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McEwen puts positive personal spin on challenging Q2 report

Aug 7, 2020

“I very much wish I could say that all our difficulties that started last year are now behind, but they are not, yet." 

Rob McEwen isn't known for holding back or sugar-coating anything. The president and CEO of McEwen Mining released his company's second quarter numbers yesterday. 

  • Cash and working capital at June 30th, 2020 were $18.4 million and $25.5 million, respectively.
  • Gold and silver production was adversely impacted by two factors: first, the temporary suspension of operations at all of our mines as a result of steps taken to stop the spread of COVID-19; and second, by operational issues. Production for Q2 was 15,700 gold ounces and 359,400 silver ounces, or 19,200 gold equivalent ounces (“GEOs”)(1) using the average gold:silver price ratio for the quarter of 104:1.
  • A net loss of $19.8 million(2) in Q2, or $0.05 per share, compared to a net loss of $13.0 million, or $0.04 per share, in Q2 2019.
  • On August 3rd, the New York Stock Exchange informed the Company that it had regained compliance with the continued listing standards.
  • Refinanced the $50 million term loan facility, thereby deferring the start of principal payments by two years and extending the term to August 2023.
  • At Black Fox, development of the access to the Froome underground deposit has advanced 30%. The plan is to reach the deposit in the second quarter of 2021, complete the necessary development and achieve commercial production in the fourth quarter of 2021.
  • At Gold Bar, the evaluation of the revised resource estimate is continuing. Mining has resumed and is expected to reach full capacity by September 2020.
  • Our quarterly webcast will take place tomorrow, Friday, Aug 7th at 11 am EDT. Details are provided below.

Operations Update

"The second quarter was challenging from an operational and health and safety standpoint. Our significantly lower production not only reduced our revenue, but also dramatically increased our costs per ounce. In addition, a change in how we account for development expenditures added significantly to our cash cost per ounce at Black Fox. However, our path to future growth and improved operational performance has become clearer," said McEwen.

"We are in a transition period setting up for future growth. We have a large resource base, four operating mines and can see an exciting organic growth pipeline of projects ahead that could potentially push our production to 300,000 ounces per year. I recently purchased 2 million shares, increasing my ownership to 82 million shares, and underlining my confidence in our future.” he added.

San José Mine, Argentina (49% Interest)

Mining at San José was temporarily suspended on March 20th due to a nationwide mandatory quarantine imposed in Argentina to combat the spread of COVID-19. Although mining restarted in mid-April, government‑imposed travel restrictions have materially increased the cost of mining, as San José is operating well below its required manpower needs for an efficient operation. As a result, our partner and operator in Argentina has withdrawn production guidance for 2020 until the situation stabilizes.

Our attributable production from San José in Q2 was 5,500 gold ounces and 358,700 silver ounces, for a total of 9,000 GEOs. For Q2, total cash costs(3) and all-in sustaining costs (AISC)(3) were $1,280 and $1,476 per GEO, respectively.

Black Fox Mine, Canada (100% Interest)

Our work has begun to map out the first stage of the future expansion strategy at the Black Fox Complex in Timmins, Canada. While the present may appear uncertain, the future shows significant promise. A preliminary economic assessment on the expansion potential for the Black Fox Complex, inclusive of the Grey Fox, Black Fox, Froome and Stock deposits along with the potential inclusion of our Lexam portfolio of past producers, is targeted for completion by Q4 2020. The objective of this study is to assess the potential of increasing the Timmins annual gold production in 3 years to more than 100,000 oz per year over a mine life of 10 or more years.

Mining at Black Fox was temporarily suspended from March 26th to mid-April due to health and safety concerns related to the COVID-19 pandemic. A staged return to work was completed by the end of April. For the remainder of the quarter, production was lower due to lower than expected grade and a focus on development work to establish a greater number of mining areas that will improve operational flexibility. Production from Black Fox in Q2 was 2,200 GEOs. As such, total cash costs and AISC increased to $3,121 and $3,332 per GEO, respectively. These costs reflect the fewer ounces produced and sold, development ahead of plan for the quarter, and $1.7 million of underground development costs expensed, as opposed to capitalized, due to the short reserve life of the mine.

A total of 44,800 feet (13,650 m) of underground diamond drilling was completed at Black Fox between April 13th and June 30th, with 70% devoted to closely spaced definition drilling of gold mineralization within or adjacent to upcoming mining blocks.

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