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    McEwen Mining Inc (MUX)

    Q1 2024 Summary

    Published Feb 5, 2025, 12:06 AM UTC
    Initial Price$7.14January 1, 2024
    Final Price$10.60April 1, 2024
    Price Change$3.46
    % Change+48.46%

    What went well

    • McEwen Copper's Los Azules project is well-funded with approximately $60 million in cash and investments at the end of Q1 2024, supporting continued advancement towards a feasibility study expected in the first half of next year. Significant drilling results, including around 100,000 meters not yet included in resource estimates, are anticipated to enhance project value. The company plans to consider an IPO of McEwen Copper after the feasibility study and environmental permits are obtained, which could unlock substantial value for shareholders.
    • The Fox Complex is experiencing an increase in gold grades to around 3 grams per ton in Q2 2024, expected to improve production and reduce costs over the rest of the year. Additionally, the development of the decline (ramp) at Stock is set to start this month, providing access to the Stock East and Stock West ore zones, where drilling results have been "very good" and an announcement is expected within 30 days. This development could significantly enhance the mine's production profile.
    • McEwen Mining is actively pursuing growth opportunities, including the acquisition of Timberline Resources expected to close by early July 2024, expanding the company's resource base near existing operations in Nevada. Moreover, management is considering potentially transformational acquisitions to increase resource base and annual production, positioning the company for greater leverage to rising gold, silver, and copper prices.

    What went wrong

    • Delays and uncertainties in obtaining permits for the Phoenix project in Mexico may impact production timelines and financial performance. The company is waiting for permits and hopes to receive them in the third quarter, but they need to engage with the Minister of Economic Development to expedite the process.
    • Operational challenges at the Fox Complex, including lower grades and production issues, may affect the company's ability to meet production and cost guidance. In Q1, grades were low, and although they expect improvement to around 3 grams in Q2, this may not be sufficient to meet expectations.
    • Ongoing expenses related to McEwen Copper's Los Azules project are significantly impacting earnings and will continue until costs can be capitalized after the feasibility study is completed in the first half of next year. In Q1, the company reported a consolidated net loss of approximately $20 million, with $18 million attributable to McEwen Copper and $4 million in exploration expenses. These expenses are expected to continue in Q2, affecting earnings.

    Q&A Summary

    1. M&A Strategy
      Q: Considering complementary or transformational acquisitions?
      A: Management is exploring several fronts in their M&A strategy, including potential transformational opportunities if attractive, believing it's a rare time to grow.

    2. McEwen Copper IPO Timing
      Q: Is an IPO for McEwen Copper planned soon?
      A: The company plans to consider an IPO for McEwen Copper after completing the feasibility study and obtaining permits, aiming to maximize value.

    3. McEwen Copper Expenses and Feasibility Timing
      Q: Guidance on McEwen Copper's expenses and feasibility study timing?
      A: Expenses in Q2 are expected to be similar to Q1 due to ongoing drilling; Q3 will be quieter with no drilling activity. The feasibility study is expected in the first half of next year.

    4. McEwen Copper Cash Position
      Q: Does McEwen Copper have $60 million in cash?
      A: Yes, McEwen Copper had approximately $60 million in cash and investments at the end of Q1.

    5. Fox Grade Improvement
      Q: Has the grade at Fox improved in Q2?
      A: The grade at Fox has increased to around 3 grams per ton this month and is expected to be around 3 grams in Q2, with hopes for further improvement.

    6. Gold Bar Costs and Stripping
      Q: Will lower costs at Gold Bar continue into Q2?
      A: Production challenges from weather have lessened; costs may remain lower in Q2 as they expand work to improve leaching and manage stripping by upgrading trucks.

    7. Fox Decline and Mexico Construction Update
      Q: Update on Fox decline and Mexico construction?
      A: Surface excavation at Fox is expected to start this month; in Mexico, they are awaiting permits hoped for by the third quarter, planning to start construction once permits are received.

    8. Timberline Acquisition Timing
      Q: When will the Timberline acquisition close?
      A: The closing is expected by early July, with factors that could accelerate the timing.

    9. Stock East Development Plan
      Q: Will Stock East be included in initial ramp?
      A: Yes, including Stock East is a priority once underground; they will head towards Stock East and West immediately, with recent drilling results to be announced soon.

    10. Mexico Project Timeline
      Q: Is construction in Mexico expected by Q4 with production in Q1?
      A: Management hopes to begin construction by fourth quarter and potentially start production in Q1 next year.

    11. Market Performance Concerns
      Q: Any comments on market performance concerns?
      A: The CEO believes market performance is overdone and the company has positive momentum at the moment.

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