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spk02: Hello, ladies and gentlemen. Welcome to McEwen Mining Q4 and Year-End 2021 Operating and Financial Results Conference Call. Present from the company today are Rob McEwen, Chairman and Chief Owner, Shagan O'Donoghue, VP, Corporate Controller and Interim CFO, Peter Ma, Chief Operating Officer, Michael Metting, Vice President, Andes Corporation, Minera SA, Steve McGibbon, 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'll now turn the call over to Mr. Rob McEwen, chief owner. Please go ahead, sir.
spk07: Thank you, operator. And hello and welcome to fellow shareholders and investors. As you know, we've been working to turn our fortunes around. Today, we're going to discuss the progress that we made in 2021 and provide our outlook for this year. In 2021, we had a number of notable steps of improvement. We increased our production, lowered the cost per ounce at our operations, delivered positive exploration results, along with a preliminary economic assessment for our fox complex, showing that there's a 10-year life out in front of us there. And we created MacEwan Copper to fund the advancement of our Losses of List Copper project. Today on the call, a number of our officers will be talking about 2021 results and looking forward into this year. And we're going to start with Shugun. And it's on your, you're up Shugun.
spk04: Thank you, Rob. Good day, everyone. Our financial performance is looking to improve at our global and first complex in 2021. after a 2020 marked by the beginning of the COVID-19 pandemic. Although most significantly impacted by COVID-19, our 50-50 generation operation, as one would say, managed to generate $10 million in dividend payments to McLaren Mining during 2021. Our liquid assets at the end of the year, which include cash and cash equivalents, of $54.3 million including a split cash of $6.3 million. Investment in short-term cash would be a cash equivalent of about $1.8 million. And precious metal inventory of $1 million, we have $63.9 million as of the end of 2021. In 2021, we completed three financing transactions. which included a $40 million private placement for the advancement of Los Angeles project. At the first complex here in Ontario and in Canada, the full mine attained commercial production during 2021 ahead of schedule. We are expecting that the mine will continue to deliver as planned during 2022. Also, in 2022, primarily we continue to manage our operating margin by reviewing capital expenditures, materials contracts, improving to our management systems, and also bringing synergies to our procurement between operations. So the year has started, as we are all aware and know what is happening in the global arena right now. We started the year with a very high diesel cost, which already impacting our cash cost per ounce of about $35,000. We expect to see offset with the increase in gold price, like at current gold price, averaging $1,900. This is something that we are expecting that will be a positive impact to us, even though the diesel price is increasing, but we expect to see offset with the gold price. We'll be working in Los Altos during 2022 to advance the project to the feasibility stage. This spending will be accounted in our income statement as an expense. So we expect to see our income statement in 2022 be impacted by the spending that we are doing at Los Altos. Substantial to the year end, at March 5th, we raised $15.1 million through a flow-through financing that will be used exclusively for our qualifying calendar exploration and expedition. On building on the business case applied in the PA for the Fox Complex. And these are all the things that we'll be working towards in 2022. I will now turn the call to Peter, to Operations Region.
spk07: I'm not sure if Peter's on the call right now. He's in transit from the airport.
spk08: I'll just join Rob and everybody. Thank you.
spk09: Okay, welcome. Thank you, Rob. Thank you, Sige. The three highlights for 2021 were improved production, lowering costs, and advancing our pipeline of growth projects. I'll just take a moment to go through some of those highlights. For Q4 2021, consolidated production was 31,300 gold ounces. and 683,000 silver ounces for 40,150 GEOs, or 33% higher than Q4 2020. Our consolidated production for 2021 was 154,410 GEOs above the midpoint of our guide for the year and about 34% higher than 2020. Production costs are coming down. uh cost per ounce for 21 decreased compared to 2020 2020 an additional reduction for maine for the focus for this year uh cash cost deals sold from our one dental mines in 2021 were 1453 representing an 18 decrease over last year and all unsustaining costs uh were 1635 or 21 below 2020. For 2020, we are forecasting production between 153,000 to 172,000 GEOs. I'll just shift into each region quickly here. Fox Complex production from Perun in Q4 2021 was 9460 GEOs, 18% higher compared to mining out of Black Fox in Q4 2020. Fox Complex production in 2021 was 30,060 geos, or 23% higher than production in 2020. Production guidance in 2022 at the complex, based on a full year production from Froome, where we're fully into the production and past commercial and full production there, will be ramping up to around 44,000 to 49,000 geos. 2021 cash costs We're 11% and 14.61% down from the same period last year. For 2022, we'll just keep continuing those downward trend efforts and working on improved efficiency as we advance our project. We also came out with a FOX PEA. It adds another 950,000 to 80,800 ounces of gold. So, again, growing our scale, helping spread out our fixed costs. That will add on after the firm is completed. We have about another two and a half years of firm left. We added a year of resources in 2021. The IRR on that project is 21%, and it's got some nice low-cost ounces, cash costs being added. of 770 and all in sustaining being around 12.46. Expiration continues through 2022. Steve will touch on that more a bit later. Gold bar, Nevada. Our production for Q4 2021 was 99.50 geos or 66% higher compared to Q4 2020. Operations in Nevada produced 43,850 geos for 2021, representing 57% increase over 2020. This was the improved production was mainly due to improved heat bleach operating efficiencies. and lesser material impact, or sorry, no material impacts on COVID-19. No suspension of operations last year. 2021 cash costs and all in sustaining for GEO for Gold Bar were $16.87 and $17.50. GEO down in 2020. Reduction guidance for Gold Bar in 2022. It's 38,000 to 44,000 geos. We'll continue addressing reduced costs in 2022. We anticipate placing more ROM on the leach pad, which will reduce our milking and agglomeration costs, increasing that ROM placement to about 80% from a historical 50%. Other highlights, we've changed mining contractors to a new fixed unit rate contract, and that's proving out to help lower costs compared to last year. San Jose, moving south to Argentina, our 49% interest. San Jose, the tribute of production for Q4 2021 was 20,200 geos, 38% higher than Q4 2020. as well as for the full year, for one year from now to 2021. Gold and silver production increased due to the lessening COVID restrictions that impacted operations in 2020. That's it, and I'll now turn over the presentation to Steve, who will talk about our exploration plans and results.
spk04: Thank you, Peter. And good afternoon, everyone. During 2021, we invested $20.9 million in exploration at Fox complex in Nevada, and delivered solid results in three important projects, those being increasing the mine life at Froome, completing our initial resource estimate at Stockwest, and completed initial assessments of Tonkin Rooster and Atlas in Nevada. We remain focused on our principal goal in 2022 of, one, cost-effectively discovering and extending gold deposits adjacent to our existing operations, two, drill testing very attractive exploration targets at stock, and three, seeking to expand Fruin still further to depth and in other areas. During 2021, we completed over 250,000 feet or 77,000 meters of drilling focused on stock and gray fox properties. 2021 delineation drilling, EFRUM, has expanded the deposit further to the west. The best 2021 result from drilling was a 20-meter true width intercept of 7.43 grams per ton gold in hole 222. F08514. 2022, Diamond Drilling will focus on extending Froome's mine life through resource expansion at depth. In 2021, 24,300 GEOs were produced from Froome, and as at year end, 2021 indicated resource additions at Froome and Gray Fox of some 317,000 ounces had a discovery cost of less than $55 per ounce. And in addition, we released an initial resource estimate at Stockwest that includes 144,000 ounces indicated and 111,000 ounces of incurred material. The stock exploration area is adjacent to our stock mill, which currently processes ore from crude. Drilling plans for 2022 will follow up on the 2021 drill intercept in for S21202, which encountered 21 meters true width of 4.29 gram per ton material at Stockwest and Maine. If this intercept connects to mineralization at Stockwest, it will materially enlarge the boundaries of the Stockwest mineralization system. visible gold has been noted in several drill holes from our exploration on stock main and the historic stock mine shallow uh drill intercepts include uh 9.1 meters of 7.43 grams per ton gold including 2.6 meters of more than 23 grams per ton gold within 25 meters of surface from whole sm21024 the exploration budget for 2022 at fox is about 10 million dollars Now at Gold Bar in 2021, we completed 17,500 or 5,300 meters of drilling, which included some 8,620 feet, 2,630 meters of metallurgical, geotechnical, and drilling programs at Ridge and Tonkin Rooster. Delineation programs were conducted at Atlas Pit, Southwest Pit Extension, and Cabin Moor. The Gold Bar exploration budget for 2022 is $2.5 million and will be targeting replacement of mining depletion and growth of mineral resources and reserves. Modeling of delineation drilling at Cabin North and at Southwest Pick Extension is ongoing. We will focus on near-mine exploration that can offset mining depletion and grow mineral resources over time. San Jose, our 49% interest, In Argentina, the San Jose mine, McEwen Mining, is funding a pro rata portion of a $3.5 million exploration program for 2022. The San Jose property surrounds Newmont's Cerro Negro mine and is host to high-grade epithermal gold and silver deposits. Important areas of exploration in 2021 were San Jose and Saavedra, located in the center of the property. Exploration drilling in the mine area at San Jose returned several encouraging results, including 6.3 meters of 44.4 grams per ton gold in the Batana vein, 1.9 meters of 14.5 grams per ton and 342 grams per ton silver in the Mena vein, and 4.3 meters of 14.9 grams per ton gold and nearly 1,400 grams per ton silver in the Amelia vein. Cyclone Este is a new newly acquired property 70 kilometers south of San Jose. It represents a bulk mineralization target. Six initial holes and 1800 meters of planned drilling for 2022 is to demonstrate continuity of high grade silver results that have been recognized on surface. This concludes the exploration portion of the presentation. and I will pass that back to Rob.
spk07: Thank you, Steve. I'd like to now introduce the newest member of our team, Michael Medding. He is looking after our McEwen copper. He has spent seven years working for Barrick in San Juan Province, Argentina. both at Valadero, mine, and Tosca Lama. You can say he has extensive experience in San Juan. He lived there for seven years, and two of his three daughters were born there, so he has strong connections there politically and commercially. So we just returned from a trip down to San Juan, the Los Azules property, and I'll ask Michael to speak about that. Michael.
spk01: Thank you so much, Rob. As Rob said, the senior management just came back from San Juan, Argentina. There we visited our Los Azules properties and had the opportunity to meet key stakeholders, including San Juan Governor Sergio Uñac, Minister of Mines Carlos Astudillo, and the Calingasta Mayor, Franco Castaneda, who are all positive about our project and wants it to advance as quickly as possible. We visited the site and also had the opportunity to drive a new access road that we are currently developing that is significantly lower than our current exploration road, which will almost allow for year-round access to the site and should help us to develop the properties quicker. We also had the opportunity to see our drill program advancing, and this is an exciting opportunity, as we have heard by all stakeholders that we met during that visit.
spk07: We're good. Thank you, Michael. Yes, sir. Before starting question and answers, I want to make a couple of comments. For those of you unfamiliar with the term geo, which you heard, It's not that we're employing a lot more geologists, but the geos are gold equivalent ounces. And in that is converting the silver ounces that come out of our operations in Argentina and some in Nevada are converted to a gold equivalent. And that's what is referred to as geos. Michael just mentioned the new access road we're looking at is lower. That's lower elevation. and it lacks the high, our current route in there has two high mountain passes that we have to pass that are prone to getting closed because of snow loads, and this new route is quite an important development for that project. I want to say that Looking forward, our production for 2022, we expected the trend of lowering cost per ounce to continue, and there will be a slight increase in production. But I want to alert everybody to the fact that in the first quarter, we're going to experience higher costs. COVID was a large contributor to that. but it's contributed to a lot of companies having higher costs. We have higher costs both in Timmins and in Nevada. So Q1, there'll be a hiccup, and costs are projected to be lower going forward for the balance for the year. There are a number of questions that have been asked, and I wanted to speak to them. before opening up for further questions. Cost guidance was given by Peter just now and Shugun for the year. The commodity prices, there was some sensitivity given by Shugun on oil and the offset of a higher gold price. There's a big issue of... We're trading below a dollar, and the New York Stock Exchange, as many of you know, has given us notice that they don't like stocks below a dollar. And if within a six-month period it isn't trading above a dollar, then you face two decisions, one to accept the listing, or you go and think about a consolidation. We've had some experience with this before, and each time, We've entered into this danger zone. We've been able to escape it and think that we will be able to do that again. There are a number of reasons for that. One, the exploration that Steve spoke about, we believe it will allow us to reduce the payback period in the preliminary economic assessment for the Fox Complex, which would be quite positive because that is projected to be a nine-year mine life as we know it. We have annual production of about 80,000 ounces a year or about almost 60% higher than what we're currently doing and a significantly lower cost, but it's important to get the payback done. Two, we'll be coming out later this year with our progress at Los Azules. where we'll be updating the preliminary economic assessment. We've been looking at the project, going through a number of simulations, optimization simulations, and believe there is a larger deposit there and a more profitable deposit using a $3.00 copper price, and copper is now about $4.50, so 50% higher. We decided to... The best way to develop this project or to fund the development of Los Angeles was to put it into a separate company. And some people have questioned that decision. It was largely driven by a desire not to issue a lot of shares in McEwen Mining to fund it. And it was also so we wanted to reduce the potential for significant dilution that would be required to fund the project within McEwen Mining. But also, there is a very distinct preference by most investors for specific plays, like a pure copper play or a pure precious metal play. And that's why we put it out. The question relating to McEwen Copper is when do we expect to close the $60 to $80 million financing we announced last year, and we hope to conclude that. We expect to conclude that in the first quarter of this year. Still relevant to McEwen Mining and McEwen Copper, with this financing that we expect to close by the end of the first quarter, McEwen would have 69% interest in McEwen Copper. There have been some people asking, well, what would the percentage ownership be following the IPO? The IPO is still some time away, but I do believe that Los Azules represents a very valuable asset for us. that we will enhance its value in its form as a separate company, and it would appear very attractive to copper investors. As you heard earlier on, or may have, the Canadian Mining Journal ranked it as the ninth largest undeveloped copper deposit in the world. We also, at McEwen level, McEwen mining level, we had $50 million of debt that we were to start the retirement of it in August of this year. We will be moving that. We expect to have that pushed out by a year, taking that immediate need off our balance sheet. And there's also some people saying, why hasn't management been buying? Well, there are long blackout periods that we have to observe when we're releasing financials or any significant news of the company, such as the preliminary economic assessment. So that's largely been why people haven't been adding to their positions In terms of profitability, you should know that since McEwen Copper will be a subsidiary of McEwen Mining, and McEwen Mining being a large shareholder, the money we spend at Los Azules, a large portion of it, will be reflected on our income statement as an expense. The question of profitability will be up in the air for quite a while as we're spending money there. Operationally, our minds are generating positive cash flow. And with that, I'd like to open it up for questions and answers. Thank you, Arthur.
spk02: No problem. As a reminder, to ask a question, you will need to press star, followed by the number one on your telephone keypad. To withdraw your question, press the pound key. Your first question comes from the line of Jake Shekelski with Alliance Global Partners.
spk06: Hey, Rob. Thanks for taking my questions. Hey, Rob.
spk04: Sure.
spk06: I think you mentioned that cost guidance was given on the call. I might have missed it. My apologies for that. Would you mind just walking us through that again?
spk07: Sure. First quarter is going to be quite expensive. I'll do it on a consolidated basis first. Cash of $1,900, all in sustaining of $2,450. Second quarter, $1,400 cash, $1,850 all in sustaining. Third quarter, $1,230 and $1,550. And in the fourth quarter, $1,200 cash and $1,350 all in sustaining. It was COVID and weather. that affected both Black Fox and Gold Bar during the first quarter, and that caused that bump up. And then a problem in the mill with a piece of equipment also at Black Fox. But you can see the trend, aside from that ugly bump in the first quarter, is progressively lower.
spk06: Yeah, no, that's helpful, and it's good to see the trend in the second half. Okay. And then just quickly at Gold Bar, you mentioned in the release potentially bringing on the Gold Bar satellite deposit in the second half of the year. Any color on development costs that you expect to incur there during the first quarter to kind of bring that kind of into the mine plan?
spk07: I'll ask Peter to shed some light on that.
spk09: Yeah, thanks, Rob. Hi, Jake. Yeah, Gold Bar, the capex for the year is around $10 million. We're expecting to be able to bring that project on in the second half of this year, so we moved it forward from the feasibility spend, if you will. Most of that spend is to expand the heat bleach pad. build the gold barge south road and construction and pay some sage growth credits.
spk04: Got it. Okay. That's all on my end. Thanks, guys. Thanks, Jake.
spk02: Your next question comes from the line of Joseph Recker with Roth Capital Partners.
spk06: Hey, Rob. How are you guys doing? Great. So you mentioned weather impacting Q1, but looking back to Q4, the grade was, you know, quite a bit below the first three quarters. Was that planned or was that something where, you know, the resource didn't match expectations?
spk07: Peter? Yeah.
spk09: Yeah. In Q4, we changed out the mining contractor and transitioned to lead core unit rates, so we didn't quite get the strip we had hoped for and the ore release. So things have gone well now. The contractors fully transitioned, and we expect to get back on track this year.
spk06: Okay. And then Looking at the guide for this year, particularly at Gold Bar, I think when we've talked about this maybe even over a year ago, there was kind of an expectation that sometime around 2022, 2023, there'd be an uptick in grade as you guys completed some, you know, pre-stripping activities and got to a higher grade part of the resource. Has that been pushed out? Is it just not as high as maybe we'd anticipated? You know, any additional color you can give there as far as, you know, like going forward expectations on grade?
spk09: Yeah. I'm not sure which time frame you're referring to, but the – so we're still in PEC West, and obviously that mining's extended out longer than the feasibility by adding in some other – um opportunity org as we call it so we've been mining some waste dumps for and this year we continue to do that the higher grades will actually come with gold ourselves in the mine plan and we're advancing that uh ahead of the feasibility uh quicker into this this half of the year on the permit is progressing well. We're expecting approval from the next month. I would caveat, though, that although the gold bar sells great, they're expected to be hotter. The recoveries are slightly lower.
spk06: Okay. And then, um, looking at MSC, and I realize guidance there is provided by your partner, um, but the, there was a pretty decent jump in both cash costs and on sustaining costs in Q4. Um, What do you guys attribute that to, and do we expect that to continue into 2022?
spk07: A large part of that cost came from COVID. The mine was largely evacuated for a period of several weeks. There were a number of people that were infected with COVID, and they came in and shut down the mine. If you didn't have the production, you had the expenses.
spk09: The San Jose pandemic, I could add, were tallied up to be, I believe, 11.4 million in 2020. So significant pandemic loss and delays, as Rob mentioned.
spk06: And no issues in Q1 so far?
spk09: They started opening their borders. We've gone down, so it's improving. I guess stay guarded. We didn't see the Omicron going, but things seemed to be getting back to normal when we were there. Okay. Yeah.
spk06: All right. I'll turn it over. Thanks, guys.
spk07: Thank you, Kim.
spk02: Our next question comes from the line of Heiko Ilya with HC Wainwright.
spk07: Hello, Heiko. Hello.
spk02: Michael, your line is open.
spk07: Maybe we should move to the next question. No?
spk02: Okay, we'll move on to the next question. Your next question is from John Tommaso with John Tommaso's Very Independent Research.
spk04: Thank you.
spk03: Hi, John. How are things?
spk07: Well, I've got back down to a lower altitude. And I'm not looking as far now when it's Argentina's seat for long distances and down in the city, your vision isn't quite as far.
spk03: So with all these great metals prices, maybe there's a shot of selling El Gallo or the 49% of Manera, San Jose, or eventually McEwen Copper. Do you have enough confidence to borrow $25 million and maybe buy 25 million shares? If you were to sell Monero San Jose, the proceeds would be a lot more than that, for example. Even El Gallo might be that much or more. It might also address your... NYSE issues too.
spk07: Yes. Yes. We have been endeavoring to move some of our assets. We just haven't been able to conclude a transaction on that. But definitely that would be I think high on the list would be reducing the debt or eliminating it and with the extra funds using it on some of the areas you suggested there.
spk03: I can ask a second question. Looking at the MD&A, beginning around page five, it mentions reserves at San Jose. I'm looking at the resources for Ontario that were about the same as the end of 2020, but more at Gray Fox and Stock West and less at Fuller and what you call others or other than the first five zones. Could you explain the progress where the Ontario reserves, resources, excuse me, stayed the same and the documentation that Peter Steve and the team need to do to classify reserves at your 100% projects. And I'm assuming that the absence of much gross profit or net profit in current periods is not relevant because if you doubled Ontario production, the costs would fall and the results would improve. More tons in grade, more zones. But correct me if that impression is wrong. current results have an impact. I'm just trying to understand the reserve and resource accounts better.
spk07: Sure. I'll ask Peter and Steve to weigh in on that question.
spk09: Steve, do you want to go first on resource or I can lead out?
spk04: Yeah, go ahead, Peter.
spk09: Okay. Yeah, thanks, John. Lots of moving pieces there in Ontario. As I mentioned, we mined a year and we kept drilling with Minex and added a year's resource, which really is in our mine plan. So it added to our mine planning inventory. So we stayed flat there on a resource reserve basis by mining a year out and by adding another year. So very positive. We're looking to try to do the same this year, maybe slightly less, maybe 30,000, 40,000 ounces. targeted to add at Froome. Grey Fox went up with some drilling around there. More focus was on Stock West and we came out with the maiden resource of about 250,000 ounces and about 185,000, if my memory is correct, was in the mine plan, which made the PEA. So although it might seen that some of the PA resources decrease. They're there. They just need more drilling. And what we've added in was what we believe were the more sure mine plan constrained ounces into the PA. So that's why there's a bit of difference between PA mine planning and the financial models you see in there and the resource numbers and why we decided to raise some more flow through funds could both unlock Great Fox and Froome. Fuller, a full look hadn't been done, no pun intended, in the past. And so when we started putting mining shapes on that, again, for the same reason, we thought some of the drilling areas would require more drilling. So that might be part of the reason for some of the reductions you saw at Fuller. That's really all I have there, Steve, over to you.
spk04: Maybe, Peter, what I'll add to that, for our 2022 plan, as I had mentioned, we believe there's still an opportunity to increase further the resources at Froome. most notably from our drilling at the bottom of the deposit. Also, our near-surface drilling at Stock West, we believe there's an opportunity to ultimately improve the payback period that was in the PPA, and that would come by adding some additional ounces near-surface proximal to the stock mine. There's further delineation to be undertaken at Stock West, over time and from an exploration standpoint, while it may not show up in resources this year, any success we have following up the, you know, the 4.3 gram per ton interceptor with 21 meters is going to certainly signal probably a meaningful increase in the resource over time a little further at depth. And at San Jose, what I can at least best speak to now is the new property, Suclon Estate, south of San Jose proper, that has veins on the surface that is a very attractive bulk mineralization opportunity, and that's really the focus of a good portion of the exploration program there this year.
spk03: Thank you, Steve and Peter. If I could ask a little more. There's 235,000 measured indicated and inferred ounces called others. And I think that might be Black Fox or Stock Central or Buffalo Anchorite or Davis and Tisdale. Do any of those four projects have Zilch? could you tell us kind of which one is the biggest one in others?
spk04: Steve? Peter? Yeah, I would say the biggest one in the other category would likely be Stock East, which was around 95,000.
spk03: Stock East is broken out, Steve, and I'm pitching Stock Central.
spk04: I'd have to go back and kind of do a tabulation on that, John, and certainly I could report that back to you.
spk03: In ancient times before Steve and before Peter, when Lexam VG Gold stood alone or was brought into the McEwen mining, my recollection is that there are three deposits, Fuller, Davis, and Tisdale, and Buffalo Anchorite were purchased. much larger resources. I'm assuming the drilling wasn't, was too widely spaced and the current QPs and management just interpret the resources smaller pending more infill drilling. Is that fair?
spk07: That'd be a fair statement.
spk03: Thank you very much. Thank you for putting up with all my questions.
spk07: Glad to, John. Thank you.
spk02: Your next question is from the line of Heiko Ilja with HC Wainwright.
spk04: Can you guys hear me okay?
spk07: Now we can, yes.
spk04: Not sure what happened earlier. Phone's been working all day. Thanks for taking my question for the second try, and thanks for taking it the first time, too. Hey, Rob, most of my questions have been answered, but geopolitical risks are all over the news right now, I mean, for obvious reasons. In your conversations with investors or potential business partners, do you feel you're getting enough credit for the geopolitically safe jurisdictions they have to have? I'm thinking of Russian oil versus non-Russian oil. I'm thinking about North American-sourced uranium versus every other source of uranium. Do investors need to give you enough credit for that? And if no, what can the analyst community and your company do to maybe lead up to that?
spk07: I don't think political risk has come into the consideration for Canadian and American assets. There was questions, and it remains, about Mexico, but Mexico is a small, small part of our portfolio today. Argentina has dominated the area of concern, I'd say, about our assets. With the recent developments in Chile and Peru in terms of the political leaning of the parties elected, and the amount of copper produced by those nations, there's been a decided shift to Argentina. And it's looking better, but I think they have to do a better job of convincing investors it's a good place. But we have Glencore talking about it and developing their El Pachon mine that's close to Los Azules. You have Fortescue making a very large statement about working to develop the hydrogen green energy of Argentina. They're also exploring near us. You have Lundin working to develop a copper mine in the same province. So I think you need to see more of that. And you're seeing some good copper drill holes that I'd say Argentina is better than the Congo. I would concur.
spk04: Go ahead. Sorry. I said I would concur, and so would probably just about everybody else.
spk07: I guess right now the political conflicts are just illustrating the short supply of metals in the face of the demand profiles that are being constructed. Okay.
spk04: So I guess I agree with every single word you said, but probably just a little bit more. I mean, do you think that investors give you full credit? I mean, most of your assets are in places where, you know, you could walk alone at night and be just fine. And do you think you get enough credit for them being safe already in the marketplace? And if no, how do you think we might be able to achieve this?
spk07: As I said, I don't think there's any concern about the location of our Canadian and American assets. There's more concern about the operation results coming out of them. And then Argentina, I think people... Argentina should do a better job, and we should be doing a better job of just highlighting the types of capital investments moving into the country, but Argentina needs to be changing a few of the rules to make it look like an even more attractive time. So I would say the Argentinian asset is receiving the largest discount.
spk04: And then just a quick clarification, in your model, what figure do you guys use for salary inflation for the remainder of the year? And I assume all of that is baked into the guidance.
spk07: Correct. Salary inflation across the board? Yes. I'll have to ask Shugun and Peter for that one. Shugun. It was just about what inflation factor did we factor into compensation levels for this year?
spk09: I think we were around in Nevada. Do you have the exact numbers?
spk04: Yes. At Nevada, at our U.S. operation, we factor in 4.5% inflation rate, and at our Canadian operations, we factor in 3.5% inflation rate. Okay. Thank you, Shagan. Heiko? That was it on my end. Thank you all so much, and sorry about being muted there. You're not sure what happened.
spk07: No. No need to apologize. Thank you. Appreciate your time. Bye-bye. Operator?
spk02: Here, our next question comes from the line of Ronnie, who is an investor.
spk07: Sure. Hi, Ronnie.
spk04: Hi, Rob. Rob, I've been a long-term shareholder, and I watched the McEwen share price. Five years ago in March, it was trading at $4 a share, and gold was trading at between $1,200 and $1,300 an ounce. Fast forward today... We're less than $0.90 a share, and gold is trading for $2,000 an ounce, which is very, very disappointing. I'd like for you to give me some color on that. And my question is, if you cannot improve your cash flow and profitability in the near future, would you be willing to sell the whole company to a larger miner? Okay.
spk07: Well, it depends. If you had a bid, you'd look at it, right? Right. I'd have to say we encountered some natural problems that were unanticipated and we experienced some serious operational issues. I share your disappointment in a very large way. I think we have Some interesting assets in particular, and it might sound different because you bought it as a precious metal company, but we happen to have a very large copper resource that makes every other asset look very small right now. And I don't think that's getting value, but in the past two years you've seen copper more than double, and recently you've seen a lot of other commodities trying to do the same thing. And it's a very big size. So we're trying to bring the cost down. We're going along nicely. And then a couple of operational missteps, big missteps happened that shouldn't have. But that's water under the bridge right now. I feel pretty confident we're going to rebuild that. But it's testing everyone's patience. Okay. Yeah, to get copper going, I put in $40 million. My total investment in the company is now $200 million. And trading at about half the value I paid. Not happy about that at all. And we're working to resolve that, and we spoke about... The cost, there's a bump in the first quarter, but we're heading down, and the margins will be increasing, hopefully.
spk04: Yeah, I guess the share price is what really I'm looking at. A lot of the other miners, you know, they've doubled, tripled in the last four years, and here we are, 75% less in price.
spk07: We went the wrong way.
spk04: Yep.
spk07: I think better times are coming. I see them, but it's been hard on everyone. I don't have anything further to add to that. Thank you. You're welcome, Mike.
spk02: Our next question comes from the line of Bill Powers, who is a private investor.
spk05: Thank you. Hi, Ron. Thanks for taking my question there today. Just a quick question on, I guess, the cost billing and forward. What is it going to be? Is it the big drop into Q3 versus a slight uptick into Q4 or about a 20% uptick in Q4. What is kind of the surrounding factors for that?
spk07: Improved production at Prue in terms of number of ounces and getting through some of the large waste removal at Gold Barker. Okay.
spk05: And how quickly can we see a decision, I know, with improved metals prices at Stock West, I know, or at, you know, going forward there? I know you're actively drilling. What is the I guess, do you need another six months, another year? Can you give us some idea on what the time frame is looking like on that front?
spk07: We're exploring and very encouraged by what's going on at the stock mine. We put out our initial for a preliminary economic assessment, and it projected a nine-year life average production of 80,000 ounces a year, which would be about 60% higher than what we're projecting for this year. It, however, had a payback period that was not attractive. It was about six years. I think we're using $1,750 on it. So at a higher gold price, it would be a shorter period. But we expect that the exploration work we're doing will expand the resource base and have a positive impact on the payback period.
spk05: I mean, I guess the question is, you know, you have near-surface material at Stock and Stock West. As far as looking for ways to bring that forward, Is that something, I guess, how much more, you know, before, I know it's been up to two years before you would go forward with a decision on construction there. You know, I guess, is there ways to do a smaller initial investment to get, you know, that would, to me, would seem to be pretty profitable ounces given the proximity to the to the mill as well as not having a royalty on it.
spk07: Yes, that's true. That's true. Peter, would you like to give a little more flavor there?
spk09: Yeah, absolutely. Yeah, we're very encouraged and a very astute question. I think that's an exciting project. You know, we have enough resources you see in the PA to go after it now. What Rob and Steve have been talking about is drilling up higher in and around the old workings. And the host unit that Stock West is is in the footwall of Stock Main, the historical workings. So we're busy drilling around the old workings and near and around the new Stock West ramp to try and find around 100,000 ounces of in the upper part of the mine that we could easily access and start mining while we develop the ramp all the way down to Stock West. So that's the strategy. Drilling's been encouraging, as Rob says. We're very excited about that. We've started preparing the baseline work. and the work to submit a permit application. So things work out in the drilling and on the back of that, we see that resulting in much less dilution of the shareholders. It's about a year to get down to the top of Stockwest. uh and about a 10 10 million dollar uh estimate on the on the capex to do that so it's something we could uh do quickly and we're working on and hoping to bring something in the second half of this year for for a decision for maybe next steps and further advancement okay now that's that sounds i mean i that's i mean with prices i think your your base case was 1650
spk05: you know, plus or minus, you know, 2,000. And, you know, a way to move that forward would be, I think, very welcomed by pretty much all shareholders just given its the impact it could have in moving things forward. I guess the other thing I'm laughing is Mexico. I saw that you put out a little news on that. Is that something that is in the cards as far as – or potentially developing? I know there is fairly, there are some options that involve relatively low initial capital. Is that something that you guys are actively looking at right now?
spk07: Peter?
spk09: Yep. Hi, Rob. Absolutely. We're looking at each of those strategic options. There are still some folks in the data room that are looking at purchasing the asset. We haven't remained idle ourselves on other options. We've identified a low capital option for about $29 million for Phase 1. Shigun and Stephan and team have been coordinating with Asahi on a potential gold loan option to finance and build Phase 1. The permitting has been advancing. As you may all know, the in-pit tailings disposal is permitted, but we've also been advancing the power permits for compressed natural gas. So we have the team there. We have two potential mills that we could achieve that low CapEx cost for, and we're working on getting quotations for those mills and the final detailed engineering designs and all the steps that go with that. That would be something like a 12 to 18 month construction period from the time we take the decision, hit the go button. So with the price of gold at these levels, you look at the robust upside case, if you will, in the feasibility, it's quite attractive. I think payback at around the 1,900 gold, reduced to just around a year on the 29 million. So it's looking to be a really good project and averaging 30,000 ounces of gold for the first six or seven years at a cost of 700 bucks. So it could be a really nice gas generator for essentially McEwen Mining or an acquirer.
spk05: No, I mean, especially if it can be done, you know, partially through debt financing. I mean, that sounds like you've put some more work on that. I mean, certainly that's a, you know, I would imagine very attractive with the payback of a year or so. Anyway, I hope you can keep us updated on all of that. Anyway, thank you for all your time today. Thank you, Bill.
spk07: Operator?
spk02: Our next question comes from the line of Mark Ellert with LendUS IDC.
spk07: Hi, Mark. Can everyone hear me?
spk04: I'm clear. Great. Thank you. Hi, Rob. We spoke a few months ago, believe it or not, about the copper IPO. But quick question. Since I work for International Data Corporation, you know, our job is to really put names out there. And I think with your company, do you have any ideas or plans to get more analysts involved or coverage on Wall Street because I think that would help with your visibility quite a bit.
spk07: Yes. Well, we wanted to move the copper project forward to a degree and then communicate with the street. COVID was restricting that at first, but no, that's in the plans. Do you have ways to do that effectively?
spk04: Yes, we do, but that's a whole other conversation. I just wanted to see if you had plans, because I don't think a lot of big banks or Wall Street, there's not enough coverage, and I know that the future is bright with your company. So that was my purpose of the question.
spk07: Well, there is some work. We're working to update the preliminary economic assessment that was done in 2017, and included in that would be some of the some of the results coming from the optimization work that's being done by an Australian company called Whittle Consulting. And they're envisioning, through all the simulations they've done, what appears would be larger and more profitable than what the PEA suggested. So we wanted to fine-tune that, and granted, It's a preliminary economic assessment, but it shows that working at a $3 copper price, you can improve the economic by a considerable degree. And if you were to plug in today's price of copper, it's a very attractive proposal. Definitely. That's all I have. Thank you so much. You're welcome, Mark. Thank you.
spk02: Your next question comes from the line of Jeffrey Hull, who is a shareholder.
spk04: Hi, Rob. Hey, I'd like your thoughts. You know, since the announcement of McEwen Copper, we've talked about this. That was, I believe, July 6, 2021. The price of McEwen mining was $1.35. And since that announcement, it's gone down a black diamond slope. to the price we see today. I'd like your thoughts on why the market and investors have given that a thumbs down. And secondly, you've created McEwen Copper and you have stated in the past to show the value of McEwen mining. Why not sell your gold and silver properties because they're just not, it seems like they're hemorrhaging money, and just go full force into the McEwen copper.
spk05: Also, can you give an update on the CFO's condition?
spk04: And finally, what would be the devisting date from the New York Stock Exchange? I know those are like three questions to answer, but anyway. Sure. Yeah. Yeah.
spk07: Well, let's start with the CFO. She had a stroke in December, mid-December, that led to a brain aneurysm and some brain surgery. She's been recovering well and expects to report back to work next week. Okay, good. Usually on a part-time basis. Okay. And we're all very happy about that. We learned that when she went into the operating theater, the doctors gave her a 30% chance of living. So it was very sudden and very sad, and we're delighted to see her recovering. She was an athletic individual, and that contributed to that recovery.
spk05: You know, as a retired anesthesiologist, that's great to hear. You know, my question was just because, you know, any time, you know, when the market or when a company reports CFO, you know, leaving or whatever, temporary leave, that always, you know, gives investors a sense of alarm.
spk04: But anyway, that's good news.
spk07: With respect to selling gold, I mean, our other assets and just concentrating on the copper market, If you were to look at the potential of the assets that we hold, certainly today it would appear that the largest potential return and the longest life asset would be Los Azules. And that's never escaped me. It's always been one of my favorite assets in our portfolio because of its size. and its economic power once developed. What was important, though, we did a PEA some time ago, and a number of majors looked at it, and they said, well, there are a couple of things that we would have liked to have seen done before to convince us that this is a great deposit. They were looking at us and saying our finances were weak. We had this big deposit. Let's put some low-ball bids in there and see if we can get it. Since then, the profit price has gone from $2 to now better than $4.5. And we looked at, well, could we finance it by just financing the QM mining? And I'm really not happy with the number of shares we have outstanding. in McEwen Mining, and John Tommaso was saying, well, let's buy some back. But we didn't have the financial strength to advance our gold and silver assets at the same time as advancing the copper. So I know some people have wondered, well, why didn't I just put the $40 million into McEwen? And you look at it and say, well, you're going to have to issue a ton of shares So I thought if we could advance, and I didn't want to issue a ton of shares in McEwen. I said, all right, if investors prefer a pure play over an amalgam of gold, copper, and silk, let's create a separate company, and that should create value once we get it fully financed. for McEwen Mining, and it retains a large interest, retains a royalty. The PEA suggests a 36-year life, and copper is 50% higher than what it was, but the project was all remote.
spk04: Hey, Rob, with most azules, from day one, I guess, how were you going to develop that originally, your plan, before you you went into this McEwen copper. Oh, do you follow me on that? I mean, what? Yeah, yes. Yeah.
spk07: No, it's a good question. I looked at it at first. I thought, okay, we're supposed to have gold bar and it was going to be up and running. We had a positive cashflow surplus cashflow that would allow us to develop. Um, okay. Gold bar flew into a wall where we had to scramble for the last two years to try to repair the damage. a wrong geological model that sucked enormous amounts of cash out of our system. And I took on debt believing in the projections on Goldbar and said, well, I'd rather have debt than repay it. But in hindsight, it would have been better to do equity and not have that amount of debt on the And it's not a lot of debt, but it's certainly weighing heavily on the company right now.
spk04: Rob, so on those projections, who made those projections with Goldbar? We're way off, apparently.
spk07: We used a firm, recognized geologic consultant, SRK. And they looked at our resources, came up with a geological interpretation that our geologists compared with. And the year after we went into production and we weren't getting the grade or the tonnage that had been projected, they came back in and said, oh, the interpretation of the deposit is different. And rather than being laterally distributed, it's more concentrated vertically. And that wiped out a large part of the tonnage we had and the resources.
spk04: Well, is that a screw-up on their part, then?
spk07: I won't put it exclusively on it. Okay. I have to say we were part of the party. I see. Okay. Wow. Yeah. That just slammed us in the head. And you spent all of 2020 and a large part of 2021 trying to think, well, where did the gold go? Is there more of it? And all of a sudden it was like we looked at a rather continuous ore body, and what the reinterpretation said, it didn't extend the full distance. In fact, there's a big chunk right in the middle. Okay.
spk04: Because I'm kind of learning as I go too. I mean, I've been investing with your company since 2016 when, you know, you had no debt. You paid a dividend. I mean, it was only a penny, but anyway. Well, do you still use that company then for projections or?
spk07: That's an excellent question. I believe in some cases we do. They're different areas. They're international.
spk04: Oh, I see. Okay. And then I know I threw something. About, you know, the delisting date. I mean, I hope you don't have to do that, and I hope you don't do a reverse split because, as I've told you on my e-mails, I know they've been kind of harsh at times. I think that will be the last nail in the coffin, I hope. But anyway, so what date do we look at where you have to get this – price above a dollar yeah you have to be above a dollar for 30 days trading days right avoid that happen okay so this depends on so what's what from the data data denouncement what's the cutoff date and work they say well you know it's a six month period Jeff right okay so that puts six months from the date of notice okay so I'll figure that okay I'll figure that out into June Okay. Um, but you're kind of so confident you can address that. Sure. It's hell good to try. Yeah. Okay. Um, and I think, I think that's it for me. Um, yeah, yeah, yeah. Uh, we did get a nice, of course, gold's down 50, about $50 today. I think it's under, you know, under 2000, but, uh, But it just boils down. I hear my ram is going to release some oil. Anyway, but hey, Rob, I think that's it. Thanks for bearing with me. And get this puppy going. That's right.
spk07: All right. Jeff, we just came back from, as Michael said, came back from Argentina. Uh-huh. There's a lot of excitement down there right now, and we'll be putting out a PEA, an updated PEA on the Los Azules project. When you start doing some of the math, it starts looking very interesting.
spk04: Okay. You know, we've been hearing this for a long time from you, I know.
spk07: I know.
spk04: All right. All right, be safe, and thanks a lot for taking my call.
spk07: You're welcome. Thank you. Bye-bye. Bye. Operator, next question.
spk02: And there are no further questions at this time. Mr. Rob McEwen, I'll turn the call back over to you.
spk07: Thank you very much, Operator. Thank you, everyone, for attending. A friend of mine, Ted Rogers, used to say, the best is yet to come. I know it's been a long wait, but... metal prices are moving in the direction that are a function of the huge amounts of liquidity that's been pumped into the system by governments around the world the large levels of debt and low interest rates and that's an environment in which hard assets appreciate value and gold being one of the most valuable of those but copper is also moving as we electrify the world, and I think we have the right assets. And the trend, despite bumps and hurdles we've had, the trend is lower production costs and an opening of the margins, profit margins. So thank you very much for joining us today. Goodbye.
spk02: This does conclude the conference call. Thank you. You may now disconnect at this time.
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