McEwen Mining Q1 2025 Earnings Call Transcript

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Provided by Quartr
May 8, 2025

There are 6 speakers on the call.

Operator

Welcome to McEwen Mining's First Quarter twenty twenty five Operating and Financial Results Conference Call. Present from the company today are Rob McEwen, Chairman and Chief Owner William Shaver, Chief Operating Officer Perry Ng, Chief Financial Officer Jeff Chan, Vice President Finance Stephane Spears, Vice President Corporate Development Michael Medding, Vice President and General Manager of McEwen Copper and Carmen Diaz, General Counsel and Secretary. After the speakers' presentation, there will be a question and answer session. I will now turn the call over to Mr. Rob McEwen, Chief Owner.

Operator

Please go ahead, sir.

Speaker 1

Thank you, operator. Good morning, and welcome, fellow shareholders, analysts and interested investors. Year to date, 2025 has been an eventful year for us with the higher prices of gold, silver and copper brightening the outlook

Speaker 2

for our

Speaker 1

operations. We've increased our liquidity by using a financial instrument called a capped call convertible note. This instrument allowed us to reduce potential share dilution by setting an effective conversion price of at 100% premium to our share price at the time of the transaction. The majority of these funds will be used to advance the development of our Fox Complex, And we expect that once this work is completed and the Stock And Grey Fox mines are in production, our consolidated annual production in 02/1930 could reach as high as 225,000 to 255,000 ounces. This represents an increase of over 80% above our current production.

Speaker 1

So let's start with some other good news. It's taken some time, but our 49% interest in the San Jose mine has once again paid a dividend, and we're expecting more during the balance of the year. During the quarter, we were delighted to see Gold Bar produce 10% more gold than budgeted at a cash cost 24% below the low end of our annual guidance at $11.46 dollars as opposed to the low end of our guidance of $1,500 However, I expect you will be alarmed when you see Gold Bar's all in sustaining cost per ounce of approximately $2,200 an ounce. I want to explain this high number. It was a result of our decision during the quarter to access a gold zone that had been uneconomic at lower gold prices, but was quite economic at today's gold prices.

Speaker 1

So we decided to accelerate the stripping rate in the first half of this year. And so far, that's cost us about $7,500,000 in order to increase our production and lower our all in sustaining costs in the second half of the year. Financially, Q1 twenty twenty five compares well to Q1 twenty twenty four. I'll give you some examples. Our gross profit was up 68% to CAD10.1 million.

Speaker 1

Our adjusted EBITDA was up 38% to CAD8.7 million. Our cash and cash equivalents increased to CAD68.5 million from CAD17.5 million. Our consolidated working capital increased to $61,000,000 as opposed to a negative 6,500,000.0 Our total debt went up to $130,000,000 from $40,000,000 Our debt cost of service went from 9.5% to 6%. And our net debt is currently standing at just over $42,000,000 So speaking of our Fox Complex, it was a disappointing quarter from an operational perspective because production was lower than budget and cost per ounce were unacceptably higher than budget. However, many of the reasons for the under underperformance are expected to be behind us with production and cost per ounce for the balance of the year looking much improved.

Speaker 1

Speaking of Fox, on a positive note, we just received our permit to construct a ramp to the underground at the Stock Mine. This is a key element in our plans for the Stock Complex expansion. So we have exploration going on, active programs at both the Fox Complex and at Gold Bar, and we will be releasing updates on that throughout the year. We just put out a release earlier today on our exploration showing, particularly at the Grey Fox, how that resource has been growing quite rapidly. Some good grades over nice intercepts, quite optimistic that this still has quite a bit more room to grow.

Speaker 1

And with that, I'd like to open the session for questions.

Operator

And your first question comes from the line of Mike Kozak from Cantor Fitzgerald. Your line is open.

Speaker 3

Yes. Good morning. Hi, morning, and team. Thanks for hosting the call. I just really had one question.

Speaker 3

How much cash or cash plus investments is held within the copper subsidiary?

Speaker 2

Gary? Hi, Mike. So currently, the treasury for McEwen Copper is below GBP 10,000,000 currently. Obviously, we expect to announce another financing at some point as we move towards the publication of the feasibility study. But currently, cash balances held at McHugh and Coffer level are relatively minimal.

Speaker 3

Okay. And then my follow-up to that is that $10,000,000 do you think that's enough to get you to get that feasibility study complete? And then is it still I think the schedule is still there for July ideally?

Speaker 2

We will likely need some additional runway to get to July, Mike. I mean, we just finished a geotechnical program at sites. Sites went down, so costs have come down significantly. But ideally, we'd like to complete another round prior to the feasibility study.

Speaker 3

Okay. That's it for me. I'll turn it over. Thank you.

Speaker 1

Thanks,

Operator

Your next question comes from the line of Bill Powers, Private Investor. Your line is open.

Speaker 4

Hi Rob. Thanks for hosting the call. A few quick questions. I guess we'll start with San Jose. As far as getting a $2,200,000 dividend during the quarter, It still seems as though, as I talked about last time, there still seems to be over $80,000,000 of working capital.

Speaker 4

Have Hopfield given any indication on what they may be paying out? I would imagine have you talked about regularly quarterly dividends with them? Or what's the status?

Speaker 2

Sure. I can answer that as well, Bill. No, we're in regular dialogue with Hochschilds. There is a focus to extend mine life at San Jose. So it's going to be a balance between reinvesting in the mine, especially with silver prices above $30 and gold where it is.

Speaker 2

Between continued exploration, return to shareholders and setting aside some funds for rainy day and closure, it's going to be a balancing act. And right now, terms of the Argentine peso, it's right now very strong right now. So that has a negative impact on reported U. S. Dollar cash costs.

Speaker 2

But we are optimistic. We think the mine the mill expansion to 2,000 tonnes per day with the installation of the Verde mill has been performing very well. And that allows us to increase throughput and lower unit costs, which effectively lowers our cutoff grade at the mine. So all those things are important to us, but we do expect to receive further dividends this year at these commodity price levels.

Speaker 4

Okay. Good to hear. I guess one of the things I saw on your updated information sheet regarding the Fox Complex is that it looks like there's about $71,000,000 of spend for development this year.

Speaker 5

I was

Speaker 4

wondering how far along, I guess, percentage wise, are you complete with before you begin production? And is there any production expected to come from stock this year? Or what could be the status of that?

Speaker 5

Yes, Bill. Bill Shaver here. I'll answer that for you. Yes, we anticipate that we will have the first production from the underground portion of the stock mine in the last quarter of this year. The permit that we got a few days ago allows us to start the drilling and blasting of the ramp.

Speaker 5

And we now have obviously the final design of that ramp and we anticipate that we'll have the ramp down sometime late in the third quarter or early in the fourth quarter. And at the same time, we have the shaft now dewatered down below the 400 level. And we're in the midst now of doing the surveying, making sure that all the headings are safe and properly bolted and so on to the standard that's required today. And the plan is to do some exploration type work, sampling and so on underground in the old workings because we know that mine was shut down when the gold price was relatively low. And we're confident that there's some a certain amount of ore down there that we can extract fairly quickly.

Speaker 5

So as soon as we get the ramp broken through so that we can load trucks from the underground, that will allow us to go ahead with that work. And then as we go into next year, we'll ramp stock up to its full production capability.

Speaker 4

Okay. That is good to hear. I guess, one last question regarding Grey Fox. You guys have done a lot of drilling, seems to be going well. I guess what is the time frame?

Speaker 4

And what might you envision the cost to put the Gibson ramp back into production?

Speaker 5

So that's a very good question. So we're just in the midst of starting a study on that, what the capital costs are going to be, what the operating costs are going to be and what the exact strategy is for number one, getting the permit in as timely a manner as possible. And then number two, what's that going to look like in terms of a mine plan and capital. And I guess the opening of the mine, the Grey Fox mine, I mean, we're right now we're studying which is the best access method, should we be talking about an underground operation or should we be talking about a small open pit. And both of those options are viable.

Speaker 5

So now it's a question of deciding which one is the, you know, the cheapest and the fastest. So the the plan initially for, for that part of the property, Grey Fox and the associated other ore bodies around there would be to bring that ore back to the stock mill. And it's relatively high grade and therefore we would establish some cash flow. And then the next step would be what is the long term potential of Grey Fox, which we see as pretty robust. So then we would want to increase the tonnage through a process plant that would be significantly larger than the stock mill.

Speaker 5

So that's another part of this study that we're working on. And I guess I see a mine that's running at 3,000 to 5,000 tonnes a day. And then we need a tailings facility and so on. And I guess the major thing we have to think about in terms of the ultimate timeframe for putting that together is how long is the permitting going to take. And so that's something that we're actively working on.

Speaker 5

And as we've all heard from our governments at both federal and provincial levels that they're going to speed up the permitting process. At the present time, based on historical time frames, that would take about three years. We're hoping that, that might get down to eighteen months to two years would be, I think, an optimistic view of that, and that's kind of what we're hoping for.

Speaker 4

Okay. No. That's very helpful. And so basically, the time frame of getting it would depend on a mine. I'm guessing the it would require a fair bit of work since it has not been I'm guessing hasn't been active for quite some time.

Speaker 5

Well, that area, in fact, has a ramp there, an exploration ramp that was driven many years ago, to tell you the truth. I don't know exactly when it was, but it's approximately ten years ago. And so there's a significant amount of development to bringing a new mine into operation there. The positive thing about that area is the depth of the overburden is insignificant. We have ore right at surface you know, that we understand, you know, that we could be mining, like, within months of getting a permit.

Speaker 5

So so I think there's lots of really good things about the ore body that's out at Great Fox. And the drilling that we're doing right now continues to expand the resources that we have there. And you know, we've just spent a couple of days up there reviewing the the drilling and the exploration program, and, you know, we're very, very positive about what's going to happen up there, you know, based on our success up to now.

Speaker 4

Okay. That's great. Thank you so much for all your time today.

Speaker 1

Thank you, Bill. While we're pausing, operator, one thing I'd like to bring up that I didn't mention in my introductory comments was something that's going to happen to our financials. Our income statement is going to look better once the feasibility study for Los Azules has been published, which will be this summer. It's going to improve because we won't be needing to include the expenses of McEwen Copper and Los Azules in our income statement any longer once the feasibility is published. That expense will be capitalized under accounting standards.

Speaker 1

And so it will improve our bottom line. And over the period of the last few years, I think Jeff is going to tell us how much we've had to incorporate in our income statement for the expenses of losses. And that but that will be removed, which I think is a good thing. We've invested heavily to increase the value of Los Azules, and we've paid the price of showing a negative bottom line for quite a while as a result of those investments.

Speaker 3

Yes. So just to expand on what Rob just mentioned. At the end of the first quarter, we reported negative $6,300,000 in net income and capitalizing the expenditures of McEwen Copper would have resulted in a positive net income of $2,300,000 rather than a negative. If we take a look at the last few years of expenditures since 2021, we've spent over $250,000,000 in McEwen copper that we could have capitalized onto our books should we have hit feasibility four years ago. Thank you, Jack.

Operator

And there are no my apologies. There are no questions at this time. I will now turn the call back over to you, Rob McEwen, for some final closing remarks.

Speaker 1

Thank you, operator. When I look at it, it's been an interesting year so far. I think it's going to get more exciting. From an operational standpoint, we're still not quite there in terms of where we want to be with respect to performance, but that's on the right track to be repaired. As I said, from a financial standpoint, we've improved our liquidity.

Speaker 1

We have the money to advance the project at Fox, and that's going to have a big impact on our future. Although a couple of years away, but that's moving ahead. Exploration is delivering encouraging results. And so there'll be active news coming out on exploration each quarter. And I believe price of gold is going higher.

Speaker 1

So for a company like such as ourselves, higher gold is good price for us. Thank you.

Operator

And this concludes today's call. You may now disconnect.

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Earnings Conference Call
McEwen Mining Q1 2025
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