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spk01: Hello, ladies and gentlemen. Welcome to McEwen Mining's Q2 2023 Operating and Financial Results Conference Call. Present from the company today are Rob McEwen, Chairman and Chief Owner, Perry Ng, Chief Financial Officer, William Shaver, Chief Operating Officer, Michael Medding, Vice President and General Manager of McEwen Copper, Carmen Diaz, General Counsel and Secretary Jeff Chan, Vice President of Finance. 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, again, press the star one. I will now turn the call over to Mr. Rob McEwen, Chief Owner. Please go ahead, sir.
spk04: Thank you, Operator. Good morning and welcome, ladies and gentlemen. Today I'll be discussing the highlights of our operating and financial results in Q2 and the first half of this year, as well as our expectations for the balance of the year. Our press release of this morning discusses these matters in greater detail, and members of senior management are on the line to answer your questions. As many of you are aware, our gold and silver assets had a weak start for the year, while activities at McEwen Copper's Los Azules project were running at a rapid pace. I'm pleased to say that our mines delivered better results in Q2 than Q1, and the outlook for the second half of the year is significantly better. But I'd like to share with you the highlights of the first quarter. this quarter that's passed, second quarter. One, the Fox Complex generated gross profits of $6 million and is expected to deliver on our guidance. The San Jose performance was much stronger in Q2 than in Q1, and it too is expected to deliver on its production guidance, but costs will be 10% to 20% higher on a cost per ounce basis. At Gold Bar, The outlook, again, is looking significantly better as a result. We are increasing the mining rate. We'll be mining with a lower strip ratio and processing a higher grade of ore. McEwen Copper released in June its updated preliminary economic assessment. It displays a project with robust economics, a long life, low production costs, and based on an environmentally sensitive approach to mining. Safety at all of our sites was the way we like it. No lost times at Fox and Gold Bar. We improved our balance sheet by reducing our debt by 39% to $40 million. And financially, we consolidate the financials of our 52% owned subsidiary, McEwen Copper, And as I said, we've invested heavily in exploration and other work in order to complete the updated PEA. So at quarter end, our consolidated liquid assets were $85 million, with an additional $29 million in investments. Our working capital was $92 million. And our consolidated net loss in the quarter was $22 million, and in the first half, $65 million, again reflecting the very heavy investment in moving the Los Azules project forward. And we've increased the value of Los Azules significantly during this period. It now has a value of about $555 million implied. based on the last financing we did. Our investment in exploration at Fox has given us a resource base and confidence to see a mine life being extended by nine years. And in Mexico, construction of the Phoenix project is expected to start later this year and provide a nine-year mine life. In terms of our share performance, since the beginning of the year, to present day. We're up just under 18% in US dollars. And that compares against the GDX, which is down 1.8%. The GDXJ down 5.2%. Gold's up 4%. The Dow's up 6%. And the NASDAQ is the only one of those. that is outperformed. It's up 32%. Largely driven, it appears, by generative AI development. And I have to say that the mining world will be embracing generative AI as we go forward, like many other industries. I'd now like to open the conference calls for questions.
spk01: If you would like to ask a question, You will need to press star followed by the number one on your telephone. To withdraw your question, press the star one. Your first question comes from the line of Jake Zaleski with Alliance Global. Your line is open.
spk06: Hey, Robin. Thanks for taking my question. Hi, Jake. So just Starting off at the Fox complex, you mentioned grades should take a bit higher in the second half of this year. Are you able to quantify that at all? I'm just trying to get a handle on how that might impact costs for Q3 and Q4 heading into next year. Bill, would you like to answer that?
spk02: Yes, sure. Yeah, Jake, we expect That they grade in the second half of the year is going to be closer to 4 grams per ton. The second order the grade was. Closer to 3 grams per ton and and that goes back to our original budget and mine plan for this year. So the original plan had us with a lower grade in the first half of the year and a little bit higher grade. And we're now into the higher grade stope. The stope that we're in right this week, the grade is more like five grams per ton. We'll see the grade increase and so that'll move our costs down by a significant amount. And so we'll finish the year following our guidance almost exactly right. The upside, I would say, is the fact that the mill has run significantly better in the second quarter. We had some more or less record months of around 1,250 tons per day for the quarter. May and June was actually closer to 1,320 tons per day. If there's upside, it's in the fact that we've been able to increase the tonnage through the mill. And if the grade stays where we think it will, and there's no reason to think it won't be predictable, then we'll have a slightly better second half.
spk06: That's helpful and good to see there. And just switching over to Los Azules, any color on the work that's left for the feasibility study, the timing of the report, and maybe the specifics or milestones that need to be hit just to switch over from expensing investments there to capitalizing them?
spk00: Michael? Sure. So, we slated the delivery of the feasibility study to the end of 2024, beginning of 2025. We have confirmed the main consultants that are working with us to the delivery. Mainly, the most important one, I would say, is Samuel Engineering and Knight PESOL. Samuel, who has helped us in the PEA, as well as Knight PESOL, who was also delivering our environmental impact assessment report. So that is well under the way. We need to drill about 45,000 meters. We have secured already 16 drills to be able to do that. We own four drill rigs and bought another two and have import permits. We're looking to get another two to ensure that we can get through the drilling program to be able to get all the information required to feasibility level of detail. So I think we are very optimistic going forward. Now, with regards to the capitalization criteria, it's basically the environmental permit issued plus the feasibility study. Perry, I'm not sure whether you would like to give additional insights.
spk03: Yeah, no, I think that's an accurate statement, Michael. And just for context, I mean, that's a result of us obviously being a U.S. GAAP reporter. And, you know, assuming that, you know, if we IPO McEwen Copper at some point, we could have a situation where, you know, if McEwen Copper reports on their IFRS, it would actually capitalize those costs. The criteria under IFRS are a lot looser, whereas McEwen Mining would still have to continue expensing those costs. So that's just a unique feature of the differences in accounting policies.
spk07: Got it. Okay. That makes sense. That's all on my end. Thanks again. Thanks, Jake.
spk01: Your next question comes from the line of Heiko Ille with HC Wainwright. Your line is open.
spk07: Hello, Heiko. Sorry, I hope you can hear me. I assume you can hear me all right. Loud and clear.
spk08: Excellent. Would you be able to provide me with an approximation of your labor cost increases from the past, call it six or 12 months by assets? I assume there are some pretty meaningful differences in what you've seen between, you know, Timmins, or I guess rather Canada, Nevada, and Argentina, please.
spk04: Bill, would you like to venture into that?
spk02: Yeah, I guess that's a question I'm not totally prepared to answer, but I guess our cost in Canada in terms of labor cost is around $7 seven or 8%. And, you know, I would say our material costs are probably somewhere in the range of 10%. And, you know, I think, you know, we anticipated that we would see a higher fuel price than we're actually seeing. So I think there's some positives there. And I think there's some other, I guess, consumables that we're seeing which seem to have smoothed out to some extent and not being steel in terms of grinding balls and also cyanide. So I think if I had to say what the cost increase has been on a year-over-year basis, I'd say it's around 10% or maybe a little bit higher than that, but I think if you use 10%, you wouldn't be wrong.
spk08: That's fair. Moving on to drilling at Gold Bar a little bit, as per your release, your exploration for the second half of the year is on the nearby resources there. You're operating two drills there in the second half, if my memory is correct. And you were talking about the feeder fault. Now, what exactly do you think that will do to the ore body? Are your geologists telling you that's more or less the same type of ore, so metallurgy would be the same, or is this just creating ounces? What exactly is the goal, I guess, is what I'm saying. Thank you.
spk02: Yeah, so the goal of that drilling program is kind of two- or three-fold. First, we're defining the parameters for ore that we will mine in the relatively near future, meaning next year and the year after. The second part is to find more ore that will that we'll mine into the future. And it's to, you know, in both cases we're trying to get a very good understanding of what the strip ratios are going to be and also, you know, where there might be carbon associated with some of these resources so that we're able to mine that in the proper fashion to make sure we can segregate the carbonaceous ore from the ore that doesn't have carbon. There's also some deeper drilling that we're doing there where I would say we're kind of exploring for perhaps some elephants that are similar to some properties that are, you know, just north of us, say about 20 kilometers away. So, you know, but the focus of the drilling program is to make sure we know what we're doing over the next 18 to 24 months.
spk08: I appreciate that. We'll get back to you. Thank you all.
spk07: Thanks, Heiko.
spk01: As a reminder, if you would like to ask a question, press star followed by the number one on your telephone keypad. We will pause for any last questions. Your next question comes from the line of Bill Powers. Your line is open.
spk07: Bill Powers Good morning.
spk05: Thanks for setting this up today. just had a couple questions um you know i guess starting in canada you uh during the agm you mentioned that you had a capacity of 1400 tons per day and i guess my question would be is the stockpile has that been able to be reduced at all at the higher rate of mill running or is that just or is that still there and i guess are you planning to move towards 1,400 tons per day in Q3 and the rest of the year?
spk02: Yeah, so thanks for the question. The mill tonnage in May and June has increased up to about 1,320 tons a day. But meanwhile, the stockpile is still very close to 100,000 tons. So although we're increasing the tons through the mill, the mine is operating very well. The whole operation is kind of in a sweet spot in terms of the mining operation. So we're keeping up with the milling process, even though we've increased it by something more than 15% over last year. So we would like to get the stockpile lower to transfer it over into actual cash. But we also want to keep the mine running at that sweet spot so that we get the optimum mining cost. So yeah, I would say we're doing better on the milling, where the mine is fine, keeping up, and we're continuing to try to improve the throughput through the mill. Okay.
spk05: Thank you on that. As far as Nevada goes, I know there was some exploration around the Atlas pit that was done last year and seemed to have some promising results. Have those Has that been followed up on, and I guess is that a target for later this year, or is that something, or if you focus elsewhere, you're drilling near term?
spk02: We're actually focusing on other portions of our property. The drill holes at the Atlas pit, I guess we found a small amount of ore in one pit wall that at some point we may go and take, but we're talking about something in the order of 10,000. It hasn't turned out as positive as we hoped.
spk05: Okay. And thank you for the update. And I guess my last question would be, I was a little late to the call this morning, but if you could, maybe you've gone over this or this question was asked earlier, but the expansion of the ramp, I know you're, are you still planning to put out a study for that or is I guess a larger study for that, or is that something that is going to be moving forward in the balance of this year?
spk02: So, yes. And we're talking now about the ramp at the stock mine.
spk07: Yes.
spk02: Yes. And yes, that ramp will be moving ahead. We're doing the final bit of delineation drilling with regard to that part of the project. And we are putting together, I guess, what we're calling an economic analysis, which we'll have late in the third quarter or early in the fourth quarter. But we don't plan to do a revised PEA or pre-feasibility study on that. We're going to basically produce an economic analysis to make the final decision to go ahead. But at this point, we're basically working at full speed to move that project ahead.
spk05: OK. Thanks so much for all your time this morning.
spk07: Thanks, Bill.
spk01: There are no further questions at this time. Mr. Rob McEwen, I will turn the call back over to you.
spk04: Thank you, operator. Assuming metal prices stay where they are and we're delivering on guidance, we don't anticipate having to come to the capital markets to fund any of our development projects. We're in a good position from our liquidity. And we're quite excited about the projects we're advancing. There'll be exploration news coming out throughout this latter part of the summer and into the fall, both from Los Azules and coming from the Fox Complex. So quite excited by that. Thank you very much. And have a great day.
spk01: This concludes today's conference call. You may now disconnect.
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