Q3 2023 McEwen Mining Inc Earnings Call

Hello, Ladies and gentlemen, welcome to Mcewen Mining's Q3, 2023 operating and financial results Conference call present from the company today are Rob Mcewen, Chairman and Chief owner Carey, Inc. Chief Financial Officer, William Shaver, Chief Operating Officer, Michael <unk>, Vice President and General manager of the Q1 call.

Jeff can vice President Finance Carmen D S General Counsel and Secretary Stefan Spears, Vice President corporate development.

After the speaker's presentation, there will be a question and answer session. If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad. If he would like to withdraw your question Press Star One again I will now turn the call over to Mr. Rob Mcewen Chief owner. Please go ahead Sir.

Thank you operator, good morning, fellow shareholders and guess welcome to our Q3 2023 conference call.

So John the individuals' you all heard on the call with me will be participating in our question and answer period.

I'm going to start by highlighting our share performance over the past 13 months from September 1st 2022 to present.

I picked that date because that is when the market began to see the value of our strategy to finance, our mcewen copper assets separately.

At that time.

Our share price has increased 133%.

And has far outperformed the performance of the Dow Jones industrial average nasdaq's, the price of gold price of copper and the E. T. S. F. G D X N G D X J, representing the gold sector.

I believe our superior share performance has been driven by the success, we have achieved financing our subsidiary Mcewen copper.

Where we have raised privately.

Equity of close to 400 million U S. During this period.

Recognizing the impressive size and value of Mcewen Koppers losses, <unk> project are two global Giants.

Who are provided.

Three quarters.

Of these funds.

It's the Atlantis, the world's fourth largest car manufacturer and Rio Tinto, the world's second largest mining company through its Newton venture arm.

With the end of winter in the southern Hemisphere, we are a backup of losses illness, and moving aggressively to complete all the activities necessary to deliver a feasibility study in the first quarter of 2025.

As a result of the latest financing the implied value of Mcewen copper has increased to $800 million.

Which gives mcewen 47, 7% ownership interest.

Value.

Oh $382 million.

Dollars.

Which translates into a value of $7.48 per fully diluted share of mcewen mining.

I expect our investment in Mcewen mining will continue to grow.

Invaluable as we advance our large losses are less project.

And the demand for copper increases.

Mcewan copper is one of our assets the others are gold and silver mines and a portfolio of five royalties I.

I believe these assets represent considerable underlying value the range of our estimated value per share is from $9.32 a share to $29.17 a share.

And our share price is currently trading around $7.20 a share deal.

Details of these calculations can be found on our website under our latest corporate presentation.

I believe our next performance driver will be our gold and silver mines after enduring a very challenging three years.

We are seeing very encouraging signs that the fortunes of these operations are finally, turning around production is increasing at all three of our mines and it appears that we could achieve the low end of the range of guidance. We gave for production this year.

Just over a 150000 ounces of gold equivalent.

Regarding cost per ounce, we expect the Fox mine complex.

It should deliver within our guidance range, while gold bar in San Jose.

Are likely to come in 10% to 15% over the cost guidance we've given.

Gold bar had a particularly difficult nine months. However in Q. This quarter, we were putting on a big push to drive up production and that would result in.

Lower cost per ounce.

You might ask what are these encouraging signs.

At the Fox mine annual gold production in 2020 had fallen to 24004 hundred ounces.

Since then it has increased steadily and we are expecting to reach 45500 ounces by year end an improvement of 86%.

At the gold Bar mine daily Gold production.

It was a meager 50 ounces.

At the start of the year.

But as the year progressed, the daily gold recovery increased.

And has average year to date 92 ounces.

And in late October it really began to accelerate and by month and it was over 210 ounces and is continuing to climb higher since then.

These improvements are a very welcome change, but our share price still has a long way to climb before many of you and myself get back to our cost.

I believe the combination of the advancement of losses Atlas the improving operating performances of our mines and our continuing exploration exploration efforts will continue to lift our share price.

Hopefully to the levels, we were all expecting when we invested.

Yes.

Many of you have asked a very important question.

When we make a profit.

I'm, sorry to say I am unable to give an exact date.

But this might surprise you it could be as early as year end.

Our Fox and San Jose Mines are now generating.

Positive cash flow and gold bar is expected to generate positive cash flow this quarter.

Our expenses have been to have been large for two principal reasons.

One we've been consolidating the financials of Mcewen copper.

And it's a lot of zealous project, where exploration and development.

<unk> expenses are high.

In addition, we have invested heavily in exploration at Fox and at Gold bar, our major Leach pad expansion and exploration expenses.

Hum.

Represented more than $200 an ounce.

Just in the third quarter.

Starting this quarter, our financial statements are likely to change significantly we expect to be no longer consolidating mcewen koppers financials due to our ownership interests dropping below 50%.

As a result of the recent mcewen copper financing.

The impact will be will significantly lower our cash balance.

Our total expenses and produce a large unrealized capital gain that will be reflected in both our income statement and balance sheet.

Yeah.

Recently, we.

Put out a press release that we filed a new base shelf prospectus.

And we've had some calls this morning and yesterday and are we going to do an issue.

Wanted to emphasize that this is not an offering prospectus.

We like most other companies routine routinely file.

He's based prospectus.

Just to provide updated information put us into a position where we could react if we saw an opportunity.

Yes.

And it's we've done this in the past every few years with a similar pace shelf prospectus.

Okay.

Okay.

I think the market right now is a very attractive market to be looking for opportunity.

And we will continue to do so the prices right.

We were established to grow but the prior year's challenges effectively put any consideration of that on hold today. The timing is right and we want a position be positioned to act if offensively.

Operator like to open the Q&A.

As a reminder to ask a question you will get depressed star followed by the number one on your telephone to withdraw your question Press Star. One again. The first question comes from the line of Heiko with H C. Wainwright. Please go ahead.

Hi, Robin team. This is Marcus Giannini, calling in for Tycho, Thanks for taking our questions.

I'm happy to.

So our gold bar you stated in your release that cost increase due to delays from extreme weather and labor constraints during 2023 other.

But then you expect the average cost for the year to be 10% to 15% higher than your guidance.

These projections how much of these increases do you view as say transitory and how much of this should we model into 2024 and can you provide any color on the different factors contributing to these expected increases.

Bill would you like to handle that yes sure.

Thanks for the question.

Yes.

Just.

Going into 2024 that we will be at or below the guidance that we gave for this year.

For the following reasons.

This year, we have spent about $5 million on exploration drilling.

And that will continue into next year.

Probably either both got same.

But this year we also.

Bill.

A new leach pad.

Which was completed.

Two or three weeks ago.

At a cost of about $7 million.

So that has.

No.

Those two things plus or minus 200 dollar impact on.

On our cost per ounce sold.

Pat is finished it was finished basically.

And the scheduled amount of time.

Completed on budget.

And as well.

If you remember we've changed contractors at the end of 2022.

So the ramp up.

Early in the year was.

Was challenging part because of the weather and so on.

Now.

Our contractor is doing very well.

Their production numbers are higher than.

When required.

And the amount of material that we're putting onto the old lease.

Please.

Now approx.

Approximately 6000 tons per day, and we're also putting.

4000 tonnes, a day onto the new Leach pad.

<unk>.

Where we have permission that does.

Point to put material along that path, but we still don't have provision to put cyanide onto that.

But we anticipate getting that permit.

This week or next week.

So.

And basically so we see the.

If production of gold.

Going to increase for sure for the for the next two months and hopefully carry on into the new year.

As Rob mentioned earlier were basically something like plus 200 ounces per day right now so we're looking for.

Six.

And the range of 6000 ounces.

Per day.

Our per month for the next couple of months and I guess, we anticipated that.

Would have started earlier, but.

We started the construction on the new Leach pad late because of the winter weather.

From last winter.

And we finished it in exactly the amount of time that we said, we would but it was a month lag so rather than.

Gold production popping up in October Hasnt happened until until well the last couple of days of October.

No.

November and December so.

So with that kind of explains what situations.

Situation is going to look like going forward.

Production.

Good evening and good shape.

So we should have a reasonable start to the year next year.

Thanks Marcus.

Yeah, No awesome that was great and then just one quick follow up.

Regarding losses or less given that $18 5 million spend this quarter can you maybe provide some color on where you see this figure trending over the next few quarters are there any additional big ticket items department, the feasibility work and and drilling.

Mike would you like to answer that.

Yeah.

Yes sure.

So the majority of the costs will be minimal.

Many of them drilling.

Very comprehensive campaign.

<unk> drilled more than 48000 meters.

You already have floating rigs mobilized and let's get it up to more than 18, so that is the driver.

Okay investment in Los Angeles.

Okay.

Okay perfect. That's it for me Thanks, a lot guys.

Thanks Mark.

Your next question will come from the line of Jake Zukowski with Alliance Global Partners. Please go ahead.

Hey, Robyn Thanks for taking my questions good morning Jacob.

So it looks like costs at Fox were lower in the quarter as the turnaround is taking hold I'm. Just curious does this related mainly to the grade profile.

Or do you think this sub $300 an ounce level is something we can expect going forward.

Yeah.

So, yes, I mean as you.

Probably no.

Increase the production.

Hi.

The Fox complex from something like.

950 times, a day up to now closer to.

Say 12 75.

And maybe even a little bit more than that right now we're up closer to 1400 tonnes a day.

I guess, we did have a few issues with some stope sequencing.

Great.

It wasn't quite behaving itself.

<unk>.

No.

Nothing extreme.

But.

So as we are.

We expected the grade two.

And the back up into the four Gram range.

As we move forward here so.

The production for the last quarter.

Well as we've gone through the whole year every quarter, we improve the production. So we were.

We're in a position now where we think the production going into next year will look pretty much like the last quarter.

Okay. That's helpful.

And then Rob you touched on the M&A landscape a bit towards the end of your remarks.

Obviously valuations have come down across the board, whereas you've held up pretty well in a difficult market.

I'm just curious if you expect to take a proactive approach here, if the right opportunity Pops up or if you feel that you have your plate full right now.

Any thoughts there would be helpful.

I'd like to see our currency value, a little better and share price before acting but in terms of the market environment I think it's offering terrific value.

Particularly in the.

The junior and in the explorer space.

If it's just we've seen these cycles before.

And this just looks like we're getting ready for a big run up in the price of gold and it's good to be looking for opportunity to get a larger mass.

Makes sense and I couldnt agree more there thanks again guys.

Thank you.

Again to ask a question simply press star one on your telephone keypad and your next question will come from the line of Joseph Reagor with Roth and KN. Please go ahead.

Hi, Robert and team Thanks for taking my questions.

Yes.

So.

Kind of following I will take this task.

Should we look at it like.

You know you guys would do.

Looking for a certain type of asset whether it be.

Early stage exploration.

Highly promising or something thats like late stage and permitting work.

Where is your thoughts there.

It's a good question well one.

Contemplating.

And looking because we feel our assets or start they've turned around and we have a more stable solid base to push off from.

I think if.

One is looking we could use more cash flow.

Probably a producer or someone who is I think.

More attractive space would be someone who has got a permit. So you don't have to worry about the time delays isn't going to cost a lot of money to put into production.

And.

There's some good exploration potential.

Okay fair enough.

No problem.

Probably within the Americas.

Yeah Fair, a fair thing to add there.

And then looking at the balance sheet. So.

Well, if we ex out the cash that's in Mcewen copper you got $6 million in to start the quarter.

Do you feel comfortable with that call it $7 million to $8 million level of cash moving forward is there like a certain minimum you guys would like to maintain.

Or is there room, there to add say flow through or something like that in.

In the future to keep advancing projects like stock.

We expect our.

Our cash balance to growth during the quarter.

Considerably.

Flow through in that we always have exploration.

That might be a consideration.

Going forward.

Just as a way of.

And inexpensive way of exploring.

Okay, and if the cash balance does grow a bit for mcewen parent company like is there a certain level that you'd like to maintain once you get above it.

Going forward to just provide the proper financial flexibility quarter to quarter.

Is that would be very dependent on the market our share price.

Yes.

We think it's undervalued at the moment so.

Not keen to release many shares into an environment like this.

Fair enough alright, thanks for the color and Rob I'll turn it over.

Thank you Jeff.

Your next question comes from the line of John Tumazos with John Tumazos very independent research. Please go ahead.

Congratulations on all the different progress, especially in Argentina.

Rob how are you.

Do you think.

So this is going to transition.

Yeah.

From the equity placement stage.

With a consortium of shareholders and Mcewen mining.

Running the exploration project.

Two one of those.

Okay, Great Big Company mine operators.

Yes.

Ticket presence from their suppliers.

Quaker and command.

Yeah.

How long do you expect that Mcewen will continue to run the exploration project and when is the right time.

One of those great Big days to tell you what to do.

Good question John.

We just raised some money so that.

Allows us to weather some of the turbulent markets that are around us.

We'd like to get to a feasibility or close to a feasibility.

We do have conversations with those big companies.

Companies.

When they certainly have the expertise to build them.

But we're on our way, we're trying to build a new model here for mining that could.

Mining more attractive too.

The general population and more supportive.

Okay.

I think I'd like to see a stronger market for copper before we get into serious discussions with the big ones and at the same time.

Our next.

Steps, we'll be talking to some of the large providers of capital.

That so we get a sense of.

We will be in a better bargaining position with the majors, knowing what the cost of capital.

So we don't have a date for you John.

We're moving in that direction to get.

Probably still running the ship for a couple more years.

Yes, yes.

Yeah.

Thank you congratulations on so much progress so quickly now.

Thanks, John appreciate it.

There are no further questions at this time, Mr. Rob Mcewen, I will turn the call back over to you.

Yeah.

Thank you operator.

Thank you our fellow shareholders, ladies and gentlemen, the best is yet to come.

Thank you.

That does conclude today's meeting we thank you all for joining you may now disconnect.

[music].