Argonaut_Gold_and_Pr.. - Argonaut Gold Inc.
Argonaut_Gold_and_Pr.. - Argonaut Gold Inc.
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<strong>Argonaut</strong> <strong>and</strong> <strong>Pr</strong>odigy Announce Business Combination<br />
TSX:AR TSX:AR.WT<br />
<strong>Argonaut</strong><strong>Gold</strong>.com<br />
October 15, 2012<br />
1
Cautionary Forward Looking Statements<br />
All monetary amounts in U.S. dollars unless otherwise stated<br />
FORWARD-LOOKING STATEMENT<br />
This document contains certain “forward-looking statements” <strong>and</strong> “forward-looking information” under applicable Canadian securities laws concerning the proposed transaction <strong>and</strong> the business, operations <strong>and</strong><br />
financial performance <strong>and</strong> condition of each of <strong>Argonaut</strong> <strong>Gold</strong> <strong>Inc</strong>. (“<strong>Argonaut</strong> <strong>Gold</strong>”) <strong>and</strong> <strong>Pr</strong>odigy <strong>Gold</strong> <strong>Inc</strong>orporated (“<strong>Pr</strong>odigy”). Forward-looking statements <strong>and</strong> forward-looking information include, but are not limited<br />
to, statements with respect to the Arrangement, development <strong>and</strong> estimated production <strong>and</strong> mine life of the various mineral projects of <strong>Argonaut</strong> <strong>Gold</strong> <strong>and</strong> <strong>Pr</strong>odigy; synergies <strong>and</strong> financial impact of the Arrangement;<br />
the benefits of the development potential of the properties of <strong>Argonaut</strong> <strong>Gold</strong> <strong>and</strong> <strong>Pr</strong>odigy; the future price of gold, copper, <strong>and</strong> silver; the estimation of mineral reserves <strong>and</strong> resources; the realization of mineral reserve<br />
estimates; the timing <strong>and</strong> amount of estimated future production; costs of production; success of exploration activities; <strong>and</strong> currency exchange rate fluctuations. Except for statements of historical fact relating to<br />
<strong>Argonaut</strong> <strong>Gold</strong> <strong>and</strong> <strong>Pr</strong>odigy, certain information contained herein constitutes forward-looking statements. Forward-looking statements are frequently characterized by words such as “plan,” “expect,” “project,” “intend,”<br />
“believe,” “anticipate”, “estimate” <strong>and</strong> other similar words, or statements that certain events or conditions “may” or “will” occur. Forward-looking statements are based on the opinions <strong>and</strong> estimates of management at<br />
the date the statements are made, <strong>and</strong> are based on a number of assumptions <strong>and</strong> subject to a variety of risks <strong>and</strong> uncertainties <strong>and</strong> other factors that could cause actual events or results to differ materially from<br />
those projected in the forward-looking statements. Assumptions upon which such forward-looking statements are based include that all required third party, court, regulatory <strong>and</strong> governmental approvals to the<br />
Arrangement will be obtained <strong>and</strong> all other conditions to completion of the transaction will be satisfied or waived, that actual results of exploration activities will be as expected, that proposed mine plans <strong>and</strong> recoveries<br />
will be achieved, that capital costs <strong>and</strong> sustaining costs will be as estimated, that the assumptions underlying mineral resource estimates are valid, that <strong>Argonaut</strong> <strong>Gold</strong> <strong>and</strong> <strong>Pr</strong>odigy will not experience unforeseen<br />
accident, fire, ground instability, flooding, labor disruption, equipment failure, or adverse metallurgical or environmental events, <strong>and</strong> that supplies, equipment, personnel, permits <strong>and</strong> other approvals required to<br />
conduct planned activities will be available on reasonable terms. Many of these assumptions are based on factors <strong>and</strong> events that are not within the control of <strong>Argonaut</strong> <strong>Gold</strong> or <strong>Pr</strong>odigy <strong>and</strong> there is no assurance they<br />
will prove to be correct.<br />
Factors that could cause actual results to vary materially from results anticipated by such forward-looking statements include non-completion of the Arrangement, changes in market conditions, variations in ore grade<br />
or recovery rates, risks relating to international operations, fluctuating metal prices <strong>and</strong> currency exchange rates, changes in project parameters, the possibility of project cost overruns or unanticipated costs <strong>and</strong><br />
expenses, labour disputes <strong>and</strong> other risks of the mining industry, failure of plant, equipment or processes to operate as anticipated. Although <strong>Argonaut</strong> <strong>Gold</strong> <strong>and</strong> <strong>Pr</strong>odigy have each attempted to identify important<br />
factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be anticipated,<br />
estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate, as actual results <strong>and</strong> future events could differ materially from those anticipated in such statements.<br />
<strong>Argonaut</strong> <strong>Gold</strong> <strong>and</strong> <strong>Pr</strong>odigy undertake no obligation to update forward-looking statements if circumstances or management’s estimates or opinions should change except as required by applicable securities laws. The<br />
reader is cautioned not to place undue reliance on forward-looking statements. Statements concerning mineral reserve <strong>and</strong> resource estimates may also be deemed to constitute forward-looking statements to the<br />
extent they involve estimates of the mineralization that will be encountered if the property is developed. Comparative market information is as of a date prior to the date of this document.<br />
CAUTIONARY NOTE TO U.S. INVESTORS CONCERNING ESTIMATES OF MEASURED, INDICATED AND INFERRED RESOURCES<br />
This presentation uses the terms “Measured”, “Indicated” <strong>and</strong> “Inferred” Resources as defined in accordance with National Instrument 43‐101 – St<strong>and</strong>ards of Disclosure for Mineral <strong>Pr</strong>ojects. United States readers are<br />
advised that while such terms are recognized <strong>and</strong> required by Canadian securities laws, the United States Securities <strong>and</strong> Exchange Commission does not recognize them. Under United States st<strong>and</strong>ards,<br />
mineralization may not be classified as a “reserve” unless the determination has been made that the mineralization could be economically <strong>and</strong> legally produced or extracted at the time the reserve calculation is made.<br />
United States readers are cautioned not to assume that all or any part of the mineral deposits in these categories will ever be converted into reserves. In addition, “Inferred Resources” have a great amount of<br />
uncertainty as to their existence, <strong>and</strong> as to their economic <strong>and</strong> legal feasibility. It cannot be assumed that all or any part of an Inferred Resource will ever be upgraded to a higher category. United States readers are<br />
also cautioned not to assume that all or any part of an Inferred Resource exists, or is economically or legally mineable.<br />
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October 15, 2012<br />
2
Transaction Rationale for <strong>Argonaut</strong><br />
Shareholders<br />
Multi-million ounce deposit with tremendous grade flexibility<br />
Growth beyond <strong>Argonaut</strong>'s existing organic growth profile<br />
Entry into another of the world's most supportive mining jurisdictions<br />
Significantly accretive to all of <strong>Argonaut</strong>'s per share metrics<br />
Once pre-production projects have been developed, <strong>Argonaut</strong> is expected to fulfill its stated<br />
goal of 300 - 500k oz per year of production <strong>and</strong> enter the ranks of the intermediate<br />
producers<br />
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October 15, 2012<br />
3
Transaction Rationale for <strong>Pr</strong>odigy<br />
Shareholders<br />
Significant premium of 54% to <strong>Pr</strong>odigy based on both companies 20-day VWAPs as at<br />
October 12, 2012<br />
<strong>Pr</strong>ovides <strong>Pr</strong>odigy shareholders with exposure to current production <strong>and</strong> strong gold price<br />
environment, <strong>and</strong> continued growth<br />
Substantially decreases the financing risk for Magino<br />
Leverages <strong>Argonaut</strong>'s highly experienced <strong>and</strong> successful management team to develop<br />
Magino<br />
<strong>Argonaut</strong>'s shares provide improved trading liquidity for <strong>Pr</strong>odigy shareholders<br />
4<br />
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October 15, 2012<br />
4
Transaction Overview<br />
Offer Terms<br />
• 0.1042 of an <strong>Argonaut</strong> share <strong>and</strong> C$0.0001 cash for each <strong>Pr</strong>odigy share<br />
• Friendly plan of arrangement<br />
• <strong>Pr</strong>o forma ownership: 78% <strong>Argonaut</strong> / 22% <strong>Pr</strong>odigy (1)<br />
Key Conditions<br />
• 66 ⅔ <strong>Pr</strong>odigy shareholder approval<br />
• 50.1% <strong>Argonaut</strong> shareholder approval<br />
• Stock exchange <strong>and</strong> court approvals<br />
Other Terms<br />
Indicative Timeline<br />
• Unanimous <strong>Argonaut</strong> <strong>and</strong> <strong>Pr</strong>odigy board approval<br />
• No solicitation <strong>and</strong> 5 business day right to match Superior <strong>Pr</strong>oposal<br />
• Termination fee of C$10.25 million payable under certain circumstances<br />
• <strong>Pr</strong>odigy options <strong>and</strong> warrants roll at exchange ratio<br />
• Support agreements signed by <strong>Pr</strong>odigy’s management <strong>and</strong> board<br />
• <strong>Pr</strong>odigy to receive one Board seat on <strong>Argonaut</strong> Board<br />
• Mailing of Circular: November 2012<br />
• <strong>Argonaut</strong> <strong>and</strong> <strong>Pr</strong>odigy shareholder votes: December 2012<br />
• Transaction close: December 2012<br />
1. Based on share capital as of June 30, 2012, adjusted for subsequent events on a fully diluted in-the-money basis 5<br />
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October 15, 2012<br />
5
<strong>Pr</strong>o Forma Capitalization <strong>and</strong> Balance<br />
Sheet<br />
<strong>Argonaut</strong> <strong>Pr</strong>odigy Combined<br />
TSX Share <strong>Pr</strong>ice (12-October-12) (C$) $10.48 $0.69 n.a.<br />
Basic Shares Outst<strong>and</strong>ing (1) (mm) 93 293 123<br />
FD ITM Shares Outst<strong>and</strong>ing (1) (mm) 118 307 151<br />
Basic Market Capitalization (1) (C$ mm) $970 $202 $1,173<br />
FD ITM Market Capitalization (1) (C$ mm) $1,242 $212 $1,454<br />
Cash (2) (C$ mm) $42 $50 $93<br />
Cash including <strong>Pr</strong>oceeds from<br />
ITM Instruments (2) (C$ mm) $159 $57 $220<br />
YTD Avg. Daily Value Traded (C$ mm) $5.7 $0.3 $6.0<br />
Source: Bloomberg, Company Filings, FactSet<br />
1. Based on closing prices as of October 12, 2012 on the TSX <strong>and</strong> TSX Venture Exchange <strong>and</strong> share capital as of June 30, 2012, adjusted for subsequent events<br />
2. Based on September 30, 2012 financial for <strong>Argonaut</strong> balance <strong>and</strong> June 30, 2012 financials for <strong>Pr</strong>odigy balance, adjusted for subsequent events<br />
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October 15, 2012<br />
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Ability for <strong>Pr</strong>odigy Shareholders to<br />
Participate in <strong>Argonaut</strong> Portfolio<br />
Share <strong>Pr</strong>ice<br />
Volume<br />
<strong>Pr</strong>ice<br />
Share <strong>Pr</strong>ice (C$)<br />
$12<br />
$9<br />
$6<br />
$3<br />
Completes<br />
compulsory<br />
acquisition of<br />
Castle <strong>Gold</strong><br />
Announces business<br />
combination with Pediment <strong>Gold</strong><br />
Releases updated resources for<br />
El Castillo highlighted by a<br />
doubling of reserves<br />
Releases La Colorada PEA with<br />
first production in early Q2 2012<br />
Announces updated PEA for the<br />
San Antonio project<br />
8<br />
6<br />
4<br />
2<br />
Volume (millions)<br />
--<br />
--<br />
Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12<br />
<strong>Pr</strong>emium Received by Pediment Shareholders<br />
Current Board <strong>and</strong> Select Management <strong>Pr</strong>ofile<br />
Share <strong>Pr</strong>ice Day<br />
<strong>Pr</strong>ior to<br />
Announcement<br />
1 – Day <strong>Pr</strong>emium Implied Current <strong>Pr</strong>emium<br />
51% 285%<br />
Name Title Description<br />
Brian Kennedy Chairman Former <strong>Pr</strong>esident <strong>and</strong> CEO of Meridian <strong>Gold</strong><br />
Peter Dougherty<br />
<strong>Pr</strong>esident, CEO &<br />
Director<br />
Former VP of Finance <strong>and</strong> CFO of Meridian <strong>Gold</strong><br />
Thomas Burkhart VP Exploration Over 30 years of experience in mineral exploration<br />
Richard Rhoades COO Former General Manager <strong>and</strong> Director of Mine Planning for Asarco<br />
$6.55<br />
Curtis Turner<br />
Corporate<br />
Development Officer<br />
Former Director of Finance of Yamana <strong>Gold</strong> <strong>and</strong> Corporate Controller<br />
of Meridian <strong>Gold</strong><br />
$1.70<br />
$2.56<br />
James Kofman<br />
Christopher<br />
Lattanzi<br />
Director<br />
Director<br />
Vice-Chairman, Cormark Securities <strong>and</strong> Chairman, ZENN Motor<br />
Company<br />
Former <strong>Pr</strong>esident of Micon International <strong>and</strong> Director of Meridian <strong>Gold</strong><br />
<strong>Pr</strong>e Announce<br />
Share <strong>Pr</strong>ice<br />
Source: Bloomberg, Company Filings<br />
1-Day Transaction<br />
Consideration<br />
Current Implied<br />
Consideration<br />
Dale Peniuk<br />
Director<br />
Current Director of Capstone Mining, Lundin Mining, Rainy River<br />
Resources <strong>and</strong> Sprott Resource Lending<br />
Peter Mordaunt Director Founder <strong>and</strong> former <strong>Pr</strong>esident <strong>and</strong> CEO of Stingray Copper<br />
7<br />
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October 15, 2012<br />
7
<strong>Argonaut</strong> Q3 Results<br />
Record gold production of 31,074 ounces <strong>and</strong> record sales of 42,534<br />
ounces during Q3<br />
<br />
<br />
<br />
<br />
Highlights<br />
‣ <strong>Inc</strong>luded 24,575 ounces at El Castillo <strong>and</strong> 6,499 ounces at La Colorada<br />
‣ La Colorada also produced 41,937 ounces of silver<br />
El Castillo<br />
‣ <strong>Gold</strong> production for the quarter at El Castillo represented a 46%<br />
improvement over Q3 2011<br />
‣ Conveying <strong>and</strong> stacking system on the east pad fully functional for Q3<br />
La Colorada<br />
‣ <strong>Gold</strong> production for the quarter at La Colorada represented a 42%<br />
improvement over the prior quarter, <strong>and</strong> silver production represented a<br />
63% increase<br />
‣ With the refining facility at La Colorada now in place, the stripping <strong>and</strong><br />
refining process for both El Castillo <strong>and</strong> La Colorada has been<br />
accelerated<br />
Fourth Quarter Outlook<br />
‣ El Castillo production estimates of 22,000 - 23,000 ounces of gold<br />
‣ La Colorada production estimate of 3,000 - 4,000 ounces of gold<br />
Full year Outlook<br />
‣ El Castillo: 84,000 - 85,000 ounces of gold<br />
‣ La Colorada: 17,000 - 18,000 ounces of gold<br />
‣ Total guidance for 2012 of 101,000 - 103,000 ounces of gold, increased<br />
from 88,000 – 97,000 previously<br />
10,242 10,066<br />
12,724<br />
18,300 18,064 17,453 16,884<br />
19,700<br />
17,799<br />
19,533<br />
20,500<br />
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3<br />
Guidance<br />
3,085<br />
El Castillo <strong>Pr</strong>oduction (oz Au)<br />
2010 2011 2012<br />
La Colorada <strong>Pr</strong>oduction (oz Au)<br />
4,590<br />
3,000<br />
6,499<br />
Q1 Q2 Q3 Guidance Q3 Actual<br />
2012<br />
24,575<br />
Q3<br />
Actual<br />
Source: Company Filings<br />
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8
Overview of <strong>Pr</strong>odigy’s Assets<br />
Description Magino <strong>Pr</strong>oduction <strong>Pr</strong>ofile (Au k oz) (1)<br />
<br />
<br />
<br />
<br />
<strong>Pr</strong>odigy’s flagship asset is the Magino gold project, located in Ontario<br />
‣ A former producing underground mine with total production of 105k oz Au from<br />
1988-1992 currently designated as an “inactive mine”, facilitating permitting<br />
process<br />
‣ Located approximately 40km northeast of Wawa <strong>and</strong> in close proximity to<br />
excellent infrastructure (road, rail, power, etc.)<br />
On December 22, 2011, <strong>Pr</strong>odigy released an updated <strong>Pr</strong>eliminary Economic<br />
Assessment (“PEA”):<br />
‣ <strong>Pr</strong>e-tax NPV of C$939 mm <strong>and</strong> pre-tax IRR of 36% (US$1,200/oz gold price <strong>and</strong><br />
0.93 USD:CAD exchange ratio)<br />
‣ LOM average gold production of 249k oz per year over 11 year mine life at cash<br />
costs of US$461/oz (C$496/oz) – LOM production of 2.6 million ounces at 1.15 g/t<br />
‣ Total development capital expenditures of C$404 mm with LOM sustaining capital<br />
expenditures of C$145 mm<br />
‣ 20,000 tpd mill achieving 95% recoveries<br />
‣ The December 2011 PEA is shown here for comparative purposes only, readers<br />
should note that the current technical report states as the new resource estimate<br />
is significantly different from the existing one, the mine plan <strong>and</strong> process<br />
disclosure in the PEA is no longer current; <strong>Pr</strong>odigy is currently working on<br />
prefeasibility study which will supersede previous technical reports<br />
On August 20, 2012, <strong>Pr</strong>odigy released an updated resource estimate for Magino<br />
‣ Based on 0.35 g/t cut-off, indicated resources of 6.3 mm oz in 223 mm tonnes at<br />
0.87 g/t (previously 2.2 mm oz at 1.0 g/t) <strong>and</strong> inferred resources of 0.4 mm oz in<br />
14 mm tonnes at 0.80 g/t (previously 1.7 mm oz at 0.99g/t)<br />
<strong>Pr</strong>odigy also has ownership or option interests in the Hercules, Highl<strong>and</strong> <strong>Gold</strong>, West<br />
Porcupine, <strong>and</strong> Akweska Lake properties<br />
367<br />
232<br />
252<br />
240 243<br />
Year 1 Year 2 Year 3 Year 4 Year 5<br />
0.35 g/t Cutoff<br />
Tonnage<br />
(mm tonnes)<br />
Measured<br />
& Indicated<br />
Grade<br />
(g/t)<br />
Magino Resource<br />
Au<br />
Cont.<br />
(k oz)<br />
223 0.87 6,251<br />
Inferred 14 0.80 355<br />
1.00 g/t Cutoff<br />
Tonnage<br />
(mm tonnes)<br />
Measured<br />
& Indicated<br />
Grade<br />
(g/t)<br />
Au<br />
Cont.<br />
(k oz)<br />
55 1.69 3,005<br />
Inferred 3 1.71 154<br />
Source: Company Filings, Equity Research<br />
1. <strong>Pr</strong>oduction schedule based on February 2012 Magino PEA 9<br />
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9
Significant Impact on <strong>Argonaut</strong><br />
Portfolio<br />
Measured & Indicated Resources (1)<br />
0.35 g/t Cutoff 1.00 g/t Cutoff<br />
12,663<br />
99%<br />
9,417<br />
<strong>Pr</strong>oduction Growth <strong>Pr</strong>ofile (k oz)<br />
<strong>Argonaut</strong> <strong>Pr</strong>odigy San Antonio<br />
490<br />
6,355<br />
48%<br />
381%<br />
249<br />
<strong>Argonaut</strong><br />
<strong>Pr</strong>o Forma<br />
M&I Resources (Au k oz)<br />
69<br />
50%<br />
11%<br />
103<br />
76<br />
110%<br />
214<br />
56<br />
241<br />
102<br />
241<br />
(3)<br />
158<br />
<strong>Argonaut</strong><br />
<strong>Pr</strong>o Forma<br />
(2)<br />
M&I / Share (oz / 000's shares)<br />
2012<br />
(See slides “About <strong>Argonaut</strong>” <strong>and</strong> “About <strong>Pr</strong>odigy”)<br />
AR Mgmt. Guidance<br />
Source: Company Filings, Equity Research<br />
1. Resources shown inclusive of reserves<br />
2. <strong>Pr</strong>o forma shares based on current basic shares outst<strong>and</strong>ing of <strong>Argonaut</strong> <strong>and</strong> basic shares outst<strong>and</strong>ing of <strong>Pr</strong>odigy converted at a 0.1042x exchange ratio<br />
2. Midpoint of range of 17 – 18k oz for La Colorada <strong>and</strong> 84 – 85k oz for El Castillo<br />
2014<br />
AR Street Consensus<br />
(San Antonio Start-Up)<br />
2016<br />
AR Street Consensus<br />
2016<br />
AR Street Consensus<br />
- PDG PEA LOM Avg.<br />
3. The December 2011 PEA is shown here for comparative purposes only, readers should note that the current technical report states as the new resource estimate is significantly different from the existing one, the mine plan <strong>and</strong> process<br />
disclosure in the PEA is no longer current<br />
(3)<br />
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Magino Resource Flexibility<br />
Description<br />
Magino <strong>Pr</strong>oject Mineral Resource Estimate<br />
<br />
<br />
<strong>Argonaut</strong> began its due diligence investigation of<br />
Magino over 10 months ago<br />
‣ As part of that due diligence investigation<br />
<strong>Argonaut</strong> established a level of comfort on<br />
permitting risk for Magino<br />
An attractive element of Magino is that it contains<br />
tremendous grade flexibility without the loss of<br />
significant ounces<br />
‣ <strong>Pr</strong>ovides an opportunity for <strong>Argonaut</strong> to develop a<br />
mine that balances returns with scale<br />
Approach that <strong>Argonaut</strong> is targeting for development<br />
of Magino is one that focuses on a higher grade <strong>and</strong><br />
lower scale operation that can be funded out of<br />
<strong>Argonaut</strong> cash flow<br />
‣ Multiple development scenarios have been<br />
evaluated by <strong>Argonaut</strong> management in assessing<br />
the merits of this transaction<br />
<strong>Argonaut</strong> is targeting a pre-feasibility study in 2013<br />
which will explore this approach<br />
Dec 2011<br />
PEA<br />
Cutoff<br />
Grade<br />
Indicated Resource<br />
Inferred Resource<br />
Tonnes Grade Ounces Tonnes Grade Ounces<br />
(g/t) (000's) (g/t) (k oz) (000's) (g/t) (k oz)<br />
0.35 67,555 1.00 2,176 54,242 0.99 1,721<br />
Current Indicated Resource Inferred Resource<br />
Cutoff<br />
Grade<br />
Tonnes Grade Ounces Tonnes Grade Ounces<br />
(g/t) (000's) (g/t) (k oz) (000's) (g/t) (k oz)<br />
0.35 223,480 0.87 6,251 13,809 0.80 355<br />
0.40 199,897 0.92 5,913 11,920 0.87 333<br />
0.50 159,681 1.04 5,339 9,021 1.00 290<br />
0.60 128,135 1.16 4,779 7,006 1.13 255<br />
0.70 102,970 1.29 4,271 5,430 1.27 222<br />
1.00 55,306 1.69 3,005 2,795 1.71 154<br />
Source: <strong>Pr</strong>odigy SEDAR Company Filings as described on the slide “About <strong>Pr</strong>odigy”<br />
Note: The December 2011 PEA is shown here for comparative purposes only, readers should note that the current technical<br />
report states as the new resource estimate is significantly different from the existing one, the mine plan <strong>and</strong> process disclosure<br />
in the PEA is no longer current<br />
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<strong>Argonaut</strong> Can Fund Magino<br />
$700<br />
Sources of Funding (US$mm)<br />
$600<br />
$564<br />
$500<br />
$419<br />
$145<br />
$400<br />
$300<br />
$200<br />
$162<br />
$204<br />
$42<br />
$290<br />
$85<br />
$130<br />
$100<br />
$114<br />
--<br />
$47<br />
<strong>Argonaut</strong> End of Year Cash<br />
+ Dilutive Instruments<br />
<strong>Pr</strong>odigy End of<br />
Year Cash<br />
<strong>Argonaut</strong><br />
2013E FCF<br />
<strong>Argonaut</strong><br />
2014E FCF<br />
<strong>Argonaut</strong><br />
2015E FCF<br />
<strong>Argonaut</strong> expects to have sufficient cash to fund the development of Magino<br />
Source: Equity Research<br />
Note: Free cash flow estimates based on average broker estimates for operating cash flow <strong>and</strong> capital expenditures between 2012 <strong>and</strong> 2015 at broker estimated gold prices<br />
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Transaction Rationale Summary<br />
The development of Magino in combination with <strong>Argonaut</strong>'s existing projects will exp<strong>and</strong><br />
<strong>Argonaut</strong>'s production scale to that of an intermediate producer<br />
Asset portfolio diversification via a development stage asset located in Ontario<br />
Highly accretive transaction to <strong>Argonaut</strong> when considered on all relevant per share metrics<br />
<strong>Pr</strong>ovides a non-dilutive financing scenario for the development of an asset of significant<br />
scale<br />
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For Additional Information<br />
www.argonautgold.com<br />
Nichole Cowles<br />
Investor Relations Manager<br />
<strong>Argonaut</strong> <strong>Gold</strong> <strong>Inc</strong>.<br />
9604 <strong>Pr</strong>ototype Ct.<br />
Reno, NV 89521<br />
Ph.: 775-284-4422 ext. 101<br />
Cell.: 775-240-4172<br />
Fax: 775-284-4426<br />
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About The Companies<br />
About <strong>Argonaut</strong> <strong>Gold</strong><br />
<strong>Argonaut</strong> <strong>Gold</strong> is a Canadian gold company engaged in exploration, mine development <strong>and</strong> production activities. Its primary assets are the production-stage El Castillo Mine in the State of Durango, Mexico, the La<br />
Colorada Mine in the State of Sonora, Mexico, the advanced exploration stage San Antonio project in the State of Baja California Sur, Mexico, <strong>and</strong> several exploration stage projects, all of which are located in Mexico.<br />
Creating Value Beyond <strong>Gold</strong><br />
Resource Tonnes Au Ounces Ag Ounces<br />
Category<br />
Grade (g/t)<br />
Grade (g/t)<br />
Mineral Reserves<br />
Castillo - Oxide <strong>Pr</strong>oven 84,470,000 0.36 994,000<br />
Castillo - Transition <strong>Pr</strong>oven 19,180,000 0.37 228,000<br />
Sub Total <strong>Pr</strong>oven - Oxide & Transition 104,650,000 0.36 1,222,000<br />
Castillo – Oxide <strong>Pr</strong>obable 772,000 0.33 8,000<br />
Castillo – Transition <strong>Pr</strong>obable 73,000 0.35 1,000<br />
Sub Total <strong>Pr</strong>obable - Oxide & Transition 844,000 0.33 9,000<br />
Total <strong>Pr</strong>oven <strong>and</strong> <strong>Pr</strong>obable Reserves 105,495,000 0.36 1,231,000<br />
Measured <strong>and</strong> Indicated Mineral Resources<br />
(<strong>Inc</strong>luding P&P Reserves)<br />
Castillo - Oxide in Pit Measured 114,300,000 0.293 1,220,100<br />
Castillo - Oxide in Pit Indicated 4,900,000 0.293 45,700<br />
Castillo - Oxide in Pit M&I 119,200,000 0.331 1,268,000<br />
Castillo - Transition in Pit Measured 44,600,000 0.295 423,200<br />
Castillo - Transition in Pit Indicated 1,900,000 0.278 17,100<br />
Castillo - Tranistion in Pit M&I 46,500,000 0.294 439,900<br />
Total Castillo Oxide <strong>and</strong> Transition in Pit Measured 158,900,000 0.322 1,645,300<br />
Total Castillo Oxide <strong>and</strong> Transition in Pit Indicated 6,800,000 0.289 62,900<br />
Total Castillo Oxide <strong>and</strong> Transition in Pit M&I 165,700,000 0.32 1,704,700<br />
Castillo Sulphide (Global) Measured 70,600 0.328 744,800<br />
Castillo Sulphide (Global) Indicated 91,200 0.272 797,500<br />
Total Castillo Sulphide (Global) M&I 161,800,000 0.296 1,540,000<br />
San Antonio, Las Colinas - Oxide & Transition Indicated 1,910,000 0.62 38,000<br />
San Antonio, Las Colinas - Sulphide Indicated 8,103 0.69 179,000<br />
San Antonio, Los Planes - Oxide & Transition Measured 12,351,000 0.76 303,000<br />
San Antonio, Los Planes - Oxide & Transition Indicated 8,408,000 0.67 181,000<br />
San Antonio, Los Planes - Sulphide Measured 6,649,000 1.17 250<br />
San Antonio, Los Planes - Sulphide Indicated 22,065,000 0.92 653,000<br />
San Antonio, Intermediate - Oxide & Transition Indicated 643,000 0.39 8,000<br />
San Antonio, Intermediate - Sulphide Indicated 4,961,000 0.77 123,000<br />
All San Antonio Deposits - Oxide & Transition M&I 23,312,000 0.71 530,000<br />
All San Antonio Deposits - Sulphide M&I 41,778,000 0.90 1,205,000<br />
Total San Antonio Deposits - Oxide / Transition / Sulphide M&I 65,089,000 0.83 1,735,000<br />
La Colorada, Gran Central - La Colorada Indicated 29,915,053 0.724 696,336 5.1 4,905,135<br />
La Colorada, Gran Central - La Colorada Inferred 2,500,000 1.204 95,149 8.4 661,000<br />
La Colorada, El Creston Deposit Indicated 14,438,662 0.618 286,658 12.1 5,635,385<br />
La Colorada, El Creston Deposit Inferred 2,199,713 0.88 62,703 13.3 943,734<br />
La Colorada, Veta Madre Indicated 2,900,000 0.491 46,261 3.3 307,155<br />
La Colorada, Veta Madre Inferred 8,799 0.665 200 2.4 700<br />
La Colorada, ROM Pad Indicated 2,700,000 0.429 38,000 36.5 3,200,000<br />
Total La Colorada Deposits M&I 50,000,000 0.664 1,067,255 8.7 14,047,675<br />
La Fortuna Measured 1,538,000 2.956<br />
La Fortuna Indicated 3,287,000 1.533<br />
Total La Fortuna M&I 4,800,000 1.98 308,000<br />
Inferred Mineral Resources<br />
San Antonio Inferred 6,215,000 0.34 67,000<br />
La Colorada Inferred 4,700,000 1.04 158,000 10.6 1,605,000<br />
Total Inferred Resources 10,915,000 225,000 1,605,000<br />
Total Measured <strong>and</strong> Indicated Resources 447,389,000 6,354,955 14,047,675<br />
The technical information contained in this document has been prepared under supervision of, <strong>and</strong><br />
reviewed <strong>and</strong> approved by Mr. Thomas H. Burkhart, <strong>Argonaut</strong>’s Vice <strong>Pr</strong>esident of Exploration, <strong>and</strong> a<br />
qualified person as defined by National Instrument 43-101 (“NI 43-101″). For further information on<br />
the Company’s properties please see the reports as listed below on the Company’s website or on<br />
www.sedar.com:<br />
El Castillo Mine NI 43-101 Technical Report on Resources <strong>and</strong> Reserves, <strong>Argonaut</strong> <strong>Gold</strong> <strong>Inc</strong>.,<br />
El Castillo Mine, Durango State, Mexico dated November 6, 2010<br />
La Colorada<br />
NI 43-101 <strong>Pr</strong>eliminary Economic Assessment La Colorada <strong>Pr</strong>oject, Sonora,<br />
<strong>Pr</strong>operty<br />
Mexico dated December 30, 2011<br />
San Antonio<br />
Technical Report <strong>and</strong> Mineral Resource Estimate on the San Antonio <strong>Gold</strong><br />
<strong>Gold</strong> <strong>Pr</strong>oject<br />
<strong>Pr</strong>oject, Baja California Sur, Mexico dated June 30, 2011<br />
La Fortuna<br />
<strong>Pr</strong>operty La Fortuna, Durango, Mexico, Technical Report dated October 21, 2008<br />
The preliminary economic assessment is preliminary in nature, includes inferred mineral resources<br />
that are considered too speculative geologically to have the economic considerations applied to<br />
them that would enable them to be categorizes as mineral reserves, <strong>and</strong> that there is no certainty<br />
that the preliminary economic assessment will be realized.<br />
Mineral resources are not mineral reserves <strong>and</strong> do not have demonstrated economic viability.<br />
There is no certainty that all or any part of the mineral resource will be converted into mineral<br />
reserves<br />
About <strong>Pr</strong>odigy<br />
<strong>Pr</strong>odigy is currently evaluating the development of the Magino mine gold project in Ontario as an<br />
open-pit mining opportunity with the potential for deeper, higher grade gold production. The Magino<br />
project contains Indicated gold resources of 6,250,990 ounces grading 0.87 g/t gold (223.5 million<br />
tonnes), <strong>and</strong> 355,190 ounces of Inferred gold resources grading 0.80 g/t gold (13.8 million tonnes)<br />
at a cut-off grade of 0.35 g/t gold. For more information please refer to the “Technical Report on the<br />
Magino <strong>Pr</strong>operty, Wawa, Ontario dated October 4, 2012 available on SEDAR or <strong>Pr</strong>odigy’s website.<br />
Mineral resources are not mineral reserves <strong>and</strong> do not have demonstrated economic viability. There<br />
is no certainty that all or any part of the mineral resource will be converted into mineral reserves..<br />
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