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McEwen Mining: 2021 Year End and Q4 Results

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McEwen Mining: 2021 Year End and Q4 Results

 

 

 

 

 

 

McEwen Mining Inc. (NYSE: MUX) (TSX: MUX)  reported fourth quarter and full year results for the period ended December 31, 2021.

  • Cash and liquid assets(2) and working capital at December 31, 2021 were $63.5 million and $32.6 million, respectively.
  • Our operations delivered production in line with our guidance. For the full year 2021, production was 154,410 gold equivalent ounces (GEOs)(1), above the midpoint of guidance for the year and 34% higher than 2020 production.
  • Production costs/oz for 2021 decreased compared to 2020 and additional reductions remain a focus. Cash costs(2) per GEO sold from our 100%-owned mines in 2021 were $1,453 representing a decrease of 18% compared to 2020. All-in sustaining costs(2) per GEO sold from our 100%-owned mines in 2021 were $1,635, representing a decrease of 21% compared to 2020.
  • For 2022, our gold equivalent production guidance is 153,000 to 172,000 GEOs (see Table 5).
  • We continued to invest aggressively in exploration, completing 254,800 feet (77,700 meters) of drilling at the Fox Complex, and 17,500 feet (5,300 meters) of drilling at Gold Bar.
  • Our 100%-owned mines generated a cash gross profit of $17.3 million(2) in 2021 and a gross loss of $6.5 million. Cash gross profit (loss) is calculated by adding back depletion and depreciation to gross profit (loss).
  • Our consolidated net loss in 2021 of $56.7 million, or $0.12 per share, relates primarily to investment of $35.0 million in advanced projects and exploration, general and administrative costs of $11.4 million, and a gross loss of $6.5 million from our operations.
  • Fox Complex PEA outlined potential to extend the mine life by 9 years, generating average annual production of 80,800 gold ounces at average cash costs and AISC per ounce of $769 and $1,246, respectively.
  • A webcast will be held on Wednesday, March 9th at 2 pm EST. Please see the details further below.

 

Table 1. Production for Q4 & 12 months ended December 31, 2021, compared to Q4 & 12M ended December 31, 2020.

 

2021 vs 2020 Increased Production in Q4 2021 Increased Production in 2021
Q4 2021 Q4 2020 Q4 2021 
vs 
Q4 2020
2021 2020 2021 
vs 
2020
(GEOs) (GEOs) (GEOs) (GEOs)
       
Gold Bar Mine, Nevada 9,950 6,000 +66 % 43,850 28,000 +57 %
Fox Complex, Canada 9,500 8,000 +18 % 30,060 24,400 +23 %
San José Mine, Argentina 20,200 14,600 +38 % 76,800 54,500 +41 %

Table 2. Cash costs and AISC per ounce sold for 12M ended December 31, 2021, compared to 12M ended December 31, 2020.

 

2021 vs 2020 Cash Costs AISC
2021 2020 2021 
vs 
2020
2021 2020 2021 
vs 
2020
($/GEO) ($/GEO) ($/GEO) ($/GEO)
       
Gold Bar Mine, Nevada 1,687 2,106 -20 % 1,753 2,459 -29 %
Fox Complex, Canada 1,108 1,397 -21 % 1,461 1,650 -11 %
San José Mine, Argentina 1,262 1,233 +2 % 1,603 1,514 +6 %

Table 3. Liquidity on December 31st, 2021 and December 31st, 2020.

 

(Millions of Dollars)   Dec 31st, 2021   Dec 31st, 2020  
           
Cash and cash equivalents   $54.3   $20.8  
Liquid assets(2)   63.5   25.9  
Working capital   32.6   7.9  
Debt principal   50.0   50.0  
           

Table 4. Financial results Q4 & 12M 2021, compared to Q4 & 12M 2020.

 

    2021   2020
(Millions of Dollars) Q4 12M Q4 12M
Revenue $35.0 $136.5 $27.7 $104.8
Cash gross profit (loss)(2)   1.2   17.3   (6.9)   (4.0)
Gross profit (loss)   (5.9)   (6.5)   (13.7)   (27.0)
Net loss   (21.0)   (56.7)   (23.5)   (152.3)
(Dollars)        
Net loss per share   (0.05)   (0.12)   (0.06)   (0.38)

 

Operations Update

 

Fox Complex Canada (100% Interest)

 

Fox production for Q4 and 12M 2021 was 18% and 23% higher, respectively, compared to Q4 and 12M 2020. Cash costs and AISC per ounce sold for the 12M period both dropped by 21% and 11%, respectively, compared to 12M 2020.

 

Black Fox mine wound down during 2021 as production shifted to the Froome mine. We realized a milestone on September 19th, 2021 when commercial production was reached at the Froome mine, three months ahead of schedule. To date, mineralized material extracted from the Froome mine produced grades that are consistent with the resources model and mine plan.

 

On January 26, 2022, we announced the results of our PEA for the Fox Complex. The PEA presents estimates for a positive business case for the Fox Complex expansion project, with potential average gold production of 80,800 gold ounces per year over nine (9) years, after the depletion of the current resources at Froome. The economic analysis estimates an after-tax IRR of 21% at a gold price of $1,650/oz, and average cash costs and AISC per ounce of gold of $769 and $1,246, respectively. Additional exploration work on the Fox Complex properties will be conducted throughout 2022 to support ongoing studies necessary to advance the expansion project and shorten the payback period.

 

We remain focused on our principal exploration goal of cost-effectively discovering and extending gold deposits adjacent to our existing operations, that can contribute to near-term gold production. During 2021, we incurred $15.0 million in exploration initiatives at Fox. The exploration budget for 2022 at the complex is $10.0 million.

 

Gold Bar Mine, USA (100% Interest)

 

Gold Bar production for Q4 and 12M 2021 was 66% and 57% higher, respectively, compared to Q4 and 12M 2020. Production increased significantly in 2021, primarily due to improved heap leach operating efficiencies and no materially adverse COVID-19 impacts on operations. Cash costs and AISC per ounce sold for the 12M period dropped by 20% and 29%, respectively, compared to 12M 2020.

 

The permitting process to access ore at Gold Bar South satellite deposit is ongoing and we anticipate receiving the permit in Q1 of 2022. The initiation of gold production from Gold Bar South is planned for the second half of 2022.

 

In 2021, we spent $4.2 million on exploration activities, including metallurgical, geotechnical and drilling programs for a cumulative 8,620 feet (2,627 m) at Ridge and Tonkin Rooster. Delineation drilling programs were conducted at Atlas Pit, SW Pick Extension, and Cabin North, with a cumulative 8,629 feet (2,632m) completed. Delineation drilling at Cabin North and the SW Pick Extension is ongoing. The Gold Bar exploration budget for 2022 is $2.5 million.

 

San José Mine, Argentina (49% Interest)

 

San José attributable production(3) for Q4 and 12M was 38% and 41% higher, respectively, compared to Q4 and 12M 2020. Cash costs and AISC per ounce sold for the 12M period increased by 2% and 6%, respectively, compared to 12M 2020.

 

Gold and silver production increased in 2021 due to the lifting of COVID-19 restrictions that impacted operations throughout 2020. We received $10 million in dividends from our interest in San José in 2021, compared to $0.3 million received in 2020.

 

McEwen Copper (81% Interest)

 

Activities at Los Azules ramped up in Q4, with the opening of the seasonal exploration road, the activation of two camps, the start of construction of a new all-year access road, and the preparation of drill pads and roads to support the current drilling program. Drilling started in January 2022 and there are currently five rigs operating, increasing to seven in March.

 

On February 17th, 2022, Michael Meding joined as Vice President responsible for the overall direction and management of the Los Azules project. Mr. Meding has over 20 years of international experience, primarily with major mining companies such as Barrick Gold and Trafigura, including extensive experience with project development and operations in Argentina. While at Barrick Gold’s Veladero mine in Argentina, he played a key role in the turnaround, extension of the mine life, and subsequent strategic partnering with Shandong Gold.

 

An extensive team of experts have been engaged to advance the Los Azules project to a pre-feasibility stage, including the following:

  • Bechtel Corporation, the largest construction company in America with a long history of advancing, building and developing large copper concentrators and infrastructure projects globally, including the recent feasibility study update on the El Pachon project approximately 75 km south of Los Azules;
  • Samuel Engineering, who will help oversee project management, controls, metallurgy and processing plant design, is a full service multi-disciplinary project development and execution company bringing a team with extensive experience in large South American copper projects, including past involvement at the Los Azules project;
  • Stantec, a full service engineering and consulting firm, with offices in Argentina, Chile, and Peru, will focus on geology, resource and reserve estimates, mining engineering, hydrology, geotechnical and the design of tailings, waste, and water management facility;
  • Whittle Consulting from Australia, with over 35 years of leadership in the field of integrated strategic planning and optimization; and
  • McLennan Design in Seattle, led by Jason F. McLennan, a prominent figure in the field of architecture and green building movement. McLennan is the creator of the Living Building Challenge – the most stringent and progressive green building program in existence.

 

Our overarching goal is to design a mine that will be the model for copper mining in the 21st century, one that supplies the raw material to enable a greener world, while incorporating the use of renewable energy sources and technological innovation for a low-carbon footprint and energy efficient mining.

 

Table 5 below provides production and cost results for Q4 and the full year 2021, with comparative results from 2020 and our guidance range for 2022.

 

  Q4 Full Year Full Year 2022
Guidance Range
2020 2021 2020 2021
Consolidated Production          
Gold (oz) 24,100 31,300 92,100 118,500 118,000-133,000
Silver (oz) 532,400 682,700 2,020,000 2,572,000 2,520,000-2,800,000
GEOs(1) 30,100 40,150 114,800 154,410 153,000-172,000
Gold Bar Mine, Nevada          
GEOs(1) 6,000 9,950 28,000 43,850 38,000-44,000
Cash Costs ($/GEO)(1) 3,439 2,038 2,106 1,687  
AISC ($/GEO)(1) 3,726 2,104 2,459 1,753  
Fox Complex, Canada          
GEOs(1) 8,000 9,460 24,400 30,060 44,000-49,000
Cash Costs ($/GEO)(1) 1,307 1,122 1,397 1,108  
AISC ($/GEO)(1) 1,439 1,760 1,650 1,461  
San José Mine, Argentina (49%)          
Gold production (oz)(3) 8,700 11,300 31,800 40,900 34,500-38,500
Silver production (oz)(3) 531,500 682,700 2,013,000 2,572,500 2,520,000-2,800,000
GEOs(1)(3) 14,600 20,200 54,500 76,800 69,500-77,500
Cash Costs ($/GEO)(1) 1,234 1,708 1,233 1,262  
AISC ($/GEO)(1) 1,455 2,043 1,514 1,603  

 

Our El Gallo project produced 540 GEOs during Q4 and 3,700 GEOs for 2021. Residual heap leaching continues with production of 1,500 GEOs expected in 2022.

 

Notes:

  1. ‘Gold Equivalent Ounces’ are calculated based on a gold to silver price ratio of 77:1 for Q4 2020, 89:1 for 2020, 77:1 for Q4 2021 and 72:1 for 2021. 2022 production guidance is calculated based on 72:1 gold to silver price ratio.
  2. Cash gross profit, cash costs per ounce, all-in sustaining costs (AISC) per ounce, and liquid assets are non-GAAP financial performance measures with no standardized definition under U.S. GAAP. For definition of the non-GAAP measures see “Non-GAAP Financial Measures” section in this press release; for the reconciliation of the non-GAAP measures to the closest U.S. GAAP measures, see the Management Discussion and Analysis for the year ended December 31, 2021 filed on Edgar and SEDAR.
  3. Represents the portion attributable to us from our 49% interest in the San José Mine.

 

Resource and Reserve Updates

 

The following statements apply to the information contained in the resource and reserve tables below:

  • Mineral Resources are exclusive 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 these estimates 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 and in accordance with the definitions in SEC Regulation S-K subpart 1300.

 

San José Mine

 

Hochschild Mining Plc our joint venture partner, prepared the mineral resource and mineral reserve estimates for the San José mine current as at December 31st, 2021.

 

These figures, reported on a 100% basis, were prepared by Hochschild and audited by P&E Mining Consultants Inc. whose audit letter dated February 11th, 2022, concluded that the estimates for the San José mine prepared by Hochschild at December 31, 2021 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.

 

Table 6.1: San José Mine – Mineral Reserve Estimate, December 31, 2021 – 100% Basis

 

Classification Quantity
(‘000 t)
Gold Grade
(g/t)
Silver Grade
(g/t)
Contained Gold
(‘000 oz)
Contained Silver
(M oz)
Proven 778 5.69 368 142 9.2
Probable 717 5.68 314 131 7.2
Total Proven & Probable 1,495 5.69 342 273 16.4

 

Table 6.1 Notes:

  • Reserves are stated on a 100% basis. McEwen Mining Inc. has a 49% attributable interest in the San José mine.
    • Mineral 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 (NI 43-101) and the Joint Ore Reserves Committee of the Australian Institute of Mining and Metallurgy (“JORC”) as well as the US Securities and Exchange Commission under section 1300 of rule S-K for reserves.
    • Metal prices used for reserve estimation are US$1,600/oz for gold and US$23.00/oz for silver.
    • For reserves average internal dilution was 5%, average mining and geotechnical dilution was 46%, and mine extraction was 37%.
    • Reserve cut-off grades: Cut and fill = 269 gpt AgEq., Long hole = 191 gpt AgEq. [AgEq = (Au x 72) + Ag].

 

Table 6.2: San José Mine – Mineral Resource Estimate, December 31, 2021 – 100% Basis

 

Classification Quantity
(‘000 t)
Gold Grade
(g/t)
Silver Grade
(g/t)
Contained Gold
(‘000 oz)
Contained Silver
(M oz)
Measured 115 5.09 310 19 1.1
Indicated 101 2.41 204 8 0.7
Total Measured & Indicated 216 3.84 260 27 1.8
Total Inferred 1,839 5.22 332 308 19.6

 

Table 6.2 Notes:

  • Resources are stated on a 100% basis. McEwen Mining Inc. has a 49% attributable interest in the San José mine.
    • Mineral resources 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 (NI 43-101) and the Joint Ore Reserves Committee of the Australian Institute of Mining and Metallurgy (“JORC”) as well as the US Securities and Exchange Commission under section 1300 of rule S-K for reserves.
    • Resource estimations utilized inverse distance and ordinary kriging methods depending upon data density.
    • Metal prices used for resource estimation are US$1,800/oz for gold and US$26.00/oz for silver.
    • Resources for 2021 were defined at a cut-off grade of 240 gpt silver equivalent [AgEq = (Au x 72) + Ag].

Technical Information

The technical content of this news release has been reviewed and approved by Peter Mah, P.Eng., COO of McEwen Mining and a Qualified Person as defined by SEC S-K 1300 and the Canadian Securities Administrators National Instrument 43-101 “Standards of Disclosure for Mineral Projects.”

 

The technical information in this news release related to resource and reserve estimates has been reviewed and approved by Luke Willis, P.Geo., McEwen Mining’s Director of Resource Modelling and Qualified Person as defined by SEC S-K 1300 and Canadian Securities Administrators National Instrument 43-101 “Standards of Disclosure for Mineral Projects.”

 

Reliability of Information Regarding San José

Minera Santa Cruz S.A., the owner of the San José Mine, is responsible for and has supplied to the Company all reported results from the San José Mine. McEwen Mining’s joint venture partner, a subsidiary of Hochschild Mining plc, and its affiliates other than MSC do not accept responsibility for the use of project data or the adequacy or accuracy of this release.

 

ABOUT MCEWEN MINING

 

McEwen Mining is a diversified gold and silver producer and explorer focused in the Americas with operating mines in Nevada, Canada, and Argentina. It also has a large exposure to copper through its subsidiary McEwen Copper, owner of the Los Azules copper deposit in Argentina.

 

Posted March 1, 2022

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