Mr. Rob McEwen reports
MCEWEN MINING REPORTS 2018 FULL YEAR AND Q4 RESULTS
McEwen Mining Inc. has released fourth quarter and full-year results for the period ended Dec. 31, 2018. For the year, McEwen Mining achieved record production of 175,640 gold equivalent ounces, at cash costs of $817
per gold equivalent ounce and all-in sustaining costs (AISC) of $1,002 per gold equivalent ounce. The company's 2019 production guidance is 210,000 gold equivalent ounces, a 20-per-cent increase over 2018 production, at average cash costs and AISC per gold equivalent ounce of $877 and $1,034, respectively. During 2018, the company invested heavily in areas that it believes will enhance its future growth and profitability. The company invested $35-million in exploration, $66-million in construction at the Gold Bar mine in Nevada, and $10-million to advance the company's Fenix and Los Azules projects. As a result the company is reporting a consolidated net loss for 2018 of $45-million, or 13 cents per share.
At Dec. 31, 2018, the company had cash and liquid assets of $38-million, including cash and restricted cash of $31-million. In August, 2018, the company raised $50-million in debt to finance construction of the Gold Bar mine. The company decided to debt finance a portion of the required capital rather than issuing equity because it strongly believed that higher gold and silver prices were close at hand, and that its share price should improve as a result.
The company's year-end conference call will take place today, Thursday, Feb. 21, at 11 a.m. Eastern Standard Time. Details are provided below.
The associated table provides production and cost results for the fourth quarter and year ended Dec. 31, 2018, comparative results from last year, and production and cost guidance for 2019.
PRODUCTION AND COSTS
Q4 Full year Full-year 2019 guidance
2017 2018 2017 2018
Consolidated production
Gold (oz) 48,609 29,369 109,947 135,203 167,000
Silver (oz) 926,739 819,439 3,178,742 3,032,694 3,225,000
Gold equivalent ounces (1) 60,965 40,296 152,329 175,640 210,000
Gold Bar mine, Nevada
Gold equivalent ounces (1) - - - - 55,000
Cash costs ($/gold equivalent ounce) (1) (4) - - - - 930
AISC ($/gold equivalent ounce) (1) (4) - - - - 975
Black Fox mine, Canada (5)
Gold equivalent ounces (1) 14,279 11,177 14,279 48,928 50,000
Cash costs ($/gold equivalent ounce) (1) (4) 865 864 865 845 905
AISC ($/gold equivalent ounce) (1) (4) 1,319 1,074 1,319 1,137 1,080
El Gallo mine, Mexico
Gold equivalent ounces (1) 19,893 5,632 46,694 39,105 13,000
Cash costs ($/gold equivalent ounce) (1) (4) 1,135 849 791 733 875
AISC ($/gold equivalent ounce) (1) (4) 1,251 877 909 771 915
San Jose mine, Argentina (49 per cent) (3)
Gold (oz) 14,528 12,602 49,233 47,331 49,000
Silver (oz) 919,89 8816,34 73,159,35 23,020,69 63,225,000
Gold equivalent ounces (1) 26,793 23,487 91,357 87,607 92,000
Cash costs ($/gold equivalent ounce) (1) (4) 699 817 839 851 830
AISC ($/gold equivalent ounce) (1) (4) 828 1,013 1,027 1,061 1,060
Notes:
(1) Silver and gold production are presented as gold equivalent ounces (gold equivalent ounces). Gold
equivalent ounces approximate prevailing spot prices at the beginning of the year. The silver to gold
ratio used for 2017, 2018 and 2019 is 75:1.
(2) All amounts are reported in U.S. dollars unless otherwise stated.
(3) Represents the portion attributable to the company from the company's 49-per-cent interest in the
San Jose mine.
(4) Earnings from mining operations, total cash costs per gold equivalent ounce, all-in sustaining costs
(AISC) per gold equivalent ounce, and cash, investments and precious metals are non-GAAP (generally
accepted accounting principles) financial performance measures with no standardized definition under
U.S. GAAP.
(5) Since the Black Fox mine was acquired on Oct. 6, 2017, only gold production from the mine after this
date was included in the 2017 total.
The associated table provides financial highlights for the year ended Dec. 31, 2018, and comparative results from last year.
FINANCIAL HIGHLIGHTS
Year ended Dec. 31, 2017 Year ended Dec. 31, 2018
Treasury
Cash, investments and
precious metals ($ millions) (4) 68.1 37.8
Cash and restricted cash ($ millions) 37.2 30.5
Working capital ($ millions) 49.2 23.4
Debt (notes) ($ millions) nil 50.0
Earnings from mining operations (4)
El Gallo mine ($ millions) 22.1 30.4
San Jose mine (49 per cent) ($ millions) 24.5 13.4
Black Fox mine ($ millions) 2.2 7.1
Consolidated net income
Net income (loss) ($ millions) (10.6) (44.9)
Net income (loss) per share ($) (0.03) (0.13)
Cash flow
Net cash (used in) provided by
operations activities ($ millions) (27.6) 0.5
Gold Bar mine, Nevada (100 per cent)
Construction of the Gold Bar mine started in November, 2017, and by year-end 2018 the company had invested $72-million, approximately 89 per cent of the total construction budget of $81-million, the balance of which will be spent in the first quarter of 2019. In 2018, the company's exploration expenditures of $5-million resulted in an increase in its gold reserves of 8 per cent, which extended the mine's estimated life to 7.4 years from 6.3 years. It is expected that a portion of the resources at Gold Bar South will be converted to reserves once the permits for development are in place, which would further extend the mine's life.
The company's 2019 exploration budget on the Gold Bar property is $5-million. Exploration drilling will target both near-surface and deep Carlin-type mineralization.
Gold Bar 2019 production guidance is 55,000 gold ounces at cash costs and AISC per gold equivalent ounce of $930 and $975, respectively. The first gold ingot weighing 390 ounces was poured at the mine on Feb. 16, 2019. Heavy snowfall at Gold Bar and being understaffed have recently impacted the company's operating activities, particularly delaying the ramp-up of the crushing plant, as a consequence the company expects to achieve commercial production during the second quarter of 2019.
Gold Bar feasibility study (2018)
The company's 2019 cash costs guidance of $930 per gold equivalent ounce at Gold Bar is approximately 6 per cent higher than that projected for the first year of operations in the company's feasibility study. This is primarily due to an increase in the amount of waste stripping. A revised mining schedule has been designed to better position the mine for its second year of production in 2020, which is estimated to have 20 per cent lower cash costs and 35 per cent higher gold production.
Black Fox mine, Canada (100 per cent)
Production in 2018 was 48,928 gold equivalent ounces, in line with the company's production guidance of 48,000 gold equivalent ounces. For 2018, total cash costs and AISC per gold equivalent ounce were $845 and $1,137, respectively.
Black Fox 2019 production guidance is 50,000 gold ounces at cash costs and AISC per gold equivalent ounce of $905 and $1,080, respectively. The Black Fox mine is undergoing significant changes in management, work force and mining practices, with the objective of improving the overall economic performance of the mine in 2019/2020. So far in 2019 the mine has faced some challenges reaching targeted productivity levels, although the company believes these issues are temporary and should not impact the company's planned output in 2019.
In 2018, the company spent $21-million on exploration at the Black Fox complex. The company's 2019 exploration budget is $17-million.
The mineral resource and reserve estimates for the Black Fox mine have been updated to reflect mine depletion, additions from exploration and the deletion of certain resource blocks that are deemed inaccessible due to prior mining activity. Resources and reserves decreased by 19 per cent and 21 per cent, respectively. The mineral resource for the Stock East exploration project was updated and increased by 32 per cent. Resource estimates for other deposits at the Black Fox complex including Froome, Grey Fox and Tamarack are unchanged.
San Jose mine, Argentina (49 per cent)
The company's attributable production from San Jose in 2018 was 47,331 gold ounces and 3,020,696 silver ounces, for a total of 87,607 gold equivalent ounces. Compared with 2017, gold and silver production was down 4 per cent, primarily due to lower average mined grades of gold and silver. For 2018, total cash costs and ASIC per gold equivalent ounce were $851 and $1,061, respectively.
During 2018, the company received $10-million in dividends from its interest in San Jose. For 2019, the company expects to receive $7-million to $10-million in dividends, with the final amount being determined by the profitability, treasury position, and decisions on capital and exploration investments.
In 2018, $6-million was invested in exploration at San Jose, and the 2019 exploration budget is $5-million (100-per-cent basis).
San Jose 2019 production guidance is 49,000 gold ounces and 3,225,000 silver ounces, for a total of 92,000 gold equivalent ounces attributable to the company, at cash costs and AISC per gold equivalent ounce of $830 and $1,060, respectively.
The mineral resource and reserve estimates for the San Jose mine have been updated to reflect mine depletion and additions from exploration. Resources increased by 11 per cent and reserves decreased by 10 per cent.
El Gallo project, Mexico (100 per cent)
Production in 2018 was 39,105 gold equivalent ounces. For 2018, total cash costs and AISC per gold equivalent ounce were $733 and $771, respectively. Mining activity ceased at El Gallo by the end of the second quarter of 2018.
El Gallo 2019 production guidance is 13,000 gold ounces at cash costs and AISC per gold equivalent ounce of $875 and $915, respectively. These ounces are derived from residual heap leaching activities that are continuing and will continue for several years.
Fenix project
In 2018, the company invested $4-million to advance the development of the Fenix project. Activities included metallurgical studies, permit applications and the preparation of a feasibility study. The Fenix project's PEA is available for review on the company's website
and SEDAR.
Potential sale
The company's focus is on delivering near-term production growth from its projects in the United States and Canada, and on advancing Los Azules. As part of its capital allocation strategy the company will be exploring the potential sale of its Mexican assets. The company anticipates that half of the net proceeds from the potential sale would be used to advance the development of projects with the greatest potential to significantly improve the company's share value, and the balance would be used to retire a portion of the company's debt.
Los Azules project, Argentina (100 per cent)
The company spent $6-million at Los Azules during 2018. The activities performed were mainly technical site investigations and environmental baseline monitoring work, to advance permitting efforts. The company is currently investigating a new access route to the project that, if developed into a road, could provide year-round access to Los Azules, greatly accelerating the potential development of the project and reducing operating costs. The company's 2019 exploration budget for Los Azules is $3-million.
Distribution
During the year ended Dec. 31, 2018, the company paid two semi-annual distributions on Feb. 14 and Sept. 4, totalling one cent per share of common stock, for total distributions of $3.4-million. The
next semi-annual distribution of a 0.5 cent per share will be paid on
March 15, 2019,
to shareholders of record on
March 8, 2019.
Conference call and webcast
The company invites you to join its conference call, during which management will discuss the company's 2018 financial results and project developments and follow with a question-and-answer session. Questions can be asked directly by participants over the telephone or can be e-mailed in advance to info@mcewenmining.com.
Thursday, Feb. 21, 2019, at 11 a.m. Eastern Standard Time:
Toll-free U.S. and Canada:
1-844-630-9911
Outside U.S. and Canada: 1-210-229-8828
Conference ID: 3366294
An archived replay of the webcast will be available for one week after it takes place. Access the replay by calling 855-859-2056 (North America)/404-537-3406 (international), conference ID 3366294.
Resource and reserve updates
Mineral resources and reserves have been updated for the Gold Bar mine and Gold Bar South (Nevada), Black Fox mine and Stock project (Ontario), and San Jose mine (Argentina). Resources for other deposits in the company's portfolio are unchanged from the previous estimates. For a summary of all the McEwen Mining's resources and reserves refer to the tables on the company's website.
The following statements apply to information contained in the resource and reserve tables below:
- Mineral resources are inclusive of mineral reserves.
-
Mineral resources are not mineral reserves and do not have demonstrated economic viability. There is no certainty that any part of the mineral resources estimated will be converted into a mineral reserves estimate.
- Numbers in the tables have been rounded to reflect the accuracy of the estimates and may not sum due to rounding.
- The inferred mineral resource in this estimate has a lower level of confidence than that applied to an indicated mineral resource and must not be converted to a mineral reserve. It is reasonably expected that the majority of the inferred mineral resource could be upgraded to an indicated mineral resource with continued exploration.
- 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.
-
Mineral resources and reserves were estimated using the guidelines set out in the CIM Definition Standards for Mineral Resources and Reserves prepared by the CIM standing committee on reserve definitions.
- For additional information about the projects, please refer to the following NI 43-101 technical reports:
- San Jose mine: "Technical Report on San Jose Silver-Gold Mine, Santa Cruz, Argentina," dated Aug. 15, 2014, with an effective date of Dec. 31, 2013;
- Gold Bar: "Gold Bar Project Form 43-101F1 Technical Report Feasibility Study," dated March 30, 2018, with an effective date of Nov. 8, 2017;
- Black Fox complex: "Technical Report for the Black Fox Complex, Canada," dated April 6, 2018, with an effective date of Oct. 31, 2017.
Gold Bar mine resource and reserve update
SRK Consulting (U.S.) Inc. developed the updated resource estimate in accordance with the requirements of National Instrument 43-101. The resource estimate comprises only gold resources that fall inside the boundaries of a conceptual pit and the permitted mine area. Cut-off grades and inputs for the conceptual pit are provided in the footnotes of the resource statement.
GOLD BAR MINE -- MINERAL RESOURCE ESTIMATE, DEC. 31, 2018
(U.S. standard units unless otherwise indicated)
Classification Quantity Grade gold Grade gold Contained gold
(000 ton) (oz/ton) (metric g/t) (000 oz)
Measured mineral resource
Open pit Gold Bar 3,097 0.034 1.17 106
Gold Bar South - - - -
Total measured 3,097 0.034 1.17 106
Indicated mineral resources
Open pit Gold Bar 23,789 0.026 0.88 614
Gold Bar South 3,488 0.029 0.99 100
Total indicated 27,277 0.026 0.90 714
Total measured + indicated 30,374 0.027 0.92 819
Inferred mineral resources
Open pit Gold Bar 7,460 0.026 0.90 196
Gold Bar South 123 0.042 1.44 5
Total inferred 7,583 0.027 0.91 201
Independent Mining Consultants (IMC) developed the mineral reserve estimate in accordance with SEC Industry Guide 7 and NI 43-101. In accordance with NI 43-101, only resources in the measured or indicated resource category can be included as proven or probable reserves.
GOLD BAR MINE -- MINERAL RESERVE ESTIMATE, DEC. 31, 2018
(U.S. standard units)
Contained Recoverable Contained Recoverable
Classification Quantity grade gold gold grade gold gold
(000 ton) (oz/ton) (oz/ton) (000 oz) (000 oz)
Proven 2,411 0.037 0.030 88 72
Probable 15,725 0.028 0.023 436 357
Total proven +
probable 18,136 0.029 0.024 524 430
GOLD BAR MINE -- MINERAL RESERVE ESTIMATE, DEC. 31, 2018
(metric units for tonnage and grade)
Contained Recoverable Contained Recoverable
Classification Quantity grade gold gold grade gold gold
(000 tonne) (g/t) (g/t) (000 oz) (000 oz)
Proven 2,187 1.27 1.03 88 72
Probable 14,265 0.96 0.79 436 357
Total proven +
probable 16,453 0.99 0.82 524 430
Notes
Gold Bar resources are stated as contained within a potentially economically minable open
pit with optimization parameters of: gold price of $1,350 (U.S.)/ounce Au, 82-per-cent
recovery and $5 (U.S.)/oz Au sales cost; waste mining costs of $1.85 (U.S.)/t (Cabin Creek),
$1.80 (U.S.)/t (Gold Pick) and $1.78 (U.S.)/t (Gold Ridge); ore mining and processing
costs (OMPC) of $9.57 (U.S.)/t (Cabin Creek), $9.48 (U.S.)/t (Gold Pick) and $10.57 (U.S.)/t
(Gold Ridge); 54-degree pit slopes for Gold Pick and Cabin Creek, and a 42-degree pit slope
for Gold Ridge.
Gold Bar South resources are stated as contained within a potentially economically minable
open pit with optimization parameters of: gold price of $1,350 (U.S.)/ounce Au, assigned
recovery 82 per cent for gold, an ore mining cost of $2.80 (U.S.)/t, waste mining cost of
$1.80 (U.S.)/t, ore processing cost of $6.74 (U.S.)/t, and pit slopes of 50 degrees.
Resources are reported using gold cut-off grades of 0.007 ounce per ton (Gold Pick and
Cabin Creek) and 0.008 ounce per ton (Gold Ridge and Gold Bar South).
Reserves stated in the table are contained within an engineered pit design.
Reserves equal the total ore planned for processing from the mine plan based on a $1,250
(U.S.)/ounce gold price.
Black Fox complex resource and reserve updates
SRK Consulting (Canada) Inc. developed the mineral resource for the Black Fox mine. The mineral reserve for the Black Fox mine was developed by the site engineering team; the updating of the mineral resource for the Stock East property was undertaken by McEwen Mining. All resource and reserve statements are as at Dec. 31, 2018. Resource estimates for other deposits in the complex, including Froome, Grey Fox and Tamarack, are unchanged.
BLACK FOX MINE -- MINERAL RESOURCE ESTIMATE, DEC. 31, 2018
Classification Quantity Grade gold Contained gold
(000 tonnes) (g/t) (000 oz)
Indicated 1,901 7.72 472
Total indicated 1,901 7.72 472
BLACK FOX MINE -- MINERAL RESERVE ESTIMATE, DEC. 31, 2018
Classification Quantity Grade gold Contained gold
(000 tonnes) (g/t) (000 oz)
Probable 437 6.33 89
Total probable 437 6.33 89
Notes
Resources are reported at a cut-off grade of 3.0 g/t Au, assuming an
underground extraction scenario, a gold price of $1,500 (U.S.)/ounce and
a metallurgical recovery of 96 per cent.
Reserves are based on a cut-off value of 3.55 g/t Au (4.09 g/t Au including
15-per-cent dilution) assuming a gold price of $1,250 (U.S.)/ounce, a
Canadian/U.S. exchange rate of 1.3:1, milling recoveries of 96 per cent
and operating costs of $172.05 (Canadian)/t.
Reserves are stated at a mill feed reference point and include for diluting
materials and mining losses.
STOCK PROPERTY -- MINERAL RESOURCE ESTIMATE, DEC. 31, 2018
Classification Quantity (000 t) Grade gold (g/t) Contained gold (000 oz)
Indicated mineral resource
Open pit East zone 1,343 1.00 43
Underground East zone 147 3.50 17
Total indicated 1,490 1.25 60
Inferred mineral resource
Open pit East zone 1,657 1.01 54
Underground East zone 340 3.26 36
Total inferred 1,997 1.39 90
Notes
Resources are stated as either contained within a potentially economically minable open pit or outside
of the pit shell as underground resources using the following parameters: an assumed gold price of
$1,500 (U.S.)/ounce, a metallurgical recovery of 94 per cent and a cut-off grade of 0.8 g/t Au (mill
cut-off grade of 0.25 g/t Au); a cut-off grade of 2.4 g/t Au was used for an underground scenario
outside of the pit shell.
San Jose mine resource and reserve update
Hochschild Mining PLC, the company's joint venture partner, prepared the mineral resource and mineral reserve estimates for the San Jose mine as at Dec. 31, 2018.
These figures, reported on a 100-per-cent basis, were prepared by Hochschild and audited by P&E Mining Consultants Inc. whose audit letter dated Feb. 7, 2019, concluded that the estimates for the San Jose mine prepared by Hochschild at Dec. 31, 2018, provide a reliable estimation of reserves and resources. The reserves as presented are in situ and include mining dilution and mining losses; however, they do not include allowances for mill or smelter recoveries.
SAN JOSE MINE -- MINERAL RESERVE ESTIMATE, DEC. 31, 2018
Classification Quantity Gold grade Silver grade Contained gold Contained silver
(000 t) (g/t) (g/t) (000 oz) (M oz)
Proven 728 8.40 584 197 13.7
Probable 255 7.69 566 63 4.6
Total proven and
probable 983 8.21 579 259 18.3
SAN JOSE MINE -- MINERAL RESOURCE ESTIMATE, DEC. 31, 2018
Classification Quantity Gold grade Silver grade Contained gold Contained silver
(000 t) (g/t) (g/t) (000 oz) (M oz)
Measured 1,410 9.41 627 427 28.4
Indicated 1,070 6.86 464 236 16.0
Total measured and
indicated 2,480 8.31 557 663 44.4
Total inferred 1,696 6.73 386 367 21.1
Notes
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 and reserves were estimated by Hochschild Mining PLC; P&E Mining
Consultants Inc. have audited the resource and reserve estimates and found that
they meet the requirements for disclosure under Canadian National Instrument 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 for reserves.
Resource estimations utilized inverse distance and ordinary kriging methods depending
upon data density.
Metal prices used were $1,150 (U.S.)/ounce for gold and $15 (U.S.)/ounce for silver.
For reserves average internal dilution was 2 per cent, average mining and
geotechnical dilution was 34 per cent and mine extraction was 36 per cent.
Resources for 2018 were defined at a cut-off grade of 305 g/t silver equivalent
(AgEq equals (Au times 81) plus Ag).
About McEwen Mining Inc.
McEwen has the goal to qualify for inclusion in the S&P 500 Index by creating a profitable gold and silver producer focused in the Americas. McEwen's principal assets consist of the San Jose mine in Santa Cruz, Argentina (49-per-cent interest), the Black Fox mine in Timmins, Canada, the Fenix project in Mexico, the Gold Bar mine in Nevada and the large Los Azules copper project in Argentina, advancing toward development.
Technical information
The technical contents of this news release have been reviewed and approved by Chris Stewart, PEng, president and chief operating officer of McEwen Mining and a qualified person as defined by Canadian Securities Administrators National Instrument 43-101 Standards of Disclosure for Mineral Projects.
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