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McEwen Mining Inc. (MUX)
Q3 2012 Conference Call
November 7, 2012 2:00 pm EST
Robert McEwen – Chief Executive Officer
Ian Ball – Senior Vice President
Perry Y. Ing – Chief Financial Officer
Richard McCray – Private Investor
Aleksandra Bukacheva – Fraser Mackenzie
Good afternoon, ladies and gentlemen. Welcome to the McEwen Mining Third Quarter Financial Results Conference Call.
I would now like to turn the meeting over to Mr. Rob McEwen, Chief Owner. Please go ahead sir.
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Joining me on the call today are Ian Ball, our Senior Vice President; and Perry Ing, our CFO. And I just before getting them to speak about operations and financial aspects of the company, I’d like to deal with the three highlights of the quarter. For me, one was the, our second source of gold production started during the quarter at El Gallo Phase 1 and began producing gold. The second, we issued a feasibility study for Phase 2 at El Gallo, which will be an important source of production and cash flow. And our third mine, which we hope to have up and running are being constructed in the second half of next year.
And the other aspect was our rights offering, which was recently announced. And I just want to say, I currently have an investment in the company that equates to 25% of the company. My cost space on those shares is a $110 million and there was no stock given for free. With the rights issue, I will be subscribing for a further $15 million, which is my prorate of share. And I happen to like it. I think it’s a great investment from my perspective.
So I also said that I would backstop the entire issue. We wanted to give shareholders back. Shareholders have been loyal and supportive give them a benefit and the rights issue as a way of doing that it’s priced at a discount more than a 50% to market. So if it gives everyone who is a shareholder an opportunity to acquire an additional 10% for half of the current market and if they choose not to exercise the rights they can sell it and treat it like a dividend.
At this time, I would just like to and I’ll ask Ian Ball to discuss the highlights of our operations. He will be followed by Perry Ing to discuss the financial highlights and after that we’ll open it up for questions.
Thank you very much Rob. Operationally our strategy continue to in fall as planned during the third quarter. I believe it’s provided us with a solid base where we can look to grow production in the coming quarters were we’ll go from a 105,000 ounces of gold equivalent at the end of this year to approximately a 125,000 ounces of gold equivalent by the end of next year.
At the San José mine in Argentina, production remains steady and quite predictable. The dividends that we are receiving from the mine are staying in the country and are going to be used to pay for our exploration at Los Azules and our 100% own properties around the San José mine and Goldcorp’s Cerro Negro project. San José remains on track to produce a 192,000 ounces of gold equivalent, 49% of which is attributable to McEwen Mining.
As Rob alluded to, this quarter was a significant milestone for our team. It was our first mine that we had constructed. This was El Gallo Phase I it was built slightly below the budget that we have predicted and it was built on time.
We exited October, running about 70% capacity and we expect to have commercial production by the end of this year. What we’ve been able to achieve there I think is going to tie over directly into our second phase where we’ve been able to attract talented personnel, construction experience, as well as operating experience that will play right into building of Phase II, which we’re looking to break ground on during the second half of next year.
Also on our feasibility study, well this was put out in beginning of September and a confirmed the potential to have another 5.2 million ounces of silver and 5,000 ounces of gold or a 105,000 ounces of gold equivalent coming out of Phase II in Mexico. So when you put both phase together you’re looking at dealing a 135,000 ounces of gold equivalent and that would be a tremendous boost in terms of our production cash flow going at the end of 2014.
Also I want to touch quickly on our exploration activities. During the quarter, both at San José and El Gallo we experienced good success, growing the resources beyond what’s currently been defined. At San José where we have a 13-year mine life, we announced a new Emilia vein, which is showing a very attractive grade in Intercept lengths comparable to what we’re currently mining at site.
On Tuesday morning we point out new drill results from El Gallo and what’s attracted both of these are the grades that we’re encountering. There are much higher grades in the current resource space. It is showing that is high, it could be high grade potential below the currently designed pits and we have exploration following upon as we speak. So it appears to be good organic growth at both of our projects and the reason why we invest so heavily into exploration.