McEwen Mining Inc. (NYSE: MUX) (TSX: MUX) today
reported its first quarter (Q1) results for the period ended March
31st, 2023.
“This quarter we completed a series of
large financing transactions involving shares of our
McEwen Copper subsidiary, which has increased the market value
attributable to our copper business to $550 million (for 100%) from
$257 million at the conclusion of the prior financing round in
August 2022. As 52% owner, McEwen Mining shareholders are
benefitting from this value accretion, which validates the strategy
we set out in July 2021 to surface value from Los Azules by funding
it independently,” said Rob McEwen, Chairman and Chief
Owner. “Our 100% owned precious metal mines generated a
gross profit this quarter, although McEwen Copper expenses obscures
our improved performance on a net basis. We continue to invest in
exploration as the most cost-effective means to extend the life of
our operations with positive results.”
Financial Results
Notice to reader: Under US GAAP, McEwen Mining
consolidates 100% of the accounts of its wholly-owned and majority
owned subsidiaries in its reported financial results, including
McEwen Copper. Entities over which we exert significant influence
but do not control, such as Minera Santa Cruz S.A. (“MSC”), are
presented as an equity investment on our balance sheet.
Our gross profit in Q1 was $4.4
million and our cash gross profit(1) was $11.3
million, compared to a gross loss of $6.0 million and cash
gross loss of $2.3 million in Q1 2022. The increase in gross profit
and cash gross profit directly resulted from improvements in
productivity across our Fox Complex and Gold Bar mine
operations.
Adjusted net loss(1) was $6.4
million, or $0.14 per share in Q1,
compared to an adjusted net loss of $13.1 million, or $0.28 per
share in Q1 2022. Adjusted net income or loss is a new non-GAAP
financial measure intended to provide readers with a metric to
evaluate our 100% owned precious metal business, excluding McEwen
Copper (52%) and MSC (49%), which owns the San José mine.
We reported a consolidated net loss of
$43.1 million, or $0.91 per share
in Q1, compared to a net loss of $20.7 million, or $0.45 per
share in Q1 2022. The largest contributor to our net loss was
$31.9 million spent on exploration at our Los
Azules project, which we expensed under US GAAP. We also incurred
$5.9 million in exploration expenses at our Fox
Complex and Gold Bar mine operations.
Liquidity and Capital
Resources
Consolidated cash and equivalents increased to
$190.8 million(2) at the end of Q1 with the
completion of a primary and secondary offering of common shares in
McEwen Copper. These transactions brought in 30 billion Argentine
Pesos from FCA Argentina (a subsidiary of Stellantis) and $30
million from Nuton (a Rio Tinto venture).
McEwen Mining received $47.5
million in available funds from the secondary sale of 8.7%
of McEwen Copper, which will be used to reduce our senior secured
debt, for project development spending and general corporate
purposes. The balance of the funds raised from the primary issuance
will be used by McEwen Copper for Los Azules project spending,
predominantly drilling and other feasibility-oriented work programs
to advance the project towards an updated Preliminary Economic
Assessment (PEA) in Q2 2023 and a Feasibility Study by the end of
2024.
Total debt was $65 million at
the end of Q1. Management intends to reduce this amount by $25
million through the repayment in full of the portion of the senior
secured credit facility owed to Sprott Lending.
Gold & Silver
Production
Production from our three operating mines was
30,400 gold equivalent ounces (GEOs) (3) in Q1,
compared to 25,200 GEOs in Q1 2022. Production guidance remains
150,000-170,000 GEOs for 2023.
Individual Mine Performance
(See Table 1):
Fox performed well in the
quarter and achieved its budgeted production at costs in-line with
our guidance for the year. This is a significant improvement over
Q1 last year when the mine struggled with effects of the pandemic
and equipment failures. The Fox team’s diligent efforts have
resulted in much improved operating performance and cash
generation.
Gold Bar continued to ramp-up
mining from the Gold Bar South deposit in Q1, and successfully
placed 15,000 contained gold ounces on the heap leach pad. Extreme
snow and rainfall in the southwestern United States this winter
resulted in flooding around Gold Bar, temporarily restricting
access to the mine. Despite these challenges the Gold Bar team kept
costs under control and remained focused on delivering ore to the
heap leach pad and production is steadily increasing. Mining
resumed at the Pick pit in April, which will continue to add gold
inventory to the heap leach pad, contributing to the increase of
production in the balance of the year.
San José usually has a lower
production in the beginning of the year because of holidays closure
and a planned annual shutdown for maintenance during Q1. This
quarter’s production was additionally hindered by negative grade
reconciliation to the mine model, which is attributed to
variability around the margins of the mined veins. From a financial
perspective, lower production in Q1 was offset by higher than
budgeted realized gold and silver prices, which allowed the San
José team to adjust their plans for 2023 by accelerating
development and definition drilling to access new mining areas.
McEwen management visited San José in April to review the 2023 plan
and exploration activities.
Exploration
Exploration results from flow-through funded
drilling at the Fox Complex were published in a
separate press release on May 8th; drilling will continue during
the rest of the year, focusing on prospective zones at the Stock
property and the Grey Fox property.
Infill and exploration results from Los
Azules were published on January 26th, March 6th, April
5th, and May 5th. Drilling at Los Azules is expected to continue
until the end of May and then resume in October, after the
South American winter.
Gold Bar exploration activities
were focused on defining the boundaries of our oxide resources at
the Pick deposit, and on testing the Benmark target, located
immediately southwest of the leach pad. Drilling at the Cabin South
target is expected to be underway shortly. If results are
successful in these areas, they each have potential to positively
impact the mine plan in the near-term.
San José’s drilling programs to
define additional resources and reserves have a long history of
success due to a high vein density, aided by good geophysical
response from hidden veins. Exploration drilling to discover and
extend veins is occurring in several areas with success to the
North of the mine, where two potentially economic veins (Maura NW
and Maura SW) are returning good results. Drilling at the Telken
target in the South of the property, and adjacent to Newmont’s
Cerro Negro mine, is planned for Q3.
McEwen Copper
We own a 52% interest in McEwen Copper Inc.,
which holds a 100% interest in the Los Azules copper project in San
Juan, Argentina, and the Elder Creek exploration project in Nevada,
USA.
On February 23, 2023, we closed an ARS $30
billion investment by FCA Argentina S.A., a subsidiary of
Stellantis N.V., and on March 15, 2023, we closed a $30 million
investment by Nuton LLC, a Rio Tinto Venture and existing McEwen
Copper shareholder. Subsequent to these transactions Stellantis and
Nuton each own 14.2% of McEwen Copper.
During Q1, McEwen Copper spent $31.9 million to
advance a major drilling campaign involving up to 15 rigs, ongoing
road maintenance and improvements, hyperspectral scanning of the
entire drill core library, technical studies necessary for the
updated PEA, environmental baseline work, project optimization and
trade-off studies including renewable power supplies and mining
methods, and metallurgical test work.
On April 14, 2023, the Los Azules Environmental
Impact Report for Exploitation was submitted by McEwen Copper to
the Argentinian authorities for review.
Drilling at the Elder Creek project conducted by
Kennecott Exploration Company, a subsidiary of Rio Tinto, is
expected to begin in May. Kennecott has the option to earn a 60%
interest in Elder Creek by investing $18 million over a maximum of
seven years.
Management Conference Call
Management will discuss our Q1 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.
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TuesdayMay
9th, 2023at
11:00 AM EDT |
Toll Free (US & Canada): |
(888) 330-2398 |
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Outside US & Canada: |
(240) 789-2709 |
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Conference ID Number: |
67121 |
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Event Registration Link: |
https://conferencingportals.com/event/ZSafhHZi |
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Webcast Link: |
https://events.q4inc.com/attendee/775071696 |
An archived replay of the webcast will be
available approximately 2 hours following the conclusion of the
live event. Access the replay on the Company’s media page at
https://www.mcewenmining.com/media.
Table 1 below provides
production and cost results for Q1, with comparative results from
Q1 2022 and our guidance range for 2023.
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Q1 |
Full Year 2023Guidance Range |
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2022 |
2023 |
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Consolidated Production |
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| Gold (oz) |
20,850 |
25,900 |
123,000-139,000 |
| Silver (oz) |
335,500 |
381,200 |
2,300,000-2,600,000 |
|
GEOs(3) |
25,200 |
30,400 |
150,000-170,000 |
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Gold Bar Mine, Nevada |
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| GEOs |
6,300 |
6,500 |
42,000-48,000 |
| Cash Costs/GEO |
$2,284 |
$1,491 |
$1,400 |
|
AISC/GEO |
$2,633 |
$1,725 |
$1,680 |
|
Fox Complex, Canada |
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|
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| GEOs(1) |
7,700 |
12,700 |
42,000-48,000 |
| Cash Costs/GEO |
$1,193 |
$1,088 |
$1,000 |
|
AISC/GEO |
$1,729 |
$1,311 |
$1,320 |
|
San José Mine, Argentina (49%) |
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| Gold production (oz)(4) |
6,450 |
6,700 |
39,000-43,000 |
| Silver production (oz)(4) |
335,500 |
381,200 |
2,300,000-2,600,000 |
| GEOs |
10,700 |
11,200 |
66,000-74,000 |
| Cash Costs/GEO |
$1,589 |
$1,800 |
$1,250 |
|
AISC/GEO |
$2,103 |
$2,234 |
$1,550 |
Notes:
- Cash gross profit, cash costs per
ounce, all-in sustaining costs (AISC) per ounce, and adjusted net
income or loss and adjusted net income or loss per share 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 quarter ended March 31, 2023, filed on Edgar
and SEDAR.
- On our balance sheet the Argentine
Pesos held by McEwen Copper are converted to US dollars at the
official exchange rate (209ARS/USD on March 31st).
- 'Gold Equivalent Ounces' are
calculated based on a gold to silver price ratio of 84:1 for Q1
2023 and 78:1 for Q1 2022. 2023 production guidance is calculated
based on 85:1 gold to silver price ratio.
- Represents the portion attributable
to us from our 49% interest in the San José Mine.
Technical Information
The 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 Annual Report on Form 10-K for the
year ended December 31, 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 Annual Report on Form 10-K for the year
ended December 31, 2022.
Adjusted Net Income or Loss and Adjusted Net
Income or Loss Per ShareAdjusted net income or loss is a non-GAAP
financial measure and does not have any standardized meaning. We
use adjusted net income or loss to evaluate our operating
performance and ability to generate cash flow from our wholly-owned
operations in production; we disclose this metric as we believe
this measure provides valuable assistance to investors and analysts
in evaluating our ability to finance our precious metal operations
and capital activities separately from our copper operations. The
most directly comparable measure prepared in accordance with GAAP
is net income or loss. Adjusted net income or loss is calculated by
adding back McEwen Copper and MSC’s income or loss impacts to our
consolidated net income or loss.
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 Company 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, foreign exchange
volatility, foreign exchange controls, foreign currency risk, 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, 2022,
Quarterly Report on Form 10-Q for the three months ended March 31,
2023, 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 gold and silver producer with
operations in Nevada, Canada, Mexico and Argentina. In addition, it
owns approximately 52% of McEwen Copper which owns the large,
advanced stage Los Azules copper project in Argentina. The
Company’s goal is to improve the productivity and life of its
assets with the objective of increasing its share price and
providing a yield. Rob McEwen, Chairman and Chief Owner, has
personal investment in the company of US$220 million. His annual
salary is US$1.
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WEB SITE |
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SOCIAL
MEDIA |
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www.mcewenmining.com |
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LinkedIn: |
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CONTACT
INFORMATION |
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Twitter: |
twitter.com/mcewenmining |
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150 King Street West |
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Instagram: |
instagram.com/mcewenmining |
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Suite 2800, PO Box 24 |
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Toronto, ON, Canada |
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McEwen Copper |
Facebook: |
facebook.com/
mcewencopper |
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M5H 1J9 |
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LinkedIn: |
linkedin.com/company/mcewencopper |
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Twitter: |
twitter.com/mcewencopper |
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Relationship with
Investors: |
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Instagram: |
instagram.com/mcewencopper |
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(866)-441-0690 - Toll free line |
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(647)-258-0395 |
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Rob
McEwen |
Facebook: |
facebook.com/mcewenrob |
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Mihaela Iancu ext. 320 |
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LinkedIn: |
linkedin.com/in/robert-mcewen-646ab24 |
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info@mcewenmining.com |
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Twitter: |
twitter.com/robmcewenmux |
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