Argonaut Gold Inc.
Q1 2021 Earnings Call Transcript

Published: 9 May 2021

[Operator:]

Morning. My name is Christie and I will be your conference operator today. At this time, I would like to welcome everyone to the Argonaut’s Q1 2021 Financial Results Conference Call and Webcast. All lines have been placed on mute to prevent any background noise. After the speaker’ remarks, there will be a question-and-answer session. . Thank you. Mr. Dougherty, you may begin your conference.

[Peter Dougherty:]

Thank you, Christie and welcome everyone to Argonaut’s Q1 financial and operating results conference call and webcast. I want to thank everyone for taking the time to join the call today. Today we are going to walk through the Q1 results which yielded record production and revenue.

[Dave Ponczock:]

Thanks Pete. Please turn to the next slide Financial Performance. During the first quarter, we sold 59,116 gold equivalent ounces, leading to record quarterly revenue of $105 million. We generated a net income of $27 million or $0.09 per share and had a strong cash flow of nearly $28 million. We ended Q1 with $227 million in cash and cash equivalents. Please turn the next slide.

[Peter Dougherty:]

Thank you, Dave. As we look back over the past year, it has been an amazing year for the company. We have been able to achieve last year record production for the company, record quarterly production in the fourth quarter and now here again in the first quarter, another record quarter for production, with nearly 60,000 gold equivalent ounces produced. Overall, production was up 44% over Q1 of 2020, with all-in sustaining costs falling 1%. The three mines in Mexico are meeting or exceeding expectations at this time. Our Florida Canyon project had a tough start to the quarter. And has shown month over month improvement throughout the quarter and into April. In early Q1, we were coming off the holiday season and to begin this quarter, we were at times without 10% of our workforce due to COVID contact tracing here in Nevada. This meant that we didn't have the people necessary to run all the equipment to move the material, we would have liked to have moved and get the production out of Florida Canyon, we were hoping for. We recognize that we need a big step change at Florida Canyon. And this will come once we have the convenience stacking system in place and ramped up. I'll talk about this a little bit more shortly. Let's please turn to Slide number 10, if we can. Slide number 10, Q1 2021 and recent CSR highlights. I want to take a moment and recognize the hard work that our team has done and continues to do with respect to our environmental and social responsibility initiatives. On this slide, you can see examples of some of the initiatives, whether it be the new solar farm at La Colorada or the other community initiatives that we are embracing.

[Operator:]

Thank you. And you have a question from Eric Winmill of Scotiabank.

[Peter Dougherty:]

Morning Eric.

[Eric Winmill:]

Morning, guys. Thanks for taking my question. Just quick question. There's obviously lots of chatter about inflation these days. I appreciate the comments in the presentation, but just wondering if you can touch on any sort of supply constraints, you're seeing in Magino, or any sort of cost pressures in particular that you're especially concerned about or tracking closely?

[Peter Dougherty:]

Yeah, Eric, as we stated, we think we're within that 15%. But I actually have with me this morning, Bob Rose, our Vice President Technical Services, who's over the construction and management of this. So, lets him answer what we're starting to see. But I think things are tracking nicely. Bob?

[Bob Rose:]

Thank you, Pete. Certainly, there are some inflationary pressures. I think one of the advantages that we've got at the moment is that with our fixed price contract with Ausenco, they are actually managing much of the purchasing of the items that potentially have that problem. We're certainly seeing fuel prices that move around. And some of the movement of materials is certainly becoming more difficult. So, it's certainly there. And that's part of what we're planning around right at the moment, we can see that you need to look ahead. Shipping times are extended, obviously, costs are going up. But again, much of that is within Ausenco’s ballpark. And they're very much on top of it right now.

[Peter Dougherty:]

Eric, and as you know, with the Ausenco contract, that is a fixed price bid, so they have locked most of that those longer lead items in and it's now setting up the shipping times to coordinate that within the time and scope and frame that they have to deliver. Because as you're aware with these fixed price bids, there is requirements for them to hit various milestones. And if they delayed, there are also penalties associated with that getting this completed on time.

[Eric Winmill:]

Okay, that's great. Thank you, really appreciate the added color. Maybe longer a similar sort of vein, just quickly on exploration. How are you seeing your turnaround time on the assay labs? And are you seeing any pressures there as well, in terms of getting quick turnaround?

[Peter Dougherty:]

Well, Eric, again, I have the resident expert on this here and Brian Arkell, our Vice President Exploration. He's been in this business for nearly 40 years. So, if anybody knows what's happening, and how to get things lined up, drills, and assays, et cetera he's the man. So, let's turn it over to him. Brian?

[Brian Arkell:]

Yeah, hi, Eric. We're seeing some pressure, but it's not bad at all. We have about a one month turnaround time up in Canada, with our SA lab and we get priority there because we have a pretty long standing relationship with those guys. And down in Mexico, we're seeing a three-week turnaround. So, Mexico is not bad at all and Canada is about down normal one month.

[Eric Winmill:]

Okay, great stuff. Again, appreciate that. That's it for me. Thanks a lot, everyone. Cheers.

[Peter Dougherty:]

Thank you.

[Operator:]

Thank you. Your next question is from Gabriel Gonzalez of Echelon Capital.

[Gabriel Gonzalez:]

Good morning, everyone. Good morning. Congratulations on another fun quarter. I wanted to ask, just following up a little bit on the question about the cost pressures. Just wondering and bearing in mind that the review that is ongoing with respect to costs is not completed and an ongoing process. But I was just wondering, is there any thought to the potential impact of a rising Canadian dollar in offsetting -- potentially offsetting some cost inflation? Is there a Delta or a sensitivity around that, that you'd be able to speak to?

[Peter Dougherty:]

Gabriel, the interesting thing with this project is, it is a Canadian project in every sense, where out of that $480 million to $510 million that we're looking at Canadian, over 85% of this project looks to be in Canadian dollars. Okay. The biggest U.S. dollar impact here that we're looking at would be for the mining fleet itself. So that FX trade, I'm sure that Ausenco has an FX trade issue for themselves. But that being a fixed bid contract in Canadian dollar terms to us, really locks in this as a Canadian dollar denominated project.

[Gabriel Gonzalez:]

Okay, perfect. Sounds good. And actually, that's it for me questions. Pardon me. That's it for me for my questions. Thank you very much Pete. Really appreciate the answer.

[Peter Dougherty:]

All right. Okay, thank you.

[Operator:]

. And we have no further questions at this time.

[Peter Dougherty:]

Okay, thank you, Christie. And thank you all of those who have joined us with this morning or those who may listen in the future that have been supporting us here at Argonaut. We appreciate your support. We look forward to Q2 as we continue to ramp up the operations and push forward on these initiatives that we're seeing with the construction happening at Magino. And the exciting things that will be occurring there as we head into Q2 where we're actually starting to pour cement and starting to see buildings start to come to life. And then with the exciting drill results that will be coming out of the drill programs that Brian and the teams are leading as we continue to explore and understand better, not only La Colorada, but Florida Canyon, Standard mine and then also at Magino. So again, thank you for all your support. And we look forward to talking to you in the upcoming quarter. Thank you.

[Operator:]

Thank you. This does conclude today's conference call. You may now disconnect.