Q1 2021 McEwen Mining Inc Earnings Call
Okay.
Okay.
Hello, Ladies and gentlemen, welcome to Mcewen, Mining's, Q1, 2020, one operating and financial results conference call price.
And from the company today are Rob Mcewen, Chairman and chief owner and a lack of Kruger of Chief Financial Officer, Peter MA Chief Operating Officer, Steve Mccann and executive Vice President of exploration and after the Speakers' presentation. There will be a question and answer session. If you would like to ask a question. During this time simply press star followed.
And 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.
Everyone and welcome.
I am certain every word and I'll agree with me. The 2020 was the brutal year for us.
But.
2021, and it started off with great momentum.
One of our Treasury is full.
The going concern qualification and it's gone from our financials and three.
Our exploration program is generating strong results as evidenced by today's press release.
Sure.
Our mine lives and tendons and Nevada have been extended and operations are now getting.
Target the true.
The gold production.
We have much work still to do to bring our cost per ounce down.
On.
Bye.
With the much improved per and filled the price over the last 12 months better than the top line in both cases.
We have them.
Inside of the care of the 90, and we have the sales and the company.
The production and we also have a very large copper deposits lots of the zumiez.
Which we're looking.
The belief for ways to best the bands that projects.
And at this point I'd like to turn the session over to and you talk about their financial operations and she'll be followed the bi.
Peter and.
And they will be followed by suite.
Yeah.
George.
Thank you Ravi and good morning, everyone of them.
And can you give a brief overview of our Q1 results our revenue and Q1 and gold and silver sales are from our 100% operating property with just under $24 million average realized price of $17 63, as compared to the 102020 of $31 million revenues.
Average realized price of $15 91.
Production in Q1 was 30600 gold equivalent ounces, a predominant factor of reduced production from our 100% own lines of which Peter Moore, Our COO will review in more detail shortly.
We reported a net loss of $12 5 million or three cents per share. This compares to a net loss of $99 2 million of 25 cents per share in Q1 of last year.
The decrease in our net loss relate to and 84 million dollar of impairment charge recorded at gold bar and the comparative quarter last year. We also had improved performance from our investment on the MSC, San Jose mine and Q1.
2021.
During the quarter as Rob alluded to our Treasury pool, we completed two equity financings and the first one was specific range of $4 $7 million and Canadian development expenses.
And the funds were specifically raised with the development of our newsroom deposits, which part of our Fox complex in Timmins, Ontario the.
Second was and equity financing for gross proceeds of 31 and a half million dollars with the completion of these races. All of our programs are now fully funded for 2021.
In addition to this we received $5 million and dividend and in Q1 from the interest in the San Jose Mine we.
We ended the quarter with 52, and a half million and liquid assets $81 million and current assets and a positive working capital of over $35 million.
We've been very busy with our exploration program invested 5 million and one of the primary focus was on growing the thoughts complex and resource base. We also invested $1 8 million on the Fox of complex expansion Pea and as well as on the Fenix project in Mexico.
Given our new executive Vice President of exploration and joined US during Q1, and he will be providing more details on the exploration program shortly.
We continue to manage our operating margins by controlling our capital expenditures and the rail contracts as well as looking to reduce our G&A costs. This year. We also began income and management system to streamline processes and to gain further efficiencies.
We expect the financial performance and more specifically cost the continue to improve throughout 2021, as we ramp up our firm deposit towards commercial price.
And for.
Given the ramp up and the ongoing <unk> study, which will have further production and cost and sales.
Still not in a position the <unk>.
Price firm cost guidance further the ongoing variable restrictions in response to recent outbreaks of the new COVID-19 strength continue to create uncertainty for the mining industry.
The company provide and update on cost and if possible and in any of them no sooner than the release of our PK study in late and kit.
I will now turn the call over to Peter Moore, our Chief operating officer. Thank you.
Thank you Anna and good morning, all the turnaround of our operations continues to show positive signs to improve delivery cost and growing production from our strong pipeline of resources and discoveries the sourced organically from our strategically located.
Strips.
During Q1, we met important milestones such as the feasibility studies for the Fenix project in Mexico and the.
The that's the gold bar mine in Nevada.
We also reached an important milestone at the <unk> deposit where first ore was mined in Q1 and currently mining is progressing as planned.
All of operations delivered production in line with the results and our expectations.
Production is expected to increase through 2021 and achieved 20% of 40% higher than 2020.
At the San Jose mine in Argentina are attributable production from the mine was 9500 gold ounces 492, and 300 silver ounces for a total of 16700 gold equivalent ounces.
Total cash costs and all in sustaining costs were 10, 88, and $13 28 per day, respectively, all of which compared favorably to the same period last year.
Moving on to gold bar on the U S. The mine produced 7400 gold equivalent ounces in Q1, the total cash cost and all in sustaining cost of $18 65, and $19 34 per geo respectively.
Production reflects the 19% decrease from the 9100 Geos produced in Q1 2020.
Production was impacted by decreased mining and pressure availability due to COVID-19 quarantine quarantines.
Limiting available operators and winter weather hampering mining all resulted in lower gold production.
We continued to execute execute improvement initiatives at the gold bar mine, which include improving contractor mining efficiencies, while adding more equipment to accelerate production potentially stacking more wrong to reduce costs and improve throughput.
And finally, adding ounces the plan with exploration drilling at ridge, Pik and old Gold bar mine deposits production.
Production in Q2 is expected to be higher than Q1, and correspondingly cost per ounce are expected to decrease.
At the Fox complex and Canada, we produced 5200 deals and Q1 <unk>.
<unk> cash costs and all in sustaining of $12 62, and <unk> 60 per <unk>, respectively.
Mining at Black Fox has begun transitioning to the firm deposits where progressive ramp up.
Land and commercial production is expected in Q4.
Cost per ounce are expected to decrease as we ramp up.
There are an estimated 111000 gold ounces and the life of mine plan on planet through with more underground exploration drilling planned aiming to extend the <unk>.
Was it near existing and planned line.
And Q1 work progressed on the expansion PPA for the Fox complex, we are targeting improved production and cost profiles leveraging the potential for operational synergies through shared resources and infrastructure.
Results of the PAA are expected to be released towards the end of Q2.
And I'll dial in Mexico, and we.
<unk> thousand 500 gold equivalent ounces from residual leaching operations were disrupted and March by a demonstration of the mine entrance by some of the local community members.
There was overwhelming support for the company shown by the majority of the community, which help resolve the situation and a new 10 year agreement was reached with the communities.
At losses, and the least copper project in Argentina, Q1 work continued with preliminary engineering and developing of the cost estimate to advance the proposed low altitude all year access road.
Throughout the remainder of the year work will continue on baseline studies related to flora and fauna surface water quality and archaeology as required by the environmental and mining and the authorities.
And estimate for a bankable feasibility study is being prepared and currently under review by the company.
In addition work will continue to identify opportunities to improve the economics of losses, and the lease with bulk of ore sorting technologies and other value add alternatives.
I will now turn the call over to Steve Mcgibbon, the executive Vice President of exploration.
And thank you Peter.
And Q1, we raised $5 billion on exploration.
Invested $5 million on exploration drilling and other exploration work.
With the primary focus on growing the Fox complex the resource base.
We remain focused on our principal exploration goal of cost effectively discovery and extending gold deposits adjacent to our existing operations to contribute to near term gold production.
Of San Jose the 2021 exploration budget is $10 million on a 100% basis with three of $2 $3 million being spent and Q1 recent exploration results generated by our partner and mine operator has been encouraging including and outstanding risk.
So from the Escondida vein.
Of 62, five grams per tonne gold at 50, 571 grams per ton silver.
Over two meters.
Some 1400 meters of drilling were completed at Escondida and telecom targets and Q1 <unk>.
<unk> will see a further 1000 meters of drilling in Q2.
At gold bar and USA.
And updated resource and reserve estimate were completed.
Zero $9 million were spent from the $5 million exploration budget.
During the quarter.
Which is focusing on testing near mine targets and further defining oxide resources on the neighboring tungsten property.
Drilling activities, we're focused primarily on the ridge deposits in part to provide improved density and metallurgical data.
Near mine exploration during Q1 has delivered encouraging results from the North Ridge target.
The ridge oriented drill core programs successfully confirmed mineralization locally increasing the average grade of existing resource model blocks and extending the mineralization and to new areas.
Exploration initiatives are continuing average where this phase of the 2021 program consists of 2000 and reverse circulation holes and seven oriented cohorts.
Early stage geological evaluations are underway at the old Gold bar mine in Q2.
At the Fox complex and Canada XP.
The exploration activities ramped up in Q1 following the funding received from our flow through share programs, which are being used to expand high potential target areas eligible for Canadian exploration expenditures.
Exploration work has been the primary focus on growing the Fox complex resource base.
During Q1 drilling at the Black Fox mine continued to return encouraging high grade intercepts at debt.
Underground drilling is being completed to identify additional mineralization.
Adjacent to the Black Fox ore body, where mineralization remains unconstrained in multiple directions.
The West Mineralized body was discovered in mid 2019 in 2020 exploration activities were focused on follow up drilling as.
And as our press release outlines this morning 57 holes have been completed since August 2020 of.
A portion of these do have assays pending including some of that contain the visible gold.
Initial results suggest the potential to defining important you zone of mineralization and 500 meters of about half a mile from our stock processing facility.
And Q1, we spent $3 $4 million of a total of $9 million exploration budget for the Timmins area.
We contracted four drills.
At the stock to increase the density of our intercept and needed to develop the <unk> model to generate kind of initial resource estimates for stock west.
And to test and confirmed.
Historical drill results below 300 meters of stock means of.
The total of 58000 feet or 17700 meters on.
The surface exploration drilling was completed at stock West and the stock mean with the primary focus at the stock West Mineralized zone.
Together with the PGA for the expansion of the Fox complex that will be released in Q2, we will update the resource of stock East and will produce a maiden resource at southwest.
Surface exploration is continuing at the stock property with four drills of stock West and one drill at the historic stock line.
That concludes the exploration presentation, and we'll now open the call to questions.
Before we open the call for questions and I'd like to ask everyone.
And we have the communication link that is a little fragile. So if I can ask you state your question.
And the local.
Globally and it being helpful.
But before I ask you to ask questions and yes.
One thing and.
And the Steve and Peter.
Sure there are.
Statements and the assessment of where we are.
We brought on.
And you can expect.
For the balance of this year and get more exploration results throughout the year.
We have large land packages and the major gold districts.
And then and the.
And we also went in and the emerging Gulf, So the district, and southern Argentina, San Jose market.
The expansion plans for our tenants of the operations, where we have 3 million ounces and the indicated category.
The release at the end of Q2.
And of the doubling what day.
Over and the copper prices and the last 12 months.
When you look at the two of the mining we had the sale of their company inside of the two operations delivering silver.
And the San Jose mine and the Fenix project in Mexico.
And on.
Large lots of interest copper project, we are aggressively pursuing.
Two alternatives right now two of them at.
Advance and projects.
It's very sensitive to the price of copper and.
And.
And we're looking to monetize that value.
The optical range we can.
So.
And I wouldn't expect the decision and there is the mix.
A few months.
So now I'd like to entertain your question. Please.
Operator, please open the Q&A.
And as a reminder to ask a question and you will need to press star followed by the number one on your telephone.
The draw your question press the pound key.
The first question comes from the line of Heiko, if ebay from.
H CW your line is open.
Alright.
Hi, there thanks for taking my questions Rocco, everyone and this is doing well.
Two quick ones for you in regards to the strong drilling results of debt.
Software and it looks like several of the asset results for Oleds and of your awards not minus on which contained visible goal of theirs.
The pending.
Any idea of how long it'll take produce results and more importantly have you encountered any results of software or anywhere else for that matter.
And it changed your focus of drilling for the respective site over the remainder of the year.
And it looks like some of some more assays with goldcorp coming as well.
Okay.
Peter here and see if we can kind of answer of Heico's question.
Yes, I can I can chime in the first on that.
With respect to the.
Drill results pending.
We expect to be getting a steady stream of results.
And over time and.
We are seeing vector is the constraints.
The labs right now that are and are making that turnaround time and not not as.
And as quick as we'd like it to be and we're working on.
Opportunities to try to mitigate that somewhat but in general of the results that we've gotten.
Haven't changed our focus on our priorities, which ultimately are being driven by the <unk>.
By the plan and the.
The results that will be presented and the PPA.
Peter perhaps you want to chime in.
Yes, I would concur with Steve Hi, Heiko at the Fox complex, where drilling stock West stock main whiskey, Jack 147 contact zone, and Gibson Gibson has an existing decline.
Which we would probably use to access the whiskey, Jack and the north and their contact and $1 seven so those were all in the plan.
Very promising and encouraging results confirming the geologic and interpretations and our business cases for the P. Eight.
Over at Gold Bar Ridge was our number one target so.
And you've got some great results, there and continue drilling there the net.
Ex one we're going to be targeting after that is the <unk>.
Old Gold bar mine and the targeting analysis of underway there and then talk and we'll follow on and then we'll also do some follow up drilling and pixel.
Continuing to follow the plan and the really encouraging results.
Thanks for debt comprehends, the answer and just a quick clarification with the Dio.
Obviously, you are saying that the cash cost and on sustaining our earn on key metrics that you're using which makes sense.
So you are in the lower relying on disclosing cash costs all of the sustaining costs or really anything else.
Another metric that you would be willing to disclose or any more guidance you can give to us in regards to helping us estimated cash flow from the site for the rest of the year and any idea with the duration of all along.
And it comes to the disposable asset.
Or how all of the phase of the sales of last rather.
Yes, the HEICO business and I. Thanks for the question.
Could you provide some costs with respect to our ghio disconnect.
Certainly happy to take the top line is doing well.
And the cost of key Ohio and.
And as important as we look to kind of strategically decide what to do with that asset that that will come in I believe the next couple of months.
We continue to have a workforce there that we are keeping we are permitted to start our operation.
So in terms of cash flow I would say were pretty much breakeven in terms of the care and maintenance, but we do continue just sort of and back in.
On the algorithm along until a formal decision.
By the company on the strategic.
Strategic with GAAP.
And so thank you very much.
And welcome.
Exactly.
Your next question comes from the line of <unk> from Alliance Global Partners. Your line is open.
Hi, Rob and team and thanks for taking my questions.
Perfect.
Just staying in Mexico. The quick question on Phoenix.
Just curious where it stands from a capital allocation standpoint.
And if you guys have any plans to move forward with the development decision there just sort of your thoughts around that.
Hi, Jacob and such.
Great.
Go ahead Bob.
And so at the moment, we are on again, just evaluating strategic options, we will probably come to the decision on that asset in terms of how will the fund it and what the Mac.
And the next couple of months on if not sooner Rob I didn't know if you'd add anything further to add on that.
And that's kind of of Dana Thank you.
And we did well.
Okay, and so that's probably the mid year type of event that we'll see something out of that line.
That's correct Jack.
And then just switching over to Blackhawks and the Timmins region in general the hub and spoke strategy seems like it's coming together, which room coming on line.
But do you think there's additional M&A opportunity and the region or are you guys sort of comfortable with the assets in the land that you have there now.
And any day.
And killer currency the stronger.
We're and we're looking at.
Building on our base on it.
Making solid before we think of stepping out.
Okay that makes sense.
All of them and I'll hop back in the queue. Thanks.
Thank you.
Your next question comes from the line of Joseph Reagor from Roth Capital Partners. Your line is open.
Good morning, Robert and team thanks for taking the questions.
Good morning, Jeff I guess.
So first thing the.
The dividend from MSC was.
Pretty significant this quarter.
Was that.
Solely from this quarter or was there some kind of.
Okay.
Extra cash in there from previous quarters during the pandemic.
Maybe the.
You guys over how shall we are being a little more conservative and holding back the cash.
I can't answer that question. Thanks for the question so the cash and we see the bid.
Your line.
So the.
How is that cash for most of the.
2020 on later cohort.
Or is the surplus there and sort of it.
But the mix of both.
We are certainly happy to have received the 5 million dividend and Cadbury signal that there will be.
Essentially the more Deborah Bang on.
And yeah, but it is really quite dependent on the situation in etch and clean out with respect of Colgate total.
And that's right now in terms of the operation.
Like they're all on the back in order.
And I remain on on hold and with respect to fight the global bond and the rest of the kind of front line.
Okay Fair enough and then switching gears to gold bar.
Obviously, the cash costs were quite elevated and the quarter.
And I assume the the plan is that as grades ticked up and and stacking rates tick up over the remainder of the year, we should see cash cost come down I know youre, not giving specific guidance, but is it best for us from and <unk>.
Modeling standpoint to assume a gradual decline.
Yes, Hi, Joe and theater.
Yes, youre exactly right there.
Hello.
Yes, youre exactly right there.
We are working to.
Worked through that strip, we talked about last year, we're getting through that releasing or and and.
And looking at opportunity are and including debt.
The exploration stuff you heard earlier.
So we're working towards the feasibility and and beating the feasibility.
Okay, and then one final one if I could on gold bar.
From what we've been hearing and there's a lot of people looking to buy operating assets in Nevada is that something you would consider selling or do you guys consider it kind of like of flagship of the company.
Every asset because of price.
Yes.
The.
And now you're always up and to the congestion but.
We think.
Our property and that is large it's on the <unk>.
Trends, where theres some major mines just the ballots.
And we don't think the the plots of the exploration of potential there and has room to grow and that that deposits and our dunkin' private projects significantly.
So they have to put the sleep number in front of us.
Okay fair enough. Thanks, Rob.
Okay.
And as a reminder to ask a question press Star. One. Your next question comes from the line of John Charles Tumazos from John Tumazos very independent research. Your line is open.
Rob Congratulations on the life extensions at gold bar.
Hey, good updated statement.
Concerning the PPA for the.
Black Fox directing the question to Peter and Steve.
I don't understand why.
It's the P. A.
When the mill and tails and processing of <unk>.
Very well defined.
Yeah.
Uh huh.
How much money would you have to spend.
To upgrade.
The gold resources.
To determine the precise size and shape of stopes.
The mine development and lay out.
Resolve any uncertainties about the top cuts sir.
Drill density.
For it to be the feasibility study how many holes.
How many dollars would that be.
To have a more certain mine plan.
I'll start of Steve and.
Hi, John It sounds like you're on the team already.
And in the room talking yeah. Those are all big questions and I think that's that's the reason why we're a P E and and combining the three.
You know really good project areas and the district.
It was quite a challenge to assess the trade offs and and what order, we could bring things in and what permitting and we did a big GAAP analysis to identify all of that so we're right in the middle of running the cash flow now and the answering all of those questions. So can't really report there that'll come out of.
Obviously with the P. A.
But we plan to fast track rate of two.
And to NFS and potentially and some cases.
And if we can see a clear enough line of sight right towards the project development and and early production and that that if you recall on the past calls was was our objective to see if we could identify.
A pathway, there and and we like the stock west deposits.
And we like the accessing the.
Great box area through the.
And the Gibson decline and and that's what we're trying to reach.
Respond to and answer.
At Great Park, there's a lot of drilling has been done, but again up above 400 500 meter level. So there's a lot more to do.
And that that will be one of the outputs from the Pea.
So Peter let me try.
Another way and some in honor of remember the team.
For the year and reserve for Black Forest Fox was 14000 ounces.
We all know Theres more gold there.
Since mcewen as part of the project spend and Numerable.
Over one on SaaS is often have familiar of meter and narrow.
How much money.
Do you think the property and merits to drill tightly so of Q P calls of reserves.
The I'll pass that just EBITDA I can add to that two of them right.
Yeah I guess.
Specific to Black Fox, what I would say is that.
As you'd be aware of.
We do get some very.
The high grade drill results.
The you're at the same time he is very very nuggety.
And.
We expect debt.
In order to really be able to.
Identify and and seized on that potential.
And we need to undertake a significant program that probably gets our drilling centers somewhere between the.
Between five and the meters to try to overcome that the negative that'd be the nature of the ore.
And we can kind of confirm what that drilling is from.
More immediate access points, but the longer term potential of the property will require.
A significant amount of the drilling of which we haven't put a final number on at this point.
We're really just initially trying to target accessible areas and drill and with the density that satisfies us, but that we would reliably converting them into each of the zones.
It's five meters has an impressive goal that would certainly define the size and shape of stopes.
Thank you.
And you're correct.
Concur with Steve and.
We've moved where and the process of moving the production team to for them and that way exploration can go about carrying out the drilling and work needed without the pressure of production.
On their backs and we liked the west flank, we like the deep and.
And is there potential connection picture and so.
And where we're still gonna be advancing the project and and hopefully coming forward with a better understanding thats, a minable shapes and higher grades are achievable.
Thank you very much.
Youre welcome.
Yes.
There are no further questions at this time, Mr. Rob Mcewen I turn the call back over to you.
Thank you operator, thank you everyone for joining the call and the shipping.
And going forward, she and Rob.
And the exploration and they are coming.
Coming out of the chimney.
And in there.
The movement on lots of the physics.
And.
And the very successful.
Thank you.
This concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
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