Argonaut Gold to double share count with equity raise for Magino build

Argonaut Gold (TSX: AR) has entered into an agreement with banks and financial institutions to issue 434 million common shares to help it finance the final construction of its Magino gold mine in Ontario.

Argonaut's 100%-owned Magino mine is an underground, past-producing project located about 40 km northeast of Wawa. Construction to bring mine back into production as an open pit operation has been ongoing since October 2020.

In a news release Thursday night, Argonaut said the shares would be offered for 45 ? each, for gross proceeds of about $195 million. The offering is expected to close on July 5, and the company is seeking a "financial hardship" exemption from the Toronto Stock Exchange to complete the financing without shareholder approval. The financing will more than double Argonaut's outstanding common shares, currently around 333 million. It would also see the company's largest shareholder, GMT Capital, with a 27.5% share of the company, up from its current 20.3% holding.

Construction at Argonaut Gold's Magino gold mine in Ontario. Credit: Argonaut Gold

Its agreement partners include BMO Capital Markets, Scotiabank, Cormark Securities, Canaccord Genuity Corp., RBC Capital Markets, Desjardins Capital Markets, Echelon Wealth Partners, Laurentian Bank Securities, Paradigm Capital, and Stifel GMP.

The share deal is in addition to a US$250-million debt financing agreement made with several lenders that is intended to help Argonaut pay off its debts and finance development and expansion at Magino and other producing assets.

The financing deal includes a six-year, US$200-million term loan credit facility and a US$50-million three-year revolving credit facility.

Argonaut president and CEO Larry Radford said the debt financing agreement and proposed equity financing "will put Argonaut Gold in a strong financial position to complete the Magino project and move it forward into production by the end of Q1 2023."

After acquiring Magino in 2012, Argonaut began construction in 2020, when development costs were estimated at about $510 million. A little more than one year later, the capital cost estimate rose by 57% to $800 million. In May 2022, the miner again updated costs to $920 million.

Magino is on schedule for the first gold pour by the end of March 2023, Argonaut said.

Construction at Argonaut Gold's Magino gold mine in Ontario as of May 2022. Credit: Argonaut Gold

Argonaut also completed a-bought deal private placement of 19.8 million flow-through common shares for total proceeds of $51.8 million in March. That included the full exercise of an over-allotment option to purchase another 2.6 million shares.

That placement was made between Argonaut and several underwriters led by BMO Capital Markets, and including Cormark Securities, Canaccord Genuity, RBC Dominion Securities, Scotia Capital and Echelon Wealth Partners.

A feasibility study for Magino published in December 2017 outlined an open-pit project, with measured and indicated resources of 144 million tonnes grading 0.91 gram gold per tonne for 4.2 million oz. of contained gold. Its mine life is estimated to be 19 years.

Argonaut's portfolio includes several producing gold mines: the El Castilo mine complex in Durango, Mexico; the La Colorada mine in Sonora state; and Florida Canyon, in Nevada.

Argonaut shares closed the day at 58 ? apiece. The stock has traded in a 52-week range of 43.5 ?-$4.09. Argonaut has a market capitalization of $193 million.