ARGONAUT GOLD AND PRODIGY AGREE TO FRIENDLY BUSINESS COMBINATION TORONTO, Ontario; VANCOUVER, British Columbia - October 15, 2012 - Argonaut Gold Inc. (TSX: AR; "Argonaut Gold") and Prodigy Gold Incorporated (TSX.V: PDG; "Prodigy) are pleased to

announce that they have entered into an agreement (the "Arrangement Agreement") pursuant to which
Argonaut Gold has agreed to acquire all of the issued and outstanding common shares of Prodigy by way
of a Plan of Arrangement (the

"Arrangement"). The combined entity will benefit from the

strong
operating experience and cash flow of Argonaut Gold and its ability to successfully advance Prodigy's
Magino gold project, which has an indicated resource of more than 6 million ounces (223 million tonnes at
0.87 g/t using a cut-off grade of 0.35 g/t).
Pursuant to the terms of the Arrangement announced today, Prodigy shareholders will receive 0.1042 of an Argonaut Gold share and C$0.0001 in cash per Prodigy share, representing C$1.08 per share based on Argonaut Gold's 20-day volume-weighted average price ("VWAP") and a premium of 54% based on both companies' 20-day VWAPs as at October 12, 2012, the last trading day prior to this announcement. The transaction values Prodigy's equity at approximately C$341 million on a fully diluted in-the-money basis and implies an enterprise value of approximately C$277 million.
Pro forma the transaction, Argonaut Gold will be owned approximately 78% by current Argonaut Gold shareholders and 22% by current Prodigy shareholders (based on fully diluted in-the-money shares outstanding). The terms of the transaction have been unanimously approved by both companies' Boards of Directors, with the commitment of votes from all directors and officers of Prodigy, representing approximately 3.9% of Prodigy's shares, having been secured.

Highlights of the Combined Entity: