McEwen Inc.

Hello, ladies and gentlemen, and welcome to McEwen Mining's Q1 2020 Operating and Financial Results Conference Call. Present from the company today are Ron McEwen, Chairman and Chief Owner, Peter Ma, Chief Operating Officer, Mary Burley, Chief Financial Officer, and Siddharth Gaurav, Senior Vice President of Exploration. After the speaker's presentation, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press the pound key. I will now turn the call over to Mr. Rob McEwen, Chief Owner. Please go ahead.

Thank you, Operator. Good morning, fellow share owners, ladies and gentlemen. It's been... It has been over two months since the World Health Organization declared the COVID-19 virus a global pandemic. Starting in late March and into early April, our operations were temporarily shut down to protect all of our employees and comply with government-imposed restrictions. I'm delighted to say that none of our employees or the employers of our contractors have contracted the virus. In part, we hope this result is because of our rapid action and the vigorous measures that we put in place. As of today, Black Box is back up, operating normally. Gold bar is starting to increase activities with a focus on preparing for production. Government restrictions have Our San Jose mine operating at 50% capacity and our El Guayo mine is limited to residual leaching. We think these government restrictions will be lifted in June. I'd like to turn to Gold Bar. Last year was a disaster. I had, and I'm sure you hoped, our problems would be far behind us, but this year we have experienced a significant shift. This quarter we are reporting a very large non-cash write-down of our Gold Bar mine. This is a result of a revised geological model that reduced the size and structural interpretation of a deposit. This mine was to be a star asset for us, but so far it has been clearly one enormous screw-up. Many professionals Some who worked for us and others who were technical consultants made decisions that compounded to bring us to where we are today. We're not ready to close the mine and write it off as a very bad and expensive decision for several reasons. We believe there are opportunities to improve the operation, reducing costs, and also to find additional resources Through Exploration. Both Peter and Sylvain will speak to these issues later in the presentation. I'd like to talk about our financial results for the quarter. First, our liquidity. At the end of Q1, our liquid assets were $31 million compared to $46.5 million at the end of the year. Working capital was $25.3 million. However, we are forecasting that our working capital will decrease below the required working capital levels required by our debt covenant. Therefore, we are evaluating several alternatives to refinance in order to extend and amend the terms of our $50 million debt. Until we have an alternative financing in place which addresses the risk created by a potential working capital shortfall. Our auditors have added a going concern language to our financial statements, and that is reflected in our Q1 10-K report. Assuming a current low price remains constant and we've been able to refinance the debt and amend the term, extend the term, We believe we have adequate cash to fund the company through 2020. The big item on our balance sheet and income statement is the impairment of the Gold Bar Mine. And it's as a consequence of changes to our resource estimate related to the mine. Our finance department, our auditors, and external property evaluators, That information was put together and performed a recoverability test using a discounted cash flow method employing a 9% discount rate. They also used, which I find hard to believe, a long-term gold price assumption of $14.30 per ounce. The conclusion was that the carrying value needed to be repaired in Thus, we are recording a non-cash impairment, reducing plant and equipment and mineral property interest by $83.8 million in the first quarter. When we combine the impairment with $6.3 million spent on exploration and advancing projects, plus G&A, the consolidated net loss for Q1 was $99.2 million, or $0.25 a share. Excluding the impairment, the net loss would have been $15.4 million or $0.04 a share. I would now like to provide an introduction to our new Chief Operating Officer, Peter Maugh, who joined the company on April 2nd. Peter is someone who I've worked with before at Goldcorp, with Red Lake Mines, He is a very accomplished engineer and executive. He is a believer in innovation, likes to challenge conventional wisdom, and we have to say that he has been working flat out for the last six weeks to put in place strategies that we believe are going to turn the kiln mining into a performer. I will now ask Peter to continue with the presentations.

Thank you, Rob. I'm very excited to be joining McEwen Mining and the opportunity to work alongside you again. McEwen Mining has a bright future. We have some near-term operational challenges to overcome and a stellar pipeline of resources and discoveries with which to grow. Before providing the operations and projects updates, I'd like to share some of my background and how my experience can be applied to the challenges and opportunities at McEwen Mining. I'm an engineer with a background in mining and mineral processing and earned a master's degree in open pit and underground rock mechanics. Over the past 30 years, I've worked as an engineer, a supervisor, manager, and executive in open pit and underground operations. My experience spans feasibilities, new mine builds, expansions, and a turnaround. I also worked in the Red Lake Mines for nine years in varying capacities. My experience as mine general manager at the Victor Diamond Mine has taught me the importance of blending challenging clay-rich ores and material handling systems designs to optimize processing efficiencies and throughput. At the Musselwhite Mine, efficiencies in transverse open stoping and conveying will support the transition to production at our new Froome project. Speaking of Froome, the ramp development advanced in Q1 2020 and first ore is expected in Q4 2021. The Froome deposit has a resource grade of five grams per ton and is expected to provide two to three years of mill feed with a productive low-cost transverse open stope mining method. Continuing with the update on the growth of the Black Sox complex, The high-grade mineralization at Gray Fox Project, Black Fox Mine, and the stock mine represent high growth potential to utilize the excess capacity at the stock mill. High-grade open pits are being evaluated at the Gray Fox Project. Permitting is set to begin in Q2 2020 and expected to take approximately two years. In addition to the open pits, underground scenarios are being evaluated. The Gray Fox project is expected to grow into a long-life core asset for the company. The company has received the permit to dewater the stock shaft and is evaluating options and costs to re-access the mine via the existing shaft. Resource definition drilling is required to further advance this exciting discovery. High-grade intercepts at stock yeast are also encouraging. and their strong potential for underground and or open pit mining. At the Black Fox mine, lateral development was boosted in Q1 to increase ore faces and access to new stoping areas in the west side of the mine. Other cost and productivity improvement plans include reducing stope dilution through improved drill control and cable bolting trials, more focused exploration and mining in the upper part of the mine to reduce haulage costs, Ground Control Optimization, Reductions in Rehab, and Improving Development Rates. Moving to Nevada, results of the Gold Bar Mine were disappointing. An estimated 25-35% reduction in contained ounces in the Gold Pick deposit is expected. Drilling, resource modeling updates, and determination of the best business case going forward is ongoing and expected to be completed in early Q3. Key drivers for rising costs and underperformance in 2019 is being analyzed for improved solutions. Some areas for improvement being examined are resource reserve definition drilling to improve mine planning delivery, improve stockpile management and blending, better unit mining costs and productivities with a dispatch system, assessment of run of mine heat leaching, Improve Grade Ore and Blast Control Practices. In April, the mine began a staged return to operations that included maintenance, site cleanup, unlimited stripping for the next drill-ready ore in Westpick, and processing of stockpiled ore. Ore mining remains on hold as management adjusts plans for operations. Gold Bar South is in the permit stage and is expected to begin production in the second half of 2021 Ongoing metallurgical work indicates favorable metallurgical recoveries in excess of 70% with the potential for run-of-mine heat leaching. The mineralization starts at surface and exploration is planned, targeting the extensions. In Mexico, our El Gallo mine continued to produce gold from residual leaching. The Phoenix project study demonstrates robust economics and we expect to finalize I will now turn the call over to Sylvain to take you through the exploration