TORONTO Dec 29, 2015 (Thomson StreetEvents) -- Edited Transcript of McEwen Mining Inc earnings conference call or presentation Friday, November 6, 2015 at 4:00:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Rob McEwen McEwen Mining Inc. - Chairman, President, Interim CFO, and Chief Owner * Andrew Iaboni McEwen Mining Inc. - Controller * Nathan Stubina McEwen Mining Inc. - Managing Director ================================================================================ Conference Call Participants ================================================================================ * Heiko Ihle H.C. Wainwright - Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Good morning, ladies and gentlemen, and welcome to the McEwen Mining third-quarter 2015 financial results conference call. I would now like to turn the meeting over to Mr. Rob McEwen, Chief Owner. Please go ahead, Mr. McEwen. -------------------------------------------------------------------------------- Rob McEwen, McEwen Mining Inc. - Chairman, President, Interim CFO, and Chief Owner [2] -------------------------------------------------------------------------------- Thank you, operator. Good morning, ladies and gentlemen. I'll reiterate that: welcome to our third-quarter 2015 conference call. Presenting with me today will be our Managing Director, Nathan Stubina; and our Controller, Andrew Iaboni. I'd like to start by saying Q3 was robust. We had strong production growth, positive cash flow, and operating earnings. Our treasury is growing larger. We paid our first dividends. We approved a share buyback program. We increased our production guidance for the year. And here to give you the financial details is our Controller, Andrew Iaboni. -------------------------------------------------------------------------------- Andrew Iaboni, McEwen Mining Inc. - Controller [3] -------------------------------------------------------------------------------- Thanks, Rob. We finished the quarter with $30.9 million in cash and cash equivalents compared to $22.4 million at the end of Q2. This represents an increase of $8.5 million in cash flow from operations during the quarter. The improved cash flow is largely attributable to the strong operational performance at El Gallo 1, and is net of our first semiannual return of capital distribution of $0.005 per share, paid on August 17. Our current VAT receivable is $10.9 million, which we have a line of credit securitized against the VAT receivable in the amount of $5.2 million. During the year we received total VAT refunds of $4.3 million, of which $200,000 was used to reduce the line of credit during Q3. Also during the third quarter, McEwen Mining's recorded net income of $2.6 million or $0.01 per share. And on a nine-month, year-to-date basis, we recorded a net loss of $5.4 million, or $0.02 per share. Our earnings from mining operations were $13.4 million and $44 million for the three and nine months ended. This compares to a loss of $800,000 and earnings of $17 million during the comparable period. The significant increase is a combination of our increased production and reduced mining costs. We define our earnings from mining operations on page 34 of the 10-Q. For the three- and nine-month periods, we spent $1.8 million and $7.3 million on exploration. These expenditures relate to drilling and feasibility work conducted on our Gold Bar project, along with near mine exploration programs at El Gallo 1. For the remainder of the year, we plan on spending an additional $1 million in exploration, and for 2016 we are planning on spending $6 million in exploration. During the year, we spent $1 million on sustaining capital in Mexico. We are projecting sustaining capital expenditures in Mexico to be approximately $500,000 for Q3 -- or, sorry, Q4 -- and $3.3 million for 2016. Most of these expenditures pertain to our leach pad expansion, which is expected to be complete in March 2016. At this time, I will turn the call over to Nathan for an operational update. -------------------------------------------------------------------------------- Nathan Stubina, McEwen Mining Inc. - Managing Director [4] -------------------------------------------------------------------------------- Thank you, Rob and Andrew. First of all, I am pleased to report a record per quarterly production of 43,400 gold equivalent ounces. Due to these results, our consolidated 2015 production guidance was recently increased to 150,000 gold ounces from an original 138,000. In Mexico at our El Gallo mine, we produced over 19,500 gold equivalent ounces this quarter compared to 6,800 ounces during the same quarter of 2014. During Q3, the average ore grade mined was approximately 2.7 grams per tonne or 0.078 ounces per short tons. This higher-than-reserve grade, plus our costs and process improvement projects, contributed to the very low all-in sustaining cost value of $570. For 2015, the year-to-date AISC for Mexico is $578. From our 49% share of the San Jose Mine in Argentina, our production was over 12,000 ounces of gold and almost 870,000 ounces of silver. Both of these values are an improvement over the same quarter of 2014. For our share of production from Argentina, the forecast for 2015 is maintained at 46,500 ounces of gold and 3.1 million ounces of silver. For our Gold Bar development project, which is located in Nevada and is 100% owned by McEwen Mining, we issued a positive feasibility study on October 21. Key findings are a low capital cost of $60 million; a solid internal rate of return of 20% at a gold price of $1,150; an average annual production of around 65,000 ounces, at an estimated average cash cost of $720 per ounce. The complete report will be available in early December. Formal notice from the Bureau of Land Management states that our record of decision for the environmental impact statement is expected in January of 2017. Construction should take about 10 to 12 months, which means production should start in early 2018. For the El Gallo 2 silver project in Mexico, we are continuing with metallurgical [test working] that improving silver recoveries, at the same time reducing CapEx and OpEx. We plan to reduce a new feasibility study during Q2 of 2016. Exploration efforts for the remainder of this year and early 2016 will be focused on near mine targets. Thank you very much. -------------------------------------------------------------------------------- Rob McEwen, McEwen Mining Inc. - Chairman, President, Interim CFO, and Chief Owner [5] -------------------------------------------------------------------------------- Thanks, Andrew. Thanks, Nathan. In a sea of disappointing results for the industry, I'm very pleased with our performance, both on a quarterly basis, year to date, and for the balance of the year. Going into 2016 looks strong, and we not only will survive at these prices, we'll prosper. I'd also like to thank Perry Ing, who is our recently departed CFO, for his strong contribution to the Company's growth, and wish him much success in his future. Our search for a CFO is ongoing, and we are considering both internal and external candidates. And until a selection is made, the Board has recommended that I serve as the Interim CFO. At this point, we are now happy to take your questions. Operator, if you could open up to Q&A. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Yes, of course. Thank you. Our first webcast question comes from Stewart Bailey. The average realized prices of $1,106 for gold and $14.05 for silver in the quarter seem below spot prices for the quarter. Is this due to the penalty imposed by the Argentina government? -------------------------------------------------------------------------------- Rob McEwen, McEwen Mining Inc. - Chairman, President, Interim CFO, and Chief Owner [2] -------------------------------------------------------------------------------- No, I think it's just a matter of timing, Stuart, when we made the sales. There's no penalty from Argentina. Next question, please. -------------------------------------------------------------------------------- Operator [3] -------------------------------------------------------------------------------- Heiko Ihle, H.C. Wainwright. -------------------------------------------------------------------------------- Heiko Ihle, H.C. Wainwright - Analyst [4] -------------------------------------------------------------------------------- Congratulations on the quarter. You took the gold equivalent cash costs, quarter-over-quarter, from almost $1,800 to $1,000. And the sequential cash cost decline was quite impressive, as well. Walk us through the remainder of the year, and most importantly what changes you guys are going to undertake to keep this moving in the right direction. I mean, you know, where we have it modeled -- I just fail to see the actual, quantifiable difference that you're going to make, please. -------------------------------------------------------------------------------- Rob McEwen, McEwen Mining Inc. - Chairman, President, Interim CFO, and Chief Owner [5] -------------------------------------------------------------------------------- I'll ask Nathan to answer that question, Heiko. Thank you for it. [And we are] encouraged with the guidance for the year. -------------------------------------------------------------------------------- Nathan Stubina, McEwen Mining Inc. - Managing Director [6] -------------------------------------------------------------------------------- Yes, so far up to Q3, it's around 55,000, 56,000 ounces. The target for Mexico will be 62,000. We weren't as impacted as the rainy season as we were last year, so that's why the Q3 results are quite strong. And that will continue into Q4, and of course into Q1 of next year. So, everything in Mexico is running quite smoothly, and we're pretty sure we're going to hit the new target of 62,000 ounces in Mexico. -------------------------------------------------------------------------------- Heiko Ihle, H.C. Wainwright - Analyst [7] -------------------------------------------------------------------------------- Very fair, very fair. You guys have a very strong treasury. I mean, $36 million in cash for a company your size is -- I wouldn't want to say unheard-of, but certainly a rarity out in the market. Just walk us through potential acquisitions. I know you would be willing to do something if the right opportunity arose, but should we be shocked to see something happen before the end of the year? -------------------------------------------------------------------------------- Rob McEwen, McEwen Mining Inc. - Chairman, President, Interim CFO, and Chief Owner [8] -------------------------------------------------------------------------------- You should never be shocked. We hope to give you some advance notice. But we've been preparing ourselves for opportunity, making sure we have a strong balance sheet to give us that ability. I think there are opportunities out there, and we've been looking at a number. Unfortunately, first impressions are usually better than when you get deep into the situation. There are questions and ownership issues and financial concerns that make the deal a little more difficult. But there's opportunity out there, and we're looking for it. -------------------------------------------------------------------------------- Heiko Ihle, H.C. Wainwright - Analyst [9] -------------------------------------------------------------------------------- Excellent. Congratulations again. I'll step out of the queue. -------------------------------------------------------------------------------- Operator [10] -------------------------------------------------------------------------------- (Operator Instructions). -------------------------------------------------------------------------------- Rob McEwen, McEwen Mining Inc. - Chairman, President, Interim CFO, and Chief Owner [11] -------------------------------------------------------------------------------- Okay. If there are no further questions, I'd like to thank everybody for joining the call, and wish you well. And here's to a higher gold price. It's going the wrong way today, but it's going to come back. Thank you. -------------------------------------------------------------------------------- Operator [12] -------------------------------------------------------------------------------- Ladies and gentlemen, this concludes today's conference call. You may now disconnect.
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