McEwen Mining: Q2 2023 Results
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TORONTO, Aug. 10, 2023 (GLOBE NEWSWIRE) -- McEwen Mining Inc. (NYSE: MUX) (TSX: MUX) reported its second quarter (Q2) and half year (H1) results for the period ended June 30th, 2023.
“The year started with operational challenges at both Gold Bar and San José. San José appears to have turned the corner and we are confident that the plan in place for Gold Bar will do the same. Fox Complex has delivered another solid quarter and we expect even better results in the second half of the year. We thank our operating teams for their hard work. The story at Los Azules keeps getting better and better! With a strong financing, an updated Preliminary Economic Assessment (PEA) showing robust economics, unparalleled partners in Rio Tinto (through Nuton) and Stellantis, and potentially game changing copper leaching technology, we could see Los Azules provide a model for how the mine of the future should look,” said Rob McEwen, Chairman and Chief Owner.
Second Quarter Highlights and Building Our Future:
- Fox Complex: Record daily mill throughput of 1,250 tonnes per day, generating
$6 million in cash gross profit in Q2. Sustained higher throughput and improved grade expected to result in stronger production and margins in H2. - San José: Production increased
54% with cash costs/oz declining24% compared to Q1, as the revised mine plan continues to be executed. - Gold Bar: Higher mining rates and gold grades, together with faster recovery and lower strip ratio from the Pick deposit setting stage for improved production and margins in H2/23 and beyond. Higher costs/oz during Q2 included the additional costs associated with the heap leach pad expansion, which is expected to be completed in Q3.
- Fenix Project: We continue to advance towards a formal construction decision. During the quarter, we initiated a sonic drilling campaign, advanced permitting applications and engaged a project manager.
- McEwen Copper: PEA for the Los Azules copper project issued in June 2023 with NPV8% of
$2.7 Billion and payback period of 3.2 years, assuming a copper price of$3.75 /lb. Based on the financing closed in Q1/23, our52% ownership of McEwen Copper has now an implied value of$285 million , which is equal to67% of our current market capitalization. - Early retirement of
$25 million or39% of our outstanding debt in Q2; reduction of debt service of$2.2 million annually. - We continued our safety track record of no lost time incidents at our
100% owned operating mines during Q2. - Exploration update across the portfolio to be delivered later in Q3.
Mr. McEwen continued, “At McEwen Mining, quarterly production from our mines delivered a marked improvement in terms of ounces produced over Q1. At the Fox Complex its AISC was
Our biggest single asset with the greatest near-term potential to increase our share value is our
Moreover, by implementing a sustainable approach, this potentially multi-generational asset could become a model for mines of the future. Compared to conventional copper mines, Los Azules is designed with a much lighter impact on the environment, emitting 1/3 the carbon initially to zero by 2038, utilizing ¼ the water,
Investing with us in the future of Los Azules are two global companies, Rio Tinto and Stellantis (through their respective subsidiaries), the world’s 2nd largest mining company and the world’s 4th largest automaker, each owning
The updated Los Azules PEA surpasses the 2017 assessment in key areas, including: 1. Superior financial metrics, 2. Larger copper resource estimate, 3. Significantly lower water consumption and greenhouse-gas emission, 4. Substantial decrease in electricity consumption and 5. A design optimized for permitting and development in the next 5 years. We are now focused on our next milestone, which is to deliver a final Feasibility Study by late 2024 - early 2025.
We have invested heavily in exploration and the results have been most encouraging, particularly at Los Azules, where the resource base increased by
Financial Results
Notice to reader: Under US GAAP, McEwen Mining consolidates
Our cash gross profit(1) was
Adjusted net loss(1) was
We reported a consolidated net loss of
Liquidity and Capital Resources
Consolidated cash and equivalents increased to
During Q2, we decreased our total debt by
In addition, the Company’s
The Company also maintains a portfolio of royalties including a
Gold & Silver Production
Production from our three operating mines was 35,625 gold equivalent ounces (GEOs) (3) in Q2 and 66,100 GEOs in H1, compared to 36,218 GEOs in Q2 2022 and 61,200 GEOs in H1 2022. Our consolidated production guidance remains 150,000-170,000 GEOs for 2023. Details on how we plan to achieve guidance are outlined in the section below.
Individual Mine Performance (See Table 1):
Fox Complex: Timmins, Canada
Fox performed well in the quarter and achieved its budgeted production. Mill throughput in Q2 was
Gold Bar: Nevada, USA
Despite the historic difficulties at Gold Bar, we are confident in our team’s plan at the mine to ramp up gold production during H2, which will also result in lower costs and increased profitability. This will be achieved by mining
San José: Santa Cruz, Argentina
San José had a difficult start to 2023 as seen in our Q1 results. The team at San José has been quick to respond by implementing operational changes that resulted in production increasing
Exploration
Exploration results from the Fox Complex were published in a separate press release on May 8th and an additional update is planned in early September.
Gold Bar exploration activities are focused on discovering near mine resources. Two drills will be active on the property in H2, with one drill outside the mining area testing the Wall Fault, which is believed to be a primary feeder fault for the mineralization at Gold Bar.
McEwen Copper
Infill and exploration results from Los Azules were published on April 5th, May 5th, July 12th and Aug 1st. The drilling campaign at Los Azules ended mid-June and is expected to resume in October, after the South American winter.
Additional assay results from the recently completed drilling campaign will be published over the next months. All drilling information received after the December 31, 2022 cut-off date for the PEA will be incorporated in our upcoming feasibility study.
We own a
During Q2, McEwen Copper spent
At the Elder Creek project operated by Kennecott Exploration Company, a subsidiary of Rio Tinto, six exploration drill holes have been completed with results pending. Kennecott has the option to earn a
PEA Highlights
Please refer to our June 20, 2023 news release for summary results of the Los Azules PEA update. The technical report has been filed on SEDAR and on the Company’s website: https://www.mcewenmining.com/investor-relations/reports-and-filings/default.aspx
Base Case Highlights (Nameplate capacity of 175 kt per year of copper cathode production,
- Updated independent mineral resource estimate, which increased to 10.9 billion (B) lbs. Cu Indicated (
0.40% grade) and 26.7 B lbs. Cu Inferred (0.31% grade) - Average annual Cu cathode production of 401 million lbs. (182,100 tonnes) during the first 5 years of operation, and 322 million lbs. (145,850 tonnes) over the 27-year life of the mine (LOM)
- Total Cu recoverable to cathode of 8.68 billion lbs. (3.94 million tonnes), based on the LOM extraction of mineralized material containing approximately 11.90 billion lbs. of total Cu (5.40 million tonnes), and average copper recovery of
72.8% - After-tax net present value (NPV8%) of
$2.65 9 billion, internal rate of return (IRR) of21.2% , and a payback period of 3.2 years - Initial capital expenditure of
$2.46 2 billion, and a project capital intensity of$7.66 per lb. Cu ($16,880 per tonne Cu)(5) - Average C1(5) cash costs of
$1.07 per lb. Cu and all-in sustaining costs(5) of$1.64 per lb. Cu (AISC Margin of56% )(5) - Average EBITDA(6) per year of
$1.10 1 billion (Years 1-5) and$692 million (Years 6-27) - Estimated carbon intensity of 826 kg CO2 equivalent per tonne of Cu (CO2-e/t Cu)(7) for Scope 1&2 GHG Emissions, well below the industry average of 1,980 kg CO2-e/t Cu(8). McEwen Copper’s goal at Los Azules is to be carbon neutral by 2038, a target achievable through the use of emerging technologies and offsets
- Estimated site-wide water consumption of 137 liters per second (L/s) from Years 1 to 10, increasing to 163 L/s from Years 11 to 27. This compares to approximately 600 L/s(9) for a conventional mill producing copper concentrate
- Upside case with the addition of Nuton™ technologies(10) increases NPV8% to
$3.70 1 billion, IRR to23.9% , and mine life to 39 years, and reduces payback to 2.7 years.
Management Conference Call
Management will discuss our Q2 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.
Thursday Aug 10th, 2023 at 11:00 AM EDT | Toll Free (US & Canada): | (888) 210-3454 |
Outside US & Canada: | (646) 960-0130 | |
Conference ID Number: | 3232920 | |
Event Registration Link: | https://events.q4inc.com/attendee/300718616 |
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 Q2 and H1, with comparative results from Q2 and H1 2022 and our guidance range for 2023.
Q2 | H1 | Full Year 2023 Guidance Range | ||||||||
2022 | 2023 | 2022 | 2023 | |||||||
Consolidated Production | ||||||||||
Gold (oz) | 27,600 | 28,700 | 48,450 | 54,600 | 123,000-139,000 | |||||
Silver (oz) | 704,600 | 571,210 | 1,039,500 | 954,090 | 2,300,000-2,600,000 | |||||
GEOs(3) | 36,100 | 35,700 | 61,200 | 66,100 | 150,000-170,000 | |||||
Gold Bar Mine, Nevada | ||||||||||
GEOs | 5,100 | 7,900 | 11,400 | 14,400 | 42,000-48,000 | |||||
Cash Costs/GEO | 1,562 | 2,113 | 1,951 | 1,842 | ||||||
AISC/GEO | 2,108 | 2,585 | 2,377 | 2,190 | ||||||
Fox Complex, Canada | ||||||||||
GEOs(1) | 11,200 | 10,400 | 18,900 | 23,100 | 42,000-48,000 | |||||
Cash Costs/GEO | 985 | 1,237 | 1,066 | 1,153 | ||||||
AISC/GEO | 1,290 | 1,371 | 1,460 | 1,337 | ||||||
San José Mine, Argentina ( | ||||||||||
Gold production (oz)(4) | 11,100 | 10,500 | 17,550 | 17,200 | 39,000-43,000 | |||||
Silver production (oz)(4) | 704,600 | 569,740 | 1,039,500 | 950,960 | 2,300,000-2,600,000 | |||||
GEOs | 19,600 | 17,400 | 30,300 | 28,600 | 66,000-74,000 | |||||
Cash Costs/GEO | $1,362 | $1,537 | ||||||||
AISC/GEO | $1,811 | $1,980 |
Notes:
- Cash gross profit, cash costs per ounce, all-in sustaining costs (AISC) per ounce, and adjusted net income or loss per share are non-GAAP financial performance measures with no standardized definition under U.S. GAAP. For definition of the non-GAAP measures see "Non-GAAP- Financial Measures" section in this press release; for the reconciliation of the non-GAAP measures to the closest U.S. GAAP measures, see the Management Discussion and Analysis for the quarter ended June 30, 2023, filed on Edgar and SEDAR.
- On our balance sheet the Argentine Pesos held by McEwen Copper are converted to US dollars at the official exchange rate (257 ARS/USD on June 30th).
- 'Gold Equivalent Ounces' are calculated based on a gold to silver price ratio of 83:1 for Q2 2023, 84:1 for H1 2023, 83:1 for Q2 2022 and 80:1 for H1 2022. 2023 production guidance is calculated based on 85:1 gold to silver price ratio.
- Represents the portion attributable to us from our
49% interest in the San José Mine. - Project capital intensity is defined as Initial Capex ($)/ LOM Avg. Annual Copper Production (lbs. or tonnes). C1 cash costs per pound produced is defined as the cash cost incurred at each processing stage, from mining through to recoverable copper delivered to the market, net of any by-product credits. All-in sustaining costs (AISC) per pound of copper produced adds production royalties, non-recoverable VAT and sustaining capital costs to C1. AISC margin is the ratio of AISC to gross revenue. Capital intensity, C1 cash costs per pound of copper produced, AISC per pound of copper produced, and AISC margin are all non-GAAP financial metrics.
- Annual earnings before interest, taxes, depreciation, and amortization (EBITDA). EBITDA is a non-GAAP financial measure.
- Kilograms of Carbon Dioxide Equivalent per tonne of Copper Equivalent produced. Carbon Dioxide Equivalent means having the same global warming potential as any another greenhouse gas.
- Wood Mackenzie Limited average Scope 1&2 emissions intensity for 394 assets during the period between 2022 and 2040.
- 2017 NI 43-101 Technical Report on Los Azules Project, Hatch Engineering (Throughput of 120,000 tpd of mineralized material).
- McEwen Copper does not currently have a commercial arrangement with Nuton that enables it to deploy their technologies at Los Azules, and there is no guarantee that such an agreement will come to fruition, however McEwen Copper and Nuton intend to work in good faith toward such an arrangement. The results disclosed assume that Nuton™ technologies are implemented without including costs associated with technology licensing or some other commercial cost structure.
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 José
Minera 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 Costs
Cash 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 three and six months ended June 30, 2023.
Cash Gross Profit
Cash 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 three and six months ended June 30, 2023.
Adjusted Net Income or Loss and Adjusted Net Income or Loss Per Share
Adjusted 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. A reconciliation to net income, the nearest U.S. GAAP measure is provided in McEwen Mining’s Quarterly Report on Form 10-Q for the three and six months ended June 30, 2023.
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 and six months ended June 30, 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 the 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
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Suite 2800, PO Box 24 | ||||||
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M5H 1J9 | LinkedIn: | linkedin.com/company/mcewencopper | ||||
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(866)-441-0690 - Toll free line | ||||||
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Mihaela Iancu ext. 320 | LinkedIn: | linkedin.com/in/robert-mcewen-646ab24 | ||||
info@mcewenmining.com | Twitter: | twitter.com/robmcewenmux | ||||
FAQ
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