McEwen Mining Inc. (NYSE: MUX) (TSX: MUX) today
reported its first quarter (Q1) results for the period ended March
31, 2020.
- Production was 29,200 gold ounces and
553,200 silver ounces, or 35,100
gold equivalent ounces(1) (GEOs)(see Table
1), at the average gold:silver price ratio for the quarter
of 94:1.
- A non-cash impairment charge for the Gold Bar mine of
$83.8 million was recorded during Q1. The write
down is necessary because a change in the geological interpretation
resulted in a substantial reduction in expected gold production
over the life of mine (see the Gold Bar Mine
section below for further details).
- A consolidated net loss of $99.2 million, or
$0.25 per share, primarily due to a $83.8 million
impairment adjustment for the Gold Bar mine and $6.3 million spent
on exploration and advanced projects. Before the impairment
adjustment the net loss is $15.4 million.
- The Grey Fox Indicated gold resource estimate
has increased by 43% to 888,000
gold ounces at 7.1 g/t, with an additional
173,000 gold ounces at 6.6 g/t in
the Inferred category.
- Each of our mine sites are navigating the impacts of the
COVID-19 pandemic. Black Fox, Gold Bar, and San
José mines were temporarily suspended at the onset of emergency
measures imposed in Ontario, Nevada, and Argentina. Black Fox and
San José have now restarted operations, and Gold Bar has started to
ramp-up operations with limited mining and stockpile processing
during May. Production and cost guidance for 2020 has been
withdrawn until the situation normalizes.
- Our quarterly webcast will take place today
at 11 am EDT. Details are provided below.
Operations Update
COVID-19
All our operations have implemented
rigorous health and safety measures to prevent the spread of the
COVID-19 virus. Fortunately, none of our employees have been
infected.
San José Mine, Argentina (49%
Interest)
Our attributable production from San José in Q1
was 9,000 gold ounces and 551,900
silver ounces, for a total of 14,900 GEOs. For Q1,
total cash costs(2) and all-in sustaining costs (AISC)(2) were
$1,138 and $1,592 per GEO,
respectively.
Mining was temporarily suspended on March 20,
2020 due to a nationwide mandatory quarantine imposed in Argentina
to combat the spread of COVID-19. Mining has restarted at San José
around April 14, but government-imposed travel restrictions mean
that it will take some time before full production is achieved. As
a result, 2020 production guidance has been withdrawn until the
situation stabilizes.
Black Fox Mine, Canada (100%
Interest)
Production from Black Fox in Q1 was
8,300 GEOs at a total cash costs and AISC of
$838 and $1,339 per GEO,
respectively. The Black Fox mine was temporarily suspended due to
the COVID-19 pandemic on March 26, 2020 and resumed normal
operation on April 14, 2020.
The mineral resource estimate for Grey Fox
deposits has been updated with drilling completed in late 2019. The
estimated Indicated and Inferred resources increased by
43% and 30%, respectively,
compared to the mid-2019 update published in March 2020. The
updated resource estimate contains 888,000 gold
ounces at 7.1 g/t in the Indicated category, and
173,000 gold ounces at 6.6 g/t in
the Inferred category.
The Grey Fox resource has grown rapidly through
focused exploration that we initiated in 2018. For the first time,
the Grey Fox resource update includes a resource for the Gibson
area. In addition, it includes a major reinterpretation of the Grey
Fox South area, with updates to the 147, 147 NE and Contact
zones.
Open pit and underground mining scenarios are
being evaluated for the development of the Grey Fox deposits and
environmental studies are in progress to allow access to the area
for potential bulk sampling and initial open pit mining. In
addition, we are also exploring and advancing economic studies of
the Stock East gold deposit and of the recent Stock West Zone
discovery at the Stock Property. Further information about economic
development and mining scenarios will be provided later in
2020.
Development of underground access to the Froome
ore body is proceeding towards production.
Gold Bar Mine, USA (100%
Interest)
Gold Bar produced 9,100 GEOs in
Q1 at cash costs and AISC of $1,887 and
$2,177 per GEO, respectively. Both cash cost and
AISC included the impact of $4.5 million spent for pre-stripping at
the Gold Pick West pit, or $495 per ounce which cannot be
capitalized under US GAAP. Excluding the impact of the $4.5 million
spend on pre-stripping, cash cost per gold equivalent ounce in Q1
was $1,392, which is 9% or $111 per ounce higher than the cash cost
per ounce in the fourth quarter of 2019.
The latest updated feasibility study for the
Gold Bar mine was published in February 2018 (2018 FS). The study
estimated that 485 thousand gold ounces were contained in the
reserve pits designed at that time. In November 2018, permits to
build the mine were received and construction commenced based on
the 2018 FS. At year end 2018, the resource and reserve estimates
were updated, which at that time had increased primarily because of
additional drilling to 524 thousand gold ounces contained in the
reserve pits (2018 Reserve Estimate). Pre-commercial mining
commenced in December 2018, the first gold was poured in February
2019, and commercial production was declared in May 2019. The
majority of material mined at Gold Bar between December 2018 and
the end of 2019 was from the Cabin Creek ore body, which exhibited
positive overall gold reconciliation to the 2018 Reserve
Estimate.
After transitioning to mining the upper benches
of the Gold Pick West ore body we started to experience poor
reconciliation, contrary to our experience to this point. Our
mining returned lower ore tons, gold grade and contained ounces
compared to the block model. This is interpreted to occur because
of greater structural control and less bedding control of the
mineralization than was previously modeled by our external
consultant SRK Consulting (U.S.) in the 2018 FS and 2018 Reserve
Estimate. In light of the change in geologic interpretation, and
control and distribution of the gold mineralization, supported by
our observations while mining, the future mine plan is currently
being re-evaluated. Preliminary updated resource estimates for the
Gold Pick deposit were completed in Q1 and in-pit and near-pit
drilling is currently taking place to further validate the results.
Preliminary revised mine plans indicate that a reduction in
contained ounces at the Gold Pick deposit in the order of 25-35%
relative to the 2018 Reserve Estimate is likely.
As a result, during Q1, we recorded an
impairment charge of $83.8 million, reducing the carrying value of
the Gold Bar mine mineral property interests and plant and
equipment. The impairment calculation was primarily based on the
discounted cash flow technique, using a long-term gold price of
$1,430 per ounce, a discount rate of 9%, and USA inflation index of
2%.
Evaluation of the resource estimate is
continuing with a drilling program initiated in late-March 2020 and
extending into the second quarter of 2020. This new drilling
information will be incorporated into a revised resource model and
a new mine plan is expected to be completed for implementation by
the end of the second quarter or early in the third quarter of
2020.
On March 26, 2020 we made the decision to
temporary scale back operations at the Gold Bar mine due to
concerns related to COVID-19 and maintaining social distancing
requirements. Mining was suspended on April 1, 2020, with
downstream activities continuing, such as heap leaching and process
plant operation.
We have recently resumed stripping to access the
next ore benches in the Gold Pick West deposit and processing of
stockpiled mineralized material. We continue evaluating the next
stages to resume normal operating capacity. 2020 production
guidance has been withdrawn until the situation stabilizes.
El Gallo Project, Mexico (100%
Interest)
Production from El Gallo in 2019 was
2,700 GEOs from residual leaching of the heap
leach pad. Beginning with Q4 2019, we have ceased relying on, and
disclosing, cash costs and AISC per GEO as key metrics for El Gallo
because those measures include the expensing of accumulated heap
leach pad inventory costs, which are not informative when assessing
the current economics of residual leaching. We estimate that
residual leaching will continue for as long as incremental revenue
exceeds incremental costs. Incremental residual leaching costs for
Q1 was $2.8 million, or $1,025 per GEO.
On April 1, 2020, the Mexican government ordered
the temporary closure of all non-essential businesses, including
mining, to combat the spread of COVID-19. While this order limits
some activities at El Gallo, it is not expected to have a
significant effect on residual leaching.
NYSE Listing
We previously reported that notice from the NYSE
was received on March 24, 2020 regarding the $1.00 minimum share
price listing standard. Effective April 21, 2020, the SEC and NYSE
has provided temporary relief from the $1.00 minimum share price
standard, providing the Company until December 3, 2020 to regain
compliance.
Table 1 below provides
production and cost results for Q1 2020 and 2019.
|
Q1 |
2019 |
2020 |
Consolidated Production |
|
|
Gold (oz) |
26,900 |
29,200 |
Silver (oz) |
703,200 |
553,200 |
GEOs(1) |
36,300 |
35,100 |
Gold Bar Mine, Nevada(3) |
|
|
GEOs(1) |
(5) |
9,100 |
Cash Costs ($/GEO)(1) |
- |
1,887 |
AISC ($/GEO)(1) |
- |
2,177 |
Black Fox Mine, Canada |
|
|
GEOs(1) |
8,900 |
8,300 |
Cash Costs ($/GEO)(1) |
805 |
838 |
AISC ($/GEO)(1) |
1,454 |
1,339 |
El Gallo Mine, Mexico |
|
|
GEOs(1) |
5,400 |
2,700 |
Cash Costs ($/GEO)(1) |
967 |
(6) |
AISC ($/GEO)(1) |
989 |
(6) |
San José Mine, Argentina (49%) |
|
|
Gold production (oz)(4) |
10,600 |
9,000 |
Silver production (oz)(4) |
701,300 |
551,900 |
GEOs(1)(4) |
19,900 |
14,900 |
Cash Costs ($/GEO)(1) |
749 |
1,138 |
AISC ($/GEO)(1) |
1,115 |
1,592 |
Notes:
- 'Gold Equivalent Ounces' are calculated based on a 75:1 gold to
silver price ratio for periods up to and including Q1 2019 and 94:1
for Q1 2020.
- Cash gross profit, cash costs per ounce, all-in sustaining
costs (AISC) per ounce, and liquid assets are non-GAAP financial
performance measures with no standardized definition under U.S.
GAAP. For definition of the non-GAAP measures see
"Non‑GAAP Financial Measures" section in this press release;
for the reconciliation of the non-GAAP measures to the closest U.S.
GAAP measures, see the Management Discussion and Analysis for the
year ended December 31, 2019 filed on Edgar and SEDAR.
- Gold Bar started commercial production on May 23, 2019.
- Represents the portion attributable to us from our 49% interest
in the San José Mine.
- Pre-commercial production at Gold Bar during Q1 2019 was 2,030
GEOs.
- Both cash costs and AISC per GEO no longer represent key
metrics used by management to evaluate residual leaching at the El
Gallo Project. For this reason, the Company has ceased relying on,
and disclosing, cash costs and all-in-sustaining costs per ounce as
a key metric.
For the SEC Form 10-Q Financial Statements and MD&A refer
to:
http://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000314203
Conference Call and Webcast
We invite you to join our conference call, where
management will discuss our Q1 2020 financial results and project
developments and follow with a question and answer session.
Questions can be asked directly by participants during the webcast.
The webcast will be archived on McEwen Mining’s website following
the call.
Tuesday, May 19th, 2020
at 11:00 am EDT |
Toll Free (US
& Canada): |
1 (833)-579-0918 |
Outside US & Canada: |
(778)
560-2801 |
Conference ID Number: |
6339787 |
Webcast
Link: |
https://event.on24.com/wcc/r/2159381/6AC73B781B5B044A88E709622B35ACE5 |
An archived replay of the webcast will be
available approximately two hours following the conclusion of the
live event. Access the replay on the Company’s media page at
https://www.mcewenmining.com/media.
Grey Fox Resource Update
The new Grey Fox resource is updated as of April
30, 2020 and was based on the results of our 2019 exploration
drilling campaign (referenced by the press releases from Dec
3, 2019, Feb 5, 2020 and Feb 12, 2020), generated from mid-November
2019 to the end of Q1, 2020, and on the global remodeling of all
diamond drill hole data supported by updated geological and
structural interpretation over the Grey Fox area.
The increases are mostly due to: the addition of
the Gibson deposit for the first time; the better-defined
structural controls in the northwest-dipping cross structures
leading to improved continuity and increased confidence; and the
strike and down dip extensions of existing resources through the
recent drill campaign.
Since the previous resource estimate, an
additional 138 diamond drill holes for 52,456 meters of NQ core
were added to the Grey Fox resource database, that now consists of
1,394 holes representing 513,250 meters of diamond drill core. The
database includes a total of 249,827 sample intervals assayed for
gold, of which 21,420 samples were added to the database since the
December 31, 2019 resource estimation.
The Grey Fox area consists of five mineralized
zones over a 2.25 km2 area (1.5 km by 1.5 km): 147, 147NE,
Contact-Whiskey Jack, Gibson and South. For all but the
Gibson zone, gold mineralization is hosted mainly in mafic volcanic
rock types, extending into sediments in the Contact deposit and
into syenite intrusive rock types at the Gibson deposit.
The structural controls and continuity of grades
were confirmed during the 2019 exploration program, which targeted
northwest dipping quartz-carbonate and breccia vein structures that
were partially tested by historical drilling on a predominantly
east-to-west azimuth. McEwen Mining drilled these structures
perpendicular to strike (from north-west to south-east), the
results of which provided the basis for an improved geological
interpretation and revised geological model of the Grey Fox
area. The growth potential recognized through the early
stages of the drilling program has now been confirmed by the 2019
drill results and the current resource estimate update. McEwen
Mining considers the potential to continue to grow the Grey Fox
Resource remains excellent and follow-up drilling is being designed
to test priority targets.
The mineral resource estimate for the Grey Fox
area was carried out by McEwen Mining and will be audited by a 3rd
party engineer during Q2 2020.
The following statements apply to information
contained in the resource tables below:
- Mineral Resources are not Mineral Reserves and do not have
demonstrated economic viability. There is no certainty that any
part of the Mineral Resources estimated will be converted into a
Mineral Reserves estimate;
- Numbers in the tables have been rounded to reflect the accuracy
of the estimates and may not sum due to rounding;
- The Inferred Mineral Resource in these estimates has a lower
level of confidence than that applied to an Indicated Mineral
Resource and must not be converted to a Mineral Reserve. It is
reasonably expected that the majority of the Inferred Mineral
Resource could be upgraded to an Indicated Mineral Resource with
continued exploration;
- Quantity and grade of reported Inferred resources are uncertain
in nature and there has been insufficient exploration to classify
these Inferred resources as Measured or Indicated;
- Mineral Resources were estimated using the guidelines set out
in the CIM Definition Standards for Mineral Resources.
Table 1.1: Grey Fox Property - Mineral
Resource Estimate, April 30, 2020
|
Classification |
|
Quantity (‘000 t) |
Grade Gold (g/t) |
Contained Gold (‘000 oz) |
|
Indicated Mineral Resource |
|
3,917 |
7.05 |
888 |
|
Inferred Mineral Resource |
|
818 |
6.58 |
173 |
Table 1.1 Notes:
- All figures rounded to reflect the relative accuracy of
the estimates. Composites were capped where appropriate. Mineral
resources reported at a cut-off grade of 3.6 g/t Au.
|
|
Reliability of Information Regarding San
JoséMinera Santa Cruz S.A., the owner of the San José
Mine, is responsible for and has supplied to the Company all
reported results from the San José Mine. McEwen Mining’s joint
venture partner, a subsidiary of Hochschild Mining plc, and its
affiliates other than MSC do not accept responsibility for the use
of project data or the adequacy or accuracy of this release.
Technical InformationThe
technical contents of this news release has been reviewed and
approved by G. Peter Mah, P.Eng., COO of McEwen Mining and a
Qualified Person as defined by Canadian Securities Administrators
National Instrument 43-101 "Standards of Disclosure for Mineral
Projects."
The technical information in this news release
related to resource and reserve estimates has been reviewed and
approved by Luke Willis, P.Geo., McEwen Mining’s Director of
Resource Modelling and Qualified Person as defined by Canadian
Securities Administrators National Instrument 43-101 "Standards of
Disclosure for Mineral Projects."
CAUTIONARY NOTE TO US INVESTORS
REGARDING RESOURCE ESTIMATIONMcEwen Mining Inc. is
required to prepare reports under the Securities Exchange Act of
1934 and the Canadian Securities Administrators’ National
Instrument 43‑101 “Standards of Disclosure for Mineral
Projects” (“NI 43‑101”), under the Canadian securities laws
because we are listed on the Toronto Stock Exchange (“TSX”) and
subject to Canadian securities laws. Standards under NI 43-101 are
materially different than the standards generally permitted in
reports filed with the United States (“U.S.”) Securities and
Exchange Commission (“SEC”).
Under NI 43‑101, we report measured,
indicated and inferred resources, which are measurements that are
generally not permitted in filings made with the SEC. The
estimation of measured resources and indicated resources involve
greater uncertainty as to their existence and economic feasibility
than the estimation of proven and probable reserves under Industry
Guide 7. U.S. investors are cautioned not to assume that any part
of measured or indicated resources will ever be converted into
economically mineable reserves. The estimation of inferred
resources involves far greater uncertainty as to their existence
and economic viability than the estimation of other categories of
resources. Inferred Mineral Resources could be upgraded to
Indicated Mineral Resources with continued exploration. Therefore,
U.S. investors are also cautioned not to assume that all or any
part of inferred resources exist, or that they can be legally or
economically mined.
Canadian regulations permit the disclosure of
resources in terms of “contained ounces” provided that the tonnes
and grade for each resource are also disclosed; however, the SEC
only permits issuers to report “mineralized material” in tonnage
and average grade without reference to contained ounces. Under U.S.
regulations, the tonnage and average grade described herein would
be characterized as mineralized material. We provide such
disclosure about our properties to allow a means of comparing our
projects to those of other companies in the mining industry, many
of which are Canadian and report pursuant to NI 43‑101, and to
comply with applicable disclosure requirements.
CAUTIONARY NOTE REGARDING NON-GAAP
MEASURESIn this release, we have provided information
prepared or calculated according to United States Generally
Accepted Accounting Principles (“U.S. GAAP”), as well as provided
some non-U.S. GAAP ("non-GAAP") performance measures. Because the
non-GAAP performance measures do not have any standardized meaning
prescribed by U.S. GAAP, they may not be comparable to similar
measures presented by other companies.
Cash Costs and All-in Sustaining CostsCash costs
consist of mining, processing, on-site general and administrative
costs, community and permitting costs related to current
operations, royalty costs, refining and treatment charges (for both
doré and concentrate products), sales costs, export taxes and
operational stripping costs, and exclude depreciation and
amortization. All-in sustaining costs consist of cash costs (as
described above), plus accretion of retirement obligations and
amortization of the asset retirement costs related to operating
sites, sustaining exploration and development costs, sustaining
capital expenditures, and sustaining lease payments. Both cash
costs and all-in sustaining costs are divided by the gold
equivalent ounces sold to determine cash costs and all-in
sustaining costs on a per ounce basis. We use and report these
measures to provide additional information regarding operational
efficiencies on an individual mine basis, and believe that these
measures provide investors and analysts with useful information
about our underlying costs of operations. A reconciliation to
production costs applicable to sales, the nearest U.S. GAAP measure
is provided in McEwen Mining's Quarterly Report on Form 10-Q for
the quarter ended March 31, 2020.
Cash Gross ProfitCash gross profit is a non-GAAP
financial measure and does not have any standardized meaning. We
use cash gross profit to evaluate our operating performance and
ability to generate cash flow; we disclose cash gross profit as we
believe this measure provides valuable assistance to investors and
analysts in evaluating our ability to finance our ongoing business
and capital activities. The most directly comparable measure
prepared in accordance with GAAP is gross profit. Cash gross profit
is calculated by adding depletion and depreciation to gross profit.
A reconciliation to gross profit, the nearest U.S. GAAP measure is
provided in McEwen Mining's Quarterly Report on Form 10-Q for the
quarter ended March 31, 2020.
Liquid assetsThe term liquid assets used in this
report is a non‑GAAP financial measure. We report this measure to
better understand our liquidity in each reporting period. Liquid
assets is calculated as the sum of the Balance Sheet line items of
cash and cash equivalents, restricted cash and investments, plus
ounces of doré held in precious metals inventories valued at the
London PM Fix spot price at the corresponding period. A
reconciliation to the nearest U.S. GAAP measure is provided in
McEwen Mining's Quarterly Report on Form 10-Q for the quarter ended
March 31, 2020.
CAUTION CONCERNING FORWARD-LOOKING
STATEMENTSThis news release contains certain
forward-looking statements and information, including
"forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. The forward-looking
statements and information expressed, as at the date of this news
release, McEwen Mining Inc.'s (the "Company") estimates, forecasts,
projections, expectations or beliefs as to future events and
results. Forward-looking statements and information are necessarily
based upon a number of estimates and assumptions that, while
considered reasonable by management, are inherently subject to
significant business, economic and competitive uncertainties, risks
and contingencies, and there can be no assurance that such
statements and information will prove to be accurate. Therefore,
actual results and future events could differ materially from those
anticipated in such statements and information. Risks and
uncertainties that could cause results or future events to differ
materially from current expectations expressed or implied by the
forward-looking statements and information include, but are not
limited to, effects of the COVID-19 pandemic, fluctuations in the
market price of precious metals, mining industry risks, political,
economic, social and security risks associated with foreign
operations, the ability of the corporation to receive or receive in
a timely manner permits or other approvals required in connection
with operations, risks associated with the construction of mining
operations and commencement of production and the projected costs
thereof, risks related to litigation, the state of the capital
markets, environmental risks and hazards, uncertainty as to
calculation of mineral resources and reserves, and other risks.
Readers should not place undue reliance on forward-looking
statements or information included herein, which speak only as of
the date hereof. The Company undertakes no obligation to reissue or
update forward-looking statements or information as a result of new
information or events after the date hereof except as may be
required by law. See McEwen Mining's Annual Report on Form 10-K for
the fiscal year ended December 31, 2019 and other filings with the
Securities and Exchange Commission, under the caption "Risk
Factors", for additional information on risks, uncertainties and
other factors relating to the forward-looking statements and
information regarding the Company. All forward-looking statements
and information made in this news release are qualified by this
cautionary statement.
The NYSE and TSX have not reviewed and do not accept
responsibility for the adequacy or accuracy of the contents of this
news release, which has been prepared by management of McEwen
Mining Inc.
ABOUT MCEWEN MINING
McEwen Mining is a diversified gold and silver
producer and explorer with operating mines in Nevada, Canada,
Mexico and Argentina. It also owns a large copper deposit in
Argentina. McEwen’s goal is to create a profitable gold and silver
producer focused in the Americas.
McEwen has approximately 400 million shares
outstanding. Rob McEwen, Chairman and Chief Owner, owns 20% of the
shares.
CONTACT INFORMATION: |
Investor Relations:(866)-441-0690 Toll
Free(647)-258-0395 Mihaela Iancu ext. 320
info@mcewenmining.com |
Website:
www.mcewenmining.com Facebook:
facebook.com/mcewenminingFacebook:
facebook.com/mcewenrob Twitter:
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twitter.com/robmcewenmux Instagram:
instagram.com/mcewenmining |
150 King Street WestSuite 2800, P.O. Box 24Toronto, ON,
CanadaM5H 1J9 |
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