McEwen Mining shares surge despite lower Q3 output, revised FY 2022 guidance
Despite the revised guidance, McEwen still sees a "brighter future" at its two main assets.
McEwen Mining (NYSE, TSX: MUX) reported on Monday its financial and operating results for the third quarter of 2022, during which it posted a consolidated net loss of $10.5 million or $0.21 per share, beating the consensus EPS forecast of $0.37 a share.
According to the diversified gold and silver producer, the Q3 net loss relates primarily to the $7.8 million spent on its Los Azules project, as well as $5 million on exploration and advanced projects. In return, its 100% owned mines (Fox & Gold Bar) generated $1.5 million in gross profit during the quarter.
Located in San Juan, Argentina, Los Azules is regarded as one of the world’s largest undeveloped open-pit copper porphyry deposits.
In late August, McEwen’s copper-focused subsidiary completed an $81.85 million financing that included a $25 million investment by Rio Tinto to fund the project’s development. Publication of an updated preliminary economic assessment on Los Azules is planned for Q1 2023.
By quarter-end, McEwen had cash and cash equivalents totalling $54.9 million.
Revised guidance
On the operational front, McEwen had lower gold and silver production than last year, with third quarter production of 26,200 gold ounces and 852,200 silver ounces, or 35,700 gold-equivalent ounces (GEOs), compared to 42,900 GEOs during Q3 2021.
Year-to-date production was 74,650 gold ounces and 1,894,100 silver ounces (or 97,000 GEOs), compared to 114,200 GEOs during the nine months to Sept. 30, 2021.
As a result, McEwen has decided to revise its full-year guidance to 134,600-141,800 GEOs (104,000-111,000 oz. gold, 2.6-2.7 million oz. silver), reflecting a decrease of approximately 6,500 GEOs at Fox and 14,000 GEOs at Gold Bar due to carbonaceous material encountered throughout 2022.
Despite the revised guidance, McEwen still sees a “brighter future” at its two main assets.
Average cash costs per GEO sold from these 100%-owned mines were $1,219, which is in line with the company’s guidance. Average all-in sustaining costs (AISC) per GEO sold was $1,659, slightly above the guidance midpoint of $1,475 per GEO.
McEwen noted that the Fox Complex, which had a history of high operating costs, achieved the lowest quarterly cash cost since mid-2018 of $774 per GEO sold, which is well below the industry average. The company believes there is good potential to further reduce costs and increase production at Fox Complex by increasing mill throughput.
“Specifically, we need to increase the throughput because our mine is now producing more ore than our mill can process. As a result, we have a large surface stockpile of ore equivalent to more than two months of production,” stated Rob McEwen, chairman and chief owner in the Q3 results release.
At the Gold Bar mine in Nevada, production continued to be low due to the presence of carbonaceous material that is being treated as waste and lower mining rates resulting from a contractor staffing shortage, McEwen explained. Development of the Gold Bar South deposit is underway, with first ore expected later this quarter.
Shares in McEwen Mining surged by 10% as of 11:40 a.m. ET following the Q3 results release. The company’s market capitalization sits at C$192 million.