Q4 2023 Summary
Published Feb 5, 2025, 12:06 AM UTC- Significant production growth expected from the Timmins region, particularly with the development of the Stock property, which is planned to start production in 2025. Recent exploration at Stock East has revealed intriguing high-grade mineralization, and drilling at Grey Fox, which has over 1 million ounces, may further complement the production base.
- Advancement of the Los Azules copper project, with the feasibility study scheduled for completion in Q1 2025. The environmental permit for construction and operation was filed in April last year, and they expect to receive the permit in the second half of this year. The project has high constructability with low CapEx, which should aid in financing and construction going forward.
- Lower production costs and improved margins are being achieved by increasing production volumes and operational efficiencies. Transitioning from mining at Froome to the Stock property, with ore that has a lower work index, allows for increased throughput from 50,000 ounces to 60,000 ounces per year, and potential for even higher production with added grinding capacity.
- Uncertainty in Mexican operations due to potential legal and permitting challenges: When asked about the potential repeal of the new mining exploration law in Mexico, Rob McEwen acknowledged uncertainty, stating that "politics is a little difficult to predict" and that the impact might be felt in six years if the law were to be repealed. This indicates potential regulatory risks that could affect future operations in Mexico.
- Dependence on external financing and potential dilution: The company conducted a "reasonably large flow-through financing in December" for CAD 22 million, suggesting a reliance on raising capital to fund exploration and development activities. This could lead to shareholder dilution and raises concerns about the company's ability to generate sufficient cash flow internally.
- Cost savings may not be materializing as anticipated: When questioned about cost savings in Q1, William Shaver indicated that the company needs to "produce more ounces in order to drive some of those monthly operating costs down," implying that cost reductions are contingent upon increasing production, which may not be guaranteed. Furthermore, the response lacked specific figures on cost savings achieved thus far.
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Adjusted Earnings Without Accounting Gain
Q: What were earnings in Q4 without the large gain?
A: Jeff Chan explained that net income for the year was $54.7 million , but by backing out the accounting gain of $224 million and deferred tax impacts of $37 million , it normalizes the earnings for a clearer comparison. -
Growth Plans for 2024 and Beyond
Q: What are the key growth initiatives going forward?
A: Management highlighted that after Los Azules, the focus is on developing the Stock property in Timmins as the next production source. They are exploring increases in resources and drilling high-grade areas at Stock and Grey Fox, which has over 1 million ounces. In Mexico, they aim to complete engineering and obtain permits by mid-year, though permitting can be challenging. At Gold Bar, they plan to increase ore production using the new leach pad built last year, aiming for a 25% to 30% increase in tonnage by 2025. -
Path Forward for McEwen Copper
Q: What's next for McEwen Copper after the feasibility study?
A: Robert McEwen stated that the feasibility study for Los Azules is expected in Q1 of next year. Following that, about a year of engineering is required before construction decisions. An experienced team familiar with building mines in San Juan province has been assembled. Environmental permits were filed in April last year , with expectations to receive them in the second half of this year. Los Azules is considered highly constructible with low CapEx, which should aid in financing and construction efforts. -
Cost Savings and Increased Production
Q: How are cost savings progressing in Q1?
A: William Shaver explained that to lower operating costs, they need to produce more ounces. As they transition to mining at Stock, they can increase plant throughput due to lower work index ore, allowing production to rise from 50,000 to 60,000 ounces per year. They are also exploring ways to increase tonnage by adding capacity to the grinding circuit. -
Potential Repeal of Mexican Mining Law
Q: How might the repeal of Mexico's mining law affect you?
A: Robert McEwen said they are monitoring the situation but note that politics is unpredictable. They have current permits, and any potential impact would be in six years when they move beyond reprocessing the heap leach. In the near term, they have time to see if the law is repealed. -
Use of Flow-Through Financing Proceeds
Q: How much of the CAD 22M flow-through financing has been spent?
A: William Shaver stated that about half of the CAD 22 million is for Canadian Exploration Expenses (CEE) for drilling, spending approximately $1 million per month over 10-11 months. The remaining funds, allocated for Canadian Development Expenses (CDE), will be spent on infrastructure at Stock starting in the second quarter, at about $1 million to $1.2 million per month.