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Argonaut Gold reports lower production and net income in first quarter, flags cost pressures at Magino

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(Kitco News) - Argonaut Gold (TSX: AR) today announced production of 55,516 gold equivalent ounces (GEO) in Q1 2022, representing a 7% decrease over Q1 2021 (59,704 GEO).

The company said that the decrease in GEO production was primarily related to lower gold grades processed at La Colorada and lower recoveries at Florida Canyon due to processing more run-of-mine ore. 

All-in sustaining costs per gold ounce sold ("AISC") were $1,430 compared to an AISC of $1,318 during the first quarter 2021. Higher costs were primarily related to higher mining rates at El Castillo and La Colorada due to higher strip ratios, higher reagent costs across all operations and lower gold ounces sold.    

The company's revenue for the first quarter of 2022 was $105.8 million, relatively in line with $105.3 million in the first quarter of 2021. 

Net income was $5.6 million or earnings per basic share of $0.02, compared with net income of $27.0 million or earnings per basic share of $0.09 in Q1 2021, primarily due to a $2.5 million loss on derivatives in the first quarter of 2022 compared to an $18.8 million gain on derivatives in the first quarter 2021 as well as higher operating costs.

Adjusted net income for the first quarter of 2022 was $8.2 million or $0.03 per basic share, an increase from adjusted net income of $7.0 million or $0.02 per basic share for the first quarter of 2021.

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President and CEO Larry Radford stated, "My focus since my appointment has been primarily on the Magino construction project.  The mining industry is experiencing extraordinary cost pressures and Magino is no exception. We have looked at costs internally and with the assistance of outside experts and are looking at all aspects of the project to understand risks and opportunities. While the updated EAC is not yet finalized, we expect it is likely to be approximately 15% higher than the C$800 million estimated prior to my appointment."

He added that the company continues to advance financing options in parallel with strategic alternatives and, in order to continue to advance the Magino construction project on schedule, the company's goal is to have a solution in place by the end of the second quarter 2022.

Argonaut Gold 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, the advanced exploration stage Cerro del Gallo project and several other exploration stage projects, all of which are located in North America.

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