Canadian company Argonaut Gold has started commercial production at its San Agustin operation in Mexico.

The development comes after the operation poured its first gold last month.

The project is an open-pit/heap leach mine located 4km north of the village of San Agustin de Ocampo, 100km north of the city of Durango and 10km from the El Castillo mine.

Argonaut Gold president and CEO Pete Dougherty said: “We view San Agustin as an important piece of the El Castillo Complex given the shared infrastructure and synergies with our neighbouring El Castillo mine.

“We believe the El Castillo Complex has the ability to ramp-up to 150,000 gold equivalent ounces of production over the next couple of years.”

“We believe the El Castillo Complex has the ability to ramp-up to 150,000 gold equivalent ounces of production over the next couple of years, which will be the driving force of our approximate 60% production growth rate and lower operating costs by 2019.”

The project was taken up at an initial capital estimate of $42.6m, with an after-tax internal rate of revenue (IRR) of 50% and an after-tax net present value (NPV) at a 5% discount of $89.9m.

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It is expected to produce 80,000 gold equivalent ounces per annum.

The property consists of four mineral claims totalling 1,065ha and is owned by Argonaut’s subsidiary Minera Real del Oro.

Its mineralisation is characterised by three main rock types, including Cretaceous sedimentary rocks, a dacite dome complex and local hydrothermal breccias.