Q4 2020 McEwen Mining Inc Earnings Call
Yeah.
[music] channel.
Hello, Ladies and gentlemen, and welcome to Mcewen, Mining's Q4, and year end 2020, operating and financial results Conference call from the company today are Rob Mcewen, Chairman and Chief owner, and my Krueger, Chief Financial Officer, and Peter MA Chief Operating Officer.
After the speaker's presentation, there will be a question and answer session.
I would like to ask a question. During this time simply press star followed by the number one on your telephone keypad.
If you would like to withdraw your question press the pound key.
I will now turn the call over to Mr. Rob Mcewen Chief owner.
Thank you operator.
Good morning, and welcome as many of you have observed 2020 was a brutal year for us.
We have been consumed by fixing the problems that were created in 2019.
We invest it in can do people new systems to monitor our operations and in exploration to build our future.
We are announcing a churn in our fortunes for the better.
I'm pleased to say that's true.
For the first time in two years, our operations are finally delivering on guidance.
January and February.
We're right on target.
I will now ask.
Anna to talk about our financial results for 2020, and how we are very well positioned for 2021.
She will be followed by Peter.
Who will talk about how much of the transformation has been required and the progress made in the future we see.
Anna.
The floor is yours.
Thank you Ron and good morning, everyone.
As we all know why truly challenging year in 2020, both financially.
Shlomi.
For Q4.
Our 300% Online's reports cash gross loss of $6 9 million and a gross loss of $13 seven line.
Yeah.
For the year 2020.
Cash gross loss corn volume on a gross loss of $29.
We ended 2020 with a consolidated net loss of $152 $3 million the worst that the company has ever seen.
I want to speak a little bit about from off in particular, <unk> 55 per cent of critical path. It is a noncash aqua driven by the impairment of our gold bar mine.
And on the back of the feasibility study with chats from glue.
We were able to reverse some of that losses would be looking at approximately a $30 million reversal or <unk> 35 per cent that original loss doesn't have to be written down.
And it from Saturday, However, the QM patch a part on U S GAAP, which does not allow us to do any income.
Chairman the first dose and we are not an ISR reporter.
I thought that was important to highlight.
Also contributing to the law.
Approximately $27 million in <unk>.
Part of our operations.
Due to the challenges of 2020.
G&A administrative costs with nine month.
And we are required to record all of our advanced project from exploration expenditures and that was an investment for the company of about 27, and a half one 2018%.
The money market.
Going forward into 2021, we did remove our going concern note and today, we have just under $50 million in liquid assets.
We also extended our debt facility.
That can explore in August of 2021 to now August 2023, with the new partner spot lending book.
We are fully compliant with all of our debt covenants.
Subsequent to year end, we also raised an additional $44 million and we're now fully funded from our projects into 2021.
The $20 million flow through funding that was raised in 2020 will be used over the next two years to accept Jenny.
Generative exploration at our Fox complex right.
Yeah.
They're positive.
The liver and Peter will speak to some of that.
We also have $5 million exploration program earmarked at our Nevada operations this year.
We expect improved performance at our operations. After a challenging 2020, we've had a busy Q4 and in Q1 with some important growth.
I'll start.
Ability to study from Phoenix.
Updated.
<unk> for the mine in Nevada.
We are forecasting for 2020 full equivalent production to be in the range of 141.
60000 gold equivalent ounces, which is approximately 23% to 40% increase over our 2020 production.
As of today, we remain on track price.
In terms of our cost I can say that they will improve from 2020.
However, we will not be guiding costs at this point in time until we see our Q1 financial results.
Thank you and I will now turn the call over to Peter.
Thank you Anna.
I would.
Surmise summarized last 2020, a colossal challenge.
When I joined Mcewen mining a year ago, the backdrop with the start of the COVID-19 pandemic.
Right down at gold bar eminent Blackhawks with underperforming while developing for them.
And the financial health of the company was on life support non.
A pretty picture.
Rob on the board.
Why joining mcewen mining and my answer was simple.
You can fix it.
And the asset base, a strong to grow our major.
Fast forward to today.
As Rob mentioned 2021 pleased to report we are on plan for January and February.
Some highlights a black box.
Actually it would be.
Resource and reserve was expected to be completed in Q4 of last year, we've extended that into may of this year and the team keeps keeps working on it's my next program drilling and adding resources. So we hope to continue that trend.
Through 2021.
And from Im pleased to report as of today, we're 36 meters away from first or so in a matter of a week will be hopefully colouring on the first or in hitting a very important milestone.
Gold bar, we've worked our way through.
The write down of resources and the waste strip that was associated with that.
And and updated the feasibility.
With six years of mine life.
With just around 300000 ounces gold recovered.
So guy who remains on Brazil.
Residual leach and we published the Phoenix feasibility report.
Early this year.
So taking a look at firm.
This is amazing.
Deposit for assets Bridget.
Our gold production out of the Timmins area for two and a half years.
Some of the benefits of agreements are very different deposit than Blackhawks disseminated deposit.
A very wide intersections of 15 to 40 meters and stope width.
We are planning.
Versus open stoping primary secondary but a little bit of longitudinal retreat.
It's got good ground.
The short haul and our decline has come in off the bottom of pit at 5%.
We're achieving our target.
Development rates.
An improvement program around that to try and advance and accelerate from.
We purchased the tele remote LH D. So trying to take out.
Advantaged joke.
Apology. So this shows a very good deposit low low cost deposit it'll form.
Part of the P. Eight.
We're working on Fox complex expansion.
Which brings me to that project.
So the Fox complex expansion, we'll look at a 100 to 150000 ounces per year over 10 years. It has a resource base of over 3 million ounces of indicated resource and over $1 million.
Over 1 million inferred.
The we've been doing a lot of work.
Tradeoff analysis on mining methods and approaches.
In the following areas there are going to.
Trending very positively to the business case for the PAA and that includes Grey Fox, which is a 9000 ounce indicated resource of about seven grams per tonne.
The stock West deposit, which we're drilling and expect to have made the first initial resource.
With the Pea, which will come out both the P. A M resource come out towards the end of Q2.
It appear will also include the freedom and Black box, which I've spoken about and two deposits in the Timmins.
Properties called Davidson Tisdale and forward.
So bright days ahead.
For the Fox complex expansion and trending very well.
This year, we're going to be working on focusing on delivery and continuing with the turnaround.
It's a year of transition.
Some of our operations and particularly Blackhawks were ramping down.
Mining activities at Black Fox, while continuing with exploration drilling and ramping up.
From deposit.
We're going to be working on a lot of the systems and people processes that go along with that to set up our foundations for a good efficient.
Company and operating practices.
In closing I'd, just like to say, we survived the 2020 and we are well positioned to thrive in the years ahead.
Thank you.
Thank you Peter.
I wanted to talk now.
Now about the assets.
Is that we have but had been largely obscured by the.
Weak operational performance in 2020.
There are three important assets.
Uh huh.
And.
It was.
As a result of as I said, the weak operational performance in 2020, and the results that we need to do multiple financings.
Net of really hidden these assets from view.
First is our exploration success at our Fox complex and the resulting growth.
In the size of our resources there and.
And.
And as Peter mentioned.
In the second quarter, we will be released releasing our preliminary economic study on.
How we see the future of this.
Fox complex developing and we think there's a good room.
There isn't a large resource base in excess of 3 million ounces there.
Is the infrastructure to develop.
Those ounces.
He believes that it has the potential to develop.
100 250000 ounces.
Of annual production, there with a life in excess of 10 years.
And that will become.
More visible in.
As I said in the second quarter.
The other two assets have really come into the floor recently with the very large increase.
In the prices of silver and copper.
Our copper project, which you've heard about before is extremely sensitive to the price of copper and with the large increase copper has gone from.
In the last 12 months from a low of $2.08 per pound too high at just over four.
For $1 20 per pound and is currently at around $4 10 per pound.
It's had a powerful impact on the value of losses Lewis.
And we.
Using the <unk>.
So we're moving economic assessment for losses at least that was completed in the summer of 2017.
And looking at the net present value of this asset.
And then applying an 8% discount.
That calculation.
Losses are less now has a value of approximately $5 billion based on that PPA.
I can say that with the rise in the price of copper we've seen.
The number of people knocking on our door asking to take a look at that.
Project.
Because it is a very large project long life 36 years.
Currently modeled.
And in the first.
King is modeled to be producing 415 million pounds of copper.
And when you include the silver and gold credits.
You have that.
Projected cost production of $1 14, a pound.
So.
Right now we have a number of major mining companies in our data room looking at it and this is the first in many years.
And just underlying the interest in large copper projects by large companies.
And the next company.
That's within Mcewen mining issue, which is a silver company and it's not well appreciated but between.
San Jose mine that produces a very high grade silver and gold mine one of the highest.
In the Americas.
It's producing silver.
And.
He has a grade of just under 460 grams, silver and seven grams gold.
So if you combine that with our Mexican assets.
<unk>.
Asset.
On line.
And the Fenix project, which has a.
We recently released a feasibility on it and that has the potential for nine and a half year life.
Are you single out.
Sales are now up here to put those two together you would had a silver company.
Net win ranked against all the other public silver companies.
Hum.
Size producers and.
And we've seen at least one investment banker come on and suggest that we if we spun it out it would have a value.
Mhm value of $140 million.
So these two assets, we think aren't getting.
Real recognition in our portfolio.
And we're pursuing a course to spin them out into two separate companies of copper company with losses listen it along with a copper project we have in Nevada.
So we would have two opportunities there.
And putting.
San Jose and.
Phoenix project into another company.
And I think with the growing.
Demand from metals to fuel the.
Moved for the electrification.
Transportation.
For the year.
Renewable energies and also.
To support the growth.
And the demand coming from.
Hurricane Asian market.
See a very bright future for both of those spinouts and creating value.
We would retain a.
But a large interest in both of those companies, but we could see.
Strong appreciation of those companies.
So.
Yeah.
I just wanted to leave you with one last thought net.
We're very optimistic about the future and Thats definitely.
Turned for the better.
Last year it was as I said at the beginning brutal.
And if you look at our stock symbol book.
Luke had a tag line.
Your line to strive to make it.
And that is motivated United exceptional.
Thank you very much for joining us today and I'd now like to open the session for questions.
Operator back to you.
Certainly at this time, if you would like to ask a question simply press Star then the number one on your telephone keypad.
To withdraw your question press the pound key we'll pause for just a moment to compile the Q&A roster.
Your first question comes from the line of Joseph Reagor from Roth Capital Partners. Your line is open.
Hey, Robyn team thanks for taking the questions.
Hi, Jeff.
So first to it's good to hear the optimism.
Yes.
A nice change.
And on that note.
With this these potential spinouts like how far down the road are you on those.
We've been looking at the tax implications from the best way to structure that.
We have on track prospectus on one of them.
It's.
A three to four months process.
Whereas to hear I'm, moving we're moving down there.
We were little consumed by getting them.
Our year end results out in and making sure that we were in a position where the auditors agreed to remove the going concern.
And having sufficient plans to carry us through this year.
All of our projects.
Okay.
On the cash guidance side.
Cost guidance I know you guys arent, giving guidance yet.
Specific but.
Is it fair to assume that.
Cost should be lower this year than last year.
And then in particular, the Bull-bar cash cost seems pretty elevated in Q4. Any addition color additional color on why that was.
Ah.
A function of.
We didnt produce a lot of dogs, but we had the cost.
This year, we're looking to.
Production increasing.
Anywhere from 23% to <unk> 40 per cent.
And that from bringing the cost down I'll, just ask Peter to elaborate on that.
Yes, thanks, Rob.
Yes, as Rob noted our top line ounces were down and the waste strip.
So we went through sort of an elevated waste strip period.
Which was the result of the resource write down we lost from a resource blocks within the script.
So it will be coming through that.
And this year and coming out of emerging from that we don't expect that to continue for the life of mine.
And all of those through the cold and wet powder in the feasibility for either.
Okay.
Thanks, I'll turn it over.
Thank you Jeff.
Once again, if you would like to ask a question. Please press Star then the number one on your telephone keypad. Your next question comes from the line of Heiko UA from H C. Wainwright. Your line is open.
Hello.
Hi, there thanks for taking my question.
And I want to point out to you that I think you're giving yourself credit for a year, where life was tough for everyone involved with at least some of it has been as you say completely outside of your control I mean, one other thing earlier almost all of the work.
Colossal challenge was but at least in my opinion, a good order those circumstances towards Parnell and not really attributable to you guys.
You stated in your release that you will read from by the end of Q1, and 20 day less than three weeks well done obviously, but you'll also see the commercial production will be reached by Q4 can you maybe just provide a bit of color on your spending at through quarter by quarter until the.
Cash flow in spending before you reach commercial production at the end of it here.
Sure I'll ask Peter to Huh.
Answer that question.
Yeah, I'll give the descriptions.
But we're going to develop the deposit may be at risk.
Later on the cost per bit Heiko.
And thank you for for the cash.
Even though things are out of our challenge.
<unk> tried to do our job.
Our out of our control and try to do our two committed those risks.
<unk>.
Yes, it is a very exciting growth.
Sure.
Probably two three weeks ahead of our plan.
I end up getting to first or.
There's a way.
What it'll look like it can wait development.
Access.
Level.
Currently.
25 meters apart.
We will be growing it.
Oh.
On the ore in the primary and secondary.
And so this per store that I'm speaking about on these calls is our first panel.
Our primary panels on the ground versus book being on eastern side of the stope.
We'll skip the secondaries and opening up each primary panel.
And so why we're talking about a commercial.
Our production in Q4, we've got to do those development headings in or continue with the waste accessories for the top line.
Book.
And then Dan top and bottom line.
Go in and drill the stope sales so there is.
A ramp up process.
<unk> access.
We are working on trying to alert.
From April.
People that were working towards.
But.
That's pretty pretty big development cycle, and I'm, we're hoping to bring that forward.
Exactly.
On the cost side.
Uh huh.
And then a question on them.
<unk> second quarter until we reach.
Russia production Baton pad.
Hi.
We are working with the contractor.
Good folding.
Probably the lower end of that number that I just came from.
[laughter].
Got it.
And then can you walk us a little bit through the pricing that youre seeing for the treatment charges.
You all these might hear stories out there and I went through your 10-K in a bit of control expert treatment charges and I saw exactly one result.
So.
Missing anything it is everything hunky dory and similar what are you seeing with the duration and pricing for our results from assay labs.
Cost the cost development assays that metric mature space, yeah. So on the true Mr inclusion for the refining charges.
Or does that get.
So there isn't.
Technical charges you Didnt all of the requirements that we have.
Mining charges, yes.
I don't have that income.
Uh huh.
Police force.
Hum.
Contact with a price per finally.
When refineries.
To tinder.
Total.
And then around <unk>, but I can certainly call assets.
Yes.
Okay.
If I may just not something that I have with me.
True we will have numerous people don't think of it moves the needle too much. If you don't if you don't.
Have nightmares about it every night.
It doesn't seem to be an issue.
No no.
Well it hasn't really been there.
That's good to hear.
I mean, we're gonna be processing.
Our mill at stock at the stock now.
All of fruit.
We send it off to the refiners and I'd say, we have pretty much a standard rate that the industry gets yeah, yeah, it's definitely industry for sure.
Excellent.
Perfect. Thank you very much.
Hey.
Thanks Sandra.
Yeah.
Once again, if you would like to ask a question. Please press Star then the number one on your telephone keypad. Once again. Another star then the number one on your telephone keypad, we'll pause for just a moment to see if there are any further questions.
Yeah.
Your next question comes from the line of.
Jeffrey Hall, Mr Hill Your line is open.
Rob.
Yes, definitely yes, Jeff I'll contact you before I'm a shareholder.
First question, Rob with a possible spin off how.
Will that work with the present shares of individuals' would have.
At the moment it.
There would be no change there.
Okay.
So you would say.
<unk>.
With.
The puzzle spinoffs you what have.
You continue to have your and UX shares correct.
And then we get.
Then would you its shares of the spinoff also or.
We haven't totally resolve that.
Yeah.
Shareholders becomes.
A little more difficult.
Some of the regulatory standpoint, so at the moment, we're looking at holding it.
The shares that.
That we retain and those companies inside in Q in mining.
At a later date, we could do something with them but.
Well I'm glad you're feeling it.
You know we're at right now.
It's kind of like a Medicare.
Buying with bitcoin.
Okay.
The new digital goal and I've tried to.
Tried to research that and the hash rates in all of this.
I mean, I have trouble just figuring out how to tip a pizza.
Liana I think there's room for both.
We're gonna be a gold holder or a bitcoin or.
Well I guess all of us who hasn't bought bitcoin.
Couple of years ago wish we had of [laughter] right.
Where's its role I think it's.
There's a generation that sees the problem.
The net the governments are creating by expand from there.
Monetary base.
And decline can be easily transacted over a phone.
Hum.
Whereas <unk> is a little more difficult to move around right.
I think at the moment gold has.
A lot of central banks.
Maintain gold as the monetary asset part of their reserves.
Yes.
They leased that goes out.
Yes.
That's with banks and other and the gold mining companies indirectly.
And so people can come up with all sorts of derivatives on gold, which will flow today and the paper gold market is much bigger than the physical market.
When the day comes it they have to.
Return that goes.
No.
And we should see that gold starting to move but right now.
All markets enamored with digital.
Right.
Assume there'll always be something tomorrow.
There will be a day that comes when it is going to become very difficult to borrow.
And that will send the price go up much higher yes.
Yeah, I think the governments will eventually regulate I believe in the block chain technology bet.
I think governments are going to finally regulate this.
But you know when you have two individuals life of mine.
Sailor.
I'm not that can move a 5000 either way.
Massey buys.
Bitcoin bitcoin.
And anyway, it's just a you know I've been a shareholder since 2016, it's been such a disappointing appointing.
A big disappointment of the gold miners.
No you're trying but it just.
It's you know it's so frustrating.
At least from me as a shareholder from when we.
At a price of $4 and youre paying a small dividend.
We didn't have any debt now or.
It seems like you're.
Every quarter.
Quarter report, there's always something book.
Skus or whatever.
So it's just a frustrating.
Sure.
But anyway I hope you can turn.
Turning it around you've been saying it for two years, it's going to get better and we're still that's still there but.
Anyway, that's my two.
[laughter] well.
I think.
Those two cents a share by every line as a shareholder of the company.
Been a very difficult period.
We do have we have rebuilt management.
And we are starting to see early signs of a turn at least from operations January and February are on target.
As I said.
It's the first day and in two years.
Okay.
Feasibility as we put out there is some growth there.
Net prices, particularly copper and silver at really soared.
In the last year.
Right right I think we can realize value there.
That really hasnt surfaced yet.
Is there any benefit Rob you know, what's now the electrification of cars.
Really concentrating a lot most of <unk> putting more.
But yes more concentration in developing that the copper at <unk>.
Yeah.
Our challenge has been.
When the operations didn't deliver as much gold.
But as in any jeopardy, reaching our debt covenants.
And that caused us to do a number of financings that were at prices I realize you like but we didn't have a lot of choice. Okay. All right.
So we refinanced the debt.
Pushed out the maturity on it.
Two years to August 23, moving.
Turning around and.
And I'll share the working capital requirement. So some of the covenant so buys us more room.
The auditors took off as a going concern.
Qualification on our financials.
And right now we're in a position where he here.
Had a quick cash to take us through the year.
And.
Which is investing in our growth and future cash flow.
Yeah, I'd like to get back to prepare that day, where we're paying a dividend.
Hum.
Thank God, we got rid of the debt. After a couple of years and then started paying a dividend modestly.
Right.
Okay well.
Good morning.
Yeah I.
Thanks for taking my call I don't know probably sit from too much time, but you.
I was just kind of you know good luck and Peter I Hope you can.
<unk> sort of turn this around.
So I know I'm getting wary of holding up the.
Bulk of my shares but.
Anyway.
Thanks, a lot and good luck, okay, and I hope to I Hope you can turn this thing around.
Yeah.
But I'll, let you go sorry, emlen, but habits anytime Jeff.
Great. Thanks, a lot. Thank you.
Thank you very much.
Jeff I know you signed off but I'm confident we can do that and we're setting up as I mentioned earlier the foundation towards that.
So we have some very exciting things ahead, but it's still a tough year. This year, and we're not losing sight of that and protecting shareholder value and delivering on what we say we're going to do.
Thank you for your feedback.
Yeah.
Your next question comes from the line of.
Joseph <unk> individual Investor Your line is open.
Hello, Justin.
Good morning, everyone.
Maybe I came on a little late so maybe I missed this but it has the government of Argentina, where the provincial government made any overtures or working with you to get a road or any other infrastructure it seems like.
It's.
I can remember buying minera Andes in 2003.
For that property that was a while ago and became a and UX shareholders too.
That process and have been shareholder for a while so you know.
<unk> has been up.
A tremendous discovery and nothing else for a very long time and it seems like it's almost like the place that can never be.
Gotten to by any minors.
What are you doing to really try to get a load there and will that be sort of linchpin that gets this project moving forward.
Thank you.
Well like yourself I believe a road that would allow US 12 months access.
Would be very beneficial to the development of the project.
Hum.
Argentinean government to date has not felt the ROI.
Road.
Uh huh.
Qualified investment in <unk>.
Hum.
They don't seem to understand that you need.
To be able to get there.
12 months of the year.
Other than our current situation, which is five months it either.
It could probably try to keep the road open in the winter, but you have to cross to mountain passes at 4000 4200 meters switchbacks up and down.
And I'm quite certain there will be lots of equipment and life during the winter trying to navigate that road.
No.
During the period.
Moving to shareholder Joseph we've also seen the copper price.
Yes.
The lower during that period and so the interest in the property along with some of the uncertainties.
Uh huh.
Geopolitical issues and have.
We've seen the interest go up and down with the price of copper.
And the developments within country.
Okay.
The reason for talking about spinning it out.
Is that.
That would allow us to raise the funds too.
Adequate to advance the project to a feasibility study.
And then beyond that to <unk>.
Production.
But the issue you can spin it out or you want it still needs a low net.
Net debt.
In the infrastructure teams is just cost prohibitive. So how was the spinoff from to be successful.
Any sort of infrastructure costs dwarfs.
It will give any day.
We would be able to raise money and.
Fund the development of that road.
If you've watched our.
Financials, we have not been in a position to undertake.
A lot of projects.
Beyond that again.
I'm sorry, Rob the issue is how much is the road.
Sort of the unknown to me as an investor I don't have a sense of how much it would cost to build that road.
Well as what might be called the pioneer road or just a four wheel track road it would be in the neighborhood.
$5 million to $8 million.
You've heard from that.
There is a section of the road that is.
No one's really share.
How much it's going to cost to build.
I don't know 15 mile stream.
A very steep terrain.
We've done a lot of studies and Hana Road construction company and looking at it and coming up with an assessment and they keep coming back and saying well.
And when we get there how much we have to blast decided a mountain to get in.
It seems like it.
Sure.
I'm from <unk>.
From Boston, Rob So I know the Big Big you know then.
Started at that line Undrawn.
[laughter] underground.
Yeah.
We're trying to stay above ground and on it.
To build a.
Production Road.
Then youre getting a $30 million to $40 million.
Got it alright, well that helps.
It shouldn't be cost prohibitive to getting somebody to help you out with that I hope and I wish you guys. All the luck.
Long term holder and remains so.
Thank you very much I'm, a big believer in the revenue as well as the priority.
Thank you good luck.
There are no further questions at this time, Mr. Rob Mcewen I turn the call back over to you.
Thank you ladies and gentlemen.
We look forward to giving you exploration results and.
The results of our.
Fox complex preliminary economic assessments in Q2.
All the best in your investments Thank you very much.
That concludes today's conference call you may now disconnect.
Okay.
[music].