The company reported that the project has about 1.4 million ounces of gold equivalents. This figure is smaller than the figure I reported it to be when it was under the control of Silver Standard Resources (NASDAQ:SSRI). However, it is crucial to point out that Argonaut's estimate only applies to oxide ore and it doesn't include sulfide ore, which is more costly to exploit. If we take this into consideration then the oxide ore contains 200% more metal, which is extremely favorable for Argonaut shareholders.
As I suggested in February, and again in May, the weakness in the stock overlooks the company's secondary projects, including San Agustin. This isn't surprising since management has yet to release an economic assessment for San Agustin, and given the bear market in precious metals investors, have shown very little interest in companies with resources but with no concrete plan for extracting them.
Fortunately, as I wrote in February - parroting management - the company still intends to release a preliminary economic assessment by the end of the year, and given these results I expect that it will be robust. The oxide deposit at San Agustin should be exploitable using standard heap leaching which is a simple and inexpensive process. A positive report should come as a pleasant surprise to shareholders who have seen the company's producing projects underperform while its large San Antonio development project has been put on hold due to regulatory hurdles. Shares seem to have found a bottom, and sentiment remains lousy, and this means that this is a potential coiled spring.
Disclosure: The author is long SSRI.
The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: As a Silver Standard shareholder I have a small position in Argonaut Gold.
Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.