Argonaut Gold (AR.TO) has released the results of a pre-feasibility study on the Magino Gold project in Ontario. The base case envisages a production rate of 127,000 ounces of gold per year at a cash cost of almost $700/oz. As the initial capital expenditures are approximately $356M, the payback period is just over 4 years and the IRR comes in at 18%. This is quite a disappointing result as the after-tax NP7% is just $199M. This is lower than the total price tag of Prodigy Gold as Argonaut paid a total consideration of $310M to acquire Prodigy and the Magino Project which was its flagship asset.
The first seven years are the most important years as the average annual production is approximately 185,000 ounces of gold per year, which will fall back to less than 75,000 ounces per year from the eighth year of operations.
> Click here to read the press release
Disclosure: The author holds no position in Argonaut Gold. Please see our disclaimer for current positions.
