Magino mine costs balloon as Argonaut CEO quits
Inflation and the COVID-19 pandemic have significantly increased the cost to build Argonaut Gold’s Magino mine project in northern Ontario—and may have led to the abrupt resignation of the company’s founder and CEO.
The company announced earlier this month that its capital construction estimates to build the open-pit mine have jumped from $510 million to around $800 million. In the same release, it also announced that company founder and president-CEO Pete Dougherty had resigned with immediate effect. Argonaut did not clarify whether the two occurrences were connected.
"Pete Dougherty has taken Argonaut from a small company to a diversified gold producer operating in three countries,” said board chair James Kofman. “The Board of Directors intends to work actively with and be available to the executive leadership team. We have full confidence in the existing executive team to step up during this interim period."
Argonaut says about one third of the project’s cost overruns—about $94 million—have been related to out-of-control issues such as inflation and the impact of COVID-19.
Changes in scope have accounted for about one quarter of the capital increase and relate to site development, the tailings management facility and permanent power.
A further one-fifth of the capital-cost increase is related to increases in quantities, primarily in site development and project indirects areas. The company ran into challenges with the civil works, primarily at the process facilities site, in the early stages of construction. The uneven nature of the surface bedrock required much more time and capital to create a suitable foundation area than originally estimated.
Although this phase of the work is now behind schedule, Argonaut expects it can recover the lost time by condensing its schedule and bringing more contractors to the site on overlapping schedules. Argonaut says the project remains on schedule for completion, and its first gold pour by the end of March 2023.
Next year sees construction ramp up to peak levels as construction on the $219-million processing plant begins.