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McEwen removes "going concern" from financials to close 2020

Mar 11, 2021

“2020 was a brutal year but we more than survived and have come out stronger from it," commented Rob McEwen, Chairman & Chief Owner.

"The ‘Going Concern Note’ has been removed from our financial statements; we released two feasibility studies that shows the potential to extend the life of our Mexican operations by 9.5 years, and outlines a 6-year life for our Gold Bar mine, which recovered from what was tantamount to a near-death experience for the operation in early 2020. The future of our Fox Complex is becoming more visible. Access to the Froome deposit is nearly complete and commercial production is planned to start in Q4. This will extend the life of the Black Fox mine by 2.5 years, providing a bridge to our second phase of growth at Fox, which we will unveil in Q2. Given our large gold resource base in the Timmins area, we expect it to support a potential ten-year mine life with annual production of 100-150,000 ounces of gold.

Our recent financings in late 2020 and early 2021 were met with huge market demand and more importantly have supplied us with adequate funds for our key development projects and exploration programs in 2021. We currently have liquid assets of $49 million! Finally, we extended the maturity date of our debt from August 2021 to August 2023, with a supportive lending partner.

Beneficial developments that we welcomed, but were beyond our control, were the massive increases in the prices of silver and copper and the resultant increase in the values of our silver and copper assets. For example, using the current price of copper in the financial model from our 2017 Preliminary Economic Assessment of Los Azules, we arrive at a Net Present Value, discounted at 8%, of approximately $5 billion. In respect of the potential value of our silver assets, if we combine the San José mine and the Fenix Project, it could potentially represent a medium-sized silver producer. One investment banker we spoke to suggested the value of such a company could be a minimum of $140 million. We believe that there is significant value to be realized by spinning these assets out in two separate vehicles. In this manner we could raise the necessary capital to advance these properties, while maintaining a large shareholding. I believe that the shares of these new companies will grow in value along with the growth in demand for these metals, on the back of the green technology movement. Specifically, the electrification of transportation, renewable energy technologies and the continuing urbanization of Asia and Africa.

While I am deeply pained by our awful financial performance in 2019 and 2020, I recognize that those years are behind us and the past cannot be changed, but we can and are shaping a better future. This year will not be stellar as we continue to fix operating issues and continue to invest in exploration and business systems - the foundations for a strong mining company. Looking beyond this year, myself and our entire senior management team, many of which are new hires, feel very optimistic about the company’s growth and are committed to delivering it to you!

Let me leave you with one last thought. As you know our stock symbol is MUX and here is what we are striving to make it mean – Motivated, United, Xceptional” commented Rob McEwen, Chairman & Chief Owner.

If you would like to be immediately contacted with our progress, please provide me with your contact details via my personal assistant Tara Saratsiotis. Her email is tsaratsiotis@mcewenmining.com

  • For the full year 2020, production was 114,800 gold equivalent ounces(1) (GEOs)(see Table 1), compared to 174,400 GEOs in 2019.

    Our consolidated net loss in 2020 of $152.3 million, or $0.38 per share (see Table 2) relates primarily to the impairment for the Gold Bar Mine of $83.8 million; investment of $27.5 million on advanced projects and exploration; a gross loss of $27 million from our operations; and general and administrative costs of $9 million.
  • Our three 100%-owned mines generated a cash gross loss of $4.0 million(2) in 2020, and a gross loss of $27 million. Cash gross profit (loss) is calculated by adding back depletion and depreciation to gross profit (loss).
  • We are forecasting our 2021 gold equivalent production to be in the range of 141,000 to 160,400 GEOs(1) a 23%to 40% increase over 2020.
  • At Black Fox, development of the vent drive that will provide initial access to the Froome underground deposit has advanced 95% by the end of February 2021. We are on track to reach the main deposit before the end of March, and complete the necessary development work to allow for commercial production to be achieved by the fourth quarter of 2021.
  • Gold Bar Feasibility Study Update was filed in February 2021. Using a $1,500/oz gold price the NPV(8%) is $55.2 million, over a 6-year mine life. Probable gold reserves estimated at December 31, 2020 were 300,000 oz (Table 3.2). Exploration programs are ongoing with the objective of extending the mine life beyond 6 years.
  • Fenix Feasibility Study was filed in February 2021. Using a $1,500/oz gold price and $17/oz silver price the NPV(8%) is $32 million, over a 9.5-year mine life. Fenix has the key permits towards construction.
  • The Grey Fox project’s Indicated resource estimate was updated in April 2020, increasing 43% to 888,000 oz Au at 7.1 g/t (see Table 2.4). An independent preliminary economic study on expanding production at the Fox Complex is expected to be completed by the end of Q2.
  • In 2020, we completed 43,000 feet (13,000 meters) of drilling at Black Fox, and 111,000 feet (34,000 meters) of drilling at Gold Bar.
  • Cash and liquid assets(2) at March 10th, 2021 was $49 million.
  • Our year-end conference call will take place today, Thursday, March 11th at 11am EST. Details are provided below.

Operations Update

Black Fox Mine, Canada (100% Interest)

Production from Black Fox in 2020 was 24,400 GEOs. Total cash costs and AISC were $1,397 and $1,650 per GEO, respectively.

We incurred $6.5 million in 2020 for exploration initiatives, compared to $25.8 million in 2019. We remain focused on our principal exploration goal of cost-effectively discovering and extending gold deposits adjacent to our existing operations to contribute to near-term gold production.

The Froome deposit, which is part of the Fox Complex, is accessed from two declines starting at the Black Fox pit and is situated approximately one-half mile west of the Black Fox mine. The mineralized material from Froome will be hauled approximately 20 miles (32 km) to the Stock Mine mill, where it will be processed. Development of the vent drive that will provide initial access to the Froome underground deposit has advanced 95% by the end of February 2021. We are on track to reach the main deposit before the end of Q1 and to complete the necessary development work required to achieve commercial production by the fourth quarter of 2021.

The Stock exploration area sits adjacent to our Stock mill, which currently processes ore from our Black Fox mine. The Stock West mineralized zone was discovered in mid-2019; in 2020 five drill rigs completed 53,600 feet (16,350 meters) of follow-up drilling. Initial results suggest the potential to define a significant new zone of mineralization 800m (1/2 mile) from our Stock processing facility. The majority of our 2020 drilling was designed to infill the gaps between our encouraging 2019 intercepts. This will increase the density of the data needed to develop a 3D model and the Company expects to generate an initial resource estimate while drilling continues. Four contracted drill rigs completed a total of 58,600 feet (17,900 meters) by year-end. Drilling resumed in early January 2021. Assuming this drilling is successful in identifying sufficient gold to support a decision to re-open the historic Stock Mine, we are well positioned to act quickly and begin dewatering the mine in the second half of 2021. Previously the mine was dewatered in just 4 months.

In April 2020, the Indicated resource estimate for Grey Fox project increased 43% to 888,000 oz Au at 7.1 g/t. We have engaged an independent engineering group to complete a Preliminary Economic Assessment (PEA) on the Grey Fox - Black Fox, Stock and Timmins resources utilizing our existing central milling capacity. We plan to grow annual production at the Fox Complex to 100-150,000 ounces of gold, at a targeted cash cost of $800/oz and an all-in sustaining cost (AISC) of $1,100/oz, over a +10-year life, with production envisioned to start ramping up from 2022. The PEA’s completion is expected in Q2, and will support the optimal business case on which to further complete a feasibility study. Mining from the Froome deposit, as described above, is expected to bridge gold production, providing cash flow while we continue to drill and assess additional potential resources at the Black Fox, Grey Fox, Stock and Timmins projects for future development towards expanded production.

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