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'We are disappointed with SEMARNAT's decision [over San Antonio]'

Argonaut Gold (TSX: AR) has announced a major setback for its proposed San Antonio gold mine in Mexico.
'We are disappointed with SEMARNAT's decision [over San Antonio]' 'We are disappointed with SEMARNAT's decision [over San Antonio]' 'We are disappointed with SEMARNAT's decision [over San Antonio]' 'We are disappointed with SEMARNAT's decision [over San Antonio]' 'We are disappointed with SEMARNAT's decision [over San Antonio]'

Argonaut Gold faces major setback for its proposed San Antonio gold mine in Mexico

Staff reporter

It said the Mexican Environmental Authority (SEMARNAT) had issued a ruling to not approve the updated Environmental Impact Assessment (MIA) for its project in Baja California Sur, citing non-compatible zoning based on a revised, 2018 zoning plan filed by the municipality of La Paz.

Argonaut believed the zoning had been resolved through a favourable July 2016 supreme court ruling.

The company has envisaged a 15-year mine with initial capex of US$84.3 million with an after-tax NPV (8% discount) of $205 million at San Antonio.

"We are disappointed with SEMARNAT's decision to not approve the MIA for the San Antonio project," president and CEO Pete Dougherty said.

"We have tremendous support for the project from the local community of San Antonio and the surrounding areas, where members of the local population marched in support of the project and voiced unwavering support at the public information meeting during the MIA process."

Argonaut warned there was no assurance permits would be issued and permitting continued to be subject to regulatory processes "of uncertain duration".

This latest issue follows a challenging period for Argonaut, with the company last month saying 2019 output was likely to be near or under the lower end of previous guidance of 200,000-215,000 ounces gold-equivalent.

It revised its forecast to 190,000-200,000oz Au-eq of production from its La Colorada mine and El Castillo complex in Mexico, and increased anticipated all-in sustaining costs from $1,025-$1,125/oz gold sold to $1,125-$1,150/oz.

The company had installed a new well at San Agustin to address the lack of sufficient water in the second quarter, while El Castillo had been impacted during the September quarter by water in the pit and unexpected downtime at the east crusher for maintenance.

El Castillo had also been blockaded during the period over a dispute about community land payments but Argonaut had said there were no interruptions to operations. 

Argonaut said it was "reviewing all of its options" regarding the San Antonio decision, from seeking an amendment to the La Paz 2018 zoning plan based upon the July 2016 supreme court ruling, submitting a revised MIA and legal options.

Its shares have ranged from C$1.18-$2.87 over the past year and closed up 5.7% to $1.85 on Friday, to capitalise it at $332 million (US$250 million).