McEwen Inc.

Hello, ladies and gentlemen. Welcome to McEwen Mining's Q1 2021 Operating and Financial Results Conference Call. Present from the company today are Rob McEwen, Chairman and Chief Owner, Anna Ladkircher, Chief Financial Officer, Peter Ma, Chief Operating Officer, Steve McKinnon, Executive 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.

Thank you, operator. Good morning, everyone, and welcome. I'm certain everyone will agree with me that 2020 was a brutal year for us, but 2021 has started off with great momentum. One, our treasury is full. Two, the going concern qualification is gone from our financials. Three, our exploration program is generating strong results as evidenced by today's press release. Four, our mine lives in Timmins and Nevada have been extended and operations are now hitting our targets In terms of gold production, we have much work still to do to bring our cost per ounce down. Five, with the much improved copper and silver price over the last 12 months, better than the doubling in both cases, inside of the human mining we have a silver company, Thank you, Rob, and good morning, everyone.

He's going to give a brief overview of our Q1 results. Our revenue in Q1 from gold and silver sales from our 100% operated properties is just under $24 million. Average realized prices of $17.63 as compared to Q1 2020 of $31 million revenues at average realized prices of $15.91. Production in Q1 was 30,600 gold equivalent ounces. Predominant factors were reduced production from our 100% phone lines, which Peter Law, our COO, will review in more detail shortly. We reported a net loss of $12.5 million, or $0.03 per share. This compares to a net loss of $99.2 million, or $0.25 per share, in Q1 of last year. The decrease in our net loss relates to an $84 million impairment charge recorded at Gold Bar in the comparative quarter last year. We've also had improved performance from our investment in the MSC San Jose mine in Q1 2021. During the quarter, as Rob alluded to, our treasury is full. We completed two equity financings. The first one was a specific raise of $12.7 million in Canadian development expenses, and the funds were specifically raised for the development of our new flume deposit, which is part of our Fox complex in Timmins, Ontario. The second was an equity financing for gross proceeds of $31.5 million, With completion of these raises, all of our programs are now fully funded for 2021. In addition to this, we received $5 million in dividends in Q1 from our interest in the San Jose Mine. We ended the quarter with $52.5 million in liquid assets, $81 million in current assets, and a positive working capital of just over $35 million. We've been very busy with our exploration programs, invested $5 million in Q1. The primary focus was on growing the Fox Complex resource base. We also invested $1.8 million on the Fox Complex expansion PEA and as well as on our Phoenix project in Mexico. Steve McGibbon, our new Executive Vice President of Exploration, joined us during Q1 and he will be providing more details on our exploration program shortly. We continue to manage our operating margins by controlling our capital expenditures and material contracts, as well as looking to reduce our GMA costs this year. We've also begun implementing management systems to streamline processes and to gain further efficiency. We expect our financial performance, and more specifically cost, to continue to improve throughout 2021 as we ramp up our food deposit towards commercial participants in 2024. Given this ramp-up and the ongoing PEA study, which will have further production and cost details, we're still not in a position to provide firm cost guidance. Further, the ongoing variable restrictions in response to recent outbreaks of the new COVID-19 strains continue to create uncertainty for the mining industry. The company will provide an update on costs as soon as possible and in any event no sooner than the release of our PEA study in late Q2. I will now turn the call over to Peter Ma, our Chief Operating Officer. Thank you.

Thank you, Anna, and good morning all. The turnaround of our operations continues to show positive signs to improve delivery costs. and growing production from a strong pipeline of resources and discoveries sourced organically from our strategically located assets. During Q1, we met important milestones such as the feasibility studies for the Phoenix project in Mexico and the update at the Gold Bar mine in Nevada. We also reached an important milestone at the Foon deposit where First Ore was mined in Q1 and currently mining is progressing as planned. All operations delivered production in line with results and our expectations. Production is expected to increase through 2021 and achieve 20 to 40% higher than 2020. At the San Jose mine in Argentina, our attributable production from the mine was 9,500 gold ounces and 492,300 silver ounces. for a total of 16,700 gold equivalent ounces. Total cash costs and all unsustaining costs were $10.88 and $13.28 per GEO respectively, all of which compared favorably to the same period last year. Moving on to Gold Bar in the U.S., the mine produced 7,400 gold equivalent ounces in Q1 at a total cash cost and all unsustaining cost of 1865 and 1934 per GEO respectively. Production reflects a 19% decrease from the 9,100 GEOs produced in Q1 2020. Production was impacted by decreased mining and crusher availability due to COVID quarantines limiting available operators and winter weather hampering mining all resulted in lower gold production. We continue to execute improvement initiatives at the Gold Bar Mine which include improving contractor mining efficiencies while adding more equipment to accelerate production, potentially stacking more ROM to reduce costs and improve throughput, and finally adding ounces to plan with exploration drilling at ridge, pick, and old Gold Bar Mine deposits. Production in Q2 is expected to be higher than Q1 and correspondingly cost per ounce are expected to decrease. At the Fox Complex in Canada, we produced 5,200 GEOs in Q1 at a total cash cost and all-in sustaining of $1,262.1560 per GEO respectively. Lining at Black Fox has begun transitioning to the firm deposit where progressive ramp-up is planned and commercial production is expected in Q4. Phosphorants are expected to decrease as we ramp up. There are an estimated 111,000 gold ounces in the Life of Mine planet room, with more underground exploration drilling planned aiming to extend the deposit near existing and planned mines. In Q1, work progressed on the expansion PEA for the Fox Complex. We are targeting improved production and cost profiles, leveraging the potential for operational synergies through shared resources and infrastructure. Results of the P.A. are expected to be released towards the end of Q2. At El Gallo in Mexico, we produced 1,300 gold equivalent ounces from residual leaching. Operations were disrupted in March by a demonstration at the mine entrance by some of the local community members. There was overwhelming support for the company, shown by the majority of the community, which helped resolve the situation, and a new 10-year agreement was reached with the communities. At Los Azules Copper Project in Argentina, Q1 work continued with preliminary engineering and developing of a cost estimate to advance the proposed low-altitude all-year access route. Throughout the remainder of the year, work will continue on baseline studies related to flora, fauna, surface water quality, and archaeology as required by the environmental and mining authorities. An estimate for a bankable feasibility study is being prepared and currently under review by the company. In addition, work will continue to identify opportunities to improve the economics of losses released with bulk ore sorting technologies and other value-add alternatives. I will now turn the call over to Steve McGibbon, the Executive Vice President of Exploration.

Thank you, Peter. During Q1, we raised $5 million on exploration, we invested $5 million on exploration drilling and other exploration work, with the primary focus on growing the FOX complex and resource base. 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. At San Jose, the 2021 exploration budget is $10 million on a 100% basis. The $2.3 million being spent in Q1. Recent exploration results generated by our partner and mine operator have been encouraging, including an outstanding result from the Escondida vein of 62.5 grams per ton gold and 5,571 grams per ton silver over two meters. Some 1,400 meters of drilling were completed at Escondida and Telcan Targets in Q1, as Candida will see a further 1,000 meters of drilling in Q2. At Gold Barb in USA, an updated resource and reserve estimate were completed. $0.9 million were spent from the $5 million exploration budget during the quarter. which is focusing on testing near mine targets and further defining oxide resources on the neighboring Tonkin property. Drilling activities will focus primarily on the ridge deposit in part to provide improved density and metallurgical data. Near mine exploration during Q1 has delivered encouraging results from the north ridge target. The ridge-oriented drill core program successfully confirmed mineralization, locally increasing the average grade of existing resource model blocks and extending mineralization into new areas. Exploration initiatives are continuing at Ridge, where this phase of the 2021 program consists of 20 reverse circulation holes and 7 oriented core holes. Early stage geological evaluations are underway at the old Gold Bar mine in Q2. At the Fox Complex in Canada, exploration activities ramped up in Q1 following the funding received from our flow-through share programs, which are being used to expand high potential target areas eligible for Canadian exploration expenditures. Exploration work has been the primary focus on growing the Fox Complex resource base. During Q1, drilling at the Black Fox mine continued to return, encouraging high-grade intercepts at depth. Underground drilling is being completed to identify additional mineralization adjacent to the Black Fox ore body, where mineralization remains unconstrained in multiple directions. The stock west mineralized body was discovered in mid In 2020, exploration activities were focused on follow-up drilling. As our press release outlined this morning, 57 holes have been completed since August 2020. A portion of these do have assays pending, including some that contain visible gold. Initial results suggest the potential to define an important new zone of mineralization 500 meters or about half a mile from our stock processing facility. In Q1, we spent $3.4 million of a total $9 million exploration budget for the Timmins area. We contracted four drills at stock to increase the density of our intercepts needed to develop a 3D model to generate an initial resource estimate for stock rest and to test and confirm historical drill results below 300 meters of stock mean. A total of 58,000 feet or 17,700 meters of surface exploration drilling was completed at stock rest and stock mean with the primary focus at the Stock West Mineralized Zone. Together with the PDA for the expansion of the Fox Complex that will be released in Q2, we will update the resource at Stock East and we'll produce a maiden resource at Stock West. Service exploration is continuing at the Stock property with four drills at Stock West and one drill at the historic Stock Mine. That concludes the exploration presentation, and we'll now open the call to questions.

Before we open the call for questions, I'd like to ask everyone, we have a communication link that is a little fragile, so if I could ask you to take your questions really slowly, it would be helpful. But before I ask you to ask questions, I just want to Thank Dan, Steve, and Peter for their statements and assessment of where we are. We can expect for the balance of this year to get more exploration results throughout the year. We have large land packages in major gold districts of Timmins and Nevada. And we're also in an emerging gold-silver district in southern Argentina, where our samples are in line. The expansion plans for our chemist operations, where we have 3 million ounces in the indicated category, will be released at the end of Q2. And with the doubling of the silver and copper prices in the last 12 months, When you look at the sewer mining, we have a silver company inside. It's two operations delivering silver. The San Jose Mining Phoenix project in Mexico and our large Los Angeles copper project. We are aggressively pursuing two alternatives right now to advance that project. It's very sensitive to the price of copper. and we're looking to monetize that value in the optimal way we can. And I would expect a decision there in the next few months. So now I'd like to entertain your questions, please. Operator, please open up the Q&A.

As a reminder, to ask a question, you will need to press star followed by the number one on your telephone. To withdraw your question, press the pound key. Your first question comes from the line of Heiko Efele from HCW. Your line is open.

Hey there. Thanks for taking my question. I hope everyone is Two quick ones for you. In regards to these strong drilling results today at the Southwest, I mean, it looks like you have several asset results for holes, and in your ward, it's not mine, some of which contain visible gold, but they're still pending. Any idea how long it'll take for and all the stock lists, or anyone else for that matter, that have changed your focus of drilling for that respective site over the remainder of the year. It looks like some more assays of gold bar pending as well.

Peter and Steve, would you care to answer Heiko's question?

Yeah, I can chime in first on that. With respect to the We expect to be getting a steady stream of results over time, and we are seeing that there is constraints at assay labs right now that are making that turnaround time not as quick as we would like it to be, and we're working on opportunities to try to mitigate that somewhat. But in general, the results that we've gotten haven't changed our focus or our priorities, which ultimately are being driven by the plan and the results that will be presented in the PPA. Peter, perhaps you want to chime in?

Yes, I would concur with Steve. That's Fox Complex. We're drilling Stock West, Stock Main, Whiskey Jack, 147, Contact Roans, and Gibsons. Gibson has an existing decline, which we would probably use to access the Whiskey Jack and the North End there, Contact and 147. So those were all in the plan. Very promising, encouraging results, confirming the geologic interpretations in our business cases for the PEA. Over at Gold Bar, Ridge was our number one target, so we've got some great results there, continue drilling there. The next one we're going to be targeting after that is the old Gold Bar mine, and targeting analysis is underway there, and then Tonkin will follow, and then we'll also do some follow-up drilling and pick. So continuing to follow the plan and really encouraging results.

Thanks for that comprehensive answer. And just a quick clarification with Dalio. Obviously, you're saying that cash costs and all outstanding are no longer key metrics that you're using, which makes sense. So you're no longer relying on disclosing cash costs, all outstanding costs, or really anything else. Is there another metric? We do provide some costs with respect to El Gallo. I think it's in our domain and certainly happy to take this offline with you as well.

You know, the cost to keep Elgayo open is important as we look to kind of strategically decide what to do with that asset. That will come in probably the next couple of months. We continue to have a workforce there that we're keeping. We are permitted there to start our operations. So in terms of cash flow, I would say we're pretty much break-even in terms of the care and maintenance, but we do continue to sort of invest in keeping Elgayo long-term. until a formal decision is made by the company on strategic with the asset.

Excellent.

Thank you very much. You're welcome. Thank you.

Your next question comes from the line of Jake Sikilski from Alliance Global Partners. Your line is open.

Hi, Robin. Thanks for taking my question. Just staying in Mexico, a quick question on Phoenix. I'm just curious where it stands from a capital allocation standpoint, and if you guys have any plans to move forward with the development decision there, just sort of your thoughts around that.

Hi, Jake. Go ahead, Rob. Okay, so at the moment, we are, again, just evaluating strategic options. We will probably come to a decision on that asset in terms of how we will fund it and what the next steps are in the next couple of months, if not sooner. Rob, I didn't know if you had anything further to add on that.

No, that's great, Daniel. Thank you.

Okay, so that's probably a mid-year type event that we'll see something out of that event.

That's correct, Jake.

And then just switching over to Black Fox and the Timmins region in general, the hub and spoke strategy seems like it's coming together with room coming online. But do you think there's additional M&A opportunity in the region? Or are you guys sort of comfortable with the assets in the land that you have there now? Jake,

Until our currency is stronger, we're looking at building our base on it, making it solid before we think of stepping out.

Okay, that makes sense. That's all on my end. I'll hop back into you. Thanks.

Thank you. Your next question comes from the line of Joseph Riga from Roth Capital Partners. Your line is open.

Morning, Rob and team. Thanks for taking the questions. Morning, Jeff. Morning. So, first thing, the dividend from MSC was pretty significant this quarter. Was that solely from this quarter, or was there some kind of extra cash in there from previous quarters during the pandemic when maybe the You guys over at Hush Hour are being a little more conservative and holding back the cash.

I can answer that question. Thanks for the question. So the cash we see is a bit of both. You're right. So they held that cash for most of 2020 in light of COVID. There is a surplus there, and it's about a mix of both. We are certainly happy to have received the $5 million dividend, and there is signal that there will be potentially more dividends this coming year, but it is really quite dependent on the situation in Argentina with respect to COVID. Certain things right now in terms of the operations look like they're all back in order, but we sort of remain on hold there with respect to further dividends for the rest of 2021.

Okay, fair enough. And then switching gears to Gold Bar, you know, obviously the cash costs were quite elevated in the quarter. I assume the plan is that as grades tick up and stacking rates tick up over the remainder of the year, we should see cash costs come down. I know you're not giving specific guidance, but is it best for us from a modeling standpoint to assume a gradual decline?

Yeah, hi Joe, this is Peter. Yeah, you're exactly right there. What? Yeah, you're exactly right there. You know, we are working to work through that strip we talked about last year. We're getting through that, releasing ore and looking at opportunity ore and including the exploration stuff you heard earlier. So we're working towards the feasibility and beating the feasibilities.

Okay. And then one final one, if I could, on Gold Bar. You know, from what we've been hearing, there's a lot of people looking to buy operating assets in Nevada. Is that something you would consider selling, or do you guys consider it kind of like a flagship of the company?

Every asset has a price. Right. You know, you're always open to suggestions, but we think our property in Nevada is large. It's on a trend where there's some major mines just above us, and we don't think we've exhausted the exploration potential there. We think there's room to build that deposit and a Falcon project. So we have to put a suite number in front of us.

Okay. Fair enough. Thanks, Rob.

You're welcome. As a reminder, to ask a question, press star 1. Your next question comes from a line of John Charles Tommaso from John Tommaso's Very Independent Research. Your line is open.

Rob, congratulations on life extensions at Gold Bar. Good updated statement. Concerning the PEA for Black Fox, directing the question to Peter and Steve. I don't understand why it's a PEA when the mill and tails and processing is very well defined. How much money would you have to spend to upgrade the gold resources To determine the precise size and shape of stopes, the mine development layout, resolve any uncertainties about top cuts or drill density, for it to be a feasibility study, how many holes, how many dollars would that be, to have a more certain mine planning.

I'll start, Steve. Hi, John. Sounds like you're on the team already in the room talking. Yeah, those are all big questions, and I think that's the reason why we're a PEA and combining the three really good project areas in the district. It was quite a challenge to assess The trade-offs and what order we could bring things in and what permitting and you know we did a big gap analysis to identify all that so we're right in the middle of running the cash flows now and answering all those questions so can't really report there that'll come out obviously with the PA but we plan to fast track right to an FS and potentially in some cases If we can see a clear enough line of sight right towards project development and early production. And that, if you recall in the past calls, was our objective to see if we could identify a pathway there. And we like the stock left deposit. And we like accessing the Grey Fox area through the Gibson decline. And that's what we're trying to do. C.F.A. C.F.A. C.F.A.

The year-end reserve for Black Fox was 14,000 ounces. We all know there's more gold there. Since McEwen has bought the project, there's been innumerable over-one-ounce assays, often half a meter or a meter narrow. How much money do you think the property merits to drill tightly So a QP calls it reserves.

Yeah, I'll pass that to Steve, but I can add to that too.

Yeah, I guess specific to Black Fox, what I would say is that, as you'd be aware, we do get some very high-grade drill results. but the ore at the same time is very nuggety and we expect that in order to really be able to identify and seize on that potential that we need to undertake a significant program that probably gets our drilling centers somewhere between five and eight meters to try to Overcome Back, The Negative Nature of the Ore. And we can kind of confirm what that drilling is from more immediate access points, but the longer term potential of the property will require a significant amount of drilling of which we haven't put a final number on at this point. We're really just initially trying to Thank you. That's incorrect, right?

I concur with Steve and we're in the process of moving the production team to Froome and that way exploration can go about carrying out the drilling and work needed without the pressure of production on their backs and we like the west flank, we like the deeps and is there a potential connection to Froome so we're still going to be advancing that project and hopefully Thank you very much. You're welcome.

Thank you.

There are no further questions at this time. Mr. McEwen, I'm going to turn the call back over to you.

Thank you, operator. Thank you, everyone, for joining the call. And I'm looking forward to This concludes today's conference call. Thank you for participating. You may now disconnect.