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Edited Transcript of MUX earnings conference call or presentation 1-May-19 3:00pm GMT

Q1 2019 McEwen Mining Inc Earnings Call

TORONTO May 4, 2019 (Thomson StreetEvents) -- Edited Transcript of McEwen Mining Inc earnings conference call or presentation Wednesday, May 1, 2019 at 3:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Andrew L. Elinesky

McEwen Mining Inc. - Senior VP & CFO

* Christopher Alexander Stewart

McEwen Mining Inc. - President & COO

* Robert Ross McEwen

McEwen Mining Inc. - Chairman & CEO

* Sylvain Guérard

McEwen Mining Inc. - SVP of Exploration

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Conference Call Participants

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* Bhakti Pavani

Alliance Global Partners, Research Division - Senior Research Analyst

* Heiko Felix Ihle

H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research and Senior Metals & Mining Analyst

* Jacob G. Sekelsky

Roth Capital Partners, LLC, Research Division - Director & Research Analyst

* John Charles Tumazos

John Tumazos Very Independent Research, LLC - President and CEO

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Presentation

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Operator [1]

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Good morning, and welcome to the McEwen Mining Q1 2019 Financial Results Conference Call. I will now pass the call over to Mr. Rob McEwen, Chief Owner.

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Robert Ross McEwen, McEwen Mining Inc. - Chairman & CEO [2]

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Thank you, operator. Good morning, ladies and gentlemen. With me today are: Chris Stewart, our President and Chief Operating Officer; Andrew Elinesky, our Chief Financial Officer. And I'm going to jump right in and -- I welcome you and I'm going to jump right over to Andrew to talk about our financials.

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Andrew L. Elinesky, McEwen Mining Inc. - Senior VP & CFO [3]

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Thank you, Rob. Good morning, everyone. Thank you for joining us today. In the first quarter, McEwen Mining continued with significant investments in exploration, development of Black Fox, completing the construction at Gold Bar as well as continuing work on the Los Azules and the Fenix projects.

The combination of lower-than-expected production and sales in addition to these project investments result in the company reporting a net loss of $10.1 million or $0.03 per share. Our cash consumption by the operations for the quarter increased by $17 million compared to the same quarter of last year. However, we issued equity in the quarter of just over $22 million, which more than offset the spend and our liquid assets increased by $2.5 million in the quarter.

We ended at the end of March 31 with $26 million in cash and a total of $40 million in liquid assets, which should take us safely to the end of the year and beyond.

Regarding our overall operating results, the company had consolidated production of just over 36,000 gold equivalent ounces. With these levels being lower than planned, our cost per ounce were also higher than we forecasted. Our earnings for mining operations decreased by just over $11 million or $0.03 per share compared to the same period in 2018. This is primarily the result of: one, a significant drop-off in operating profit at our El Gallo Mine as the mine has transitioned from mining to residual leaching; and two, the Black Fox Mine had a decrease in profitability due to the production delays of the first -- for the first 2 months of the year. Please note that we did not report any non-GAAP measures, such as earnings from mining operations or cost per ounce for Gold Bar this quarter. We will start to report them once we have declared commercial production.

Moving on to the outlook for the rest of 2019. Black Fox production should be in line with the 50,000 ounces produced in 2018 and we still plan on seeing a 5% reduction in the all-in sustaining cost per ounce when compared to last year.

At San José, production level should increase slightly when compared to 2018, which is allowing the guidance for our per ounce cost to remain the same as that year despite the significant increase in export costs in addition to the inflationary outlook for Argentina.

At this point, I thank you again for taking the time to join us today, and I'll turn the presentation over to Chris.

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Christopher Alexander Stewart, McEwen Mining Inc. - President & COO [4]

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Thank you, Andrew. Good morning, everyone. I would now like to discuss our operations. At Gold Bar, construction of our newest gold mine is approaching completion, and commissioning activities are underway. During the first quarter, unfavorable weather and a lack of manpower slowed our progress. We plan to achieve commercial production in Q2. As previously announced, we have successfully implemented solutions to the operational challenges, which slowed our progress in the first quarter. We are now fully staffed and we've recruited a general manager to lead our operations into full production.

I'm pleased to announce that Jack Henris will join our Nevada operations next week. Jack has worked as General Manager at Newmont's Cripple Creek and Carlin Mines and has extensive experience in the Nevada area from a combined 21 years with Newmont and Barrick.

The first gold ingot was poured at Gold Bar on February 16, 2019, and we continue to pour gold regularly as we ramp up production towards commercial production. We are pleased with the recovery rates we are seeing from the ores stacked on the heap leach pad. They are in line with our feasibility study curves.

As a result of moving commercial production at Gold Bar into the second quarter, we have revised our production guidance for Nevada from 55,000 to 50,000 gold equivalent ounces, which impacts our Gold Bar production guidance for the year by only 2.4%. Exploration work will commence in May on the Gold Bar property.

In Canada, at the Black Fox Mine, our team recorded strong production of 5,300 gold ounces over the last 3 weeks of the quarter, producing 8,900 gold equivalent ounces in Q1, which represents 93% of our budgeted production for the quarter. This Q1 production was achieved despite the operational challenges that essentially stopped our gold production for mid-January, February and into the first week of March, so approximately 8 weeks in total. The fire-damaged crushing plant has been completely repaired and is operating normally. Production is back on track and we fulfilled our budgeted ounces for the month of April. We maintain our guidance of 50,000 gold equivalent ounces at Black Fox for 2019.

Black Fox had a cash cost of $805 with an all-in sustaining cost of $1,454 per gold equivalent ounce during the quarter. The all-in sustaining cost increased due to fixed cost being spread over decreased number of ounces sold and an increase in sustaining exploration and development cost during the quarter. As we are increasing production, reducing sustaining, exploration and development costs in the second half of 2019, the all-in sustaining cost of Black Fox will decrease in the following quarters and balance out to our guidance number of $1,080.

During Q1 2019, exploration work continue to underground at the Black Fox Mine. The first phase of the exploration drift on the 810-meter level of the mine is now complete and will provide a drilling platform that gives us a better angle to target the Black Fox deposit at depth below the existing mine development. We had 4 drill rigs turning underground and we plan to maintain that level during the year, drilling focused on confirming and expanding known mineralized trends located close to existing mine workings in 3 different areas of the mine. We're working on developing multiple mining fronts in the underground operations as this will provide more consistent ore production in the second half of the year.

As of April, we now have an additional 7 drill rigs turning on surface at various locations on the Black Fox property and we're at the Stock property next to our mill facility.

At the San José Mine in Argentina, production is on track to achieve the guidance for 2019. According to our 49% interest in the mine, our attributable production in Q1 was 10,500 gold ounces and 700,000 silver ounces for a total of 19,900 gold equivalent ounces at cash cost of $749 and an all-in sustaining cost of $1,115.

For the El Gallo Complex in Mexico, we're pleased to say that production from our operation has delivered as planned for the first quarter and that the feasibility study for Fenix project remains on track to be completed midyear. Residual leaching activities from El Gallo Gold continued after the final ore was mined and stacked on the heap leach pad back in mid-2018. Our operating team achieved a quarterly production of 5,400 gold equivalent ounces comparable with our production from the previous quarter and in line with our 2019 guidance of 13,000 gold equivalent ounces for Mexico. Total cash costs were $967 and all-in sustaining cost $989. Closure, reclamation and residual heap leaching are ongoing and will continue for several years.

During Q1, work continued to progress on the feasibility study and we expect that feasibility study to be completed by the end of the second quarter. We also progressed the permitting work for Phase 1 of Project Fenix, which is for the reprocessing of El Gallo Gold heap leach material. Our formal application is submitted with approval expected in Q3.

At Los Azules, during 2018, we defined the northern access route, a new low altitude all year access for our copper project in the Argentinian Andes. During Q1, we completed an on-the-ground expedition to gather data, which will now allow us to complete a more detailed plan and cost estimate for establishing this year-round access route.

During Q1 2019, we continued environmental baseline monitoring together with our other work for the environmental impact assessment submission. We're targeting the submission of the IIA within the next 12 months and expect the environmental impact declaration to be received during 2020. The main objective of this work and investment at Los Azules is to further de-risk and improve the value of the project while we look for strategic partners to further advance this world-class copper deposit.

In conclusion, Q1 was a challenging quarter for both our Gold Bar and Black Fox operations. We have come through with a solid focus on recovery in the production output at Black Fox and achieving commercial production at Gold Bar in Q2. We look forward to presenting you with positive updates from our projects and operations in the coming months and over the rest of 2019.

I will now turn it back over to Rob.

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Robert Ross McEwen, McEwen Mining Inc. - Chairman & CEO [5]

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Thank you very much, Chris. Good morning again. I'd like to start by saying, I'm really happy that Q1 is behind us. It was a challenging quarter with a number of events that knocked the confidence in our operations. As you heard from Chris and Andrew, Black Fox is back on track.

Looking at production in January and February, it amounted to 19,000 ounces over those 2 months from Black Fox on a consolidated basis for the company. And in the month of March, we were -- we did 17,000 ounces; in the month of April, 16,500 ounces. So we're getting back to where we thought we'd be. We're looking at a year-end production number of 205,000 ounces for the corporation, being 16% higher than the year before and that was building on a year of 16% growth. So production is going up.

At Black Fox, we see costs going down. We have a healthy treasury that will take us well into next year and beyond and a really exciting exploration program this year and we're going to start seeing a large flow of news coming out of it starting later this month. We've been investing in the future, and I'm sorry to shaking your confidence with the first 2 months, but we hope to regain it in the balance of the year.

And at this point, I'd like to open it up for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from Heiko Ihle of H.C. Wainwright.

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Heiko Felix Ihle, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research and Senior Metals & Mining Analyst [2]

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Rob, in the Feb 21 press release, you guys were talking about the potential sale of the Mexican assets. I just wanted to see if there is any progress, anything that you can report, how has buyer interest been given, I mean, there is not that many good projects on the market to the best of my understanding? And do you want to just provide some color on where this stands? Or is this still plan? And maybe -- I don't think you are willing to do this, but maybe even some of the prices that have been thrown your way.

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Robert Ross McEwen, McEwen Mining Inc. - Chairman & CEO [3]

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We have had a number of companies that have looked at or signed confidentially agreements. Some have come in and looked at it. We have received no offers as of this date.

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Heiko Felix Ihle, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research and Senior Metals & Mining Analyst [4]

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Okay. That's a very direct answer and I appreciate it. As for -- and do you see A's are still active or have they moved on to something else?

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Robert Ross McEwen, McEwen Mining Inc. - Chairman & CEO [5]

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I don't know until we hear otherwise from them.

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Heiko Felix Ihle, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research and Senior Metals & Mining Analyst [6]

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Fair enough. And then on Gold Bar, and this is just a clarification on my end. The 2,030 ounces of preproduction that you got during Q1, I assume there's going to be some more preproduction ounces during Q2 as well. Are these figures reflected in the 50,000-ounce guidance for 2019?

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Robert Ross McEwen, McEwen Mining Inc. - Chairman & CEO [7]

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Yes.

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Heiko Felix Ihle, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research and Senior Metals & Mining Analyst [8]

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Okay, okay. Perfect. And then I assume the answer to be yes as well. Are they also included in the cash cost guidance for the year? Assuming if you extrapolate that, presumably 2020 cash cost should be somewhat lower than 2019.

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Robert Ross McEwen, McEwen Mining Inc. - Chairman & CEO [9]

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Yes and yes.

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Operator [10]

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Our next question comes from Jake Sekelsky of Roth Capital Markets.

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Jacob G. Sekelsky, Roth Capital Partners, LLC, Research Division - Director & Research Analyst [11]

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You've obviously outlined a fairly robust exploration program. Can you maybe just walk us through some of the initial targets, particularly at Black Fox? Or maybe put more simply what's the primary goal of the first leg of the 2019 program?

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Robert Ross McEwen, McEwen Mining Inc. - Chairman & CEO [12]

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I'll ask Sylvain Guérard who's our Senior VP of Exploration to speak to his projects.

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Sylvain Guérard, McEwen Mining Inc. - SVP of Exploration [13]

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Yes. Yes. We started in April our surface exploration in Timmins. And quickly we ramped up, and we have now 7 rigs turning at both Black Fox and the Stock properties there. As you know, last year we had a very good year. We added reserve resources basically at all of our projects and we generated a lot of new drill intersections. Those are our potential discovery, but at very early stage.

So one of the priorities right now is to follow up on those new results and there's multiple targets that we are currently testing. One of the focus at Black Fox is over the Southeast property area, the Grey Fox sector. We have 3 deposits there. There is a total of 465,000 ounces at 6.6 gram per tonne indicated resources. And surrounding this sector, there's multiple targets within 1 kilometer radius around this place. Last year, we had a very interesting intersection. I'll give you an example.

At Gibson, within the intrusive, we intersected 34-meter over 3 grams per tonne, including 11 grams over 6 meters. So this is a new style of mineralization potential, bulk style that we are following up right now. There is a structure just to the east of one of the zones, zone 147 there where we have 264,000 ounces at 7.5 that we are also drilling. It's a shallow high-grade vein structure. So this is also something that could add to the economic of the Grey Fox deposit.

And we also have the exploration going out at Stock. Stock, as you know, we drilled first program last year. In 9 months, we came with the first resource -- very first initial resource of Stock is 150,000 ounces and we drilled over 2-kilometer strike length along the Destor-Porcupine that holds the old -- former Stock Mine.

The Stock Mine was mined down to 330 meters, which is extremely shallow for Archaean gold deposit. So we are following up on the mine itself as well as now over 3-kilometer strike length that holds the mine there, that's including of Stock East new discovery and resource. So the objective is to grow the resource and find new Argor-Heraeus along this very prospective trend that's remained underexplored.

And at Black Fox, we're also drilling underground, starting to -- Chris talked about that, expanding the mineralization to the West more particularly. And finally, I just want to not forget the Nevada. We have a great project at Gold Bar. We made a lot of work last year and we were successful to increase reserve. We had a year of mine life there. We also added resources to surround our pit. And we developed a very solid exploration model. We added new surveys, we added new geologists, including former geologist working with Barrick to the north. And together, they came with a strong model and they found multiple new targets around Gold Bar.

We see Gold Bar as a high-quality Carlin gold system in the quarter's trend and probably the most underexplored gold system along this trend. So we have multiple targets. Some are shallow oxide that we are targeting and we are going to go a bit deeper outside of our pits and oxide area also to try to define potential for large deposits like you see to the north there with Barrick.

And this program at Gold Bar is starting later this month and will continue over the rest of the year. And we also include as part of this program 2 deep holes to go and test lower part of the stratigraphy, the Roberts Mountain stratigraphy where we believe we can discover large high-grade sulfide deposits like again big deposits you see in Nevada.

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Jacob G. Sekelsky, Roth Capital Partners, LLC, Research Division - Director & Research Analyst [14]

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Got it. Okay. That's very helpful. And just switching over to Los Azules, it sounds like progress is being made on the access route. I'm just trying to get a handle on when we'll see some definitive news there and obviously the potential impacts on project economics and permit.

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Robert Ross McEwen, McEwen Mining Inc. - Chairman & CEO [15]

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Jake, on the road, we're doing engineering work right now, trying to get estimates on cost. And that we should have by the time of our annual meeting, which will be on the 23rd of this month. And we'll be sharing it with our shareholders.

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Operator [16]

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Our next question comes from Bhakti Pavani of Alliance Global Partners.

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Bhakti Pavani, Alliance Global Partners, Research Division - Senior Research Analyst [17]

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Just a quick one on Black Fox. Despite the challenges, I did notice that the grade was significantly higher than what you have -- what you guys have reported in the previous quarter. So just kind of from the modeling perspective, is that the sort of range of grade we should be modeling going forward?

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Christopher Alexander Stewart, McEwen Mining Inc. - President & COO [18]

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I would say, we reported around -- I think it was around 6.6 to a plan of 5.5 roughly during the quarter. So we did see a bit of improvement there. We have implemented a number of things at the mine essentially to try and manage our ore handling a lot better so you reduce the loss. So when you look at the overall reserves, reserve grade is around 7.7, 7.8. So I would say going forward, we should be in -- our challenge will be to keep it in that sort of 6 to 6.5 range, but I don't think it's out of the question given some of the changes that we made within the operations on a go-forward basis.

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Bhakti Pavani, Alliance Global Partners, Research Division - Senior Research Analyst [19]

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And I guess the production guidance that you have provided for Black Fox is considering this level of grade? Or does it assume the 6.5 grade?

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Christopher Alexander Stewart, McEwen Mining Inc. - President & COO [20]

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The work that we've done -- we're in the process of actually sort of reviewing all the information on site and building a bit more of a database around the grades we're getting out of some of the stopes. So we're trying to again manage that whole process better, but currently the 50,000 ounces assumes the grades that historically we have seen coming out of these stopes. So there's some potential to see a bit of a bump in the grade during the year, but we need to get a bit more experience under our belt before we can sort of confirm that.

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Bhakti Pavani, Alliance Global Partners, Research Division - Senior Research Analyst [21]

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Got it. Moving to Gold Bar, I know you mentioned that the issues with the crushing plant have all been resolved. Just kind of wondering what are the key factors that you need to, I guess, checkmark before you announce commercial production at Gold Bar?

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Christopher Alexander Stewart, McEwen Mining Inc. - President & COO [22]

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What -- the sort of requirement we've imposed on ourselves to achieve commercial production is obtaining 75% over 30 days, and we're in the process of working on that now. So our target is 7,200 tonnes per day. So we're looking for a 5,400 tonne per day average stacked onto the heap leach pad in a 30-day period.

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Bhakti Pavani, Alliance Global Partners, Research Division - Senior Research Analyst [23]

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And how is the process coming along and how is it bearing-in comparison with your expectation at this point with regards to the crushing plant and the other process?

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Christopher Alexander Stewart, McEwen Mining Inc. - President & COO [24]

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We've resolved a number of issues related to processing the grade through the crusher and through the screening plant and we've got those issues behind us. We're now sort of working on typical commissioning issues with some communication issues between grasshoppers and little things that stop you for 1/2 hour here and a 1/2 hour there. So we're getting the most out of the system now. But we're pleased with our progress, especially over the last week. We've really seen the tonnage coming up on the system since we've resolved the issues around the screening plant crusher.

So I'm pleased with what we're seeing there now and we're confident we can obtain commercial production here in Q2.

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Robert Ross McEwen, McEwen Mining Inc. - Chairman & CEO [25]

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Bhakti, just one comment on production at Black Fox. In the first 2 months of the year, January, February, we didn't really have any production coming out of Black Fox and so reflecting in our corporate numbers we only had 19,000 ounces. But right now, between March and April, we went -- we produced 76% more in the third and fourth month than we produced in the first 2 months. And so at Black Fox, January and February just to break it down just to the operations, was a little over 3,400 ounces. In March, we did 5,500 and in April we did almost 4,500. So there's significant change and improvement in production as those problems were resolved.

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Christopher Alexander Stewart, McEwen Mining Inc. - President & COO [26]

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And our current budget, just so you are aware as well, is based on head grade of 5.75 grams per tonne.

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Operator [27]

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Our next question comes from John Tumazos of John Tumazos Independent Research.

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John Charles Tumazos, John Tumazos Very Independent Research, LLC - President and CEO [28]

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In a way, Chris and Andrew, you're teasing us a little bit telling us that total company did 17,000 ounces March single month, 16,500 April single month or 200,000 annualized. Could you break it down by mine? I now you were just on the last question starting to. I'm guessing that San José does about 4,000 a month and the residual leach in Mexico about 1,500 a month. So there is about 10,000 broken down per month between Black Fox and Gold Bar starting up where some of the Black Fox surge is catching up on that Stockpiled ore in January, February that wasn't crushed and some of the Black Fox surge is a little better grade. And in March, there wasn't anything from Gold Bar, but in April, there was. So if you could break down April by mine, that would help us -- I guess we should be happy things are great. I just like to know better why they're great and how they're great?

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Andrew L. Elinesky, McEwen Mining Inc. - Senior VP & CFO [29]

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That's a good point, John. It's Andrew. As you said, San José obviously the significant contributor, being guidance of over 90,000 ounces gold equivalent for the year. So in April, we had San José at 8,600 ounces gold equivalent, gold Bar at 1,790, El Gallo at 1,800 and Black Fox, as Rob just mentioned, just under 4,500 ounces.

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John Charles Tumazos, John Tumazos Very Independent Research, LLC - President and CEO [30]

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Could you give us that for March?

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Andrew L. Elinesky, McEwen Mining Inc. - Senior VP & CFO [31]

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Sure. So Black Fox was 5,500, Mexico was 1,200, Gold Bar was 1,400 and San José was 9,000.

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Operator [32]

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(Operator Instructions) Our next question comes from [Bill Powers].

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Unidentified Analyst, [33]

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As far as my understanding is you've had a reduction of about 70 personnel in Black Fox and to me that estimates to about 50,000 per annum run rate of about $100 per annum as far as cost reduction. Is this accurate or is this am I missing something? And I guess is this trend would indicate that you have further to go as far as cost reductions at Black Fox?

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Christopher Alexander Stewart, McEwen Mining Inc. - President & COO [34]

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Bill, Chris Stewart here. The number for a reduction in the workforce is closer to -- we have 260? So we're at about 260, we are down to 209, so we have 50 people been removed from the business, which translates into about $6 million thereabouts coming out of the cost. So that's something that will be on an annualized basis. So that's now reflected in our updated budget. And we continue to analyze everything at site, leaving no stone unturned. Essentially, the training continue to reduce our cost. We're bringing some contracted task in-house this year as well.

So we're going to see cost savings around that and that's in line with our objective to, again, try and control our gold in the ore much better by reducing the amount of handling and where we're crushing the ore currently.

We crush the ore on surface of the mine and then ship it over to the mill and our plan by midyear, well actually within the next -- by the end of this mid-May, we'll actually be falling run of mine ore from the mine over -- sorry, by midyear, we'll be moving ore over to the mill and crushing it over there. So we're going to refurbish our own crushing plant that we have at the Stock Mill rather than crushing at the mine site and we think that will help improve our goal on grades that we're seeing sort of reducing the loss at the end of the day. But we are constantly looking for cost reduction opportunities at Black Fox as we continue to push ahead there.

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Unidentified Analyst, [35]

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Okay. And my second question would be as far as the tailings in Nevada, I guess, where do those stand as far as -- are those incorporated into the mine plan as of now? Or are those going to be, I guess, looked at in the future as far as incorporating them at this point?

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Andrew L. Elinesky, McEwen Mining Inc. - Senior VP & CFO [36]

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Nevada, I guess, I don’t quite understand your question. Nevada is a heap leach?

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Unidentified Analyst, [37]

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My understanding was there were historic tailings there that were, I guess, either under review for potential upgrade or potential future material or maybe I'm -- half of mind is mixed up.

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Robert Ross McEwen, McEwen Mining Inc. - Chairman & CEO [38]

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Bill, it's Rob. We don't have tailings in Nevada, but we do have material that was considered noneconomic that was mined by the previous operator in the '80s and they were -- there's a number of dumps on the property, places where they've been placed and some of them are running. They were mining 2-gram material back in the '80s and our feasibility is based on 1 gram. So there is ore that we're going to be recovering from these various areas of what was considered uneconomic 30 years ago.

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Unidentified Analyst, [39]

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Okay. And these were already incorporated into your plan?

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Robert Ross McEwen, McEwen Mining Inc. - Chairman & CEO [40]

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Yes. Yes.

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Operator [41]

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We have a question from the web. It appears that the 2019 guidance for cash cost and all-in sustaining cost at Gold Bar are $930 and $975, respectively. This is higher than the 2018 feasibility study. Can you explain the difference in costs?

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Robert Ross McEwen, McEwen Mining Inc. - Chairman & CEO [42]

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Yes. Andrew, would you care to...

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Andrew L. Elinesky, McEwen Mining Inc. - Senior VP & CFO [43]

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Yes. Thank you for the question, John. I'm afraid you're not necessarily comparing apples-to-apples. The $770 and $843 costs from the feasibility study were for the life of mine. So -- and the costs obviously for this year relate only to 2019. And what you have is a ramp-up in a partial year of production, which means our per ounce costs for the first partial year of being 2019 are going to be higher as well as we're seeing an increase in our ramp-up costs and part of the delays that we've encountered. So -- and it's our first year obviously of production, so we've come up with $930, $975. And obviously as we get to commercial production, we expect those to come down and as we switch our focus from commissioning to becoming more efficient and focusing on how we can save money there.

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Operator [44]

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Our next question is from the web, says "Has the company developed an all-in sustaining cost per ounce for the 2018 company-wide silver production?"

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Andrew L. Elinesky, McEwen Mining Inc. - Senior VP & CFO [45]

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Thank you for the question. No. We normally don’t disclose a silver all-in sustaining cost. Silver accounts for less than a quarter of our production. However, on a 75:1 ratio silver to gold ratio, 2018 cost on a silver equivalent basis would have been $13.50. If you use the average for the year which is closer to 85:1 or silver equivalent cost, all-in sustaining cost would be $12.44 per silver equivalent ounce.

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Operator [46]

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Our next question comes from [Ross Wagner] of Wagner Investment.

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Unidentified Analyst, [47]

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Yes. Bob, I have kind of a tested question. Do you -- I think reviewing some data, I think the company and/or you took an interest in Great Bear, which is an exploration company in Canada. Since you are active in that area, can you enlighten us why? Is it a company possession or is it your personal holding?

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Robert Ross McEwen, McEwen Mining Inc. - Chairman & CEO [48]

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It's -- Ross, it's both. There is an investment -- the firm made an investment, I made in the company. It's located in Northwestern Ontario. It's in an area called Red Lake where I have Gold Corps Foundation asset is located. And they had some very interesting grades when we bought it. It -- the grades were interesting, the market cap was low and it looked like there were -- there's a chance to have a new gold rush in the Red Lake District. And we use our investments to build our treasury.

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Operator [49]

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Our next question comes from the web. Given the need for capital to develop the current portfolio of projects, but it makes sense to sell off some of the investments to investees, Golden Predator, Great Bear Resources and others?

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Robert Ross McEwen, McEwen Mining Inc. - Chairman & CEO [50]

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That's the intent that over time, we would liquidate those positions and use the funds to develop the properties where it's needed.

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Operator [51]

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(Operator Instructions) Our next web question, "What are your thoughts in considering a merger or joint venture dealing with other mining companies? Are your exploration is targeting the development of new deposits? Isn't it more profitable to focus on exploration at the existing mine site? How do you see the evolution of McEwen Mining's production at various sites by the end of the year and for 2020?"

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Robert Ross McEwen, McEwen Mining Inc. - Chairman & CEO [52]

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Okay. You have 4 questions. First, thoughts of merger or joint venture. We're always -- our doors are always open for discussions. And at the right price, any joint venture or merger is worth considering. We have plans to grow the company, qualify for the S&P over time. So -- and right now is an interesting time to be looking for certainly acquisitions -- property acquisitions.

In terms of measures to reduce production cost, Chris highlighted some areas of Black Fox that we're doing it earlier in the question period. And the debt, it has a 3-year term and I'm never a big fan of debt. So I'd like to get debt off the books as quickly as we can.

The third question was asked about we're targeting new deposits. The ones that Sylvain spoke about in one of the questions, we have quite a few targets on our own properties and we're certainly putting $27 million into exploration this year, $17 million in Timmins, $5 million in Nevada, $5 million in Argentina. So I like those areas. We are on all our mine sites and we think we have excellent potential on there. How do we see production at the various sites by the end of the year? Well, our total production -- our forecasted production is 205,000 ounces, that's a 16% increase from the year before, building on a 16% the year before it. We're hoping that we can -- we will see increased production just coming -- Gold Bar should be producing more next year according to its mine plan than what it accounts for. And we're looking at bringing in -- putting plans in place that could bring in other satellite deposits that exist on our mine properties right now.

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Operator [53]

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Our next question comes from [Ronnie Simpson].

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Unidentified Participant, [54]

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This question is for Rob. Rob, I've followed McEwen Mining for several years and I've had confidence in you, but looking at your share price, I'm concerned about the share price. We're down to $1.38 now and we're getting close to $1. And that I keep hearing conversations about how we're going to be -- your goal is to join the S&P 500. I'm concerned the move in the share price up first before we start having, I mean, those kind of conversations because we -- the share price has deteriorated a lot in the last 2 years and I'd like you to address that.

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Robert Ross McEwen, McEwen Mining Inc. - Chairman & CEO [55]

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Happy to, [Ronnie]. Thank you for the question. I'm not happy with the share price either. Like yourself, I have a few shares in the company, about 78 million shares. We wouldn't -- at this point, trying to do some M&A with our share price here doesn't make a lot of sense if we don't have an extremely good price on that acquisition. Our goal is to grow, but to grow without losing value in the company. We had a particularly hard first quarter. And as I said at the beginning of the call, I'm glad it's behind us.

Production is picking up at Black Fox and Gold Bar is coming on stream this quarter. We should see our numbers by the end of the year, as I said earlier, 205,000 ounces and we think there is good room to build on our exploration success. I'm sorry, you've had -- you and every other shareholders had to endure the price decline, but I think the direction is up from here, not down. Hope that answers your question.

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Operator [56]

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(Operator Instructions) Our next web question, "what measures are you taking to reduce the debt from McEwen Mining?"

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Robert Ross McEwen, McEwen Mining Inc. - Chairman & CEO [57]

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We currently -- our debt has a 3-year term. It matures in August of 2021. So we'll look to retire it there. If we happen to sell one of our assets, we'd apply a portion of those funds to the retirement of the debt or eliminate it totally.

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Operator [58]

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Our next question comes from the web. "Has there been any progress in the potential sale or joint venture of the Los Azules copper project in Argentina?"

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Robert Ross McEwen, McEwen Mining Inc. - Chairman & CEO [59]

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We've already answered that question earlier.

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Operator [60]

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Our next question is a 3-part question. First part, "Can you provide some background on the plant to build the northern route -- road and infrastructure in the Los Azules? The cost to build the project? How long it will take to complete once all governmental approvals are in and who will maintain it?"

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Robert Ross McEwen, McEwen Mining Inc. - Chairman & CEO [61]

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Excellent questions. Don't have many answers to those. Right now, we have done aerial surveillance, created topographical charts, we've gone in on foot and currently engineering drawings and cost estimates are being put together. And by our annual meeting, we should have more details on what the cost would be to build the road. The other matters about all government permits and the cost to maintain it, that's still too premature to comment on those.

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Operator [62]

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Our next question is from the web. "Who will own what once it is complete? Does McEwen Mining have a majority say in its future evolution?"

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Robert Ross McEwen, McEwen Mining Inc. - Chairman & CEO [63]

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Of what, operator?

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Operator [64]

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We'll go to the next question. "Are there any restrictions on its use? Do you foresee developments along the route and other public and private use of the infrastructure?

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Robert Ross McEwen, McEwen Mining Inc. - Chairman & CEO [65]

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If the road would be a private road going to the mine. At this point, there'd be no other uses for that road.

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Operator [66]

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(Operator Instructions) I'm not showing any further questions. Please proceed with any remarks.

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Robert Ross McEwen, McEwen Mining Inc. - Chairman & CEO [67]

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Thank you very much, operator. It only gets better. Thank you, ladies and gentlemen. Thank you, operator.

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Operator [68]

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You're welcome. Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program, and you may all disconnect. Everyone, have a great day.