Alamos Deal with Argonaut Spins Off Florida Canyon Gold Inc.

SEATTLE (Scrap Monster):  Alamos Gold Inc. has officially acquired Argonaut Gold Inc., and a new company called Florida Canyon Gold Inc. has spun off the transaction, named for the Florida Canyon Mine in Nevada now operated by the spinoff.

Florida Canyon Gold will also operate the San Agustin Mine in Mexico previously owned by Argonaut.

Alamos now owns the Magino Mine that Argonaut developed near Alamos Gold’s Island Gold Mine in Ontario.

The Florida Canyon Mine is about 45 miles southwest of Winnemucca along Interstate 80 in Pershing County. Unofficial word from the mine was that it was business as usual on Monday. Argonaut has reported it expected annual gold production from Florida Canyon of 70,000 ounces this year through 2030.

Pegasus Gold, which later went into bankruptcy, developed Florida Canyon in 1986. The mine has changed ownership several times since then but has remained in operation except for short periods of interrupted production.

 Rye Patch Gold Corp. acquired Florida Canyon from Jipangu International Inc., Imlay Mining Co. Ltd. and ADM Gold Co. in 2016. Rye Patch restarted mining production at Florida Canyon in 2017. Alio Gold Inc. acquired Florida Canyon in a merger with Rye Patch in 2018. Argonaut acquired Florida Canyon in a merger with Alio in July 2020.

Argonaut stated on its website before the Alamos acquisition that the San Agustin Mine which will be run by Florida Canyon Gold contains two concessions that Argonaut acquired from Silver Standard Resources Inc. in December 2013. Argonaut began commercial production of gold and silver there in October 2017.

Argonaut stated that its recent technical report predicted gold production of 89,000 ounces from April 2024 through 2026 at San Agustin.

A news release from Argonaut in late June before the spinoff was officially named stated that the spinoff was exploring arrangements that could include a sale of its assets, but no agreements had been reached and any sale would require approval of the board and shareholders.

Alamos said its acquisition of Argonaut’s Magino mine will bring a lot of benefits to its operations in Canada.

 “Through our acquisition of Argonaut, we have further enhanced our unique positioning as a Canadian-focused, intermediate gold producer with growing production and declining costs,” said John A. McCluskey, president and chief executive officer of Toronto-based Alamos.

“The integration of Magino and Island Gold is expected to unlock significant synergies through the use of shared infrastructure. Together, they will create one of the largest and lowest cost gold mines in Canada with significant longer-term expansion potential supported by their long mine lives and ongoing exploration success,” he said in a July 12 announcement.

Alamos also reported on July 15 that it has entered into a gold sale prepayment agreement for $116 million in exchange for the delivery of 49,384 ounces of gold in 2025, and the proceeds were used to eliminate gold forward purchase contracts that Argonaut had entered.

 With this prepayment, Alamos stated it was able to end purchase contracts totaling 179,417 ounces in 2024 and 2025 with an average price of $1,838 per ounce, eliminating more than half of Argonaut’s hedge book inherited in the acquisition.

The forward prices on the contracts ranged between $1,821 and $1,860 per ounce, and the transaction closed out all the 2024 and 2025 forward purchase contracts.

 “This transaction has significantly enhanced our exposure to rising gold prices on attractive terms, mostly notably the near term,” McCluskey said. “We expect our growing production and declining costs to drive significant free cash flow growth in the years ahead. With the majority of the Argonaut hedge book now eliminated, we are even better positioned to capitalize on the favorable outlook for gold.”

Gold prices headed above $1,400 an ounce again last week after an earlier spurt in late May, and the spot price in early afternoon trading on Monday was $2,425.80 per ounce.

Alamos stated that the remaining hedge book consists of forward purchase contracts totaling 150,000 ounces in 2026 and 2027, and this amount is expected to be less than 12% of total production in those years. The company said it will continue to look at opportunities to unwind those contracts as well.

Alamos acquired all the issued and outstanding shares of Argonaut it didn’t already hold after approval from the Federal Economic Competition Commission in Mexico on Thursday and a final order that the Ontario Superior Court of Justice granted on July 5.

Florida Canyon Gold Inc. was spun out at the same time, with Argonaut shareholders entitled to receive 0.0185 of a Class A common stock of Alamos and 0.1 of a common share of Florida Canyon Gold in exchange for their Argonaut shares. Alamos issued 20.4 million shares as part of the deal and now has roughly 419.7 million outstanding shares.

With closure, Alamos shareholders own 95% of the pro forma company, and Argonaut shareholders, 5%, according to Alamos, who also completed a $10 million private placement into Florida Canyon Gold. That increased Alamos’ equity interest in the spinoff to 19.99%.

Alamos stated that it acquired the additional shares of Florida Canyon Gold to allow the new company to fund its immediate liquidity needs as a newly created junior gold producer, and the money from the private placement will be used for working capital and general corporate purposes.

Alamos produces gold from the Young-Davidson Mine and Island Gold District in northern Ontario and the Mulatos District in Mexico and has growth projects that include a new expansion at Island Gold and the Lynn Lake Project in Manitoba. The company employs more than 2,400 people.

 Argonaut’s final announcement as a company was to report the final approvals for the arrangement with Alamos that was reached on March 27 and amended on May 24.

Courtesy: www.elkodaily.com