Antero Resources Annual Report 2018

FY2018 Annual Report · Antero Resources

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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

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IN 2018 WE...

HIT OUR
TARGETS
BROKE
RECORDS &
REACHED A
MILESTONE

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.

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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.

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.

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“

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.

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.

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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

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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.

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“

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

OUR
STRATEGY
+
2018
PERFORMANCE

OUR CORPORATE STRATEGY

OUR THREE YEAR GROWTH PLAN

2019 GOALS

OPERATIONAL & DEVELOPMENT PERFORMANCE

FINANCIAL PERFORMANCE

MANAGING RISKS

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DID YOU KNOW
that during 2018, the
San Agustin mine’s first
full year of commercial
operations, it exceeded
crushing throughput
expectations by 22%?

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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.

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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.

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

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2019 GOALS

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

126,704

122,097

72,049

51,324

250K

200K

100K

50K

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019 E

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GEO PRODUCTION 1

OPERATING CASH FLOW 3

165,117

122,097

126,704

2
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250

200

150

100

$100

$75

M
$

$50

$25

$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

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8.0

6.0

4.0

2.0

u
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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.

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:

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:

VERSUS 2017

MP10

COMPLYING WITH STANDARDS
AT OUR OPERATIONS

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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.

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

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MANAGEMENT RESPONSIBILITIES

Senior management directs and
informs Board in a timely manner

Site management directs and informs
senior management in a timely manne

Site manages and informs head office
through normal reporting process

Managed at department level

OUR RISK MATRIX

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2 3 4

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NEGLIGIBLE

IMPACT

CATASTROPHI C

MANAGING RISKS

RISK NAME

DESCRIPTION

IMPACTS

4
5

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.

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.

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RISK APPETITE

RISK MITIGATION MEASURES

HIGH

LOW

MEDIIUM

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.

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MEDIUM

1. Consider key risk factors to achieving plan and report risk-adjusted external guidance.

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.

OPERATIONS
+
PROJECTS
OVERVIEW

EL CASTILLO COMPLEX

LA COLORADA

SAN ANTONIO

CERRO DEL GALLO

MAGINO

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DID YOU KNOW
In 2018, our operations
increased production by
30% versus 2017?

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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.

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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

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

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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

“

DEVELOPMENT PROJECTS

SAN ANTONIO

CERRO DEL GALLO

MAGINO

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.

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“

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.

SOCIAL
RESPONSIBILITY
+
SUSTAINABILITY

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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.

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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

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

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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

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.

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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

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

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

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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

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

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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

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.

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.

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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

TEAM &
GOVERNANCE

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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.

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.

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

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

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.

(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.

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