A YEAR OF
TRANSFORMATION
2020 ANNUAL & SUSTAINABILITY REPORT
TSX : AR
Argonaut Gold (the “Company”, “Argonaut Gold” or “Argonaut”) is a
Canadian gold company engaged in exploration, mine development
and production. Its primary assets are the El Castillo mine and
San Agustin mine, which together form the El Castillo Complex in
Durango, Mexico, the La Colorada mine in Sonora, Mexico and the
Florida Canyon mine in Nevada, USA. The Company also holds
the construction stage Magino project in Ontario, Canada, the
advanced exploration stage Cerro del Gallo project in Guanajuato,
Mexico and several other exploration stage projects, all of which
are located in North America.
CONTENTS
2020 & Recent Highlights
2020 & Recent Highlights
Letter from President & CEO
Letter from President & CEO
Transformation in Motion
Transformation in Motion
Where We Operate
Where We Operate
Material Mineral Properties
Material Mineral Properties
El Castillo Complex
El Castillo Complex
La Colorada Mine
La Colorada Mine
Florida Canyon Mine
Florida Canyon Mine
Magino Development
Magino Development
Cerro del Gallo Project
Cerro del Gallo Project
Corporate Social Responsibility
Corporate Social Responsibility
Our Safety
Our Safety
Our People
Our People
Our Community
Our Community
Our Environment
Our Environment
Managing Risks
Managing Risks
Leadership & Governance
Leadership & Governance
Mineral Reserves & Mineral Resources
Mineral Reserves & Mineral Resources
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San Agustin mine in Durango, Mexico
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2020 & RECENT HIGHLIGHTS
RECORD ANNUAL REVENUE
$319.7M
19% increase from $268.9M in 2019
RECORD CASH FLOW
FROM OPERATING ACTIVITIES
BEFORE WORKING CAPITAL CHANGES
$111.4M
49% increase from $74.8M in 2019
PRODUCTION1,3
203,483 GEOs
4% increase from 186k from 2019
CASH COSTS2
$936
/Au oz. sold
10% decrease from
$1,041 in 2019
ALL-IN SUSTAINING COST2
$1,244
/Au oz. sold
4% decrease from
$1,299 in 2019
Completed at-market merger with Alio Gold Inc.,
creating a North American diversified intermediate
gold producer.
Closed a C$57.5 million bought deal convertible
debenture financing, a $126.5 million bought deal
equity financing and increased the corporate revolver
to $100 million plus a $25 million accordion to fund
Magino construction.
Completed and obtained the following permits for the
Magino project:
• Federal Cabinet Decision to Authorize Schedule
2 amendment
• Species at Risk permit for bat conservation
• Magino Closure Plan
• Fisheries & Oceans Canada Fish Habitat
Compensation Plan
Discovered four new high-grade mineralized zones
at Magino as part of our deep drilling exploration
program, bringing the total to six exciting high-grade
targets.
All dollar amounts are expressed in US$ US dollars unless otherwise stated. C$ reflects Canadian dollars.
1 GEOs (gold equivalent ounces) are based on a conversion ratio of 80:1 for silver to gold for 2020 and 75:1 for 2019.
The silver to gold conversion ratio is based on the three-year trailing average silver to gold ratio.
2 Please refer to the “Notes and Disclosure” section for a discussion of these Non-IFRS Measures.
3 Florida Canyon production during Q1 2020 and Q2 2020 was under Alio Gold Inc. prior to the closing of the merger between Alio Gold Inc. and Argonaut on July 1, 2020. 2020 GEO production
combined full year 2020 production from the El Castillo, San Agustin, La Colorada and Florida Canyon.
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PETE DOUGHERTY
President and
Chief Executive Officer
A MESSAGE FROM OUR
PRESIDENT & CEO
A TRANSFORMATIONAL YEAR
2020 was a transformational year for Argonaut.
We started the year with a simple plan of Harvest,
Replace and Grow, and I am happy to say we
executed on all three phases as a company.
•
La Colorada: more than
replaced depleted ounces;
• San Agustin: more than
replaced depleted ounces;
and
• Florida Canyon: basically
replaced depleted ounces
• Received the Socially Responsible
Company ESR designation for the
eighth year at all operating mines
in Mexico;
• Completed acquisition of and
updated life-of-mine plan at
Florida Canyon;
• Developed funding plan and
green-lighted the construction of
Magino; and
• Managed through COVID-19
pandemic, including assisting
the Mexican government in the
development of new health and
safety protocols for the industry
designed to keep workforces and
communities safe while operating
during the pandemic.
record production while
We had
lowering operating
cost driving
superior cashflows. We completed the
acquisition of Alio Gold, bringing on
Florida Canyon mine which will replace
the El Castillo mine as it winds down
at the end of 2022. On the growth
front we completed the funding plan
for Magino and green-lighted the
project as a first phase of our strategy
to transition the Company from a short
mine life, high operating cost, junior
producer to a longer mine life, lower
operating cost, intermediate producer.
In terms of accomplishments, 2020
could not have gone much better for
the Company.
Key milestones for 2020 include:
•
Increased GEO production output
from 187 koz to 203 koz;
• Successful drilling programs:
• Magino: discovered four new
high-grade zones bringing the
total to six high-grade zones
below or adjacent to the
planned open pit;
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Aerial view of Magino in Dubreuilville, Ontario
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MANAGING COVID-19
The past year was challenging for
everyone. The global pandemic
affected not only our production and
operations, but the way in which we
interact
conduct our business and
with our communities. Not only did
our team demonstrate resilience, we
leadership amongst
demonstrated
our neighbours. We launched the
“Safe Return to the Mine” program
of protocols to ensure our workforce
remained diligent and safe while
returning to work. We were leaders in
our communities in Mexico, carrying
out sanitization campaigns for homes,
businesses and public spaces. We
continued to work alongside
local
businesses and health centres, donating
and lower cost operation. 2021 will
be about finalizing
the changes
necessary to take Florida Canyon to
a larger production profile at lower
operating costs.
SUCCESS AT MAGINO
We achieved significant milestones at
Magino this past year, which will lead
to tremendous growth for our business
in the near future. We received the
final major permits and authorizations
required for construction and operations,
executed
the financing plan and
reached a construction decision during
the fourth quarter of 2020. The two year
construction phase has commenced
and we anticipate first gold production
LOOKING FORWARD
We look forward to continuing our
three-phase approach of Harvesting
cash from the existing operations,
Replacing depleted ounces through
exploration at our existing asset
base and Growing our business to a
lower-cost,
intermediate
longer-life,
producer by continuing construction at
Magino and completing permitting at
Cerro del Gallo.
I am grateful for the continued hard
work, initiative and resilience of the
entire Argonaut team, the impactful
relationships we continue to nurture
within our communities and
the
continued support of our shareholders.
I look forward to our future as we
essential equipment and materials.
during the first half of 2023.
continue to execute our strategy of
transforming our Company.
FLORIDA CANYON
Since closing the acquisition of the
We also saw exploration success, as
we continued to encounter high-grade
Florida Canyon mine on July 1, 2020,
intercepts at depth below and adjacent
the first three months were spent
to the planned open pit, discovering
working with the Florida Canyon
four new high grade mineralized
team to analyse the challenges and
opportunities at the mine. In the next
three months we began initiating
changes to allow for a more efficient
zonesbringing the total to six high-
grade zones at depth that all warrant
further exploration.
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TRANSFORMATION
IN MOTION
In 2020, we set our transformation strategy in motion,
to transition from a high-cost, junior producer
with short mine lives to a lower-cost, intermediate
producer with much longer mine lives.
We executed on all three phases of our strategy to lay
the foundation and set up the building blocks for the
Company’s transformation.
OUR 3-PHASE STRATEGY
HARVEST
REPLACE
GROWTH
RECORD ANNUAL CASH
FLOW OF $111M
ALIO MERGER &
ACQUISITION OF
FLORIDA CANYON MINE
MAGINO CONSTRUCTION
DECISION &
CERRO DEL GALLO
APPLICATION SUBMITTED
OPTIMIZE
OPERATIONS
FLORIDA CANYON
MAGINO PERMITTING, FINANCING
IMPROVEMENTS
& EXPLORATION SUCCESS
• Higher production
•
Lower costs
• Managed through COVID-19
restrictions and implemented
new protocols
• Completed and filed updated
• Schedule 2 amendment authorized
LOM technical report
• Completed much needed leach
pad expansion
• Completed truck dump box to
crusher
• Submitted permit modification
for new conveying and stacking
system
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• Species at Risk permit
• Closure Plan filing
• Fish Habitat Plan approved
• C$126.5M equity & $57.5M
convertible debenture financings
• $125M corporate revolver
• Discovered four new high-grade
zones increasing high-grade
targets at depth to a total of six
high-grade zones
San Agustin Mine, part of the El Castillo Complex in Durango, Mexico
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THREE YEAR SNAPSHOT
2019A
2020A
2021E
GEO1 Production
186,615
203,4833
210k - 250k
Cash Costs2
$ per oz. Au
AISC2
$ per oz. Au
Cash Flow
from Operating Activities
before changes in non-cash operating
working capital
$1,041
$1,299
$936
$1,244
$950 - 1,050
$1,250 - 1,350
$74.8M
$111.4M
$90M - $140M4
ì
è
ì
PRODUCTION rising
COSTS relatively flat
CASH FLOW rising
“During 2020, we put the Company in a fantastic position to execute on our transition strategy
from a short mine life, high-cost junior producer to a long mine life, lower cost intermediate
producer through the permitting and financing achievements for the Magino project in Ontario,
Canada, leading to a construction decision, and the acquisition of the Florida Canyon mine in
Nevada, USA. As we look to 2021, we are focused on continuing to execute on this strategy
now that the pieces are in place to do so, as well as unlock the exploration upside at the Magino
and the Florida Canyon districts.”
Pete Dougherty, President & CEO
1 GEOs are based on a conversion ratio of 85:1 for silver to gold for 2021, 80:1 for 2020 and 75:1 for 2019. The silver to gold ratio is based on the three-year trailing average silver to gold ratio.
2 Please refer to the “Notes and Disclosure” section for a discussion of these Non-IFRS Measures.
3 Florida Canyon production during Q1 2020 and Q2 2020 was under Alio Gold Inc. prior to the closing of the merger between Alio Gold Inc. and Argonaut on July 1, 2020. 2020 GEO production
combined full year 2020 production from the El Castillo, San Agustin, La Colorada and Florida Canyon.
4 Assumes $1,700 per ounce gold.
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WHERE WE OPERATE
In 2020, Argonaut’s growth included adding
new assets to our portfolio, further diversifying
the Company geographically.
ARGONAUT’S MATERIAL ASSETS
PRODUCING MINE
ADVANCED EXPLORATION
PROJECT
CONSTRUCTION
MAGINO
*CONSTRUCTION
RENO
HEAD
OFFICE
TORONTO
OFFICE
FLORIDA CANYON
LA COLORADA
EL CASTILLO COMPLEX
CERRO DEL GALLO
MAGINO
Ontario, Canada
Acquired: December 2012
Mine Life: 17 years
Status: Construction
CERRO DEL GALLO
Guanajuato, Mexico
Mine Life: 15 years
Status: Permitting
MEASURED & INDICATED
MINERAL RESOURCES1,2
13.1Moz. Au
109.4Moz Ag and
187.1T Cu
MINERAL RESERVES2
6.9Moz. Au
62.3Moz Ag and
85.5T Cu
EL CASTILLO COMPLEX
Durango, Mexico
El Castillo Mine
Acquired: December 2009
Mine Life: 2022
San Agustin Mine
Acquired: December 2013
Mine Life: 2026+
LA COLORADA MINE
Durango, Mexico
Acquired: January 2011
Mine Life: 2025+
FLORIDA CANYON MINE
Nevada, USA
Acquired: July 2020
Mine Life: 2031+
1 Measured and Indicated Mineral Resources are inclusive of Mineral Reserves.
2 At December 31, 2020. Refer to Notes and Disclosures page for Mineral Resource Notes and Disclosure.
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Florida Canyon mine in Nevada, USA
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EL CASTILLO COMPLEX
EL CASTILLO MINE & SAN AGUSTIN MINE
During 2020, the El Castillo Complex produced 16% fewer GEOs at a cash
cost per gold ounce sold 19% less compared to 2019. Lower GEO production
was primarily due to the two-month suspension of mining, crushing and
stacking activities and lower production at El Castillo associated with the
change from processing crushed ore to run-of-mine ore.
El Castillo produced 31% fewer GEOs at a cash cost per gold ounce sold
24% less compared to 2019. El Castillo experienced a 34% reduction in cost
per tonne processed compared to 2019 by eliminating crushing early in 2020
and switching to run-of-mine ore processing.
San Agustin produced 1% fewer GEOs at a cash cost per gold ounce sold
10% less compared to 2019. San Agustin experienced a 10% reduction in
cost per tonne processed compared to 2019, primarily due to optimizing
crushing and stacking rates to available solution capacity following the
crusher expansion from 20,000 tonnes per day to 30,000 tonnes per day,
which was completed by the end of 2019.
2020 PRODUCTION
El Castillo:
46,183 GEOs
San Agustin:
63,866 GEOs
2020 CASH COSTS1
per gold ounce sold
El Castillo:
$908
San Agustin:
$780
EL CASTILLO
Measured & Indicated
Mineral Resources2:
40.4Mt at 0.34 g/t Au
447k contained gold ounces
Proven Mineral Reserves3:
0.2Mt at 0.51 g/t Au
4k contained gold ounces
Probable Mineral Reserves3:
17.1Mt at 0.36 g/t Au
199k contained gold ounces
SAN AGUSTIN
Indicated Mineral Resources2:
65.6Mt at 0.27 g/t Au and
8.4 g.t Ag
579k contained gold and
17.7M contained silver ounces
Probable Mineral Reserves3:
47.2Mt at 0.30 g/t Au and
9.4 g/t Ag
448k contained gold ounces and
14.3M contained silver ounces
1 Please refer to the “Notes and Disclosure” section for a discussion of these Non-IFRS Measures.
2 The Measured and Indicated (“M&I”) Mineral Resources for El Castillo and San Agustin, which together form the El Castillo Complex, in the above were based on pit cones using $1,800 per ounce
gold and $22.50 per ounce silver. Cut-off grades range from 0.08 g/t Au to 0.43 g/t Au for El Castillo and 0.10 to 0.23 g/t gold equivalent (“AuEQ”) for San Agustin, depending on ore type.
3 The Mineral Reserves for El Castillo and San Agustin, which together form the El Castillo Complex, in the above are based on updated models, mine plans and topography, including depletion
through mining activities and changes to recovery and cost assumptions as of December 31, 2020. El Castillo used a gold price of $1,500 per ounce; San Agustin used a gold price of $1,500 per
ounce and silver price of $18.75 per ounce. Cut-off grades for El Castillo range from 0.10 g/t Au to 0.51 g/t Au depending on ore type; cut-off grades at San Agustin were 0.13 g/t Au.
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LA COLORADA MINE
During 2020, the La Colorada mine produced 16% less GEOs at a cash cost
per gold ounce sold 11% less compared to 2019. Lower GEO production
was primarily due to the two-month suspension of mining, crushing and
stacking activities. La Colorada experienced a 4% reduction in cost per
tonne processed compared to 2019, primarily due to higher daily crusher
throughput rates and better productivity after experiencing challenges with
water in the pit during the second half of 2019.
2020 PRODUCTION
46,371 GEOs
2020 CASH COSTS1
per gold ounce sold
$937
Indicated Mineral Resources2:
35.0Mt at 0.56 g/t and
8.2 g/t Ag
631k contained gold ounces
and 9.3M contained silver
ounces
Probable Mineral Reserves3:
24.1Mt at 0.58 g/t Au and
8.6 g/t Ag
453k contained gold ounces
and 6.7M contained silver
ounces
1 Please refer to the “Notes and Disclosure” section for a discussion of these Non-IFRS Measures.
2 The Indicated Mineral Resources for La Colorada in the above were based on pit cones using $1,800 per ounce gold and $22.50 per ounce silver. Cut-off grade was 0.09 g/t AuEQ.
3 The Mineral Reserves for La Colorada in the above are based on updated models, mine plans and topography as well as updated recoveries and cost assumptions as of December 31, 2020. La Colorada
used a gold price of $1,500 per ounce and a silver price of $18.75 per ounce. Cut-off grade for La Colorada was 0.11 g/t AuEQ.
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FLORIDA CANYON MINE
REPLACING OUNCES WITH OUR NEWEST ASSET
Argonaut acquired Florida Canyon with the at-market merger with Alio Gold
Inc. on July 1, 2020. As part of our transformation strategy, acquiring Florida
Canyon provided immediate growth and will replace the El Castillo mine
when it winds down at the end of 2022. We are also excited about the growth
potential at both Florida Canyon and the past producing Standard mine,
which is located just five kilometres from the Florida Canyon mine.
2020 PRODUCTION2
47,064 GEOs
2020 CASH COSTS1
per gold ounce sold
$1,345
Making prudent capital investments to optimize operations and reduce
operating costs is our priority at Florida Canyon. In 2020, we:
• Completed and filed the updated Life of Mine technical report, with
highlights that include:
• Annual average production of 77,000 gold ounces
• After-tax NPV5% $138 million at $1,700 gold
• Average all-in sustaining cost per gold ounce sold of $1,0401
• Completed the leach pad expansion;
• Added a truck dump box at crusher to eliminate a rehandling of ore; and
• Submitted the air permit modification required for a conveying and
stacking system, which when completed, will eliminate further ore
rehandling and lower operating costs.
Measured & Indicated
Mineral Resources3:
86.0Mt at 0.42 g/t
1.16M contained gold ounces
Proven & Probable
Mineral Reserves4:
70.8Mt at 0.42 g/t
954k contained gold ounces
With the completion of the drop box in the fourth quarter 2020, haul trucks can now dump ore directly into a box
that feeds into the primary crusher. Prior to the addition of the drop box, the primary crusher had to be loader fed,
which required haul trucks to dump ore on the ground, a dozer to push the ore into a pile and a loader to feed to
the primary crusher. Currently, once ore goes through the primary and secondary crushers, it is loaded into haul
trucks with a front-end loader and delivered to the leach pads via haul trucks.
We identified potentially significant operating cost savings by eliminating the re-handling of ore at the back end
of the secondary crushing circuit by switching to a conveying and stacking system to transport crushed ore to
the leach pads. We believe this modification will reduce greenhouse gas emissions at Florida Canyon, as the
conveying and stacking system would be operated on grid power thus eliminating the need to run diesel haul
trucks from the crusher to the leach pads.
Leach pad expansion at Florida Canyon
1 Please refer to the “Notes and Disclosure” section for a discussion of these Non-IFRS Measures.
2 Florida Canyon production during Q1 2020 and Q2 2020 was under Alio Gold Inc. prior to the closing of the merger between Alio Gold Inc. and Argonaut on July 1, 2020. 2020 GEO production
combined full year 2020 production from the El Castillo, San Agustin, La Colorada and Florida Canyon.
3 The M&I Mineral Resources for Florida Canyon in the above were based on pit cones using $1,100 per ounce gold. Cut-off grade was 0.10 g/t Au.
4 The Mineral Reserves for Florida Canyon in the above are based on updated models, mine plans and topography as well as updated recoveries and cost assumptions as of
December 31, 2020. Florida Canyon used a gold price of $1,500 per ounce. Cut-off grade for Florida Canyon was 0.10 g/t Au.
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MAGINO
BUILDING CANADA’S NEXT GOLD MINE
In 2020, we executed our Growth strategy with the advancement of Magino
project to a construction decision, and the success of our deep drilling
exploration program which specifically targets high-grade gold mineralization
below and adjacent to the planned open pit.
2020 AND RECENT MILESTONES
• Completed Schedule 2 amendment;
• Received Species at Risk permit;
• Completed Closure Plan filing;
• Received approval of Fish Habitat Plan;
• C$126.5M equity and $57.5M convertible debenture financings,
plus a $100M revolver with a $25M accordion;
• Discovered four new high-grade zones at depth, bringing the
total to six;
• Participated in a ceremony to celebrate the completion of the
Indigenous community agreement with Michipicoten First Nation;
• Accommodation agreement framework agreed to with Garden
River First Nation; and
• Completed Fixed Bid contract covering approximately 40% of
initial capital.
“Magino is truly a valuable and strategic asset given existing infrastructure,
the already-known mineral endowment of the ore body and the existing
exploration potential, its location within the mining-friendly jurisdiction of
Ontario, Canada and its proximity to other strong cash flowing operations
such as the Island Gold mine. By moving Magino forward, we are executing
on our vision to transform Argonaut from a junior, relatively high-cost producer
with short mine lives to an intermediate, lower-cost producer with long mine
lives.” - Pete Dougherty, President & CEO.
DISCOVERING NEW HIGH GRADE ZONES
FEASIBILITY STUDY
HIGHLIGHTS1
Measured & Indicated
Mineral Resources:
144.0Mt at 0.91 g/t Au
4.20M contained gold ounces
Proven & Probable
Mineral Reserves:
59.0Mt at 1.13 g/t Au
2.14M ounces of gold
10k tpd processing facility
150k ounces average annual
gold production over the
first 5 years
17 year mine life
Cash cost of $669
per gold ounce sold
All-in sustaining cost of
$711 per gold ounce sold
Initial capital2
C$480-C$510M
Since commencing our exploration drilling program in July 2019, we have discovered six new high grade mineralized
zones - Elbow Zone, Central Zone, South Zone, Scotland Zone, Sandy Zone and #42 Zone. Brian Arkell, Vice
President of Exploration commented: “Through an ongoing structural investigation over the past two years, we
can now trace higher-grade ore shoots within the planned open pit and test the down dip potential of these
structures. It’s very encouraging to intersect high-grade gold mineralization in our initial drill holes testing these
structures at depth, and we’ve hit some of the highest grades encountered to date on the property. Based on
the success we have demonstrated in our first drilling at depth at the new Scotland, #42, Sandy and South zones,
combined with the Elbow and Central zones, we now have six very exciting high-grade mineralized targets that
all warrant further drilling.”
1 Based on the assumptions and parameters as set forth in the Magino Feasibility Study dated December 21, 2017.
2 The capital estimate is based on the EPC contract (fixed bid engineering, procurement, construction and commissioning contract) stated in the Argonaut press release dated January 4, 2021.
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INDEPENDENT PROJECT REVIEW
As part of the independent project review process initiated during the
Magino Environmental Assessment process, environmental technical
experts representing Michipicoten First Nation visited the Magino site and
completed an inspection together with representatives from Argonaut.
The tour included a visit to the Lakehead University re-vegetation
plots that were established at Magino in 2019 to study soil covers and
their interaction with re-vegetation effectiveness. Collaboration with
Indigenous communities throughout the environmental assessment and
subsequent permitting and implementation process has been promoted
by the United Nations and Argonaut is proud to be implementing the key
tenants of the United Nations Declaration on the Rights of Indigenous
Peoples (UNDRIP).
FIRST NATIONS & MÉTIS COMMUNITY INVOLVEMENT
We have successfully partnered with all six of our First Nation and Métis
communities by completing community agreements of various types
thereby providing support to the project. Before construction began
in early 2021, the Métis Nation of Ontario elected to undertake a
remote (COVID-19 safe) ceremony marking the beginning of the area
transformation. We believe our First Nation and Métis partners are
valuable and integral to the success of the area, the project and the
future of the Company. As stewards to the land and all that resides in the
area it is important to have their direct involvement in the management
of the land.
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Independent project review tour with environmental technical
experts representing Michipicoten First Nation.
GARDEN RIVER FIRST NATION SITE TOUR
Representatives of Garden River First Nation completed
a tour of the Magino site in the fall of 2020. The site tour
included touring the various areas of the project including
seeing some of the fish relocation efforts underway in
preparation for mine construction in 2021.
“Magino is a past-
producing mine and
has been a well-known
project for decades;
yet, we are only now
beginning to scratch
the surface of the
full potential of the
exploration upside to
this mineralized system.”
Pete Dougherty, President & CEO
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Night view of an exploration drill set up
on the Elbow Zone at Magino.
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CERRO DEL GALLO PROJECT
POTENTIAL TO UNLOCK GROWTH VALUE
The Cerro del Gallo project in Guanajuato, Mexico is an exciting pre-
feasibility stage growthproject. Currently in the permitting phase, the
project fits well within our team’s abilities as another open pit heap leach
project in Mexico and is an asset that supports our transformation strategy
from being a high-cost, short mine life junior producer to a lower-cost,
long mine life intermediate producer.
As we continue to advance permitting, we are also fostering our relationship
with the local community. Our focus is providing project education to
residents, establish long-standing relationships with key partners in the
community including gaining municipal and state support.
PRE FEASIBILITY STUDY
HIGHLIGHTS1
Measured & Indicated
Mineral Resources:
201.9Mt at 0.44 g/t Au,
12.2 g/t Ag and 0.09% Cu
2.86M contained gold ounces,
79.1M contained silver ounces
and 187.1T of contained copper
Proven & Probable
Mineral Reserves:
91.8Mt at 0.56 g/t Au,
13.3 g/t Ag and 0.10% Cu
1.64M contained gold ounces,
39.1M contained silver ounces
and 85.5T of contained copper
77k ounces average annual gold
production over the first 5 years
15 year mine life
Cash cost of $597
per gold ounce sold
All-in sustaining cost of
$667 per gold ounce sold
Initial capital $134M
1 Based on the assumptions and parameters of the Cerro del Gallo Pre-Feasibility Study results announced on December 18, 2019.
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CORPORATE
SOCIAL
RESPONSIBILITY
OUR SAFETY
OUR PEOPLE
OUR COMMUNITY
OUR ENVIRONMENT
An overview of our commitment to
socially responsible practices and
sustainability initiatives in 2020.
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CONTINUED COMMITMENT TO
SOCIALLY RESPONSIBLE
PRACTICES AND SUSTAINABILITY
Corporate social responsibility continues to be a
critical aspect of our business.
We are proud of the continued efforts our team lead in the areas of sustainability,
health and safety and community relations during a challenging year in which we
all practiced new socially distant norms and safety protocols.
Our four pillars: OUR SAFETY, OUR PEOPLE, OUR COMMUNITY and OUR
ENVIRONMENT continue to serve as our framework, as we focus on creating
balance to ensure we foster synergies with our neighbours, as well as operate in
a sustainable, safe environment.
ESR AWARD 2020
“During 2020, El Castillo and San Agustín units were granted the 2020 Socially
Responsible Company ESR® 2020 Award for the eighth year in a row, presented
by the ‘Centro Mexicano para la Filantropía’. It is a great pride to share this merit
with key members from our neighbouring communities and with those who have a
contractual relationship with us, to emphasize the benefits our operations generate on
issues such as: quality of life, community relations, governance, corporate ethics and
environmental care. Mining, like all industries, allows us to reach those who, even when
they are not miners, make our operations possible, by getting involved in community
projects through training, compliance of safety and hygiene conditions, and respect
for the environment.
This couldn’t be possible without the cooperation of the communities where we
operate. No benefit couldn’t be obtained without the constant support of those who
enable us to meet all the standards and regulations, minimizing environmental impact,
maximizing positive impacts on the quality of life, and the health and services we share
with community residents. Our industry is about sharing the good things that come
from mining with our people, by making our corporate vision a reality: improving the
quality of life in the communities.”
Alicia Guerrero
El Castillo Complex Manager
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COMMUNITY LEADERSHIP DURING THE PANDEMIC
During the pandemic, Argonaut launched multiple sanitization campaigns in
Mexico, including the community cleaning campaign in the community of
La Colorada, where we sanitized homes, small businesses and public spaces.
ENVIRONMENTAL & SUSTAINABLE EXCELLENCE
The San Agustin team with our recent ESR Award.
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OUR SAFETY
PRIORITIZING SAFE RETURN TO WORK
Safety remains our number one priority, and in 2020
we demonstrated both excellence and leadership.
As an essential service, we remained resilient, diligent and proactive in ensuring
safe return to work protocols. Our Mexico teams developed the “Safe Return
to the Mine” program that ensured the prioritization of safety and compliance
with recommendations from federal health authorities. We consulted and
collaborated with health authorities and also welcomed the Mexico Mining
Under-Secretary, Francisco Quiroga who reviewed our COVID-19 protocols at La
Colorada. In September, the La Colorada mine received the ‘The Sanitary Safety
Distinction‘ from IMSS (Instituto Mexicano de Seguro Social), the Mexican public
healthcare system. “We have been working with the collaboration of all areas to
increase awareness among all the personnel; working safely, we will minimize
our incidences,” says La Colorada General Manager, Manuel Encinas
During 2020 and into 2021, we remained consistent with our safety protocols
at all of our operations and project locations and practiced work from home
protocols where possible.
2020 OPERATIONAL SAFETY STATS vs. 2019
LOCATION
El Castillo
San Agustin
La Colorada
Florida Canyon
% CHANGE
ACCIDENTS
% CHANGE
INCIDENTS
-14.0%
-46.0%
-6.3%
-
-19.0%
-14.0%
+29.6%
-
LTIFR
-19.0%
-14.0%
-33.3%
-15.8%1
1 Florida Canyon LITFR (Lost Time Injury Frequency Rate) percentage change is based on the LTIFR as reported by Alio Gold in 2019.
In 2020, we continued to provide internal training programs on risk prevention and
safety protocols, with the goal of preserving the health and safety of all workers.
Our operations teams also completed over 7,630 hours of safety training.
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“SAFE RETURN TO THE MINE”
We made extraordinary efforts to raise awareness about Covid-19 risks through
training courses related to protection of workers, their families, and the
community. Some of the safety protocols implemented included:
• Training of all internal staff members, contractors and suppliers with
Covid-19 protocols;
• Conducted a PCR (polymerase chain reaction test) campaign among all of
our staff members and contractors for early detection;
• Checks were set up at all access points which included temperature checks,
antibacterial hand sanitization and a general medical assessment;
•
Internal and external sanitation of vehicles before entering the unit;
• Physical barriers were installed at each table in the break rooms;
• Transportation with social distancing and physical barriers;
• An integral health program for workers at risk;
• Conducted inspection visits to the camps, contractor camps and all work
areas to ensure compliance; and
• Rapid blood test campaign was conducted to all workers who were outside
the unit for more than four days.
In addition to COVID-19 related health campaigns, we continued to provide
health services to our workforce that included physical assessments, influenza
vaccinations, body x-rays and medications.
Christian Rodriguez, Medical Doctor: “Day by day we work on the personnel
assessment and consultation to make sure [our workforce] get[s] home healthy.
Workers are very pleased to receive such care, and they make comments comparing
the care they receive from the Company to the one they get at the local clinics, and
ours is better. That makes us work with more enthusiasm in order to get that kind
of response from our workers.”
“The reopening of operations demands the constant generation of innovative ideas that
enable us to successfully adapt to this ‘new normal’.
By reopening operations, we committed to resume activities in a gradual and responsible
manner, which is the reason why the “Safe Return to The Mine” program has the goal to
implement the industrial safety, occupational health, hygiene practices and the Covid-19
prevention module protocols we have developed with the valuable participation of our co-
workers from every area;
“Safe Return to the Mine” is an integral part of a series of actions we are implementing to
preserve the integrity, health and wellbeing of all the members of Argonaut Gold’s family.”
Jesús Gutiérrez Bastida, Vice-Ppresident of Corporate Affairs & Country Manager Mexico
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OUR PEOPLE
INVESTING IN HUMAN CAPITAL
As we continued to execute our transformation as
a Company in 2020, we continued to invest in and
grow our best asset - our human capital.
In 2020 we acquired the Florida Canyon mine and we also green-lighted
construction of our Magino project. These catalysts put our human capital growth
in motion, immediately adding new members to our team and also kickstarting
the growth of the team to support the construction of Magino.
2020 also challenged our workforce with the restrictions due to COVID-19, and
we are proud to mention that our workforce demonstrated initiative, leadership
and resilience while navigating the pandemic. In Mexico, our team implemented
the “Safe Return to the Mine” program, which is a set of strict safety protocols
that ensured the safety and wellbeing of the Argonaut family as we resumed
operations. Team members participated in the development, implementation
and monitoring of the program, which included consultations with health
authorities, community members and the municipal government. Our health and
medical staff at our operations were recognized and awarded by the Company
for their courage, dedication and commitment to safety.
2020 EMPLOYEE STATS
LOCATION
EMPLOYEES
%
LOCAL
%
WOMEN
%
UNIONIZED
El Castillo
San Agustin
La Colorada
Florida Canyon
Magino
Cerro del Gallo
San Antonio
Corporate
283
167
169
343
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2
12
70%
69%
63%
83%
47%
57%
50%
100%
64%
58%
16%
n/a
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n/a
n/a
n/a
12%
8%
5%
15%
26%
29%
50%
42%
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BEYOND WORKFORCE TRAINING
In addition to workforce training, it is important to provide additional workshops
in order to empower and optimize our team members. In 2020, we provided
workshops and training at our operations on the following:
Lead Supervisor Training
• Safe Production - Care to Lead Workshops
•
• Supervisor Regulatory / Compliance Training
• Superintendent / Manager Leadership Training
• Computer Training
• Risk and Safety Analysis
• Safe Use of Cyanide
• Fire Prevention and Combat
“I am very happy that they are training us, they are teaching us and keeping
us updated on safety, and above all, they are investing time, money, and they
care about us.” - Ivis Arvayo, La Colorada employee.
INDUSTRY LEADERSHIP IN THE COMMUNITY
The Argonaut team continues to demonstrate leadership within the industry and
are ambassadors for our values. Women on our team were key participants in
forums including:
• Sonoran Economy Reactivation Forum hosted by the Department of
Economy of the State of Sonora
• AMSAC Sonoran Mining Association “IRIS Mining” (Innovative,
Responsible, Inclusive and Safe Mining)
• “Today’s Mining Industry in Mexico” hosted by Sonora - Arizona
Commission
• “Communication for Sustainability” Panel during the MINNOVACIÓN
2020 Forum hosted by the Sonoran Mining Cluster
“Talent is a matter of mind and heart, more than a matter of gender.”
- Lourdes McPherson, Corporate Affairs Manager Sonora and Guanajuato.
“It is very rewarding to have the opportunity to work a few
minutes from home, as you also have the chance to spend
time with your family, which is the most important thing for
me. In my experience I have witnessed how Argonaut offers
their support to workers inside and outside the mine, which
makes people very happy and motivates them to work harder.
As we know, the economic benefits of working at Argonaut is
a benefit for the employee and their family.”
Diana Alvarado, Head of the El Castillo Complex lab and local employee of 10 years
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OUR COMMUNITY
SAFE COLLABORATION WITH OUR NEIGHBOURS
Community support and leadership during a
challenging year.
Last year as we navigated the challenges of the global pandemic across
all of our teams, our team efforts extended to the communities in which we
operate. In addition to our commitment to community initiatives that include
improving infrastructure, championing educational initiatives and scholarships,
local entrepreneurship and supporting
local businesses,
encouraging
strengthening indigenous and ejido relations and celebrating cultural programs,
we prioritized community focused COVID-19 response initiatives to help protect
the communities we work closely with.
COMMUNITY COVID-19 RESPONSE
SANITIZATION CAMPAIGNS
•
La Colorada - Monthly sanitization
campaigns that included the
sanitization of houses, local
businesses and public spaces.
• El Castillo Complex - Sanitization
campaign for public spaces in
San Lucas, San Agustín, Otilio
Montaño, Atotonilco, Las Cruces,
San Juan del Río.
MEDICAL CENTER SUPPORT
• Donated medical supplies and
equipment to the La Colorada
Sonora Health Centre including
a new autoclave, medical carts,
lamps, vaccine storage, bandages
and electrolyte serums. We also
contributed to improvement
of the facility’s infrastructure
which included the donation of
an air conditioning device and
modifications to ambulance
transportation.
• Donated full face masks and
infrared thermometers to the
Health Centre.
SANITARY SUPPLY DONATIONS
• Distribution of three-layer face
masks, antibacterial gel and other
protection supplies throughout
communities in La Colorada, El
Castillo Complex and Cerro del
Gallo.
COMMUNITY SUPPORT
• Provided COVID-19 prevention
workshops for the community.
• Participation in the Municipal
Safety Committee for the El Castillo
Complex communities.
• Training sessions provided to
community members and small
business owners on safety and
sanitization protocols.
• Community signage campaign.
• Grocery packages and blankets
donated to at-risk families.
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Community COVID-19 initiatives in Cerro del Gallo,
Guanajuato, Mexico.
COVID-19 RESPONSE
COMMUNITY
INVESTMENT
El Castillo Complex:
Total Investment
MXN $386,000
La Colorada:
Sanitization Campaign
MXN $1,070,600
Sonora Health Center
MXN $53,348
Community Signage Campaign
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INFRASTRUCTURE
Investing in proper infrastructure is key to ensuring communities have the proper
support to thrive. This includes roads, agricultural support and support for
entrepreneurial ventures. In 2020, we made key contributions including:
•
Improvements to housing and schools in La Colorada including the
restoration of eight houses and three schools, for a total investment of
MXN $2,159,534;
• Completion of maintenance work for 67 kilometres of roads near La
Colorada in the community of Cobachi and the road to the graphite
plant, for a total investment of MXN$170,000;
• Completion of improvements to the San Lucas - San Agustin road,
where we built a flood trench and sewer along the road. In San Lucas
we also assisted in the concrete pouring of the bridge;
• Provided maintenance to reservoirs in Ejido de San Agustin which
were built to collect rainwater for cattle;
• Drilled two wells and installed solar equipment at the La Cruces and
Mimbres ranches; and
• Donated a MXN$20,000 totem to Ejido Otilio Montaño.
Road improvements in the community of Cobachi near
La Colorada.
Installing new solar panels at La Cruces and Mimbres
ranches near San Agustin.
“During COVID-19, we have a valuable ally
through the effective collaboration with Argonaut
Gold’s La Colorada Mine. It is necessary to
continue working as a team on behalf of our
community, always looking out for our citizens’
wellbeing. Argonaut Gold has always paid
attention and has been close during 2020 through
its community development program to conduct
COVID-19 prevention campaigns, and to take
good care of at-risk residents in the community.”
Marco Antonio Platt Escalante, Mayor of La Colorada, Sonora
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SUPPORTING EDUCATION
Investing in education remains one of Argonaut’s key community initiatives
and continued to provide both monetary benefits and co-operative education
partnerships. In 2020 we:
• Participated in an educational partnership at Florida Canyon, as part of a
scholarship program with the Great Basin College of Nevada. We currently
have three Maintenance Training Co-operative students as part of our
partnership;
•
Launched a “Homework Club” at our Cerro del Gallo Community House
to assist elementary school students with a need for internet access and
other services; and
• Donated educational scholarships to preschool, elementary, junior and
senior high school and university students inour Mexico communities. This
includes 450 scholarships to students in La Colorada for a total investment
of MXN $481,500.
“I was granted a scholarship for one school year in senior high school and I
used that money to help me purchase the materials required by the school.
I am also able to cover my external expenses, as I am now enrolled in the
medicine program at the university. Argonaut’s support has been a great
contribution to pay for some of my tuition expenses,” says Guadalupe
Aguilera Graciano, a scholarship recipient in San Agustín.
3000th SCHOLARSHIP
In early 2020 we presented our 3000th scholarship in La Colorada, which included
a community ceremony attended by Victor Guerrero, the Secretary of Education
and Culture of the State of Sonora, Marco Antonio Platt, the Mayor of La Colorada
and Manuel Encina Cabrera, the General Manager of the La Colorada Mine.
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Two university students part of the Maintenance
in
Training Co-operative program assisted
connecting a new generator to the power grid
at Florida Canyon.
Assisting students at the “Homework Club” at
the Cerro del Gallo Community House.
“Collaborative work
between Argonaut
Gold’s La Colorada
Mine and the State
Government is an
example that the
actions to promote
education always yield
results. Granting of
Scholarship number
3000 to students
from our community
is evidence that
corporate social
responsibility goes
beyond the words
and is achieved with
action.”
Victor Guerrero,
Secretary of Education of the
State of Sonora Government
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Road improvements and Ejido members in San Lucas
receiving monthly grocery packages.
FOSTERING ENTREPRENEURSHIP
Empowering local communities is key to building a legacy. This year we continued
to foster entrepreneurship and our support for local businesses by training local,
hiring local and providing access to tools for the development of the local business
economy. This included:
• Providing a local development program at San Agustin which offered
workshops on business practices;
• Offered defensive driving courses for bus and truck drivers in Ejido San
Agustin and San Lucas;
• Developing a supplier growth program in the community of San Lucas
and adding local suppliers for services; and
•
Launching a job link program which provides specialized training
courses for residents from San Agustin, San Lucas and Otilio Montaño
which will allow participants to work either within the Company or seek
other employment opportunities.
As part of our training and workshop initiatives, we have also seen entrepreneurial
growth within our company. Martín Elías Romanos, a former Open Pit Supervisor
at La Colorada, started his own business leasing sprinkler tank trucks to the
Company, and has since seen growth in his new company. “I am very grateful
for the mine for giving me the chance to start my own business. I currently have
three workers providing our services at the pit. My family is very proud of my
growth and I look forward to starting new projects,” says Martín.
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“As a new supplier,
I am grateful to the
Company for giving us
the opportunity, and for
growing with us. This is
the reason why we are
committed to providing
them with a quality
service and to apply the
concept of continuous
improvement on all our
activities.”
Sandro Martinez Amador,
Commissioner of co-owned assets
in San Lucas de Ocampo and
administrator of the business who
provides Argonaut with tank trucks and
passenger bus services
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COMMUNITY OUTREACH AND CULTURE
Although community outreach events and the participation in community cultural
events was a challenge in 2020 due to the pandemic, Argonaut was proud to
participate in the following:
• Supported both the local Pivot Jeunesse program as well as the
community Christmas lights display in Dubreuilville, Ontario.
• Continued to distribute grocery packages to communities in Mexico
including monthly packages to ejido members and elders.
•
In January 2020, together with the Department of Culture of the State
of Sonora led by Mario Welfo, the Municipal Administration of La
Colorada, Sonora and our La Colorada Mine, La Colorada was the co-
host of the Alfonso Ortíz Tirado Cultural International Festival which was
an eight day cultural and artistic festival for the residents of different
neighbouring communities. Our La Colorada mine was the stage for the
closing concert of the festival.
• Supported local Florida Canyon community programs in Nevada
including volunteer work and donations to: Imlay School, Safe Haven
Animal Sanctuary, Boys and Girls Club, Women In Mining, Frontier
Community Coalition, Elk Foundation and the Family Resource Center.
Dr. Benividez providing free medical services in
San Antonio.
• Continued to provide free medical services and medication in San Antonio.
Argonaut team members assisting in fence
installations at the Safe Haven Animal Sanctuary.
MICHIPICOTEN FIRST NATION COMMUNITY AGREEMENT CELEBRATION
Michipicoten First Nation and Argonaut celebrated the conclusion of a community
agreement in early 2020 with a formal dinner at the community banquet hall.
The community agreement is one of the six community agreements Argonaut
has developed in consultation with the Indigenous communities impacted by the
Magino development.
(L-R) Magino General Manager, Chris Gibbs, John Kim Bell, Gimaa
Kwe/Chief Patricia Tangie Michipicoten First Nation, President &
CEO, Pete Dougherty, Director, Environment & Community Relations
Magino Project, Kyle Stanfield.
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“Michipicoten First
Nation has relationships
with a number of mines
and energy companies.
Argonaut Gold stands
head and shoulders
above all others in
their collaborative
approach, transparency
and willingness
to accommodate
Michipicoten’s concerns
and interests. The
Argonaut approach is
refreshing and modern
and other companies
need to take note and
emulate Argonaut’s high
standards of working
with First Nations.”
Gimaa Kwe/Chief Patricia Tangie
Michipicoten First Nation
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Closing concert for the Alfonso
Ortíz Tirado Cultural International
Festival at the La Colorada mine in
January 2020.
LA COLORADA COMMUNITY HOUSE INAUGURATION
In January 2020, we hosted the inauguration of Argonaut’s La Colorada Community
House in Sonora Mexico. The Community House, located on our La Colorada
property, offers a space where residents can participate in cultural activities and
workshops, learn arts and crafts, as well as to meet with other residents and seek
assistance from our community team. Attended by the Sonora Governor of the
State Claudia Pavlovich Arellano and members of the Argonaut team, the event
marked a significant step in providing safe community spaces for residents to use
for many years going forward.
La Colorada Community House Inauguration in January 2020 attended by Sonora Goveror of State, Claudia
Pavlovich Arellano, Argonaut’s Vice President of Corporate Affairs and Country Manager Mexico, Jesús Gutiérrez,
La Calorada Mine General Manager, Manuel Encinas and Mayor of La Colorada, Marco Antonio Platt.
29
“They are Sonora’s pride,”
says Governor Claudia
Pavlovich at the inauguration
of Argonaut’s Community
House in La Colorada.
“I acknowledge the social
commitment of the La
Colorada Mine, with the
creation of spaces for the
benefit of residents of this
municipality. Your corporate
vision and responsibility is
the reason why Argonaut is
Sonora’s pride, and it sets
an example to be replicated
in every corner of our state.
Mines bring prosperity
and integral development
to the regions where they
operate.”
Claudia Pavlovich Arellano
Governor of the State of Sonora
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OUR ENVIRONMENT
REDUCING OUR IMPACT
Last year we continued to optimize our operations to
reduce our use of natural resources and our impact
on the environment.
As we transition our Company, we have also assessed our impact as we continue
to grow. Over the past year we have implemented changes that resulted in
a reduction in water consumption, energy consumption and greenhouse
gas emissions (“GHG”). We also received the ESR (Empresa Socialmente
Responsable) Award for the eighth year across all operations in Mexico, which
distinguishes Argonaut as a leader as a socially and environmentally responsible
company.
MAKING CHANGES TO OUR IRRIGATION SYSTEM
At the beginning of 2020 we started the process of migrating from the use of a
sprinkler irrigation system to a hose drip irrigation system at operations in Mexico.
A telemetric flow meter was installed to improve accuracy. By doing so, we have
seen significant changes in water consumption and the optimization of resources.
• Reduction in water consumption: 8%
• Reduction in water evaporation factor: 7%
• Reduction in dust
• Reduction in ponding derived from excess humidity on the surface
• Controlled irrigation rate
• Flow priority optimization on fresh mineral
New drip irrigation lines at San Agustin.
30
Delivering tree donations in the community of
Cerro del Gallo.
“Such application
comes from the need
to optimize water use
in arid zones for the
benefit of agriculture,
and the system is mainly
based on friction to slow
water flow speed inside
the plastic (dripper).
The application of this
system in El Castillo has
favored the reduction of
the evaporation factor
by applying water in
a paused, constant
and regular rate to the
minerals dropped in the
yards. With this system
we contribute to have
a significant saving of
water resources.”
Luis Robles
Process Superintendent at El Castillo
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Solar panels have been installed
at La Colorada and the El Castillo
Complex to power areas such as
the security building.
RECYCLING DATA
ALTERNATIVE ENERGY
• El Castillo Complex:
• 306,700 litres of oil
• 242 tonnes of scrap metal
• 50 tonnes of wood scrap
• 40 tonnes of plastic scrap
• La Colorada:
• 11,600 litres of oil
• 112,616 tonnes of metal and wood scrap
• Florida Canyon:
• 211,358 litres of oil
• 3,994 litres of antifreeze
• 297 tonnes of scrap metal
By installing solar panels on-site in Mexico, including on
buildings such as the security booth, we have:
• Saved 31,345 litres of diesel per year
• Reduced GHG emissions by approximately 84
tonnes per year
• The capacity to generate 11.8 KwH off-grid
energy
“With solar panels we have the opportunity to
provide energy to areas where it is needed, without
increasing consumption from the grid.” - Mario Corte,
Coordinator of La Colorada Environmental Department
Other energy savings initiatives included:
•
Installing a device to measure power on the
medium voltage line and monitor power
unbalances to detect real time problems and
provide information to correct failures which
generate a higher power consumption.
• Changes to the lighting system in the plant and
conveyor belts. The replacement of lamps saved us
approximately 4,725 kW per month.
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MONITORING, TRAINING & PROGRAMS
Argonaut is committed to the monitoring of our impacts and providing training to
our teams on environmental protocols.
• Air quality: We measure our air quality on a monthly basis, and our dust
particle measurements are consistently below the Mexican standard.
• Workshops:
• Handling of water measurement systems
• Handling of dangerous waste
• Handling of poisonous animals
• Coordinated the 2020 Order and Cleanliness Campaign through the
Environmental Department
• Community programs:
• Donated equipment to the Municipal Administration of San Juan del Rio
for the cleaning of green spaces and the rescue of natural tourist places.
• Cleaned multiple streams including “Las Prietas” stream in La Colorada
and a stream in Cerro del Gallo, removing weeds, debris and materials
from obstructing water flow.
Performing dust particle testing to monitor air
quality at our operations.
Stream cleaning campaign in Cerro del Gallo.
SPECIES AT RISK NET BENEFIT PERMIT
2020 marked an important year for permitting the Magino project and species
conservation played a central role in how the project has evolved. Argonaut is
proud to have developed a collaborative approach with the Ontario Ministry of
Environment, Conservation and Parks through the development of a Net Benefit
Species at Risk permit in support of the Magino development. Bat populations in
North America are under threat due to the increasing prevalence of a fungal infection
called white-nosed syndrome that has become endemic in bat populations. While
Bats are generally an under appreciated part of the ecosystem, Northerners know
their importance to keeping the insect population in check.
Since any mine opening left inactive in Ontario will invariably attract bats to over-
winter and escape harsh winter conditions, the former mine adit from the prior
underground mine at Magino was no different. In order to compensate for this habitat
or Hibernaculum that will be removed during the new mine development, Argonaut
agreed to form a scientific team to design and install Ontario’s first constructed Bat
Hibernaculum. The Net Benefit permit was negotiated with the Ministry over a two-
year period and will see the constructed Hibernaculum installed during the project
construction phase and includes instrumentation to assist biologists in assessing the
use of the habitat for years to come. Argonaut and the Ministry are hopeful that
through monitoring, we will be able to gain valuable insights into bat overwintering
and potentially help with conserving the species. The approach has been greeted
with enthusiasm by local communities including our Indigenous partners who have
expressed concern related to species conservation.
32
Bat species in Northern Ontario.
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Our plant nurseries at San Agustin
and La Colorada have increased
their combined capacity to grow
over 9,000 plants to be used as part
of re-planting campaigns.
NATIONAL FORESTRY
FUND DONATION
El Castillo Complex:
MXN $3,634,347
La Colorada:
MXN $6,247,616
Our reforestation campaign at San Agustin
used new plants from our on-site nursery.
During this campaign we used hydrogel, a
biodegradable product which helps retain
water, and provides the plant with the
necessary humidity during scarce rainfall
periods.
SPECIES AND PLANT RESCUE CAMPAIGNS AT OPERATIONS
• El Castillo:
• Rescued and relocated 122 plants combining native species such as agaves,
yucas, sotoles and biznagas from the areas where mining activity is being
expanded.
• Rescued and relocated a total of seven fauna species, including a rattle snake,
coyote, opossums, and a beehive within the project.
•
San Agustin:
• Rescued and relocated a total of 825 plants of different cactuses species from
areas where our mining activity is being expanded.
• Increased our on-site plant nursery to a total of 800 yuca plants and 300
huizaches, for a total inventory is 4,000 mezquites, yucas and huizaches.
• Rescued and relocated a total of 14 fauna species that were found inside the
project, including rattle snake, tortoise, a cuncuate snake and a white tailed deer.
• La Colorada:
Installed 53 filtrating dams to preserve water.
•
• Rescued over 15,000 plants and increased our nursery capacity to grow over
5,000 plants per year.
• Rescued approximately 55 animals of various species for their subsequent
relocation.
• Florida Canyon:
• Performed surveys for ground nesting birds prior to working in previously
undisturbed areas.
• Installed and maintained exclusion fencing around process solution ponds to
preclude terrestrial animal access.
Rescued white tailed deer at San Agustin.
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MANAGING RISKS
MEASURING POTENTIAL RISK IMPACTS
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.
We identified key risks across all aspects of our organization and outlined our
top 10 risks throughout 2020, which included new risks and a shift in ranking
for the other risks included in 2019. New risks we identified in 2020 include the
Pandemic or Endemic and Communication. All of the risks carried over from
2019 to 2020 have shifted in ranking, including a change in our top risk from
Access to Capital (in 2019), to Project Development.
HEAT MAP
Below are the 2020 Top 10 Risks:
1
2
3
4
5
6
7
8
9
10
Project Development
Guidance
Pandemic or Endemic*
Country risk - Mexico*
Gold Price
Permitting
Legal Actions
Appropriate Staffing
Tax
Communication*
* New Top 10 Risks in 2020
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EXPECTED
IMPACT
RATING
EXPECTED
LIKELIHOOD
RATING
Major
Possible
HEAT MAP
RISK LEVEL
RANKING
vs. 2019
▲
2019 Rank: 8
18
(17)
Major
Possible
18
▲
2019 Rank: 4
2020 TOP 10 RISKS
RISK
CAUSES
IMPACTS
1 Project
Development
(2019 - Access to Capital)
Insufficient detailed engineering.
Lack of consistent forecasting for
capital and investment projects.
Non-compliance.
Loss of confidence in team /
company. Spend more / less than
estimates. Lost opportunity.
Operations unable to plan or
determine mine grades properly.
Poor investment decision.
Improper forecasting. Miss cash
flow estimates
Loss of shareholder confidence.
Difficulty with cash flow
estimates.
2 Guidance
(2019 - Permitting)
3 Pandemic or
Endemic*
(2019 - Land Access)
4 Country Risk
Mexico
(2019 - Guidance)
COVID-19 or similar situation.
Shutdown of operations or
supply chain complications.
Major
Possible
18
2019 Rank: n/a
Change relationship between
government and narcos,
new president, new congress.
Loss of operations, mines.
Safety issues due to fighting with
narcos. New tax laws.
Catastrophic
Rare
5 Gold Price
(2019 - Legal Actions)
Supply & demand changes,
geopolitical stability.
Variability in revenues and cash
flows.
Catastrophic
Rare
6 Permitting
(2019 - Country Risk Mexico)
7 Legal Actions
(2019 - Tax)
Inadequate technical components
of permit document; Political
influence; Legal action brought
against Argonaut or regulatory
officials.
Regulatory non-compliance. NGO
interference. Community unrest.
Inadequate legal structure in
Mexico.
Suspension of existing
operations; Delay of project
startup and development.
Major
Unlikely
Unable to operate.
Major
Unlikely
8 Appropriate
Staffing
(2019 - Project Development)
Mexico not a favorable location.
Competition for skilled employees
in Canada and Nevada.
Turnover in employees. Lower
quality employees. Bad
decisions at site level.
Major
Possible
9 Tax
(2019 - Appropriate Staffing)
Governments are looking to increase
revenue through new tax laws or
interpretations of tax laws.
Dispute with government.
Potential payment of taxes, fees,
interest. Resources required to
resolve dispute.
Minor
Likely
15
(19)
15
(15)
14
(21)
14
(19)
13
(17)
12
(18)
▲
2019 Rank: 6
▲
2019 Rank: 10
▲
2019 Rank: 2
▲
2019 Rank: 5
▲
2019 Rank: 9
▲
2019 Rank: 7
10 Communication*
(2019 - Gold Price)
Lack of organizational structure.
Geographical diversity.
Unable to grow, advance or make
decisions as quickly as desired.
Minor
Likely
12
2019 Rank: n/a
* New Risks in 2020 (#) Risk and risk level in 2019
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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.
LEADERSHIP
BOARD OF DIRECTORS
James E. Kofman 2,3 Chairman
Ian Atkinson 1,2
Peter C. Dougherty
Stephen Lang 1,3
Christopher Lattanzi (Retired December 31, 2020)
Peter Mordaunt 2,3
Dale C. Peniuk 1,2
Paula Rogers 1,2
Audra B. Walsh 1,3
MANAGEMENT
Peter C. Dougherty
President & CEO, Director
David A. Ponczoch
Chief Financial Officer
Daniel A. Symons
Vice President of Corporate Development
and Investor Relations
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Audit Committee
Nominating, Compensation and Governance
Committee
Safety, Health, Environment, Sustainability and
Technical Committee
W. Robert Rose
Vice President of Technical Services
Brian Arkell
Vice President of Exploration
36
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responsibility
THE NOMINATING,
COMPENSATION AND
GOVERNANCE COMMITTEE
to advise and
has
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.
THE SAFETY, HEALTH,
ENVIRONMENT, SUSTAINABILITY
AND TECHNICAL COMMITTEE
has responsibility to review and discuss
with management the safety, health,
sustainability
environmental
and
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.
37
BOARD COMMITTEES
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
the
independence and performance of
the Company’s internal and external
qualifications,
and
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.
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MINERAL RESOURCES & MINERAL RESERVES1
The following table shows the gold and silver Mineral Resources and Mineral Reserves at December 31,
2020. Mineral Resources are not Mineral Reserves and do not have demonstrated economic viability.
There is no certainty that all or any part of the Mineral Resources will be converted into Mineral Reserves.
Measured and Indicated Mineral Resources listed below are inclusive of Mineral Reserves.
MMIINNEERRAALL RREESSEERRVVEESS
PPRROOVVEENN && PPRROOBBAABBLLEE
Project
Category
Tonnes
(Millions)
Au Grade
(g/t)
Contained
Au Ounces
(000s)
Ag Grade
(g/t)
Contained
Ag Ounces
(000s)
Cu Grade
(% Cu)
Contained
Tonnes Cu
El Castillo2
El Castillo2
San Agustin2
EEll CCaassttiilllloo CCoommpplleexx22
Proven
Probable
Probable
PPrroovveenn &&
PPrroobbaabbllee
0.2
17.1
47.2
6644..55
0.51
0.36
0.30
00..3311
LLaa CCoolloorraaddaa33
PPrroobbaabbllee
2244..11
00..5588
Florida Canyon4
Florida Canyon4
FFlloorriiddaa CCaannyyoonn44
Magino5
Magino5
MMaaggiinnoo55
Cerro del Gallo6
Cerro del Gallo6
CCeerrrroo ddeell GGaalllloo66
Ana Paula7
Ana Paula7
Ana Paula7
Consolidated Mineral Reserves
Proven
Probable
PPrroovveenn &&
PPrroobbaabbllee
Proven
Probable
PPrroovveenn &&
PPrroobbaabbllee
Proven
Probable
PPrroovveenn &&
PPrroobbaabbllee
Proven
Probable
Proven &
Probable
Proven &
Probable
59.9
10.9
7700..88
24.2
34.7
5588..99
70.4
21.3
9911..88
6.5
6.9
13.4
0.43
0.38
00..4422
1.03
1.19
11..1133
0.59
0.46
00..5566
2.62
2.12
2.36
4
199
448
665511
445533
822
132
995544
804
1,332
22,,113366
1,326
313
11,,663388
550
471
1,021
9.4
14,278
1144,,227788
88..66
66,,770022
0.10
0.08
00..0099
67,691
17,821
8855,,551122
13.7
11.7
1133..33
5.3
5.1
5.2
31,088
8,012
3399,,110000
1,115
1,139
2,254
323.4
0.66
6,854
N/A
62,334
N/A
85,512
MMIINNEERRAALL RREESSOOUURRCCEESS
MMEEAASSUURREEDD && IINNDDIICCAATTEEDD ((“M&I”)
El Castillo8
San Agustin8
EEll CCaassttiilllloo CCoommpplleexx88
La Colorada9
Florida Canyon10
Magino11
Cerro del Gallo12
Ana Paula open pit13
Ana Paula underground13
San Antonio14
M&I
Indicated
MM&&II
Indicated
M&I
M&I
M&I
M&I
M&I
M&I
40.4
65.6
110066..00
35.0
86.0
144.0
201.9
18.0
3.0
65.0
0.34
0.27
00..3300
0.56
0.42
0.91
0.44
2.06
2.80
0.86
447
579
11,,002266
631
1,161
4,197
2,864
1,195
267
1,735
8.4
8.2
12.2
4.9
4.2
17,651
1177,,665511
9,270
79,103
2,865
404
0.09
187,100
CCoonnssoolliiddaatteedd MMiinneerraall RReessoouurrcceess
MMeeaassuurreedd &&
IInnddiiccaatteedd
665588..99
00..6622
1133,,007766
NN//AA
110099,,229933
NN//AA
118877,,110000
Measured and indicated Mineral Resources are inclusive of Mineral Reserves
MMIINNEERRAALL RREESSOOUURRCCEESS
IINNFFEERRRREEDD
El Castillo8
San Agustin8
EEll CCaassttiilllloo CCoommpplleexx88
La Colorada9
Florida Canyon10
Magino11
Cerro del Gallo12
Ana Paula open pit13
Ana Paula underground13
San Antonio14
Inferred
Inferred
IInnffeerrrreedd
Inferred
Inferred
Inferred
Inferred
Inferred
Inferred
Inferred
CCoonnssoolliiddaatteedd MMiinneerraall RReessoouurrcceess
IInnffeerrrreedd
1.8
2.1
33..99
1.4
5.8
33.2
5.1
0.2
0.6
6.2
5566..00
1 Refer to Mineral Resource Notes And Disclosures on page 39.
0.35
0.36
00..3366
0.53
0.29
0.83
0.43
1.27
2.07
0.34
00..6655
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20
25
4455
23
54
886
71
10
41
67
8.7
10.9
11.9
8.8
3.9
603
660033
480
1,947
0.06
1
70
79
11,,117700
NN//AA
33,,009944
NN//AA
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MINERAL RESOURCES & MINERAL RESERVES1
DISCLAIMERS
NATIONAL INSTRUMENT 43-101 AND QUALIFIED PERSON
Estimates of Mineral Reserves and Mineral Resources for our material mineral properties have been prepared under the general supervision of Brian Arkell,
Argonaut’s Vice President of Exploration, and a Qualified Person for the purposes of NI 43-101.
MINERAL RESOURCE NOTES AND DISCLOSURES
(1) Mineral Reserves and Mineral Resources have been estimated as at December 31, 2020 in accordance with NI 43-101 as required by Canadian securities
regulatory authorities. Mineral Resources are presented inclusive of Mineral Reserves. Numbers may not sum due to rounding.
(2) The Mineral Reserves for El Castillo and San Agustin, which together form the El Castillo Complex, set out in the above table are based on updated models, mine
plans and topography, including depletion through mining activities and changes to recovery and cost assumptions as of December 31, 2020. El Castillo used a
gold price of $1,500 per ounce; San Agustin used a gold price of $1,500 per ounce and silver price of $18.75 per ounce. Cut-off grades for El Castillo range from
0.10 g/t Au to 0.51 g/t Au depending on ore type; cut-off grades at San Agustin were 0.13 g/t Au.
(3) The Mineral Reserves for La Colorada set out in the above table are based on updated models, mine plans and topography as well as updated recoveries
and cost assumptions as of December 31, 2020. La Colorada used a gold price of $1,500 per ounce and a silver price of $18.75 per ounce. Cut-off grade for La
Colorada was 0.11 g/t AuEQ.
(4) The Mineral Reserves for Florida Canyon set out in the above table are based on updated models, mine plans and topography as well as updated recoveries and
cost assumptions as of December 31, 2020. Florida Canyon used a gold price of $1,500 per ounce. Cut-off grade for Florida Canyon was 0.17 g/t Au.
(5) The Mineral Reserves for the Magino Project set out in the table above were taken from the Magino Technical Report. The Mineral Reserves were estimated at a
gold price of $1,200 per ounce. The Mineral Reserves used a gold cutoff grade of 0.41 g/t.
(6) The Mineral Reserves for Cerro del Gallo set out in the table above were taken from the Cerro del Gallo Technical Report. The Mineral Reserves were estimated
at a gold price of $1,200 per ounce and a silver price of $14.50 per ounce. The Mineral Reserves used a gold cutoff grade of between 0.30 g/t AuEQ and 0.39 g/t
AuEQ depending on ore type.
(7) The Mineral Reserves for Ana Paula set out in the table above were taken from the Ana Paula Technical Report. The Mineral Reserves were estimated at a gold
price of $1,200 per ounce and a silver price of $17.00 per ounce. The Mineral Reserves used a gold cutoff grade of 0.67 g/t Au.
(8) 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 based on pit cones using $1,800 per ounce gold and $22.50 per ounce silver. Cut-off grades range from 0.08 g/t Au to 0.43 g/t Au for El Castillo and
0.10 to 0.23 g/t AuEQ for San Agustin, depending on ore type.
(9) The M&I Mineral Resources and Inferred Mineral Resources for La Colorada set out in the above table were based on pit cones using $1,800 per ounce gold and
$22.50 per ounce silver. Cut-off grade was 0.09 g/t AuEQ.
(10) The M&I Mineral Resources and Inferred Mineral Resources for Florida Canyon set out in the above table were based on pit cones using $1,800 per ounce gold.
Cut-off grade was 0.15 g/t Au.
(11) The M&I Mineral Resources and Inferred Mineral Resources for the Magino Project set out in the table above were taken from the Magino Technical Report. The
Mineral Resources were estimated at a gold price of $1,300 per ounce. The Mineral Resources used a gold cutoff of 0.25 g/t.
(12) The M&I Mineral Resources and Inferred Mineral Resources for the Cerro del Gallo Project set out in the table above were taken from the Cerro del Gallo
Technical Report. The Mineral Resources were estimated at a gold price of $1,600 per ounce and a silver price of $20.00 per ounce. Cut-off grades range from
0.25 g/t AuEQ to 0.30 g/t AuEQ depending on ore type.
(13) The M&I Mineral Resources and Inferred Mineral Resources for Ana Paula set out in the table above were taken from the Ana Paula Technical Report. The Mineral
Resources were estimated at a gold price of $1,350 per ounce and a silver price of $17.00 per ounce. The Mineral Resources used a gold cutoff grade of 0.60 g/t
Au for the Mineral Resources amenable to open pit extraction and 1.65 g/t Au for the Mineral Resources amenable to underground extraction.
(14) The M&I Mineral Resources and Inferred Mineral Resources for the San Antonio Project set out in the table above were taken from the San Antonio Technical
Report. The Mineral Resources were 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 may contain “forward-looking information” within the meaning of applicable Canadian securities legislation. All information, other than statements of
historical facts, included in this report that address activities, events or developments that the Corporation expects or anticipates will or may occur in the future,
including such things as future business strategy, competitive strengths, goals, expansion and growth of the Corporation’s businesses, operations, plans and other
such matters are forward-looking information.
When used in this report, the words “estimate”, “plan”, “anticipate”, “expect”, “intend”, “believe” and similar expressions are intended to identify forward-looking
information. This information involves known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements
of the Corporation to be materially different from any future results, performance or achievements expressed or implied by such forward-looking information.
Examples of such forward-looking information include information pertaining to, without limitation, inherent hazards associated with mining operations, the future
price of gold and silver, the market and global demand for gold and silver, the estimation of the Mineral Reserves and Mineral Resources, the realization of
Mineral Reserve and Mineral Resource estimates, the timing and amount of estimated future production, costs of production, expansion of production capabilities,
expected capital expenditures, costs and timing of development of new deposits, success of exploration activities, permitting risk in development projects, the
ability to obtain surface rights to support planned infrastructure at the Corporation’s exploration and development projects, currency fluctuations, requirements
for additional capital, government regulation of mining operations, environmental risks and hazards, title disputes or claims and limitations on insurance coverage.
These factors are discussed in greater detail in Argonaut’s (i) most recent Annual Information Forms, and (ii) most recent Management Discussion and Analysis,
which are each filed on Argonaut’s respective SEDAR profiles and provide additional general assumptions in connection with these statements.
Although the Corporation has attempted to identify important factors that could cause actual results to differ materially, there may be other factors that cause results
not to be as anticipated, estimated, or intended. There can be no assurance that such information will prove to be accurate as actual developments or events
could cause results to differ materially from those anticipated. These include, among others, the factors described or referred to elsewhere herein, and include
unanticipated and/or unusual events. Many of such factors are beyond the Corporation’s ability to predict or control.
Readers of this report are cautioned not to put undue reliance on forward-looking information due to its inherent uncertainty. The Corporation disclaims any intent or
obligation to update any forward-looking information, whether as a result of new information, future events or results or otherwise, unless required under applicable
laws. This forward-looking information should not be relied upon as representing management’s views as of any date subsequent to the date of this report.
39
NON-IFRS MEASURES
The Company has included certain non-IFRS measures including “Cash cost per gold ounce sold”, “All-in sustaining cost per gold ounce sold”, “Adjusted net
income”, “Adjusted earnings per share - basic” and “Net cash” in this MD&A to supplement its financial statements which are presented in accordance with IFRS.
The Company believes that these measures provide investors with an alternate view to evaluate the performance of the Company by providing information on
control of production costs, trends in cash costs of the Company and the underlying operating performance of the core mining business. Management also uses
these measures to monitor internal performance. 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.
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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
CORPORATE OFFICES
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(416) 915-3107
info@argonautgold.com