The Gold Report Interview with Christos Doulis (11/9/12)

CD: I like Argonaut Gold Inc.'s (AR:TSX) story. The company produces from heap-leach mines in Mexico. It has just done an acquisition in Ontario that is a bit of a change for the company. I have covered Argonaut with an Outperform rating for quite some time, but I have recently changed to a Sector Perform. Argonaut is a great company. Valuation is the question. Argonaut is trading at a very high multiple of next year's cash flow because it has two mines in production with two more coming soon. Based on next year's cash flow the company is fairly priced at around $11/share. With the stock trading at around $10.50/share, it's hard for me to get very excited. However, that is based on my long-term gold price of $1,350/ounce (oz). If you believe we are in an environment where we're going to see $1,700/oz as the long-term gold price, Argonaut has upside from here. That value is unlocked by building out the pipeline of new mines giving Argonaut a high torque to the gold price.

TGR: What does that production growth profile look like?

CD: Argonaut's current production is approximately 100,000 oz (100 Koz) per year. Production can grow to 200+ Koz annually among its three key assets—San Antonio, La Colorada and El Castillo. If Argonaut can successfully develop the Magino project from Prodigy Gold Inc., it will produce 400–500 Koz annually. That growth from 100 Koz to 500 Koz is the story that makes this an exciting company. It has one of the greatest exposures to growth in gold production in a junior miner today.

http://www.theaureport.com/pub/co/2145

Q3 Financial Conference Call November 14,2012 at 5:30 am Pacific time

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