Construction costs for the Magino gold mine in Ontario have risen significantly from C$510 million to C$800 million, Argonaut Gold said.
Argonaut Gold also fired the company’s chief executive and founder, Pete Dougherty, effective immediately, and had yet to name an interim or permanent chief executive.
Project cost overruns of approximately C$94 million are largely due to cost increases due to inflation and the COVID-19 pandemic, accounting for 32% of the increase. Approximately 28% of the increase is related to site development, the tailings management facility and permanent electricity. Another 20% of the increase is linked to the increase in the quantities required for the development of the site.
The project is late, but it is more economical to continue to develop the mine than to abandon it, Argonaut Gold said. The first gold pour is now expected at the end of March 2023.
Regarding site development, Argonaut Gold is required to construct 11 water dams for water management, which was not anticipated in its October 2020 projections.
The additional costs related to securing electricity stem from difficulties in upgrading the current system. Argonaut now plans to use an on-site liquefied natural gas power plant, bringing costs down from C$18 million to C$41 million.
General and administrative expenses increased from C$25 million to C$55 million, an increase due to COVID-19 testing projects and increased labor requirements to maintain schedule of the project.
Argonaut estimates that overhead costs for the project will increase from C$75 million to C$132 million due to additional services required at the main camp and additional costs for a temporary camp for Argonaut’s earthmoving contractor.
The cost of the tailings management facility has increased from C$45.77 million to C$130 million, due to a change in scope to include bedrock cleanup and slush slurry, as well as ‘increased amount of sand cement bentonite.
By the end of 2021, Argonaut will have already spent C$342 million on Magino. Argonaut plans to spend C$424 million in 2022 and C$35 million in the first half of 2023 to complete the project.
Argonaut said it has approximately US$230 million combined in cash and a revolving credit facility. However, the company expects a funding shortfall due to the current gold price. Argonaut is reviewing its financing and its strategic alternatives.