Mr. Rob McEwen reports
MCEWEN MINING REPORTS 2016 FULL YEAR AND Q4 RESULTS
McEwen Mining Inc. ha provided its consolidated financial results for the fourth quarter and year ended Dec. 31, 2016. During the year McEwen Mining achieved production of 145,530 gold equivalent ounces (1). Net cash flow generated from operating activities in 2016 was $25.2-million (2). On Feb. 27, 2017, the company had cash, cash equivalents and precious metals of approximately $55.2-million and no debt. The company's year-end conference call will occur tomorrow at 11 a.m. EST. Details are provided at the end of this news release.
"On many important fronts, 2016 was a good year for McEwen Mining. We generated significantly higher cash flow and earnings per share despite producing 6 per cent fewer ounces. We grew our treasury by 84 per cent without resorting to equity financing, or sale of metal streams, or royalties, or taking on debt. Looking forward into 2017, our next chapter of growth begins. Pending government approval we are ready to start construction in Nevada at our Gold Bar deposit late this year. In Mexico, we are reconfiguring our El Gallo silver project to improve its economics. In addition, we are testing new exploration targets. In Argentina, our Los Azules project is getting more attention as a result of the improving copper price. Finally, when completed our proposed friendly acquisition of Lexam VG Gold will enhance our development and production pipeline with several high-grade gold projects in Timmins, Canada, one of the world's largest gold districts,"
said Rob McEwen, chairman and chief owner.
The attached table provides production and cost results for the fourth quarter and year ended Dec. 31, 2016, comparative results from last year, and the company's production and cost guidance for 2017. Going forward cost guidance will be disclosed on an individual mine basis and will not be consolidated. Consolidated cost guidance is being discontinued due to regulatory requirements related to the calculation of costs in the company's 49-per-cent-owned interest in the San Jose mine and the required accounting treatment of that investment. For the company's SEC Form 10-K financial statements and management's discussion and analysis refer to EDGAR.
Q4 2015 Q4 2016 Full year 2015 Full year 2016 Guidance 2017
Consolidated total (3)
Gold ounces produced 25,452 20,337 110,320 101,482 99,700
Silver ounces produced 981,693 838,768 3,315,667 3,303,709 3,324,000
Gold equivalent ounces produced (1) 38,541 31,521 154,529 145,530 144,000
El Gallo mine -- Mexico
Gold ounces produced 11,028 7,622 62,967 54,929 49,700
Silver ounces produced 4,814 3,922 29,917 25,336 24,000
Gold equivalent ounces produced (1) 11,092 7,675 63,366 55,265 50,000
Gold equivalent total cash cost ($/oz) (1) (4) $496 $699 $440 $524 $760
Gold equivalent co-product AISC ($/oz) (1) (4) $595 $832 $581 $610 $900
San Jose Mine (3) -- Argentina
Gold ounces produced 14,424 12,714 47,353 46,553 50,000
Silver ounces produced 976,879 834,846 3,285,750 3,278,373 3,300,000
Gold equivalent ounces produced (1) 27,449 23,845 91,163 90,264 94,000
Gold equivalent total cash cost ($/oz) (1) (4) $765 $729 $865 $760 $780
Gold equivalent co-product AISC ($/oz) (1) (4) $970 $970 $1,111 $954 $990
(1) Silver production is presented as a gold equivalent. Gold equivalent calculations are based on prevailing spot
prices at the beginning of the year. The silver-to-gold ratio used for 2015, 2016 and 2017 is 75:1.
(2) All amounts are reported in U.S. dollars unless otherwise stated.
(3) Represents the portion attributable to the company from its 49-per-cent interest in the San Jose mine.
(4) Earnings from mining operations, total cash costs, all-in sustaining costs (AISC) and average realized prices are
non-GAAP (generally accepted accounting principles) financial performance measures with no standardized definition
under U.S. GAAP. See "cautionary note regarding non-GAAP measures" for additional information, including
definitions of these terms.
Financial and operating highlights
Treasury
At Dec. 31, 2016, the company had $58.8-million in cash, investments and precious metals valued at the spot prices and no debt. In comparison, the company ended 2015 with $32.0-million in cash, investments and precious metals valued at the spot prices, and $3.4-million in short-term bank indebtedness. As of Feb. 27, 2017, the company held cash, investments and precious metals valued at spot prices of $55.2-million.
Net income
The company's consolidated net income for 2016 was $21.1-million, or seven cents per share, compared with a net loss of $20.5-million, or seven cents per share in 2015. The net income in 2016 was the result of the strong financial performance achieved at both the company's mines.
Cash flow
Net cash provided by operations for 2016 increased to $25.2-million compared with $15.6-million in 2015. For 2016, the company's 49-per-cent interest in the San Jose mine contributed $17.7-million in dividends to operating cash flows, compared with $500,000 in 2015, and the company's El Gallo mine contributed $59.5-million in gold and silver sales to operating cash flow, compared with $70.2-million in 2015.
Earnings from mining operations
For 2016, earnings from mining operations from the company's El Gallo mine were $34.1-million, compared with $39.3-million in 2015, and earnings from mining operations from the company's 49-per-cent interest in the San Jose mine were $30.5-million, compared with $13.5-million in 2015.
Production costs
For the company's El Gallo mine in 2016, total cash costs and all-in sustaining cash costs were $524 and $610 per gold equivalent ounce, respectively.
For the company's San Jose mine in 2016, total cash costs and all-in sustaining costs were $760 and $954 per gold equivalent ounce, respectively.
Ounces produced
Consolidated gold equivalent production in 2016 totalled 145,530 ounces, which consists of 90,264 gold equivalent ounces attributable to the company from its 49-per-cent interest in the San Jose mine and 55,266 gold equivalent ounces from the El Gallo mine.
Ounces sold
Consolidated gold equivalent ounces sold in 2016 totalled 144,048 ounces, which consists of 48,902 gold equivalent ounces from El Gallo mine and 95,146 gold equivalent ounces attributable to the company from its 49-per-cent interest in the San Jose mine.
Average realized prices
Consolidated average realized prices for the year 2016 were $1,239 per ounce of gold sold and $17.03 per ounce of silver sold. In comparison, the consolidated average realized prices in 2015 were $1,146 per ounce of gold sold and $15.06 per ounce of silver sold.
Production guidance
Production for 2017 is expected to be 50,000 ounces of gold and 3.3 million ounces of silver from the San Jose mine and 49,700 ounces of gold and 24,000 ounces of silver from the El Gallo mine. Using a silver-to-gold ratio of 75:1 for the year 2017, this represents projected consolidated production of 144,000 gold equivalent ounces.
Cost
guidance
For 2017, total cash costs and all-in sustaining costs at the El Gallo mine are forecast to be $760 and $900 per gold equivalent ounce, respectively, and total cash costs and all-in sustaining costs at the San Jose mine are forecast at $780 and $990 per gold equivalent ounce, respectively. The company's guidance is based on an average silver-to-gold ratio of 75:1.
Return of capital
The second and third semi-annual return of capital instalments of 0.5 cent per common share were paid on Feb. 12, 2016, and Aug. 29, 2016. The fourth return of capital instalment of 0.5 cent per common share was paid on Feb. 14, 2017. To date a total of $6-million has been returned to shareowners.
Stock repurchase program
On Oct. 1, 2015, the company's board of directors authorized a plan to repurchase up to 5.4 per cent of its outstanding common stock, or up to $15-million in aggregate purchases, whichever is less. During 2015, the company repurchased for cancellation 1,896,000 shares of its common stock at a total cost of $1.8-million (93 cents per share). During 2016 the company repurchased 558,000 shares of its common stock at a total cost of $600,000 ($1.04 per share). The share repurchase program expired on Sept. 30, 2016.
Operations and projects
Mexico
El Gallo gold mine (100 per cent)
Production at the El Gallo mine for 2016 declined from 2015 by 13 per cent to 55,266 gold equivalent ounces, but met the company's 2016 production guidance of 55,000 gold equivalent ounces. Ore grades processed during 2016 averaged 2.14 grams per tonne gold, compared with 3.41 g/t gold in 2015.
For 2017, the company has budgeted a total of $1.5-million for exploration activities at the El Gallo gold mine and $3.4-million for sustaining capital expenditures.
El Gallo silver project (100 per cent)
During 2016 the company spent $1.2-million furthering studies on the feasibility and development of the El Gallo silver project. These studies are intended to identify opportunities to reduce the initial capital investment required to start the project. The company's 2017 budget for El Gallo silver is approximately $6.0-million, including $3.0-million for exploration and $3.0-million for development.
Argentina
San Jose mine (49 per cent)
Gold equivalent production for 2016, on a 100-per-cent basis, was 184,213 gold equivalent ounces, from which the 49-per-cent share attributable to the company was approximately 90,264 ounces. Two thousand sixteen production slightly exceeded the company's 2016 guidance of 89,000 gold equivalent ounces.
For 2017, the company expects to continue receipt of dividends from its 49-per-cent interest in San Jose. The company anticipates receiving dividends in excess of $10.0-million, with the final amount being determined by the profitability, treasury position, and decisions on capital and exploration investments.
Los Azules project (100 per cent)
During 2016 the company spent $1.6-million in further baseline environmental and optimization studies and related activities at Los Azules. The 2017 drilling season was started with an initial budget of $6.4-million to be spent in the first quarter with further drilling dependent on weather and results. In addition to drilling, the company plans to spend $3.2-million on further studies and other works to advance the Los Azules project.
Gold Bar project, Nevada, United States (100 per cent)
During 2016 the company spent $2.7-million on environmental studies and other requirements to complete the permitting process for an open-pit heap leach mine. Key areas of development include an updated mine plan leading to operational improvements, completion of additional metallurgical work which confirmed previous gold recovery assumptions and awarding the contract for detailed design to M3 Engineering, a leading engineering and infrastructure firm based in Arizona, U.S.
The draft environmental impact statement (DEIS) for the Gold Bar project will be published on March 3, 2017, by the U.S. Bureau of Land Management (BLM) in the Federal Register. This initiates the 45-day public comment period that will end April 17, 2017. The BLM and McEwen Mining will address public comments received prior to the approval of the final EIS and the awarding of a record of decision.
Under the assumption of receiving a favourable decision, the company has budgeted expenditures of approximately $38.7-million for 2017, which include $1.5-million for permitting and $37.2-million for initial stage construction, expect to commence during the fourth quarter of 2017.
Lexam VG Gold acquisition
Please refer to the company's news release announcing details of the proposed transaction, available at the company's website.
San Jose resource and reserve update
The attached are the audited mineral reserve and mineral resource estimates calculated by Hochschild Mining PLC, the company's joint venture partner, for the San Jose mine as at Dec. 31, 2016. They do not account for depletion from 2017 production or reserves delineated during 2017.
These figures, reported on a 100-per-cent basis, were prepared by Hochschild and audited by P&E Mining Consultants Inc., the audit letter of which dated Feb. 15, 2017, concluded that the estimates for the San Jose mine prepared by Hochschild at Dec. 31, 2016, provide a reliable estimation of reserves and resources. The reserves as presented are in situ and include mining dilution and mining losses, however do not include allowances for mill or smelter recoveries.
The tables summarize the mineral reserve and mineral resource estimates for the San Jose mine.
SAN JOSE MINE -- MINERAL RESERVE ESTIMATE, DEC. 31, 2016
Gold Silver Contained Contained
Reserve Tonnes grade grade gold silver
category (000s) (g/t) (g/t) (K oz) (M oz)
Proven 1,163 7.34 502 274 18.8
Probable 654 6.57 401 138 8.4
Proven + probable 1,817 7.06 465 412 27.2
SAN JOSE MINE -- MINERAL RESOURCE ESTIMATE, DEC. 31, 2016
Gold Silver Contained Contained
Reserve Tonnes grade grade gold silver
category (000s) (g/t) (g/t) (K oz) (M oz)
Measured 1,648 8.20 564 434 29.9
Indicated 1,891 6.26 404 381 24.6
Measured + indicated 3,539 7.16 479 815 54.5
Inferred 1,038 6.40 404 214 13.5
* Mineral resources are inclusive of mineral reserves.
* Reserves and resources are stated on a 100-per-cent basis. McEwen Mining has a 49-per-cent attributable
interest in the San Jose mine.
* Mineral resources, which are not mineral reserves, do not have demonstrated economic viability.
* The quantity and grade of reported inferred resources are uncertain in nature and there has been
insufficient exploration to classify these inferred resources as measured or indicated, however it is
reasonably expected that a significant portion of inferred resources may be upgraded to the indicated or
measured category with infill drilling.
* Mineral reserves were estimated by Hochschild Mining using the CIM standards on mineral resources and
reserves, definitions and guidelines prepared by the CIM standing committee on reserve definitions.
P&E Mining Consultants has audited the reserve estimates and found that they meet the requirements for
disclosure as reserves under Canadian National Instrument 43-101 (NI 43-101) and the joint ore reserves
committee of the Australian Institute of Mining and Metallurgy (JORC) as well as the U.S. Securities and
Exchange Commission industry Guide 7.
* Mineral resources were estimated by Hochschild Mining using the CIM standards on mineral resources and
reserves, definitions and guidelines prepared by the CIM standing committee on reserve definitions. P&E
Mining Consultants has audited the resource estimates and found that they meet both the requirements for
Canadian disclosure under NI 43-101 and JORC.
* Resource estimations utilized inverse distance and ordinary kriging methods depending upon data density.
* Metal prices used were $1,200 (U.S.) per ounce for gold and $16.50 (U.S.) per ounce for silver.
* For reserves average internal dilution was 5 per cent, average mining and geotechnical dilution was
26 per cent and mine extraction was 59 per cent.
* Resources for 2016 were defined at a cut-off grade of 214 g/t silver equivalent, which is equivalent to a
cut-off value of $88.60 (U.S.) per tonne.
* For additional information about the San Jose mine refer to the NI 43-101 technical report titled
"Technical report on San Jose silver-gold mine, Santa Cruz, Argentina" dated Aug. 15, 2014, with an
effective date of Dec. 31, 2013.
2016 full year and Q4 conference call details
McEwen Mining will be hosting a conference call to discuss the 2016 results and project developments on
Thursday, March 2, 2017, at 11 a.m. EST.
Webcast:
Media Server website
Telephone
Participant dial-in numbers: 844-630-9911 (North America)/(210) 229-8828 (international)
Conference ID: 81304828
Replay
Dial-in numbers: 855-859-2056 (North America)/(404) 537-3406 (international)
Conference ID: 81304828
Available: March 2, 2017, at 2 p.m. EST to March 9, 2017, at 2 p.m. EST
About McEwen Mining Inc.
McEwen Mining has the goal to qualify for inclusion in the S&P 500 Index by creating a high-growth gold and silver producer focused in the Americas. McEwen Mining's principal assets consist of the San Jose mine in Santa Cruz, Argentina (49-per-cent interest), the El Gallo mine and El Gallo silver project in Sinaloa, Mexico, the Gold Bar project in Nevada, and the Los Azules copper project in San Juan, Argentina.
Mr. McEwen owns 25 per cent of the company.
Technical information
The technical contents of this news release have been reviewed and approved by Nathan M. Stubina, PhD, PEng, FCIM, managing director and a qualified person as defined by Canadian Securities Administrators National Instrument 43-101 -- standards of disclosure for mineral projects.
Technical information for San
Jose
The technical content of this news release has been reviewed and approved by Eugene Puritch, PEng, president of P&E Mining Consultants Inc. Under the direction of Mr. Puritch, Al Hayden, PEng, James L. Pearson, PEng, David Burga, PGeo, and Fred H. Brown, CPG, PrSciNat, PGeo, performed an independent audit of the Dec. 31, 2016, resource and reserve estimates. Each of the foregoing is a qualified person and independent of the corporation, in each case, within the meaning of NI 43-101, and competent persons under JORC. A site visit to the San Jose mine was carried out by two of these individuals on Jan. 9 and Jan. 10, 2017. No issues with the mineral reserve or mineral resource estimate were identified during or since the site visit.
Reliability of information regarding
San
Jose
Minera Santa Cruz, the owner of the San Jose mine, is responsible for and has supplied to the company all reported results from the San Jose mine. McEwen Mining's joint venture partner, a subsidiary of Hochschild Mining, 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 report, the company has provided information prepared or calculated according to U.S. GAAP, as well as provided some non-U.S. 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 with similar measures presented by other companies.
(1) Total cash costs and all-in sustaining costs
Total cash costs consist of mining, processing, on-site general and administrative costs, community and permitting costs related to current explorations, royalty costs, refining and treatment charges (for both dore and concentrate products), sales costs, export taxes, and operational stripping costs. All-in sustaining cash costs consist of total cash costs (as described above), plus environmental rehabilitation costs, amortization of the asset retirement costs related to operating sites, sustaining exploration and development costs, and sustaining capital expenditures. In order to arrive at the company's consolidated all-in sustaining costs, it also includes corporate general and administrative expenses. Depreciation is excluded from both total cash costs and all-in sustaining cash costs. For both total cash costs and all-in sustaining costs the company includes its attributable share of total cash costs from operations where it holds less than a 100-per-cent economic share in the production, such as MSC, where it holds a 49-per-cent interest. Total cash cost and all-in sustaining cash cost per ounce sold are calculated on a co-product basis by dividing the respective proportionate share of the total cash costs and all-in sustaining cash costs for the period attributable to each metal by the ounces of each respective metal sold. The company uses and reports these measures to provide additional information regarding operational efficiencies both on a consolidated and an individual mine basis, and believes that these measures provide investors and analysts with useful information about its underlying costs of operations. A reconciliation to the nearest U.S. GAAP measure is provided in McEwen Mining's annual report on Form 10-K for the year ended Dec. 31, 2016.
(2) Earnings from mining operations
The term earnings from mining operations used in this report is a non-GAAP financial measure. The company uses and reports this measure because it believes it provides investors and analysts with a useful measure of the underlying earnings from its mining operations. The company defines earnings from mining operations as gold and silver revenues from its El Gallo mine and its 49-per-cent attributable share of the San Jose mine's net sales, less their respective production costs applicable to sales. To the extent that production costs applicable to sales may include depreciation and amortization expense related to the fair value increments on historical business acquisitions (fair value paid in excess of the carrying value of the underlying assets and liabilities assumed on the date of acquisition), the company deducts this expense in order to arrive at production costs applicable to sales that only include depreciation and amortization expense incurred at the mine site level. The San Jose mine net sales and production costs applicable to sales are presented, on a 100-per-cent basis, in Note 5 of McEwen Mining's annual report on Form 10-K for the year ended Dec. 31, 2016.
(3) Average realized prices
The term average realized price per ounce used in this report is also a non-GAAP financial measure. The company reports this measure to better understand the price realized in each reporting period for gold and silver. Average realized price is calculated as sales of gold and silver (excluding commercial deductions) over the number of ounces sold in the period (net of deduction units). A reconciliation to the most directly comparable U.S. GAAP measure, sales of gold and silver, is provided in McEwen Mining's annual report on Form 10-K for the year ended Dec. 31, 2016.
(4) Cash, investments and precious metals
The term cash, investments and precious metals used in this report is a non-GAAP financial measure. The company reports this measure to better understand its liquidity in each reporting period. Cash, investments and precious metals are calculated as the sum of cash, investments and ounces of dore held in inventory, valued at the London p.m. fix spot price at the corresponding period. A reconciliation to the most directly comparable U.S. GAAP measure, sales of gold and silver, is provided in McEwen Mining's annual report on Form 10-K for the year ended Dec. 31, 2016.
We seek Safe Harbor.
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