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Summary

  • Argonaut Gold just reported its resource estimate for the newly acquired San Agustin Project in Mexico.
  • The updated resource is larger than when I wrote about the project last summer in the context of its previous owner - Silver Standard Resources.
  • This news reflects my February prediction that the company would release a PEA for San Agustin by the end of the year.
  • Argonaut investors should be encouraged that the company is moving forward on this project despite its issues with some of its other projects.
  • The stock remains attractive on weakness.

Argonaut Gold (OTCPK:ARNGF) just announced the results of its resource estimate for its newly acquired San Agustin Project. You can see the results on the following table.

(click to enlarge)

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.

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.

Additional disclosure: As a Silver Standard shareholder I have a small position in Argonaut Gold.