Costs to build the Magino gold mine in Ontario have substantially increased from C$510 million to C$800 million, Argonaut Gold said.
Argonaut Gold has also dismissed chief executive and company founder Pete Dougherty with immediate effect, and had not yet appointed an interim or permanent chief executive.
Project cost overruns of approximately C$94 million are largely due to cost increases from inflation and the COVID-19 pandemic, accounting for 32% of the increase. Approximately 28% of the increase relates to site development, the tailings management facility, and permanent power. Another 20% of the increase is related to the increase in quantities required for site development.
The project is behind schedule, but it is more economic to continue to develop the mine than to abandon it, Argonaut Gold said. First gold pour is now expected at the end of March 2023.
As for site development, Argonaut Gold is required to build 11 water dams for water management, which was not foreseen in its October 2020 projections.
Additional costs in securing power come from the difficulties in upgrading the current system. Argonaut now plans to use a liquefied natural gas power plant on site, which increases costs from C$18 million to C$41 million.
General and administrative costs have increased from C$25 million to C$55 million, larger due to COVID-19 testing projects and increased labour needs to maintain the project schedule.
Argonaut estimates the project indirects costs 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 earthworks contractor.
The cost for the tailings management facility has grown from C$45$77 million to C$130 million, due to a scope change to include bedrock cleaning and slush grout, as well as an increased quantity 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 there to be a funding shortfall due to the current gold price. Argonaut is reviewing its financing and strategic alternatives.