Q3 2024 Summary
Published Feb 7, 2025, 7:58 PM UTC- McEwen Mining's Los Azules copper project has immense potential, with the executive stating it could be bigger than Goldcorp ever was, equivalent to over 60 million ounces of gold with low production costs and a 27-year mine life, positioning it as a significant value driver not reflected in the current stock price.
- At the Fox Complex, the company is expanding operations with successful drilling extending ore at Stock East down to 600 meters, aiming to achieve production of around 100,000 ounces per year by 2028, indicating strong future growth in gold production.
- The incoming U.S. administration's pro-mining stance, aiming to encourage resource development and streamline regulations, is expected to positively impact McEwen Mining's U.S. operations, particularly the Gold Bar mine in Nevada, leading to potential operational benefits and increased profitability.
- Operational challenges leading to higher costs and production shortfalls: The company faced an unexpected failure of one of the stopes at the Fox mine, which reduced production and increased costs per ounce. Management acknowledged that achieving lower all-in sustaining costs is unlikely in the near term, stating that the chances of getting under $1,500 are very low. Additionally, aggressive stripping programs at Gold Bar are leading to higher costs.
- Inconsistency in production and potential gaps: There is inconsistency across operations, with some mines underperforming. The Fox mine's Froom operation is entering its last year of mine life, and although development is underway at the Stock property, potential production gaps could impact revenues. Management mentioned that production at Stock is expected to come online in Q3, Q4 of next year, which may not perfectly overlap with the decline at Froom.
- Reliance on future milestones to achieve profitability: The company indicated that it will not achieve profitability until the feasibility study for Los Azules is completed, permits are obtained, and the IPO of McEwen Copper occurs, expected in the first half of next year. Until these milestones are achieved, exploration costs cannot be capitalized, and the company may continue to report losses.
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Dividend | Q4 2024 | Potential for a more sizable dividend | no current guidance | no current guidance |
Gold Bar cost (AISC) | FY 2024 | $1,500/oz | Expects to meet or exceed annual cost guidance | no change |
Feasibility study cost | FY 2024 | $60 million | no current guidance | no current guidance |
Gold Bar production | Q4 2024 | no prior guidance | 8,000 to 9,000 ounces | no prior guidance |
Fox Complex production | FY 2024 | no prior guidance | 15% to 20% below annual guidance | no prior guidance |
San Jose Mine | FY 2024 | no prior guidance | On track to meet annual guidance | no prior guidance |
Los Azules | FY 2025 | no prior guidance | Feasibility study & permit expected in H1 FY 2025 | no prior guidance |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Los Azules copper project | Discussed each quarter with a feasibility study expected in 1H 2025 and strong drilling progress. Environmental permit also anticipated, and significant $60M budgeted in Q2 2024. | Reaffirmed feasibility study for 1H 2025. Over $470 million raised, and IPO planned post-permit. | Consistently mentioned; sentiment remains bullish given large future impact. |
Fox Complex operations and expansions | Recurring focus on ramp development, resource expansion, and dealing with stope failures. Q1 and Q2 discussions highlighted lower grades and a one-off failure. | Finalizing permit for ramp at Stock, with stope failure reducing Q3 output and hiking costs. Plans to reach 100k oz/yr by 2028. | Ongoing challenges but long-term expansion potential; sentiment mixed. |
Production cost pressures and operational shortfalls | Noted at Gold Bar and Fox mines, with stope or ground issues driving costs higher. Some quarters showed improvements, e.g., Q2 at Gold Bar. | Higher unit costs at Fox due to stope failure, but management expects annual costs within guidance. | Recurring issue; short-term negatives but outlook remains manageable. |
Permitting uncertainties in Mexico | Eminent in Q1 and Q2 with delayed permits amid new government; Q4 2023 cited in-pit tailings approval. | No mention of Mexico permits. | Not discussed this quarter; uncertainty remains but topic has faded. |
Phoenix project no longer mentioned | Q1 2024 reported awaiting permits. No updates in Q2 or Q4 2023. | Briefly mentioned in Q3 2024 when asked about potential monetization, but no major update. | Focus has declined; outlook remains unclear. |
Argentine RIGI law incentives | Discussed in Q1 and Q2 2024 with 25% corporate tax and 0% export duty, boosting project economics. | No mention. | Dropped from the latest discussion, though still relevant to Argentinian operations. |
Pro-mining stance from new US administration | No prior mentions in Q4, Q1, or Q2 2024. | Mentioned in Q3 2024: Robert McEwen noted potential benefits under President-elect Trump for US-based projects. | New topic; sentiment positive for domestic operations. |
Reliance on external financing and potential dilution | No discussion in Q1, Q2, or Q4 2023. | Q3 2024: Company raises funds privately for copper to avoid diluting main operations. | Newly addressed; strategy to minimize shareholder dilution. |
Timberline Resources acquisition | Q1 2024: closing timeline set for mid-year, Q2 2024: synergy with Nevada mines. | Q3 2024: discussing integration under Gold Bar, with possible separate leach pad and earliest production by 2027. | Expanded details on development; acquisition is proceeding. |
Timmins region growth (Stock, Grey Fox, Froom) | Q4 2023: expansions at Stock and Grey Fox with 25%-30% throughput targets; Q1 2024: ramp start for Stock East. | Q3 2024: ramp permitting near completion, production at Stock set for late 2025, aiming for 100k oz/yr. | Continued positive exploration, short-term production setbacks. |
Feasibility study and IPO for McEwen Copper | Q4 2023: Feasibility in Q1 2025, no IPO mention. Q1 2024: Study for 1H 2025, IPO to follow, Q2 2024: Study by early 2025. | Q3 2024: Feasibility study remains on track for 1H 2025; IPO planned after permit issuance. | Steady progress; still bullish on unlocking value. |
-
Potential Sale of San Jose Mine
Q: Would you consider selling San Jose or Project Fenix?
A: At the right price, we are willing to consider selling San Jose. We have been approached by one potential buyer, though nothing concrete yet. -
Feasibility Study and Financial Impact
Q: When will the feasibility study be completed, and how will it impact financials?
A: The feasibility study for Los Azules is expected in the first half of next year. Once we have the feasibility and permits, we can capitalize exploration costs, potentially improving our financials and moving into positive ground. -
Higher AISC at Gold Bar and Fox
Q: Why were actual all-in sustaining costs higher than guidance at Gold Bar and Fox?
A: At Gold Bar, higher AISC is due to aggressive stripping to expose ore for next year, taking advantage of high gold prices. At Fox, higher costs resulted from lower production in Q3 and spending on developing the Stock operation. We may see slightly higher costs at Fox, depending on production in the last quarter. -
Future Production at Gold Bar
Q: Will higher production levels at Gold Bar continue into 2025?
A: Production at Gold Bar in 2025 is expected to be in line with this year. We've increased material movement mainly due to waste stripping at Big 3 pit. We're aggressively pursuing stripping now because of the high gold price. -
Fox Mine Development and 2028 Outlook
Q: What's the progress on development at Fox, and the outlook to 2028?
A: We're finalizing permits to start ramp excavation at Stock and Stock East, aiming for parts of Stock operation to be in operation by Q3/Q4 next year. We've had a successful drilling program, extending ore down to 600 meters. We're working diligently on a plan to reach around 100,000 ounces per year by 2028. -
Impact of US Election on Operations
Q: How will the US election results affect your operations?
A: We believe the election of President-elect Trump is positive, as he wants to encourage resource development, streamline regulations, and create more employment. This is good for Gold Bar and our other US properties. -
Timberline Acquisition Permitting and Integration
Q: What's the permitting timeline for the Timberline acquisition, and how will it integrate with Gold Bar?
A: We're working on the permitting process, with exploration already started. Earliest possible production is projected around 2027. From an accounting standpoint, Timberline will be unitized under Gold Bar. -
Los Azules Cash Position
Q: What's the cash balance of Los Azules after the equity issuance?
A: The Los Azules subsidiary currently has a cash balance just north of $40 million. -
Lower Grades at San Jose
Q: Can you explain the lower-than-expected grades at San Jose?
A: The lower grades were temporary, mostly due to reconciliation versus the resource model, but this was rectified by October. Q4 is trending well, and the operation is on track to meet guidance. Modest exploration success should continue to extend mine life. -
Market Not Reflecting Company Value
Q: Why isn't the market reflecting the company's improved position?
A: Past operational issues from 2018 to 2022 affected revenue and investor perception. We're now performing much better, with room to expand production over the next 3–4 years. We believe it's a timing issue that will resolve as we move forward.