Argonaut Gold (TSX: AR) has closed the sale of a 2% net smelter return royalty on its Magino project and surrounding land package in Ontario to Franco-Nevada (TSX: FNV) for US$52.5 million and a US$10 million equity private placement. Argonaut issued 34.69 million common shares to Franco-Nevada at a price of $0.3931 per share.
In addition, the company has closed its previously announced US$250 million loan facility, and drawn down the first tranche of US$80 million, which it has used to repay the outstanding balance on its former revolving credit facility. The facility consists of a US$200 million term loan and a US$50 million revolving credit facility. The funds will be used to develop and build Magino.
“In completing this financing, Argonaut expects to meet all future financial obligations related to Magino construction and banking covenants while also maintaining a high level of financial flexibility,” Larry Radford, Argonaut’s president and CEO, stated in a news release.
Radford replaced the company’s founder and former president and CEO, Peter Dougherty. Dougherty stepped down in December 2021 and Radford was appointed to the post earlier this year in March.
The Magino mine property is a past-producing underground gold mine that Argonaut acquired in December 2012. It published a feasibility study on an open-pit mining scenario in December 2017.
The 100%-owned project is 40 km northeast of the town of Wawa, about 14 km southeast of the town of Dubreuilville, and less than one km from Alamos Gold’s (TSX: AGI; NYSE: AGI) Island gold mine.
Magino has proven and probable reserves of 58.9 million tonnes grading 1.13 grams gold per tonne for 2.14 million oz. of contained gold. Measured and indicated resources, inclusive of reserves, stand at 144 million tonnes grading 0.91 gram gold for 4.19 million gold ounces.
As part of its loan facility, Argonaut has hedged 25,000 oz. gold per quarter for the six quarters starting in the third quarter of 2023 at a gold price of US$1,860 per ounce and 15,000 gold ounces per quarter for the ten quarters starting in the first quarter of 2025 at the same gold price. In addition, it has hedged 10,000 gold ounces per quarter for the 10 quarters starting in the first quarter of 2025 at a gold price of US$1,763 per ounce.
At presstime in Toronto Argonaut was trading at 39¢ per share within a 52-week range of 36¢ and $4.09. the company has about 299 million common shares outstanding for a market cap of roughly $298.3 million.