McEwen Mining Inc. (NYSE:MUX) Q3 2023 Earnings Call Transcript

McEwen Mining Inc. (NYSE:MUX) Q3 2023 Earnings Call Transcript November 9, 2023

Operator: Hello ladies and gentlemen. Welcome to McEwen Mining's Q3 2023 Operating and Financial Results Conference Call. Present from the company today are Rob McEwen, Chairman and Chief Owner; Perry Ing, Chief Financial Officer; William Shaver, Chief Operating Officer; Michael Meding, Vice President and General Manager of McEwen Copper; Jeff Chan, Vice President, Finance; Carmen Diges, General Counsel and Secretary; Stefan Spears, Vice President, Corporate Development. After the speakers presentation, there will be a question-and-answer session. [Operator Instructions]. I will now turn the call over to Mr. Rob McEwen, Chief Owner. Please go ahead, sir.

Rob McEwen : Thank you, operator. Good morning fellow shareholders and guests. Welcome to our Q3, 2023 conference call. The individuals you all heard on the call with me will be participating in our question-and-answer period. I'm going to start by highlighting our share performance over the past 13 months, from September 1, 2022 to present. I picked that date because that is when the market began to see the value of our strategy to finance our McEwen Copper assets separately. Since that time, our share price has increased 133% and has far outperformed the performance of the Dow Jones Industrial Average, NASDAQ, the price of gold, price of copper, and the ETFs of GDX and GDXJ, representing the gold sector. I believe our superior share performance has been driven by the success we have achieved financing our subsidiary, McEwen Copper, where we have raised privately equity of close to US$400 million during this period.

An aerial view of a mining site, with workers extracting gold from the deposit.

Recognizing the impressive size and value of McEwen Copper's Los Azules project are two global giants, who have provided three quarters of these funds. Stellantis, the world's fourth largest car manufacturer, and Rio Tinto, the world's second largest mining company, through its Nuton Venture arm. With the end of winter in the southern hemisphere, we are back up at Los Azules and moving aggressively to complete all the activities necessary to deliver a feasibility study in the first quarter of 2025. As a result of the latest financing, the implied value of McEwen Copper has increased to $800 million, which gives McEwen's 47.7% ownership interest a value of $382 million, which translates into a value of $7.48 per fully diluted share of McEwen Mining.

I expect our investment in McEwen Mining will continue to grow in value as we advance our large Los Azules project and the demand for copper increases. McEwen Copper is one of our assets. The others are gold and silver mines and a portfolio of five royalties. I believe these assets represent considerable underlying value. The range of our estimated value per share is from $9.32 a share to $29.17 a share, and our share price is currently trading around $7.20 a share. Details of these calculations can be found on our website under our latest corporate presentation. I believe our next performance driver will be our gold and silver mines. After enduring a very challenging three years, we are seeing very encouraging signs that the fortunes of these operations are finally turning around.

Production is increasing at all three of our mines, and it appears that we could achieve the low end of the range of guidance we gave for production this year of just over 150,000 ounces of gold equivalent. Regarding cost per ounce, we expect the Fox Mine Complex should deliver within our guidance range, while Gold Bar and San Jose are likely to come in 10% to 15% over the cost guidance we've given. Gold Bar had a particularly difficult nine months. However, this quarter we are putting on a big push to drive up production, and that would result in lower cost per ounce. You might ask, what are these encouraging signs? At the Fox Mine, annual gold production in 2020 had fallen to 24,400 ounces. Since then, it has increased steadily, and we are expecting to reach 45,500 ounces by year end, an improvement of 86%.

At the Gold Bar Mine, daily gold production was a meager 50 ounces at the start of the year. But as the year progressed, the daily gold recovery increased and has averaged year-to-date 92 ounces. And in late October, it really began to accelerate, and by month end it was over 210 ounces, and has continued to climb higher since then. These improvements are a very welcome change, but our share price still has a long way to climb before many of you and myself get back to our cost. I believe the combination of the advancement of Las Azulas, the improving operating performances of our mines, and our continuing exploration efforts will continue to lift our share price, hopefully to the levels we were all expecting when we invested. Many of you have asked the very important question, when will we make a profit?

I'm sorry to say, I'm unable to give an exact date, but this might surprise you. It could be as early as year-end. Our Fox and San Jose mines are now generating positive cash flow, and Gold Bar is expected to generate positive cash flow this quarter. Our expenses have been large for two principal reasons. One, we've been consolidating the financials of McEwen Copper and its Las Azulas project, where exploration and development expenses are high. In addition, we have invested heavily in exploration at Fox and at Gold Bar, a major leach pad expansion and exploration expenses represented more than $200 an ounce just in the third quarter. Starting this quarter, our financial statements are likely to change significantly. We expect to be no longer consolidating McEwen Copper's financials due to our ownership interest dropping below 50% as a result of the recent McEwen Copper financing.

The impact will significantly lower our cash balance, our total expenses, and produce a large unrealized capital gain that will be reflected in both our income statement and balance sheet. Recently, we put out a press release that we filed a new base shelf prospectus, and we've had some calls this morning and yesterday. Are we going to do an issue? I want to emphasize that this is not an offering prospectus. We, like most other companies, routinely file these base prospectus just to provide updated information, to put us into a position where we could react if we saw an opportunity, and we've done this in the past every few years with a similar base shelf prospectus. I think the market right now is a very attractive market to be looking for opportunity, and we will continue to do so.

The price is right. We were established to grow, but the prior year's challenges effectively put any consideration of that on hold. Today, the timing is right, and we want to be positioned to act defensively. Operator, I'd like to open the Q&A.

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