McEwen Mining Inc. (NYSE: MUX) (TSX: MUX) reports
its third quarter (Q3) results for the period ended September 30th,
2022.
“This year
has been much better than the previous three! While we still have
issues to resolve, such as increasing our treasury by producing
more ounces at a lower cost, we can clearly see a brighter future.
At the Fox Complex, where we have had a history of high operating
cost/oz we are making good progress reducing our cost. I am pleased
to say that in Q3 our cash cost/oz at Fox fell to $774, our lowest
since mid-2018. This is well below the industry average. Our next
important area to improve at Fox is the process plant (mill).
Specifically, we need to increase the throughput because our mine
is now producing more ore than our mill can process. As a result,
we have a large surface stockpile of ore equivalent to more than
two months of production.
At Gold Bar,
we are looking forward to starting to mine our Gold Bar South (GBS)
deposit this quarter. We are expecting to have a much lower cost/oz
than our YTD cost because we will be mining higher grade ore at
GBS, with half the strip ratio and no problematic carbonaceous
material.
In Mexico, we
recently acquired a complete process plant on very advantageous
terms that will help significantly reduced projected capital
requirements for our Fenix project. This acquisition has made Fenix
more attractive to build and could provide a new long life mine for
McEwen Mining.
The San José
mine, where we have a 49% interest, put in a strong quarter and its
exploration is continuing to extend its high-grade veins and
discover new veins.
We completed
an $82 million financing for McEwen Copper in a very tough equity
market. Rio Tinto, the second largest mining company in the world,
through its subsidiary Nuton, now owns 9.7% of McEwen Copper, as a
result of its investment of $25M. Also, Nuton is testing the Los
Azules copper mineralization to see if it can accelerate and
increase copper recoveries. Another of Rio Tinto’s subsidiaries,
Kennecott Exploration, signed an option to earn 60% interest in
McEwen Copper’s other copper project, Elder Creek, by spending $18
million on exploration. Elder Creek is located in
Nevada.
In July our
shares outstanding underwent a 10 for 1 consolidation. This was an
unfortunate but necessary action done to protect our listing on the
NYSE, which is our principal exchange and where our trading volume
is the highest.
Production
guidance for 2023 is 150,000 to 170,000 gold equivalent ounces
(GEOs).
Later in this
release I will explain why I believe MUX is an attractive
investment” said Rob McEwen, Chairman and Chief Owner.
A webcast will be held on
Monday, Nov 7th at 11:00
am EST. Management will
discuss our Q3 financial results and project developments and
follow with a question-and-answer session. Questions can be asked
directly by participants over the phone during the webcast.
MondayNovember
7th, 2022 11:00 am
EST |
Webcast URL: |
https://events.q4inc.com/attendee/303339246 |
Call into the conference over the phone: |
Please register here:https://conferencingportals.com/event/ZSafhHZi
Participants who cannot access the internet can dial-in using the
numbers below:Participant Toll-Free Dial-In Number: 1 (888)
330-2398Participant Toll Dial-In Number: 1 (240) 789-2709
Conference ID: 67121 |
The webcast will be archived on McEwen Mining's
website at https://www.mcewenmining.com/media following the
call.
Selected Operational & Financial
Information
Cash and cash equivalents at September 30th,
2022, totaled $54.9 million.
Q3 Production was 26,200 gold
ounces and 852,200 silver ounces, or
35,700 gold equivalent ounces(1)
(GEOs)(see Table 1), compared to 42,900 GEOs
during Q3 2021.
YTD Production was 74,650 gold
ounces and 1,894,100 silver ounces or
97,000 GEOs compared to 114,200
GEOs during 9 months to Sept. 30, 2021.
Revised guidance for 2022 production is
134,600-141,800 GEOs, reflecting a decrease of
approximately 6,500 GEOs at Fox and 14,000 GEOs at Gold Bar due to
carbonaceous material encountered throughout 2022, which should be
alleviated with Gold Bar South beginning production, and an
adjustment due to the gold:silver price ratio.
Average cash costs(2) per GEO sold from our
100%-owned mines (Fox & Gold Bar) in Q3 was
$1,219, in-line with our guidance. Average all-in
sustaining costs ("AISC")(2) per GEO sold from our
100%-owned mines was $1,659, slightly above our
guidance midpoint of $1,475 per GEO.
Our 100%-owned mines generated a cash gross
profit(2) of $5.8 million in Q3 and a gross profit
of $1.5 million. Cash gross profit is calculated
by adding back depletion and depreciation to gross profit.
Our consolidated net loss in Q3 was
$10.5 million, or $0.21 per
share, which relates primarily to $7.8 million
spent on the Los Azules project, and $5 million on
exploration and advanced projects at our mines. It is important to
understand that MUX will continue reporting losses for some time
because it is required to consolidate 100% of the expenses incurred
by McEwen Copper for the development of Los Azules in its financial
statements despite owning 68%.
Our exploration programs are focused on defining
near-term mine resources that could extend our mine lives and
contribute to future profitability. An update on our exploration
activities will be released in the coming weeks.
Operations Update
Fox Complex, Canada (100%
interest)
Fox achieved the lowest quarterly cash cost
since mid-2018 of $774 per GEO sold. We believe there is good
potential to further reduce costs and increase production at Fox
Complex by increasing mill throughput. We plan to start crushing at
the Froome mine site prior to transportation to the mill, which
should relieve stress on the primarily crushing circuit.
In Q3, we incurred $2.7
million for exploration at Stock and at the Black
Fox properties.
Gold Bar Mine, USA (100%
interest)
Gold production continued to be low due to the
presence of carbonaceous material that is being treated as waste
and lower mining rates resulting from a contractor staffing
shortage.
Development of the Gold Bar South deposit is
underway. First ore is expected later in Q4. GBS has superior
attributes compared to the current mining areas, because of its
much lower waste stripping ratio, oxide mineralization with no
carbonaceous material, and a higher average gold grade partially
offset by lower heap leach recovery. Most of Gold Bar’s production
in 2023 will be from GBS.
In order to increase our mining rate, a new
mining contractor has been engaged and mobilization of equipment
has started with a staged ramp up expected to be fully implemented
in January 2023.
In Q3, we spent $1.1 million
for exploration activities.
McEwen Copper (68%
interest)
McEwen Copper is a key component of MUX’s value
proposition. The Los Azules project is one of the world's largest
undeveloped open-pit copper porphyry deposits. During the quarter,
study work continued in parallel with preparation for the new
drilling season which started in mid-October.
The closing of the $81.85
million financing was a critical step to fund activities
necessary to complete an updated PEA (Preliminary Economic
Assessment) for the Los Azules project. These activities included
additional drilling, completing a new resource model, life of mine
plan, baseline monitoring for environmental permitting, community
development and relations, other technical work and general
corporate purposes. McEwen Copper spent $7.6
million in Q3 to advance the Los Azules project.
Publication of an updated PEA on the Los Azules copper project is
planned for Q1 2023 and in Q2 an IPO is planned along with MUX
completing a secondary financing reducing its interest to increase
its treasury. In the 2017 PEA, Los Azules is designed
as an open pit copper mine with a 36-year life. However, it is
possible that Los Azules could become ultimately an even larger
mine, with a longer life, since numerous drill holes have shown
strong copper mineralization extending below the pit bottom. It is
not uncommon for porphyry copper deposits such as Los Azules, to
extend well below 1,000 meters (3,280 feet) depth. During this
season’s drill program, two deep high-grade targets will be
drilled.
Table 1 below provides
production and cost results for Q3 & 9M 2022 with comparative
results for Q3 & 9M 2021 and our Revised guidance range for
2022.
|
Q3 |
9M |
Full Year 2022Revised
GuidanceRange |
2022 |
2021 |
2022 |
2021 |
Consolidated Production |
|
|
|
|
|
Gold (oz) |
26,200 |
32,100 |
74,650 |
87,100 |
104,000-111,000 |
Silver (oz) |
853,000 |
792,000 |
1,894,100 |
1,897,000 |
2,600,000-2,700,000 |
GEOs(1) |
35,700 |
42,900 |
97,000 |
114,200 |
134,600-141,800 |
Gold Bar Mine, Nevada |
|
|
|
|
|
GEOs(1) |
7,200 |
12,400 |
18,600 |
33,900 |
26,000-28,000 |
Cash Costs ($/GEO)(1) |
1,712 |
1,553 |
1,859 |
1,582 |
|
AISC ($/GEO)(1) |
2,049 |
1,618 |
2,251 |
1,685 |
|
Fox Complex, Canada |
|
|
|
|
|
GEOs(1) |
9,000 |
8,300 |
27,900 |
20,600 |
39,000-41,000 |
Cash Costs ($/GEO)(1) |
774 |
1,154 |
978 |
1,102 |
|
AISC ($/GEO)(1) |
1,308 |
1,423 |
1,415 |
1,339 |
|
San José Mine, Argentina (49%) |
|
|
|
|
|
Gold production (oz)(3) |
9,900 |
10,800 |
27,400 |
29,700 |
38,000-40,000 |
Silver production (oz)(3) |
852,200 |
790,000 |
1,892,400 |
1,889,600 |
2,600,000-2,700,000 |
GEOs(1)(3) |
19,300 |
21,600 |
49,700 |
56,600 |
68,600-71,800 |
Cash Costs ($/GEO)(1) |
1,223 |
1,100 |
1,300 |
1,098 |
|
AISC ($/GEO)(1) |
1,562 |
1,466 |
1,718 |
1,441 |
|
Our El Gallo project
produced 170 GEOs in Q3 2022, 900 GEOs in 9M 2022, 560 GEOs in Q3
2021 and 2,500 GEOs in 9M 2021. Residual heap leaching ceased in
July 2022.
Table 1 Notes:
- 'Gold Equivalent Ounces' are
calculated based on a gold to silver price ratio of 90:1 for Q3
2022, 83:1 for Q2 2022, 78:1 for Q1 2022, 73:1 for Q3 2021 and 68:1
for Q1 & Q2 2021. 2022 revised production guidance is
calculated based on 85:1 gold to silver price ratio.
- Cash gross profit, cash costs per
ounce sold, all-in sustaining costs (AISC) per ounce sold 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, 2021 (as amended)
filed on Edgar and SEDAR.
- Represents the portion attributable
to us from our 49% interest in the San José Mine.
What might MUX be Worth?
“Value, like beauty, is frequently in
the eye of the beholder. I am often asked what I think MUX is worth
and I want to share my answer with you.
I have arrived at a high/low range of
value for MUX by adding up the some of its parts. Here are the
parts: MUX has a 68% interest in McEwen Copper, it owns 100% of
three gold mines: Fox Complex, Gold Bar and El Gallo/Fenix, a 49%
interest in the San José gold/silver mine, a portfolio of five
royalties (NSRs) and a collection of exploration
properties.
The operating challenges we faced in
recent years have severely damaged our credibility with our
shareholders and the market. As a result, few investors have taken
a close look recently at our assets. If they did, I believe some
would see the potential value that I see today. Yes, our cash is
tight, our costs/oz are high and our mine lives are currently
short, but that has been changing for the better. So let me show
you my math and how I had arrived at a possible potential value for
MUX of $8 to $30/share.
In this valuation estimate I have
compared Los Azules to two copper projects, Josemaria and Filo,
that are in the same province in Argentina as Los Azules. Compared
to Los Azules these projects are located at substantially higher
elevations, are at a greater distance from critical infrastructure
(highways and power grid), have a smaller published copper resource
base and copper grade, and they have public market values.
Josemaria was purchased for $485M in April and Filo Mining has a
market capitalization of $1.6B. The low end of the range is based
on 50% of Josemaria’s purchase price and high end on Filo’s market
capitalization.
For the valuation estimate of MUX’s gold
and silver mining interests, we compared the average Enterprise
Value (EV) per GEO production of five smaller producers. The low
end of range is based on 50% of their multiple and the high end at
par with their multiple. Please refer to the
footnotes.
Table 2 Potential Share Value of MUX
MUX Assets |
Value Range Per MUX Share(1) |
|
Low |
High |
Los
Azules(2) |
3.24(3) |
21.36(4) |
Elder
Creek(2) |
0.40(5) |
0.40(5) |
Royalty
Portfolio |
0.69(6) |
0.69(6) |
Gold & Silver Assets |
3.75(8) |
7.50(7) |
Total |
$8.08 |
$29.95 |
|
|
|
Table 2 Notes:
- McEwen Mining has 51 million fully diluted shares
- McEwen Mining owns 68.1% of McEwen Copper which owns 100% of
Los Azules and Elder Creek
- Josemaria purchase price was $485 million. ($485M x 50% x
68.1%) / 51M
- Filo Mining market capitalization $1.6 billion. ($1.6B x 68.1%)
/ 51M
- Elder Creek value is based on earn-in ($18M / 60%) x 68.1% /
51M
- Royalties: 1.25% NSR on Los Azules and Elder Creek, plus three
other royalties. Est. $35M / 51M
- Average peer group (Jaguar Mining, Silvercorp, Fortitude, Gold
Resource, Endeavour Silver) EV/GEO multiple 2.14x higher than
MUX
- Average peer group EV/GEO x 50%
As you can see, I believe there is
considerable potential value in MUX, and that is a big reason why I
have a personal financial commitment of $220M in MUX and McEwen
Copper. Another way to look at MUX is that its current share price
of $3.66 reflects the low end of potential value of the company’s
ownership in McEwen Copper and you get all the other assets for
free,” said Rob McEwen, Chairman and Chief Owner.
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
Technical InformationThe
technical content of this news release related to financial
results, mining and development projects has been reviewed and
approved by William (Bill) Shaver, P.Eng., COO of McEwen Mining and
a Qualified Person as defined by SEC S-K 1300 and the Canadian
Securities Administrators National Instrument 43-101 "Standards of
Disclosure for Mineral Projects."
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.
CAUTIONARY NOTE REGARDING NON-GAAP
MEASURES
In 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 Form 10-Q for the period ended
September 30th, 2022.
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 Form 10-Q for the period ended
September 30th, 2022.
CAUTION CONCERNING FORWARD-LOOKING
STATEMENTS
This 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/A for the fiscal year ended December 31, 2021 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 focused in the Americas with operating mines
in Nevada, Canada, Mexico and Argentina. It also has a large
exposure to copper through its subsidiary McEwen Copper, owner of
the Los Azules copper deposit in Argentina.
CONTACT
INFORMATION: |
Investor Relations:(866)-441-0690
Toll Free(647)-258-0395Mihaela Iancu ext.
320info@mcewenmining.comJoin our email list for
updates:https://www.mcewenmining.com/contact-us/ |
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1J9 |
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