SOCIAL & SUSTAINABILITY OUR PEOPLE HEALTH & SAFETY OUR ENVIRONMENT OUR COMMUNITY TEAM & GOVERNANCE CORPORATE GOVERNANCE BOARD & MANAGEMENT 4 5 6 10 14 16 17 18 22 26 34 46 48 T A B L E O F C O N T E N T S IN 2018 WE... 2 HIT OUR TARGETS BROKE RECORDS & REACHED A MILESTONE 3 2018 HIGHLIGHTS HITTING OUR TARGETS • ACHIEVED OUR 2018 PRODUCTION GUIDANCE OF 165K GOLD EQUIVALENT OUNCES1 (“GEOs”). • ACHIEVED OUR 2018 COST GUIDANCE OF CASH COSTS UNDER $8002 PER GOLD OUNCE SOLD AND ALL-IN SUSTAINING COST UNDER $9502 PER GOLD OUNCE SOLD. BROKE RECORDS • BROKE OUR ANNUAL AND QUARTERLY PRODUCTION RECORDS, PRODUCING 51,658 GEOs1 IN Q4 AND 165,117 GEOs1 DURING THE YEAR. • RECORDED THE BEST SAFETY RECORD IN THE HISTORY OF THE COMPANY, INCLUDING ZERO LOST TIME INCIDENTS AT OUR LA COLORADA MINE. REACHED A MILESTONE • PRODUCED OUR ONE MILLIONTH GEO1 IN SEPTEMBER 2018. 2018 GEO PRODUCTION1 CONSOLIDATED CASH COSTS2 165,117 GEOs $792 PER GOLD OUNCE SOLD ALL-IN SUSTAINING COST2 REVENUE $912 PER GOLD OUNCE SOLD $196.1M For more information on our operational and financial performance, go to page 18. 1 GEOs (gold equivalent ounces) conversion ratios are based on three year trailing average silver to gold exchange ratio for each year. 2 Refer to Non-IFRS Measures on page 49. 4 I H G H L G H T S I O V E R V I E W & P E R F O R M A N C E S T R A T E G Y & P R O J E C T S O P E R A T O N S I & C S R G O V E R N A N C E T E A M & ARGONAUT AT A GLANCE PRODUCING MINE ADVANCED EXPLORATION PROJECT ARGONAUT RENO OFFICE LA COLORADA Sonora, Mexico Operated 2018 without lost time injury 47,991 GEOs1 produced 12 months ended Dec.31, 2018 SAN ANTONIO Baja California Sur, Mexico Submitted environmental permit Feb. 2019 Advancing environmental permitting 1 GEOs (gold equivalent ounces) conversion ratios are based on three year trailing average silver to gold exchange ratio for each year. MAGINO Ontario, Canada Completed Federal Environmental Assessment with Positive Decision Statement in January 2019 Advancing other key permit authorizations and detailed engineering EL CASTILLO COMPLEX Durango, Mexico EL CASTILLO MINE & SAN AGUSTIN MINE 117,126 GEOs1 produced 12 months ended Dec.31, 2018 Compared to 70,486 GEOs produced 12 months ended Dec. 31, 2017 Reduced cash cost per Au/oz. sold by 14% to $737 vs. 2017 San Agustin crusher throughput achieved 22% over nameplate capacity of 16,7000 tpd CERRO DEL GALLO Guanajuato, Mexico Re-logged drill core and developed a detailed geological model Completed drill program for metallurgical test work samples Work underway on pre-fesibility study OUR OPERATIONS Argonaut operates three mines in Mexico including the 100% owned El Castillo and San Agustin mines, which together form the El Castillo Complex in Durango Mexico, and the 100% owned La Colorada mine in Sonora Mexico. OUR EXPLORATION PROJECTS Argonaut’s advanced stage exploration projects include the San Antonio gold project in Baja California Sur, Mexico, the Cerro del Gallo project in Guanajuato, Mexico and the Magino project in Ontario, Canada. PRODUCTION, RESERVES & RESOURCES BY COUNTRY1 MINERAL RESERVES PRODUCING VS. DEVELOPING MINERAL RESERVES MINERAL RESOURCES2 38% 3.4M OZ AU 62% 38% 3.4M OZ AU 62% 47% 7.9M OZ AU 53% DEVELOPMENT PRODUCING MEXICO CANADA 1 Refer to Mineral Resource disclosure on page 49. 2 Mineral Resources are inclusive of Mineral Reserves. 5 LETTER FROM THE PRESIDENT & CEO 2018 was a very rewarding year for the Company because of the efforts of each person on the team working together, looking out for one another and achieving what seemed impossible to many during the fourth quarter. In 2017, we challenged ourselves to grow production 65% by 2019. With our record fourth quarter in 2018 leading to a record year for the Company in terms of production, we are well on our way to achieving this objective. Some highlights from 2018 include: • Pouring our one millionth GEO1 and achieving record Q4 production and full year production while meeting our cash cost2 guidance; • Having the best safety performance yet as a Company, including zero lost time incidents at our La Colorada mine; • Advancing and continuing to de-risk all of our development projects forward (San Antonio, Cerro del Gallo and Magino); • Continuing to receive ESR (Empresa Socialmente Responsable) designations at all operating mines in Mexico; and • Completing critical capital expansion programs ahead of plan and under budget to allow for greater operational flexibility. the El Castillo Complex During 2018, produced 60% more GEOs1 at a cash cost per gold ounce sold of 14% less compared to 2017. The higher production and lower costs were driven by a full year of operations at the San Agustin mine. The La Colorada mine produced 10% less GEOs1 at a cash cost per gold ounce sold which was 32% higher compared to 2017. The lower production was due to the four and a half month period where the mine lacked the ability to blast. The higher costs were primarily due to a lower allocation of stripping costs from operating expenses to capital. DURING 2018, WE SURPASSED THE SIGNIFICANT MILESTONE OF OVER ONE MILLION GEOS1 PRODUCED SINCE ARGONAUT’S FOUNDING, A TESTAMENT TO OUR COMMITMENT TO HEALTH AND SAFETY, OUR PEOPLE, OUR COMMUNITIES AND OUR ENVIRONMENT.” “ 1 GEOs (gold equivalent ounces) conversion ratios are based on three year trailing average silver to gold exchange ratio for each year. 2 Refer to Non-IFRS Measures on page 49. 6 I H G H L G H T S I O V E R V I E W & P E R F O R M A N C E S T R A T E G Y & P R O J E C T S O P E R A T O N S I & C S R G O V E R N A N C E T E A M & “ 2018 WAS A MILESTONE YEAR, AND THIS COIN REPRESENTS THE TRACK RECORD AND OPERATING EXCELLENCE THE ARGONAUT TEAM DEMONSTRATES ON A DAILY BASIS.” Pete Dougherty | President & CEO We continued to de-risk our development project portfolio. At Magino, we completed our third indigenous agreement by signing a collaborative agreement with the Métis Nation of Ontario during 2018 and signed our fourth agreement with the Batchewana First Nation early in 2019. We also received a positive decision from the Canadian Federal government for our Environmental Assessment in January 2019 and expect a Provincial Environmental Assessment decision during the first half of 2019. At our Cerro del Gallo project, we developed a detailed geological model and completed a drill program to further metallurgical test work. At our San Antonio project, we worked toward submission of our environmental permit application, which was submitted in February 2019. We continued to demonstrate our operating excellence not only at our operations and projects, but within our organization and our communities. In 2018 we realized the best safety performance in Argonaut’s history. Our commitment to Health and Safety, Our People, Our Environment and Our Communities are the four pillars on which we have built our business. We again received the distinction of being an Environmentally and Socially Responsible company by the government of Mexico – our seventh consecutive year of receiving such a distinction. I encourage you to learn more about our corporate responsibility initiatives that were undertaken in 2018 by reviewing the sustainability section of this report. Our main focus during 2019 will be expanding the San Agustin mine’s crushing capacity from 20,000 tonnes per day to 30,000 tonnes per day, adding cash to the balance sheet and continuing to de-risk and advance our development assets. As we look forward to 2019, it’s important to review the past and take note of how we achieved these successes and then harness this energy and enthusiasm toward our 2019 objectives. In 2019, we are poised to hit new production targets over 200,000 GEOs1 and we will continue to de-risk all three of our development projects through a pre-feasibility study at Cerro del Gallo and advancing permitting at Magino and San Antonio. We thank all of our stakeholders for your continued support of our shared vision and will continue to work to deliver value through responsible mining, development and exploration. Pete Dougherty President & CEO 1 GEOs (gold equivalent ounces) conversion ratios are based on three year trailing average silver to gold exchange ratio for each year. 7 Q: WHAT ALLOWED YOU TO ACHIEVE RECORD PRODUCTION IN 2018? This really began in 2017 when we challenged ourselves to grow production from approximately 125,000 GEOs1 to over 200,000 GEOs1 by 2019. This started with the acquisition of the San Juan mineral concession, which allowed us to extend El Castillo’s mine life and expand its crushing capacity from 20,000 tonnes per day at the start of 2018 to 29,000 tonnes per day by the end of 2018. Also during 2017, we built the San Agustin mine and formed what we now call the El Castillo Complex. The San Agustin mine exceeded expectations the entire 2018 year and is poised for an expansion in 2019 from 20,000 tonnes per day to 30,000 tonnes per day. 1 GEOs (gold equivalent ounces) conversion ratios are based on three year trailing average silver to gold exchange ratio for each year. 8 I H G H L G H T S I O V E R V I E W DID YOU KNOW we launched our new website and social media channels? /ArgonautGoldInc @Argonaut_Gold @ArgonautGoldInc /ArgonautGoldInc Visit our new website at www.argonautgold.com & P E R F O R M A N C E S T R A T E G Y & P R O J E C T S O P E R A T O N S I & C S R G O V E R N A N C E T E A M & 9 MEETING EXPECTATIONS IN 2018, WE SET A GOAL TO INCREASE PRODUCTION BY OPTIMIZING OUR OPERATIONS AND ADVANCING OUR DEVELOPMENT PROJECTS. 2018 TARGETS WHAT WE DELIVERED 2019 GUIDANCE PRODUCTION1 Consolidated: 165,000 - 180,000 GEOs • El Castillo Complex: 115k - 150k GEOs • La Colorada: 60 - 65k GEOs Actual - Consolidated: 165,117 GEOs • El Castillo Complex: 117,126 GEOs • La Colorada: 47,991 GEOs Consolidated Production Guidance: 200,000 to 215,000 GEOs • El Castillo Complex: 140k - 150k GEOs • La Colorada: 60 - 65k GEOs CASH COSTS2 Consolidated: $700 - $800 per oz/Au • El Castillo Complex: $700 - $800 per oz/Au • La Colorada: $700 - $800 per oz/Au Actual Cash Costs: $792 per oz/Au • El Castillo Complex: $737 per oz/Au • La Colorada: $914 per oz/Au Consolidated Cash Costs Guidance: $775 - $875 per oz/Au • El Castillo Complex: $760 - $860 per oz/Au • La Colorada: $800 - $900 per oz/Au ALL-IN SUSTAINING COSTS2 Consolidated: $850 - $950 per oz/Au Actual AISC $912 per oz/Au Consolidated AISC Guidance: $975 - $1,075 per oz/Au CAPITAL Consolidated: $50 - $55 million Actual Capital Spend: $35.9 million Consolidated Capital Estimate: $50 - $60 million • El Castillo Complex: $27M - $31M • La Colorada: $14M - $16M • Development Assets: $9 - $13M 1 GEOs (gold equivalent ounces) conversion ratios are based on three year trailing average silver to gold exchange ratio for each year. 2 Refer to Non-IFRS Measures on page 49. 10 I H G H L G H T S I O V E R V I E W & P E R F O R M A N C E S T R A T E G Y & P R O J E C T S O P E R A T O N S I & C S R G O V E R N A N C E T E A M & “ WE ACHIEVED 48% PRODUCTION GROWTH YEAR OVER YEAR FOR THE FOURTH QUARTER. WE SET A GOAL FOR OURSELVES IN EARLY 2017 THAT TARGETS A ~65% PRODUCTION INCREASE, AND WITH A STRONG FINISH TO 2018 AND THE STAGE SET FOR A ROBUST 2019, WE ARE ON THE RIGHT TRACK TO MEET THIS GOAL.” Pete Dougherty | President & CEO 11 OUR STRATEGY + 2018 PERFORMANCE OUR CORPORATE STRATEGY OUR THREE YEAR GROWTH PLAN 2019 GOALS OPERATIONAL & DEVELOPMENT PERFORMANCE FINANCIAL PERFORMANCE MANAGING RISKS 12 I H G H L G H T S I O V E R V I E W DID YOU KNOW that during 2018, the San Agustin mine’s first full year of commercial operations, it exceeded crushing throughput expectations by 22%? & P E R F O R M A N C E S T R A T E G Y & P R O J E C T S O P E R A T O N S I & C S R G O V E R N A N C E T E A M & 13 OUR CORPORATE STRATEGY AT ARGONAUT, WE BELIEVE IN A SUSTAINABLE MODEL FOR DEVELOPMENT AND GROWTH. Our mission is to deliver maximum value from our projects and mining operations for all our stakeholders. Argonaut’s management team has a strong history of creating value and will continue to focus on maintaining our track record of operating excellence through profitable mining and sustainable development. INVESTMENT CASE STRONG BALANCE SHEET Argonaut has demonstrated since its founding that it will not put its balance sheet at risk. DEFENSIVE GOLD STOCK Long track record of adding cash to the balance sheet. PROVEN OPERATOR Nine year track record and on track to meet 65% annual production growth over the last three years. HIGHLY LEVERAGED TO UPSIDE IN GOLD PRICE 5.9M M&I Resource gold ounces in development assets.1 “ARGONAUT CONTINUES TO CREATE SUSTAINABLE VALUE BY FOCUSING ON SIMPLE, LOW-RISK PROJECTS, INCREASING PRODUCTION YEAR- OVER-YEAR AND ADVANCING OUR PIPELINE OF DEVELOPMENT PROJECTS.” Pete Dougherty | President & CEO 1 Refer to Mineral Resource disclosure on page 49. 14 I H G H L G H T S I O V E R V I E W & P E R F O R M A N C E S T R A T E G Y & P R O J E C T S O P E R A T O N S I & C S R G O V E R N A N C E T E A M & ARGONAUT’S APPROACH TO SUSTAINABLE DEVELOPMENT Our strategy to create profitable and sustainable value is based on, and illustrated in, the above guiding principles. Powered by a strong board and management team, Argonaut highlights its strengths as a proven operator of open-pit, heap leach mines, and its ability to identify simple, low-risk projects to add to its development portfolio. With a track record of over nine years of operating excellence, our experienced teams focus on delivering their production and cost targets, while exploring opportunities to extend mine lives through near-mine exploration and the optimization of operations. One of the key principles that creates long-lasting value is our approach to sustainable development and innovation beyond the mine. Argonaut’s integrated approach continues to add value, not only to the Company and to our shareholders, but to all stakeholders and the communities in which we operate. 15 OUR THREE-YEAR GROWTH PLAN We challenged ourselves early in 2017 to achieve an approximate 65% production growth target between 2017 and 2019. With our record fourth quarter in 2018, leading to a record year for the Company in terms of production, we are well on our way to achieving this growth objective. In 2019, the Company expects to produce over 200,000 GEOs from its existing operations, which would reflect over 65% production growth from 2017 through 2019. This production growth is primarily driven by the ramp up of the El Castillo Complex with the addition of San Agustin mine and the extension of mine life and expansion at the El Castillo mine subsequent to the San Juan concession purchase in 2017. ON THE PATH TO 200K+ GEO PRODUCTION 200-215K GEOS 165,117 GEOS 126,704 GEOS 2 1 GEOs (gold equivalent ounces) conversion ratios are based on three year trailing average silver to gold exchange ratio for each year. 2 Actual 2017 GEO Production includes 2,932 pre-commercial production GEOs from San Agustin. 16 I H G H L G H T S I O V E R V I E W & P E R F O R M A N C E S T R A T E G Y & P R O J E C T S O P E R A T O N S I & C S R G O V E R N A N C E T E A M & 2019 GOALS 17 2018 KEY PERFORMANCE STATS IN 2018 WE BROKE ANNUAL AND QUARTERLY GEO1 PRODUCTION RECORDS. WE PRODUCED 165,117 GEOs1 IN 2018, AND IN SEPTEMBER WE REACHED A MILESTONE ONE MILLIONTH GEO SINCE BEGINNING OPERATIONS IN 2010. CONSOLIDATED GEO PRODUCTION HISTORY 200K+ 165,117 2018 GUIDANCE 165K 110,496 120,433 135,827 138,313 2 126,704 122,097 72,049 51,324 1 250K 200K 100K 100K 50K 0K 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 E 1 GEOs (gold equivalent ounces) conversion ratios are based on three year trailing average silver to gold exchange ratio for each year. 2 Actual 2017 GEO Production includes 2,932 pre-commercial production GEOs from San Agustin. 18 I H G H L G H T S I O V E R V I E W & P E R F O R M A N C E S T R A T E G Y & P R O J E C T S O P E R A T O N S I & C S R G O V E R N A N C E T E A M & GEO PRODUCTION 1 OPERATING CASH FLOW 3 165,117 122,097 126,704 2 1 1 s e c n u O . q E d o G l 250 200 150 100 50 0 $100 $75 M $ $50 $25 $0 $58.1 $45.9 $35.0 2016 2017 2018 2016 2017 2018 MINERAL RESERVES 4,5 M&I MINERAL RESOURCES 4,5,6 3.3 3.8 3.4 5.0 4.0 3.0 2.0 1.2 0 u A z o M 10.0 8.0 6.0 4.0 2.0 0 u A z o M 7.7 8.1 7.9 2016 2017 2018 2016 2017 2018 Over the past three years we have increased our production and operating cash flow while maintaining our leverage to gold through our Mineral Resources. A combination of the increased operational leverage to gold and our development projects’ Mineral Resources, along with a strong balance sheet, make Argonaut a safe gold leverage play. 1 GEOs (gold equivalent ounces) conversion ratios are based on three year trailing average silver to gold exchange ratio for each year. 2 Actual 2017 GEO Production includes 2,932 pre-commercial production GEOs from San Agustin. 3 Before changes in working capital. 4 As stated in 2016, 2017 and 2018 Annual Information Form (AIF). 5 Refer to Mineral Resource disclosure on page 49. 6 Mineral Resources are inclusive of Mineral Reserves. 19 2018 KEY PERFORMANCE STATS SAFETY HIGHLIGHTS LOST TIME INCIDENTS: REDUCED ACCIDENT FREQUENCY INDEX BY: 0 DAYS AT THE LA COLORADA MINE 34% VERSUS 2017 REDUCTION OF INJURIES AT ALL OPERATIONS BY: NUMBER OF SAFETY & SAFETY PREVENTION TALKS: 7% VERSUS 2017 6,270 ENVIRONMENTAL HIGHLIGHTS HOURS OF ENVIRONMENTAL TRAINING PROVIDED: ENVIRONMENTAL INSPECTIONS: 772 FOR WASTE MANAGEMENT AND RESCUE OF FLORA & FAUNA 100 WITHOUT INCIDENT REDUCTION OF ELECTRICITY CONSUMPTION BY: MAINTAINED & MONITORED DAILY AIR QUALITY MEASUREMENT OF: 5% VERSUS 2017 MP10 COMPLYING WITH STANDARDS AT OUR OPERATIONS 20 I H G H L G H T S I O V E R V I E W & P E R F O R M A N C E S T R A T E G Y & P R O J E C T S O P E R A T O N S I & C S R G O V E R N A N C E T E A M & HUMAN RESOURCE HIGHLIGHTS LOCAL EMPLOYMENT UNIONIZED EMPLOYEES: 67% FROM NEIGHBOURING TOWNS 57% 699 DIRECTLY EMPLOYED 748 CONTRACT EMPLOYEES MAN-HOURS OF EMPLOYEE TRAINING PROVIDED: COURSES AND CONTINUING EDUCATION PROVIDED: 60,415 429 FOR EMPLOYEES For additional Safety, Human Resource, Environmental and Community statistics and highlights go to the Social Responsibility + Sustainability section of this report on page 34. 21 MANAGING RISKS OUR RISK MANAGEMENT SYSTEM IS BASED ON: RISK IDENTIFICATION, ASSESSMENT, PRIORITIZATION, MITIGATION AND MONITORING PROCESSES WHICH ARE CONTINUALLY EVALUATED, IMPROVED AND ENHANCED IN LINE WITH BEST PRACTICE. RISK MANAGEMENT SYSTEM Argonaut’s approach to risk management is based on an outline that incorporates risk awareness across our entire Company, where we are able to identify, assess, prioritize and manage these risks systematically. Our senior management, operations and exploration teams continue to identify and manage risks, through monitoring with our internal management systems within a risk governance framework. In 2018, we identified key risks across all aspects of our organization. Through this report we have outlined the top 10 risks of emphasis for 2018: 1 2 3 4 5 6 7 8 9 10 METAL PRICES PERMITTING LAND ACCESS COUNTERPARTY LEGAL ACTIONS SAFETY & SECURITY EXTERNAL GUIDANCE DELAYS IN TAX REFUNDS PROJECT DEVELOPMENT APPROPRIATE STAFFING 22 I H G H L G H T S I O V E R V I E W & P E R F O R M A N C E S T R A T E G Y & P R O J E C T S O P E R A T O N S I & C S R G O V E R N A N C E T E A M & MANAGEMENT RESPONSIBILITIES Senior management directs and informs Board in a timely manner Site management directs and informs senior management in a timely manne r Site manages and informs head office through normal reporting process Managed at department level OUR RISK MATRIX T S O M L A I N A T R E C D O O H L E K L I I 9 10 2 3 4 7 8 1 5 6 E R A R NEGLIGIBLE IMPACT CATASTROPHI C 23 MANAGING RISKS RISK NAME DESCRIPTION IMPACTS 1 2 3 4 5 6 7 8 9 METAL PRICES A decrease in gold price negatively impacts cash flows and the ability to finance and develop projects at a reasonable cost of capital. PERMITTING A delay or suspension of permits required to operate an existing mine or advance a development project. If over an extended period, leads to the inability to build out development pipeline projects which would disrupt the growth objectives for the organization. Suspension of existing operations; Delay of project start-up and development. LAND ACCESS The inability to gain access to or acquire land necessary to complete the business objectives. The delay in the expansion and/or mine life extension. COUNTERPARTY Exposure to liquidity risks associated with counterparties that have payables to the Company. Decrease in cash flow. LEGAL ACTIONS SAFETY & SECURITY Legal actions brought against the Company due to regulatory non-compliance, non-government organization interference, community unrest or other outside legal actions. Suspension of operations. Safety and security risks associated with certain countries and regions and changes in government leading to potential changes in the tax and regulatory environment for mining. Safety and security issues decrease the ability to attract and retain quality employees while potential government changes in the tax and regulatory environment for mining lead to lessened investor interest in those countries and regions. EXTERNAL GUIDANCE Failure to meet market expectations based on guided production, costs and capital estimates. Loss of investor confidence reducing the Company valuation and increasing the Company’s cost of capital. DELAYS IN TAX REFUNDS The government changes its approach to refunding tax. Increases working capital. PROJECT DEVELOPMENT Insufficient detailed engineering capital estimation on investment projects. Non-compliance of regulations leads to safety issues or government intervention. Capital overruns. Loss of stakeholder confidence. 10 APPROPRIATE STAFFING The ability to attract and retain quality employees due to mine or project location and/or competition for quality employees. High employee turnover and/or lower quality employees lead to poor decisions at the site level. 24 I H G H L G H T S I O V E R V I E W RISK APPETITE RISK MITIGATION MEASURES HIGH LOW MEDIIUM LOW LOW 1. We choose to accept metal price risk and provide shareholders with full exposure to gold prices. 2. Focus on lower initial capital projects and production replacement versus growth until metal prices rebound. 1. Maintain compliance of existing permits. 2. Strengthen stakeholder relations. 3. Establish constructive relationships with government regulators and political figures. 1. Complete internal comparative land valuation. 2. Honor our existing agreements with various land and stakeholders. 3. Strive to develop and execute new land acquisitions in accordance with Industry standards. 4. Establish status reporting mechanism. 5. Execute agreements. 1. Get regular financial information from counterparties. 2. Review and update contract language, as necessary. 1. Ensure regulatory compliance through the implementation of controls and procedures. 2. Strengthen stakeholder relations. 3. Work with other mining companies to advocate positive improvements to the legal structure. MEDIUM 1. Make an effort to operate in safer and more secure countries and regions. 2. Expand approach to gather additional information on potential country and regional related risks and implement suggested actions. & P E R F O R M A N C E S T R A T E G Y & P R O J E C T S O P E R A T O N S I & C S R G O V E R N A N C E T E A M & MEDIUM 1. Consider key risk factors to achieving plan and report risk-adjusted external guidance. MEDIUM MEDIUM MEDIUM 1. Work with other mining companies to educate and inform the government on the impacts of potential tax process, policy and regulatory changes. 2. Maintain collaborative relationship with the Mexican tax authorities to facilitate flow of information. 1. Consider appropriate level of engineering by project considering risk and capital requirements. 2. For projects without formal studies, ensure the construction team is included in project scheduling and budgeting. 1. Continue to build a workplace culture that emphasizes and rewards safety and performance and seeks learning and improvement. 2. Provide employees with a career path and appropriate training to make it acheivable. 3. Hire locally. 4. Provide competitive compensation and benefits. 25 OPERATIONS + PROJECTS OVERVIEW EL CASTILLO COMPLEX LA COLORADA SAN ANTONIO CERRO DEL GALLO MAGINO 26 I H G H L G H T S I O V E R V I E W DID YOU KNOW In 2018, our operations increased production by 30% versus 2017? & P E R F O R M A N C E S T R A T E G Y & P R O J E C T S O P E R A T O N S I & C S R G O V E R N A N C E T E A M & 27 OPERATIONS EL CASTILLO COMPLEX EL CASTILLO SAN AGUSTIN KEY STATS LOCATION: OWNERSHIP: MINE TYPE: OPERATIONS SINCE: Durango, Mexico 100% Open pit, heap leach 2007 El Castillo, 2017 San Agustin M&I 128.3Mt @ 0.32 g/t Au for 1.33M Contained Au oz.1,4 P&P 86.1Mt @ 0.35 g/t Au for 982K Contained Au oz.1 2018 ACTUAL 2019 GUIDANCE LIFE-OF-MINE TO DEC.31/2018 GEO PRODUCTION2 CASH COSTS3 117,126 $737 140K - 150K 772,881 $760 - $860 $744 1 Refer to Mineral Resource disclosure on page 49. 2 GEOs (gold equivalent ounces) conversion ratios are based on three year trailing average silver to gold exchange ratio for each year. 3 Refer to Non-IFRS Measures on page 49. 4 Mineral Resources are inclusive of Mineral Reserves. 28 I H G H L G H T S I O V E R V I E W & P E R F O R M A N C E S T R A T E G Y & P R O J E C T S O P E R A T O N S I & C S R G O V E R N A N C E T E A M & PRODUCED IN 2018 INCREASE IN FULL YEAR PRODUCTION 2018 HIGHLIGHTS 60% 117,126 GEOs 14% REDUCTION IN CASH COSTS TO $737 22% OVER NAMEPLATE CRUSHING THROUGHPUT CAPACITY FOR 20K TO 29K TPD THROUGHPUT EXPANSION WITH FIRST FULL YEAR OF SAN AGUSTIN PRODUCTION SAN AGUSTIN DURING FIRST FULL YEAR OF COMMERCIAL PRODUCTION WITH COMPLETION OF WEST CRUSHER AT EL CASTILLO 29 OPERATIONS LA COLORADA KEY STATS LOCATION: OWNERSHIP: MINE TYPE: OPERATIONS SINCE: Sonora, Mexico 100% Open pit, heap leach 2013 M&I 27.2Mt @ 0.65 g/t Au for 625K Contained Au oz.1,4 P&P 14.0Mt @ 0.68 g/t Au for 306K Contained Au oz.1 2018 ACTUAL 2019 GUIDANCE GEO PRODUCTION2 CASH COSTS3 47,991 $914 60K - 65K $800 - $900 LIFE-OF-MINE TO DEC.31/2018 310,910 $692 1 Refer to Mineral Resource disclosure on page 49. 2 GEOs (gold equivalent ounces) conversion ratios are based on three year trailing average silver to gold exchange ratio for each year. 3 Refer to Non-IFRS Measures on page 49. 4 Mineral Resources are inclusive of Mineral Reserves. 30 I H G H L G H T S I O V E R V I E W & P E R F O R M A N C E S T R A T E G Y & P R O J E C T S O P E R A T O N S I & C S R G O V E R N A N C E T E A M & LOST TIME INCIDENTS FOR THE ENTIRE YEAR 2018 HIGHLIGHTS ZERO 47,991 GEOS MINING TRANSITIONED TO THE EL CRéSTON PIT THE SECOND OF THREE PITS IN THE LIFE-OF-MINE PLAN PRODUCED IN 2018 ACQUIRED NEW MINERAL CONCESSIONS AND SURFACE RIGHTS ADJACENT TO THE FUTURE VETA MADRE PIT THE THIRD OF THREE PITS IN THE LIFE-OF-MINE PLAN 31 “ DEVELOPMENT PROJECTS SAN ANTONIO 1 CERRO DEL GALLO MAGINO 2 Baja California Sur, Mexico LOCATION OWNERSHIP 100% MINE TYPE Open Pit, heap leach MINE LIFE 15 years M&I 65,089 tonnes @ 0.83 g/t Au for 1.735M Au oz. CASH OPERATING COSTS $553/oz.3 INITIAL CAPITAL $84.3M AFTER-TAX NPV 8% $205M STAGE PRELIMINARY ECONOMIC ASSESSMENT Guanajuato, Mexico LOCATION OWNERSHIP 100% MINE TYPE Open pit, heap leach STAGE WORK UNDERWAY ON A PRE-FEASIBILITY STUDY EXPECTED IN 2019 Ontario, Canada LOCATION OWNERSHIP 100% MINE TYPE Open pit, conventional mill MINE LIFE 17 years M&I 144.0 Mt @ 0.91 g/t Au for 4.197 contained Au oz. P&P 59.0 Mt @ 1.13 g/t Au for 2.137 contained Au oz. CASH OPERATING COSTS $669/oz.3 INITIAL CAPITAL $321M AFTER-TAX NPV 5% $288M STAGE FEASIBILITY 1 Based on the assumptions and parameters as set forth in the NI 43-101 Technical Report on Resources San Antonio Project dated October 10, 2012. 2 Based on the assumptions and parameters as set forth in the Feasibility Study dated December 21, 2017. 3 Refer to Non-IFRS Measures on page 49. 4 Refer to Mineral Resource disclosure on page 49. 32 I H G H L G H T S I O V E R V I E W & P E R F O R M A N C E S T R A T E G Y & P R O J E C T S O P E R A T O N S I & C S R G O V E R N A N C E T E A M & “ WITH OUR THREE PRODUCING ASSETS EXPECTED TO PROVIDE OVER 200,000 GEOS1 OF PRODUCTION IN 2019 AND A STRONG PIPELINE OF DEVELOPMENT PROJECTS, ARGONAUT IS IN AN ENVIABLE POSITION TO NOT ONLY REPLACE PRODUCTION BUT ALSO FUEL GROWTH.” Pete Dougherty | President & CEO 1 GEOs (gold equivalent ounces) conversion ratios are based on three year trailing average silver to gold exchange ratio for each year. 33 SOCIAL RESPONSIBILITY + SUSTAINABILITY 34 I H G H L G H T S I O V E R V I E W OTILIO MONTAÑO DURANGO, MEXICO An example of how our mining operations have positively impacted its surroundings is the application of the mining fund in the community of Otilio Montaño, Durango. The town of Otilio Montaño now has a safe and reliable access road and bridge and is now nearly 100% paved. The inhabitants of Otilio Montaño are now working on ways to create new businesses, mainly through rural tourism. & P E R F O R M A N C E S T R A T E G Y & P R O J E C T S O P E R A T O N S I & C S R G O V E R N A N C E T E A M & 35 SOCIAL RESPONSIBILTY + SUSTAINABILITY OUR PEOPLE Argonaut’s approach to sustainability starts with Our People. Human Capital is key to the foundation of our business and how we operate and remains our strength throughout our organization. Each year our goal is to improve our Human Capital, and we demonstrate this each year by providing training and development opportunities for our team. In 2018: • We continued to employ from local communities and increased our local workforce by 7%. • We provided training and development courses for our employees, providing: • 60,415 hours of workplace training • 429 development training courses • 6,270 safety talks, and • 238 talks based on the Official Mexican Health Ministry and Labour Ministry standards • We hosted 11 health campaigns for over 700 employees that included providing over 500 vaccinations and health tests. • We continued to promote and support a positive company culture by hosting several employee team building events such as internal sports tournaments. “WHEN TALENT, COLLABORATION AND PASSION COME TOGETHER IN A TEAM WORKING ENVIRONMENT, WE ACHIEVE SUCCESSFUL RESULTS.” María Elena Gomez | Human Capital Director, Mexico 36 SOCIAL RESPONSIBILTY + SUSTAINABILITY COMMITMENT TO EQUALITY IN THE WORKFORCE Argonaut continues to commit to diversity and gender equality, providing training and equal opportunities for women. To date, 11% of our workforce is made up of women across all areas of our operations - from crushing control, lab testing, geotechnical work, accounting, finance, sustainability and community relations. “ I AM VERY HAPPY WORKING AT THE MINE. I HAVE GONE THROUGH DIFFERENT POSITIONS AND HAVE ALWAYS FELT THE SUPPORT OF ARGONAUT. AND ALTHOUGH IT IS A WORKPLACE WHERE THE MAJORITY OF EMPLOYEES ARE MALE, MY COLLEAGUES HAVE ACCEPTED ME AND WE SEE OURSELVES AS EQUALS.” Rocio Sadei Villaescuza In charge of Crushing Control at La Colorada mine - Sonora, Mexico O O V V E E R R V V I I E E W W I I I I I I H G H L G H T S O V E R V H H G G H H L L G G H H E T T W S S & & & I S S T T R R A A T T E E G G Y Y S T R A T E G Y P P E E R R F F O O R R M M A A N N C C E E P E R F O R M A N C E & & & O O P P E E R R A A T T O O N N S S P R O J E C T S O P E R A T O N S P P R R O O J J E E C C T T S S I I I & & & C C S S R R C S R G G O O V V E E R R N N A A N N C C E E G O V E R N A N C E T T E E A A M M & & T E A M & KEY WORKFORCE STATS EMPLOYEES 19% INCREASE FROM 2017 699 EMPLOYEES & 748 CONTRACT ORS 1,447 67% 57% EMPLOYEES ARE UNIONIZED EMPLOYEES ARE FROM NEIGHBOURING TOWNS 37 SOCIAL RESPONSIBILTY + SUSTAINABILITY HEALTH & SAFETY The Health and Safety of our people and our communities is an ongoing commitment where we aim to build a culture of continuous improvement. This past year, we reinforced all of our security protocols and procedures and prioritized the well-being of our Company’s human capital. In 2018 we set a new Company safety record and provided more workplace training, ensuring that the safety and security of our employees throughout the workplace is our top priority. In 2018: • We operated the entire year without lost time injury at our La Colorada mine - that’s 3,325,427 man hours without incapacitating injuries. • We reduced our accident rate frequency by 34% compared to 2017, with zero major incidents and fatalities. • We operated with safety results significantly better than industry standards at our El Castillo Complex. • We reduced days lost due to medical treatment by 9% versus 2017 and assisted 63 employees with non-disabling diseases. 38 O O V V E E R R V V I I E E W W I I I I I I H G H L G H T S O V E R V H H G G H H L L G G H H E T T W S S & & & I S S T T R R A A T T E E G G Y Y S T R A T E G Y P P E E R R F F O O R R M M A A N N C C E E P E R F O R M A N C E & & & O O P P E E R R A A T T O O N N S S P R O J E C T S O P E R A T O N S P P R R O O J J E E C C T T S S I I I & & & C C S S R R C S R G G O O V V E E R R N N A A N N C C E E G O V E R N A N C E T T E E A A M M & & T E A M & SOCIAL RESPONSIBILTY + SUSTAINABILITY “ KEY SAFETY STATS LOST TIME INJURY AT LA COLORADA MINE 0 34% REDUCTION IN ACCIDENT FREQUENCY RATE THE HEALTH & SAFETY OF OUR EMPLOYEES IS OUR TOP PRIORITY. I’M PLEASED WITH THE SIGNIFICANT IMPROVEMENTS WE’VE MADE IN THIS AREA AND WE WILL CONTINUE TO STRIVE TO IMPROVE UPON OUR SAFETY PERFORMANCE.” Bill Zisch - Chief Operating Officer 39 SOCIAL RESPONSIBILTY + SUSTAINABILITY OUR ENVIRONMENT Argonaut remains firm in the promotion of policies and projects that favor the environment and the rescue of our natural resources. In addition to permanent programs to rescue flora and fauna, reforest, reduce energy consumption, and increase recycling, this year Argonaut invested in studies and projects including the rescue of an aquifer, the analysis of alternative energy use and the study of reducing future energy needs, In 2018: • We recovered and stored 388,653 square metres of fertile soil for restoration and reforestation work, and we provided 500 tonnes of protected top soil with filtering dams and built 200 metres of erosion protection. • We rescued and relocated 22 wildlife specimens, including launching a Serpent Protection Program. • We completed the construction of a greenhouse to produce 60,000 plants by 2019, with 15 kilograms of native seeds harvested for use in the greenhouse. • We built a new waste separation and storage area to improve our recycling processes. We recycled: • 388,800 litres of oil • 3.2 tonnes of cardboard • 10 tonnes of wood • 244 tonnes of metal • We signed a letter of commitment for the voluntary audit program, Industria Limpia, with the Federal Attorney for Environmental Protection in Mexico. WE RECEIVED THE ESR RECOGNITION FOR THE SEVENTH YEAR AT OUR MEXICO OPERATIONS 40 SOCIAL RESPONSIBILTY + SUSTAINABILITY team enthusiasm PRODUCING ORGANIC FERTILIZER WITH WORM FARMS Argonaut’s for environmental sustainability leads us to seek ways in which we innovate to improve the quality of life for our communities. In 2018, we produced our own worm farms for the production of organic fertilizer, which will improve the production of our plants used for reforestation and also improves the crops of neighbouring farms. Last year we produced and delivered our first 400 litres of organic fertilizer to farmers surrounding our San Antonio project in Baja California Sur, Mexico. KEY ENVIRONMENTAL STATS REFORESTATION CAMPAIGNS IN SCHOOLS & PARKS NEAR MINES 6 2.1M 1,603 RESCUED & TRANSPLANTED MEXICAN PESOS DONATED TO THE NATIONAL FORESTRY FUND INDIVIDUAL FLORA O V E R V I E W I I I I H G H L G H T S O V E R V H G H L G H E T W S & & I S T R A T E G Y S T R A T E G Y P E R F O R M A N C E P E R F O R M A N C E & & O P E R A T O N S P R O J E C T S O P E R A T O N S P R O J E C T S I I & & C S R C S R G O V E R N A N C E G O V E R N A N C E T E A M & T E A M & RE-VEGETATION TRIAL AT MAGINO PROJECT In 2018, we initiated a re-vegetation trial at our Magino project in Ontario, Canada. The trial was developed in collaboration with Lakehead University as well as indigenous partners. Vegetation types endemic to Northern Ontario were planted and will be monitored over several seasons to help understand site specific influences in support of mine reclamation planning. “ OUR GOALS OF SUPPORTING THE LOCAL COMMUNITIES AND IMPROVING MINING ENVIRONMENTAL MANAGEMENT CONTINUES TO YIELD SUSTAINABLE RELATIONSHIPS.” Kyle Stanfield Director Environmental & Community Relations, Magino Project 41 SOCIAL RESPONSIBILTY + SUSTAINABILITY OUR COMMUNITY At Argonaut, the local communities surrounding our operations and projects are a fundamental part of our Company’s success. We continue to promote the social and economic development of the communities that offer us access to land, labour, lodging and services, and the opportunity to create shared value. This past year we continued to invest in education, health, economic development and entrepreneurship, environmental programs, sports and arts and culture, benefitting 1,435 families in our communities. In 2018: • We increased the recipients of our School Scholarship program by 39% from 2017, with 732 students from 19 communities receiving academic scholarships. • We assisted five schools by providing improvements to the facilities, providing computer equipment and implementing school gardens. We also provided 110 backpacks with school supplies to local schools. • We provided workshops including: • 288 hours of arts, crafts and sports workshops for 50 families • Emotional therapy workshops for 65 parents and 150 students • Entrepreneurial workshops including hiking and birdwatching guide certifications for 66 people CONNECTING THROUGH SOCIAL MEDIA Communicating directly with our local communities is key to our sustainable strategy. In addition to our new corporate website and social media channels, our Spanish launguage Mexico focused website and social media accounts have been effective in connecting with all stakeholders. To follow our Mexico accounts, visit: W argonautas.com.mx /RevistaArgonautas @ArgonautasGold 42 O V E R V I E W I I I I H G H L G H T S O V E R V H G H L G H E T W S & & I S T R A T E G Y S T R A T E G Y P E R F O R M A N C E P E R F O R M A N C E & & O P E R A T O N S P R O J E C T S O P E R A T O N S P R O J E C T S I I & & C S R C S R G O V E R N A N C E G O V E R N A N C E T E A M & T E A M & SOCIAL RESPONSIBILTY + SUSTAINABILITY 2ND ANNUAL LA COLORADA RACE In 2017, we hosted our first ‘Challenge Within The Mine’ at our La Colorada mine in Sonora Mexico. The success of our first race and the local interest in the event proved to have a positive impact for the city of Hermosillo and its neighbouring communities. In November of 2018, we hosted our second race and welcomed 420 athletes and 700 visitors. Participants ran through an operating mine, therein showcasing our ability to coexist within the community and region. Our goal was to create an open and transparent participation in mining with the community where we operate and to showcase our safe, secure and environmentally responsible mining operation. Working with local authorities and groups, the race also helped to showcase Hermosillo and its surrounding municipalities as a cultural destination. KEY COMMUNITY STATS $178M USD ($3.4B MXN) SPENT IN MEXICO* *Derrama Económica: this reflects all the money that stays in México including salaries, taxes, supplies, land leases and operational costs. MEXICAN PESOS INVESTED IN SOCIAL PROGRAMS $30M $6.5M MEXICAN PESOS INVESTED IN 3,660 SCHOLARSHIPS A 39% INCREASE FROM 2017 43 SOCIAL RESPONSIBILTY + SUSTAINABILITY (OUR COMMUNITY continued) This past year we launched the Earth Sciences Program Gambuzos, in Baja California Sur, Mexico. This science program was implemented to teach children and youth about the importance of mining, rocks and the earth, including the study of volcanoes and oceans. religious patron We were also actively involved in the community culture by participating in local festivals. This included in seven sponsoring communities and celebrating with our neighbours on Mother’s Day, Children’s Day and Christmas Posadas. These celebrations brought together a total of 5,310 residents, where we donated 1,250 gifts and 6,970 packages throughout the year. festivities We also continued to support actions that improved the community’s infrastructure, including: • Producing over 2,000 plants in community gardens • Delivering 4,490 food support actions • Improving eight homes • Rehabilitating 270 kilometres of local roads • Rehabilitating a water well for 62 families • Donating 200 steel fence posts • Building an ejido multipurpose building, and • Sponsoring nine local sports teams At our Magino project in Ontario, Canada, we continued to work closely with our local communities and indigenous groups, signing our third collaborative agreement with the Métis Nation of Ontario. We also participated in sponsorships including: the Ontario Mine Reclamation Symposium and Field Trip, the Métis Nation of Ontario 2018 AGM, the Missanabie Cree First Nation 25th Annual Gathering and the Dubreuilville Magpie Walleye Derby. 44 SOCIAL RESPONSIBILTY + SUSTAINABILITY INVESTING IN LOCAL ENTRERENEURSHIP Laura López Águila, a local resident of the La Colorada mine community in Sonora, Mexico, started her own business sewing safety vests for Argonaut Gold in 2016. With the continued support of Argonaut, we helped Laura set up her sewing workshop, learn how to manage her growing business and assisted her in fulfilling her tax obligations. We continue to contract Laura as our safety vest supplier, and in 2018 she has produced 800 safety vests for the La Colorada mine. Laura now employs three additional women from the community. “ I NOW HAVE MY OWN BUSINESS, WITH A MINING COMPANY AS MY CLIENT THANKS TO THE LA COLORADA MINE.” Laura López Águila Local Entrepreneur, La Colorada mine - Sonora, Mexico At our San Antonio project In Baja California Sur, Mexico, we started an entrepreneurial program in conjunction with Universidad Autónoma de Baja California Sur. To highlight and support the local area’s aviary-tourism and eco-tourism, local residents can enroll in workshops and receive certificates to become birdwatching or hiking guides. O V E R V I E W I I I I H G H L G H T S O V E R V H G H L G H E T W S & & I S T R A T E G Y S T R A T E G Y P E R F O R M A N C E P E R F O R M A N C E & & O P E R A T O N S P R O J E C T S O P E R A T O N S P R O J E C T S I I & & C S R C S R G O V E R N A N C E G O V E R N A N C E T E A M & T E A M & KEY COMMUNITY STATS 3RD INDIGENOUS AGREEMENT - SIGNED COLLABORATIVE AGREEMENT WITH Métis first nation of ontario in support of our magino project FAMILIES IMPACTED BY OUR COMMUNITY PROGRAMS 1,435 2,147 FREE MEDICAL CONSULTATIONS & 2,800 UNITS OF FREE MEDICATION DELIVERED 45 TEAM & GOVERNANCE 46 I H G H L G H T S I O V E R V I E W & P E R F O R M A N C E S T R A T E G Y & P R O J E C T S O P E R A T O N S I & C S R G O V E R N A N C E T E A M & The Audit Committee, on behalf of the Board of Directors, has responsibility with respect to the integrity of the Company’s financial statements, Management’s Discussion and Analysis, compliance with legal and regulatory requirements, external auditor qualifications, and the independence and performance of the Company’s internal and external audit functions. The members of the Audit Committee have the right, for the purpose of performing their duties, to inspect all the books and records of the Company and its affiliates, and to discuss such accounts and records and any matters relating to the financial position or condition of the Company with the auditors of the Company or its affiliates. The Nominating, Compensation and Governance Committee has responsibility to advise and make recommendations to the Board of Directors on the compensation of the senior executive officers of the Company and to develop and recommend corporate governance principles. to responsibility The Safety, Health, Environment, Sustainability and review and Technical Committee has discuss with management the safety, health, sustainability and environmental policies of the Company, and to review management’s strategy with respect to sustainable development and support for communities within the area of our operations. This Committee also oversees and makes recommendations to the Board of Directors the technical aspect of the material exploration, development, permitting and mining operations. 47 CORPORATE GOVERNANCE Argonaut Gold Inc. has been committed to good corporate governance since its formation in 2009. The Board of Directors maintains open and direct communications with management on all the major strategic, investment, operating, and management decisions. The Company is best served by an informed and interactive Board which has free access to all levels of management and to all of its operations. Through Board meetings, Board agendas and background briefing materials, monthly operating and financial reports, and frequent conversations, management shared information with the Board. The cumulative experience and expertise of the Company’s directors enables the Board to bring sound business judgment to its decision making process. The independence of the Company’s directors has been fostered in order to bring an outside perspective to its deliberations. Argonaut has three Board Committees: the Audit Committee, the Nominating, Compensation and Governance Committee and the Safety, Health, Environment, Sustainability and Technical Committee. BOARD & MANAGEMENT BOARD OF DIRECTORS James E. Kofman 2,3 Chairman 1 2 3 Audit Committee Nominating, Compensation and Governance Committee Safety, Health, Environment, Sustainability and Technical Committee Ian Atkinson 1,3 Peter Mordaunt 2,3 Peter C. Dougherty Dale C. Peniuk 1,2 Christoper R. Lattanzi 1,2 Audra B. Walsh 1,3 MANAGEMENT / OFFICERS Peter C. Dougherty President & CEO, Director William Zisch Chief Operating Officer David A. Ponczoch Chief Financial Officer W. Robert Rose Vice President of Technical Services Daniel A. Symons Vice President of Investor Relations Brian Arkell Vice President of Exploration OPERATIONS William Zisch Chief Operating Officer Jesus Gutiérrez Vice President of Operations, Mexico Chris Gibbs Vice President & General Manager, Magino Project 48 DISCLAIMERS NATIONAL INSTRUMENT 43-101 AND QUALIFIED PERSON Technical information included in this report was supervised and approved by Brian Arkell, Argonaut’s Vice President, Exploration and a Qualified Person under National Instrument 43-101 (“NI 43-101”). For further information on the Company’s material properties, please see the reports as listed below on the Company’s website or on www.sedar.com: El Castillo Complex NI 43-101 Technical Report on Resources and Reserves, El Castillo Complex, Durango, Mexico dated March 27, 2018 (effective date of March 7, 2018). La Colorada Mine NI 43-101 Technical Report on Resources and Reserves, La Colorada Gold/Silver Mine, Hermosillo, Mexico dated March 27, 2018 (effective date of December 8, 2017). The M&I Mineral Resources and Inferred Mineral Resource for the Magino Project were taken from the Magino Technical Report. The Mineral Resource was estimated at a gold price of $1,300 per ounce. The Mineral Resource used a gold cutoff of 0.25 g/t. The Mineral Resources for the San Antonio Project were taken from the San Antonio Technical Report. The gold resource was estimated at a gold price of $1,500 per ounce using a cutoff grade of 0.11 g/t Au for oxide and transition and 0.15 g/t Au for sulphide. For further information on the Cerro del Gallo project, please see historical estimates disclosed in the technical report titled “First Stage Heap Leach Feasibility Study Cerro del Gallo Gold Silver Project Guanajuato, Mexico” dated June 29, 2012 and available Primero Mining Corp. (“Primero”) at www.sedar.com. Per Primero, the historical Mineral Reserves estimate was completed by Thomas Dyer, P.E., a Qualified Person and the historical Mineral Resources estimate was completed by by Timothy Carew, P. Geo, a Qualified Person pursuant to National Instrument (“NI”) 43-101, in a technical report completed by Sedgman Ltd, Reserva International and Mine Development Associates. The report was reviewed by Brian Arkell on behalf of Argonaut Gold Inc. (“Argonaut”), who has concluded that it continues to be relevant and reliable as a basis for understanding the potential Mineral Reserves and Resources at the property. To the best of Argonaut’s knowledge, information and belief, there is no new material, scientific or technical information that would make the disclosure of the Mineral Reserves and Resources inaccurate or misleading. Argonaut has not done sufficient work to classify the historical estimate as current Mineral Reserves and Resources and is not treating the historical estimate as current Mineral Reserves and Resources. Argonaut plans to complete metallurgical test work and re-log the available drill core to update the Mineral Resource model and verify or update the historical work to support the development of a current estimate. MINERAL RESOURCE NOTES AND DISCLOSURES Mineral Resources are presented inclusive of Mineral Reserves. Numbers may not sum due to rounding. The Mineral Reserves for El Castillo and San Agustin, which together form the El Castillo Complex, set out in the above table were taken from the El Castillo Complex Technical Report, including depletion through mining activities and changes to recovery and cost assumptions from July 1, 2017 to December 31, 2018, are valid as of December 31, 2018 and used a gold price of $1,200 per ounce and silver price of $14 per ounce. Cut-off grades, depending on rock and ore type, varied from 0.14 g/t AuEq for oxide to 0.57 g/t Au for silicified sulphide. The Mineral Reserves for La Colorada set out in the above table were taken from the La Colorada Technical Report, including depletion from July 1, 2017 to December 31, 2018 through mining activities, are valid as of December 1, 2018 and used a gold price of $1,200 per ounce and silver price of $14 per ounce. Cut-off grades, depending on deposit, varied from 0.12 g/t AuEq to 0.14 g/t AuEq. The Mineral Reserves for Magino set out in the table above were taken from the Magino Technical Report. The Mineral Reserve was estimated at a gold price of $1,200 per ounce. The Mineral Reserve used a gold cutoff of 0.41 g/t. The M&I Mineral Resources and Inferred Mineral Resources for El Castillo and San Agustin, which together form the El Castillo Complex, set out in the above table were taken from the El Castillo Complex Technical Report, including depletion through mining activities and changes to recovery and cost assumptions from July 1, 2017 to December 31, 2018, are valid as of December 31, 2018 and used a gold price of $1,400 per ounce and silver price of $17 per ounce. Cut-off grades, depending on rock and ore type, varied from 0.10 g/t AuEq for oxide to 0.47 g/t Au for silicified sulphide. The M&I Resource and Inferred Resource for La Colorada set out in the above table were taken from the La Colorada Technical Report, including depletion through mining activities from July 1, 2017 to December 31, 2018, are valid as of December 31, 2018 and used a gold price of $1,400 per ounce and silver price of $17 per ounce. Cut-off grades, depending on deposit, varied from 0.09 g/t AuEq to 0.12 g/t AuEq. The M&I Mineral Resources and Inferred Mineral Resource for the Magino Project set out in the table above were taken from the Magino Technical Report. The Mineral Resource was estimated at a gold price of $1,300 per ounce. The Mineral Resource used a gold cutoff of 0.25 g/t. The Mineral Resources for the San Antonio Project set out in the table above were taken from the San Antonio Technical Report. The gold resource was estimated at a gold price of $1,500 per ounce using a cutoff grade of 0.11 g/t Au for oxide and transition and 0.15 g/t Au for sulphide. CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS This report contains certain “forward-looking statements” and “forward-looking information” under applicable Canadian securities laws concerning the business, operations and financial performance and condition of Argonaut Gold Inc. (“Argonaut” or “Argonaut Gold”). Forward-looking statements and forward-looking information include, but are not limited to statements with respect to permitting and legal processes in relation to mining permitting and approvals; estimated production and mine life of the various mineral projects of Argonaut; the ability to obtain permits for operations; synergies; the realization of mineral reserve estimates; the timing and amount of estimated future production; costs of production; and financial impact of completed acquisitions; the benefits of the development potential of the properties of Argonaut; the future price of gold, copper, and silver; the estimation of mineral reserves and resources; success of exploration activities; and currency exchange rate fluctuations. Except for statements of historical fact relating to Argonaut, certain information contained herein constitutes forward-looking statements. Forward-looking statements are frequently characterized by words such as “plan,” “expect,” “project,” “intend,” “believe,” “anticipate”, “estimate” and other similar words, or statements that certain events or conditions “may”, “should” or “will” occur. Forward-looking statements are based on the opinions and estimates of management at the date the statements are made, and are based on a number of assumptions and subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking statements. Many of these assumptions are based on factors and events that are not within the control of Argonaut and there is no assurance they will prove to be correct. Factors that could cause actual results to vary materially from results anticipated by such forward-looking statements include 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, the possibility of project cost overruns or unanticipated costs and expenses, 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 document. 49 (continued next page) DISCLAIMERS continued. 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. NON-IFRS MEASURES The Company has included certain non-IFRS measures including “Cash cost per gold ounce sold” and “All-in sustaining cost per gold ounce sold” in this report to supplement its financial statements which are presented in accordance with International Financial Reporting Standards (“IFRS”). Cash cost per gold ounce sold is equal to production costs less silver sales divided by gold ounces sold. All-in sustaining cost per gold ounce sold is equal to production costs less silver sales plus general and administrative expenses, exploration expenses, accretion of reclamation provision and sustaining capital expenditures divided by gold ounces sold. The Company noted the World Gold Council issued amended guidance on All-in sustaining cost per gold ounce sold, which the Company has adopted for the 2019 guidance year. The primary changes in the All-in sustaining cost per gold ounce sold calculation between 2018 and 2019 is due to a reallocation from expansion capital to sustaining capital, primarily driven by relocations of capital stripping and leach pad expansion capital. The Company believes that these measures provide investors with an alternative view to evaluate the performance of the Company. Non-IFRS measures do not have any standardized meaning prescribed under IFRS. Therefore they may not be comparable to similar measures employed by other companies. The data is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. Please see the most recent management’s discussion and analysis (“MD&A”) for full disclosure on non-IFRS measures. This report should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2018 and associated MD&A, for the same period, which are available from the Company’s website, www.argonautgold.com, in the “Investors” section under “Financial Reports”, and under the Company’s profile on SEDAR at www.sedar.com. 50 51 CONTACT CORPORATE OFFICES 9600 Prototype Court Reno, NV United States (775) 284-4422 Tel info@argonautgold.com Email 100 King Street West, Suite 5700 Toronto, ON Canada Tel Email (416) 915-3107 info@argonautgold.com W W W . A R G O N A U T G O L D . C O M T S X : A R /ArgonautGoldInc @Argonaut_Gold /ArgonautGoldInc @ArgonautGoldInc 54 

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