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McEwen Mining reports 2Q18 results

Published by
Global Mining Review,

Yesterday, Toronto-based mining and exploration company McEwen Mining Inc. (McEwen Mining) shared its second quarter results for the period ended 30 June 2018 (2Q18). Key highlights for the company in 2Q18 included a 45% increase in gold equivalent ounces (GEOs) produced and 2% decrease in all-in sustaining costs per ounce compared to the same period in the year prior. Net cash flow from the business excluding project development costs was CAN$6.3 million or CAN$0.02 per share. A total investment of CAN$26.3 million was made to further their long-term production growth plans at the Gold Bar, Black Fox, El Gallo Fenix and Los Azules projects. As a result, the company’s consolidated net loss for 2Q18 was CAN$5.4 million, or CAN$0.02 per share.

During the first half of 2018 (1H18) GEOs produced increased by 47% and all-in sustaining costs per ounce increased by 1% compared to 1H17. In 1H18, net cash flow from the business excluding project development costs was CAN$18.7 million or CAN$0.05 share, and a total investment of CAN$49.0 million was made to further our long-term production growth plans at the Gold Bar, Black Fox and Los Azules projects. As a result, our consolidated net loss for 1H18 was CAN$10.6 million, or CAN$0.03 per share.

Construction activities at Gold Bar during the second quarter focused on the heap leach pad, installation of the crushing and process facility, as well as site-wide electrical and water utilities. All major equipment and bulk materials are either on site or purchased and engineering for the project is complete. Construction is advancing on schedule for completion by the end of 2018, targeting commercial production in the first quarter of 2019. The company capitalised to construction in progress CAN$18.2 million and CAN$27.0 million for the three and six months ended 30 June 2018, respectively, and CAN$33 million cumulative to date. During the first three years of operation beginning in 2019, Gold Bar is projected to produce approximately 55 000, 74 000 and 68 000 oz of gold respectively.

El Gallo Mine, Mexico (100%)

In 2Q18, the mine produced 10 808 GEOs, compared to 9780 GEOs in 2017. Total cash costs and AISC were CAN$783 and CAN$816 per GEO, respectively. Production and cost guidance for 2018 are for 32 000 GEOs at a cash cost and AISC of CAN$650 and CAN$715 per GEO, respectively.

By the end of 2Q18, mining and crushing activities ceased and contractor equipment has been demobilised from the mine site. Closure, reclamation and residual heap leach activities are ongoing and will continue for several years.

A new Preliminary Economic Assessment (PEA) study on potential production from the El Gallo Complex at some point in the future was published on 9 July 2018. The proposed development plan evaluated in the PEA is called Project Fenix. The key outcomes of Project Fenix include an average annual production rate of 47 000 oz gold equivalent (AuEq), a 12-year mine life, low initial capital cost of CAN$41.0 million for Phase 1 and CAN$30.0 million for Phase 2, and pay-back period of 4.1 years. At CAN$1250/oz gold and CAN$16/oz silver the after-tax internal rate of return (IRR) is 28%, and the net present value (NPV) at a 5% discount rate is CAN$60.0 million.

During the next 14 months, McEwen Mining will be applying for permits in addition to analysing options for optimising mineral processing, mine sequencing, material transportation and tailings storage as presented in the PEA.

Black Fox Mine, Canada (100%)

During the second quarter, the mine produced 14 055 GEOs. Total cash costs and AISC were CAN$771 and CAN$1056 per GEO, respectively. Year to date costs are trending below budget and gold production is above our projections. McEwen Mining are maintaining production and cost guidance for 2018 are for 48 000 GEOs at a cash cost and AISC of CAN$920 and CAN$1210 per GEO, respectively.

A CAN$15.0 million exploration programme is currently underway at the Black Fox Complex.

For 2018, the company has budgeted a total of CAN$18.4 million for sustaining and capital expenditure activities at the Black Fox mine, of which we spent CAN$7.6 million during the first half of 2018.

San José Mine, Argentina (49%) 

The company’s attributable production from San José in 2Q18 stood at 12 139 gold oz and 769 197 silver oz, for a total of 22 395 GEOs, which is essentially unchanged from the comparative period in 2017. 2Q18 production costs per GEO produced were also reportedly slightly lower than the comparative period in 2017. Year to date San José is performing in-line with their guidance for 2018 of 91 000 GEOs at a cash costs and AISC of CAN$806 and CAN$1065 per GEO, respectively.

During 2Q18 and 1H18, we received CAN$2.4 million and CAN$7.3 million in dividends from our interest in San José, compared to CAN$2.4 million and CAN$4.9 million in dividends received during the same periods in 2017. For 2018, we are forecasting dividends in excess of CAN$12.0 million.

Los Azules Project, Argentina (100%)

During the first half of 2018 the company spent CAN$5.9 million developing infrastructure alternatives and environmental base line monitoring work to advance their permitting efforts.

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