UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SeptemberJune 30, 20202021
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 001-33190
MCEWEN MINING INC.
(Exact name of registrant as specified in its charter)
| | |
Colorado | | 84-0796160 |
(State or other jurisdiction of | | (I.R.S. Employer |
incorporation or organization) | | Identification No.) |
150 King Street West, Suite 2800, Toronto, Ontario Canada M5H 1J9
(Address of principal executive offices) (Zip(ZIP code)
(866) 441-0690
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| | |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common stock, no par value | MUX | New York Stock Exchange (“NYSE”) |
Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| ||||
Large accelerated filer | ☐ | | Accelerated filer | ☒ |
Non-accelerated filer | ☐ | | Smaller reporting company | ☐ |
| | | Emerging growth company | ☐ |
| | | | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 408,841,891459,187,391 shares outstanding as of October 29, 2020August 4, 2021.
MCEWEN MINING INC.
FORM 10-Q
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2
MCEWEN MINING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 2021
(tabular amounts are in thousands of U.S. dollars, unless otherwise noted)
PART I – FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
MCEWEN MINING INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (UNAUDITED)
(in thousands of U.S. dollars, except per share)
| | | | | | | | | | | | | | | | | | | | | | |
| Three months ended September 30, | | Nine months ended September 30, | Three months ended June 30, | | Six months ended June 30, | ||||||||||||||||
| 2020 |
| 2019 |
| 2020 |
| 2019 | 2021 |
| 2020 |
| 2021 |
| 2020 | ||||||||
Revenue from gold and silver sales | $ | 27,395 | | $ | 32,691 | | $ | 77,086 | | $ | 84,657 | $ | 40,706 | | $ | 18,291 | | $ | 64,446 | | $ | 49,691 |
Production costs applicable to sales |
| (23,526) | |
| (23,584) | |
| (74,267) | |
| (59,432) |
| (31,132) | |
| (22,354) | |
| (54,721) | |
| (50,741) |
Depreciation and depletion | | (4,570) | | | (7,488) | | | (16,080) | | | (17,501) | | (5,515) | | | (4,812) | | | (10,652) | | | (11,510) |
Gross (loss) profit | | (701) | | | 1,619 | | | (13,261) | | | 7,724 | |||||||||||
Gross profit (loss) | | 4,059 | | | (8,875) | | | (927) | | | (12,560) | |||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
OTHER OPERATING EXPENSES: | | | | | | | | | | | | | | | | | | | | | | |
Advanced projects |
| (4,027) | |
| (2,140) | |
| (9,464) | |
| (6,881) |
| (823) | |
| (2,887) | |
| (2,622) | |
| (5,437) |
Exploration |
| (4,423) | |
| (13,695) | |
| (11,761) | |
| (23,717) |
| (6,916) | |
| (3,548) | |
| (11,872) | |
| (7,338) |
General and administrative |
| (2,532) | |
| (2,645) | |
| (6,836) | |
| (8,078) |
| (2,834) | |
| (2,240) | |
| (4,917) | |
| (4,304) |
Income (loss) from investment in Minera Santa Cruz S.A. (note 10) |
| 2,582 | |
| (328) | |
| (1,139) | |
| (6,775) | |||||||||||
Loss from investment in Minera Santa Cruz S.A. (Note 9) |
| (1,853) | |
| (1,045) | |
| (2,427) | |
| (3,721) | |||||||||||
Depreciation |
| (88) | |
| (96) | |
| (317) | |
| (417) |
| (75) | |
| (114) | |
| (150) | |
| (229) |
Revision of estimates and accretion of asset retirement obligations (note 12) |
| (886) | |
| (495) | |
| (2,003) | |
| (1,383) | |||||||||||
Impairment of mineral property interests and plant and equipment (note 9) | | — | | | — | | | (83,805) | | | — | |||||||||||
Other operating (note 4) | | — | | | — | | | (1,968) | | | — | |||||||||||
Revision of estimates and accretion of asset retirement obligations (Note 11) |
| (505) | |
| (457) | |
| (1,416) | |
| (1,117) | |||||||||||
Impairment of mineral property interests and plant and equipment (Note 8) | | — | | | — | | | — | | | (83,805) | |||||||||||
Other operating | | — | | | (1,968) | | | — | | | (1,968) | |||||||||||
|
| (9,374) | |
| (19,399) | |
| (117,293) | |
| (47,251) |
| (13,006) | |
| (12,259) | |
| (23,404) | |
| (107,919) |
Operating loss |
| (10,075) | |
| (17,780) | |
| (130,554) | |
| (39,527) |
| (8,947) | |
| (21,134) | |
| (24,331) | |
| (120,479) |
| | | | | | | | | | | | | | | | | | | | | | |
OTHER INCOME (EXPENSE): | | | | | | | | | | | | | | | | | | | | | | |
Interest and other finance expense, net |
| (1,945) | |
| (650) | |
| (5,576) | |
| (3,946) | |||||||||||
Other income (note 5) | | 2,090 | |
| 4,773 | |
| 6,071 | |
| 6,283 | |||||||||||
Interest and other finance expenses, net |
| (1,859) | |
| (1,754) | |
| (2,368) | |
| (3,631) | |||||||||||
Other income (Note 4) | | 3,795 | |
| 3,044 | |
| 5,207 | |
| 3,981 | |||||||||||
Total other income |
| 145 | |
| 4,123 | |
| 495 | |
| 2,337 |
| 1,936 | |
| 1,290 | |
| 2,839 | |
| 350 |
Loss before income and mining taxes | | (9,930) | | | (13,657) | | | (130,059) | | | (37,190) | | (7,011) | | | (19,844) | | | (21,492) | | | (120,129) |
Income and mining tax recovery | | 152 | | | 2,192 | | | 1,276 | | | 2,575 | | 1,022 | | | 30 | | | 3,037 | | | 1,124 |
Net loss | $ | (9,778) | | $ | (11,465) | | $ | (128,783) | | $ | (34,615) | |||||||||||
Net loss and comprehensive loss | $ | (5,989) | | $ | (19,814) | | $ | (18,455) | | $ | (119,005) | |||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | |||||||||||
Net loss per share (note 14): | | | | | | | | | | | | |||||||||||
Net loss per share (Note 13): | | | | | | | | | | | | |||||||||||
Basic and Diluted | $ | (0.02) | | $ | (0.03) | | $ | (0.32) | | $ | (0.10) | $ | (0.01) | | $ | (0.05) | | $ | (0.04) | | $ | (0.30) |
Weighted average common shares outstanding (thousands) (note 14): | | | | | | | | | | | | |||||||||||
Weighted average common shares outstanding (thousands) (Note 13): | | | | | | | | | | | | |||||||||||
Basic and Diluted |
| 403,887 | |
| 362,175 | |
| 401,603 | |
| 356,218 |
| 459,187 | |
| 400,513 | |
| 450,539 | |
| 400,442 |
| | | | | | | | | | | | | | | | | | | | | | |
The accompanying notes are an integral part of these consolidated financial statements.
3
MCEWEN MINING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 2021
(tabular amounts are in thousands of U.S. dollars, unless otherwise noted)
MCEWEN MINING INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands of U.S. dollars)
| | | | | | | | | | | | | | |
| | September 30, | | December 31, | | | June 30, | | December 31, | | ||||
|
| 2020 |
| 2019 |
|
| 2021 |
| 2020 |
| ||||
ASSETS | | | | | | | | | | | | | | |
Current assets: | | | | | | | | | | | | | | |
Cash and cash equivalents | | $ | 7,954 | | $ | 46,452 | | | $ | 42,232 | | $ | 20,843 | |
Restricted cash (note 18) | | | 10,193 | | | — | | |||||||
Investments (note 6) | |
| — | |
| 1,885 | | |||||||
Receivables, prepaids and other assets (note 7) | |
| 5,155 | |
| 5,265 | | |||||||
Inventories (note 8) | |
| 34,244 | |
| 38,376 | | |||||||
Investments (Note 5) | |
| 1,777 | |
| — | | |||||||
Receivables, prepaids and other assets (Note 6) | |
| 5,502 | |
| 5,690 | | |||||||
Inventories (Note 7) | |
| 25,430 | |
| 26,964 | | |||||||
Total current assets | |
| 57,546 | |
| 91,978 | | |
| 74,941 | |
| 53,497 | |
Mineral property interests and plant and equipment, net (note 9) | |
| 330,202 | |
| 418,791 | | |||||||
Investment in Minera Santa Cruz S.A. (note 10) | |
| 108,762 | |
| 110,183 | | |||||||
Inventories, long-term (note 8) | | | 5,457 | | | 9,603 | | |||||||
Restricted cash (note 18) | | | 3,595 | | | 48 | | |||||||
Mineral property interests and plant and equipment, net (Note 8) | |
| 340,353 | |
| 329,112 | | |||||||
Investment in Minera Santa Cruz S.A. (Note 9) | |
| 98,338 | |
| 108,326 | | |||||||
Inventories, long-term (Note 7) | | | 2,716 | | | 4,785 | | |||||||
Restricted cash (Note 17) | | | 3,625 | | | 3,595 | | |||||||
Other assets | |
| 618 | |
| 620 | | |
| 631 | |
| 621 | |
TOTAL ASSETS | | $ | 506,180 | | $ | 631,223 | | | $ | 520,604 | | $ | 499,936 | |
| | | | | | | | | | | | | | |
LIABILITIES & SHAREHOLDERS’ EQUITY | | | | | | | | | | | | | | |
Current liabilities: | | | | | | | | | | | | | | |
Accounts payable and accrued liabilities | | $ | 28,852 | | $ | 34,070 | | | $ | 34,561 | | $ | 36,055 | |
Flow-through share premium (note 13) | | | 2,058 | | | — | | |||||||
Debt, current portion (note 11) | | | — | | | 5,000 | | |||||||
Debt to related party, current portion (notes 11 and 15) | | | — | | | 5,000 | | |||||||
Flow-through share premium (Note 12) | | | 2,581 | | | 3,827 | | |||||||
Lease liabilities, current portion | | | 2,213 | | | 2,115 | | | | 2,960 | | | 2,440 | |
Asset retirement obligation, current portion (note 12) | |
| 2,860 | |
| 2,610 | | |||||||
Asset retirement obligation, current portion (Note 11) | |
| 4,883 | |
| 3,232 | | |||||||
Total current liabilities | |
| 35,983 | |
| 48,795 | | |
| 44,985 | |
| 45,554 | |
Lease liabilities, long-term | | | 3,408 | | | 5,018 | | | | 2,849 | | | 3,056 | |
Debt (note 11) | | | 23,997 | | | 19,758 | | |||||||
Debt to related party (notes 11 and 15) | | | 23,997 | | | 19,758 | | |||||||
Asset retirement obligation, long-term (note 12) | |
| 30,932 | |
| 29,591 | | |||||||
Debt (Note 10) | | | 24,250 | | | 24,080 | | |||||||
Debt to related party (Notes 10 and 14) | | | 24,250 | | | 24,080 | | |||||||
Asset retirement obligation, long-term (Note 11) | |
| 30,001 | |
| 30,768 | | |||||||
Other liabilities | | | 3,365 | | | 3,910 | | | | 2,963 | | | 3,257 | |
Deferred income and mining tax liability | |
| 3,697 | |
| 4,914 | | |
| 3,334 | |
| 3,813 | |
Total liabilities | | $ | 125,379 | | $ | 131,744 | | | $ | 132,632 | | $ | 134,608 | |
| | | | | | | | | | | | | | |
Shareholders’ equity: | | | | | | | | | | | | | | |
Common shares: 408,842 as of September 30, 2020 and 400,339 as of December 31, 2019 issued and outstanding (in thousands) (note 13) | | $ | 1,540,807 | | $ | 1,530,702 | | |||||||
Common shares: 459,188 as of June 30, 2021 and 416,587 as of December 31, 2020 issued and outstanding (in thousands) (Note 12) | | $ | 1,589,975 | | $ | 1,548,876 | | |||||||
Accumulated deficit | |
| (1,160,006) | |
| (1,031,223) | | |
| (1,202,003) | |
| (1,183,548) | |
Total shareholders’ equity | |
| 380,801 | |
| 499,479 | | |
| 387,972 | |
| 365,328 | |
TOTAL LIABILITIES & SHAREHOLDERS’ EQUITY | | $ | 506,180 | | $ | 631,223 | | | $ | 520,604 | | $ | 499,936 | |
The accompanying notes are an integral part of these consolidated financial statements.
4
MCEWEN MINING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 2021
(tabular amounts are in thousands of U.S. dollars, unless otherwise noted)
MCEWEN MINING INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(UNAUDITED)
(in thousands of U.S. dollars and shares)
| | | | | | | | | | | |
| | Common Stock | | | | | | | |||
| | and Additional | | | | | | | |||
| | Paid-in Capital | | Accumulated | | | | ||||
Three months ended June 30, 2020 and 2021: |
| Shares |
| Amount | | Deficit | | Total | |||
Balance, March 31, 2020 |
| 400,399 | | $ | 1,530,852 | | $ | (1,130,414) | | $ | 400,438 |
Stock-based compensation |
| — | | | 213 | | | — | | | 213 |
Shares issued for debt refinancing | | 2,092 | | | 1,875 | | | — | | | 1,875 |
Net loss | | — | | | — | | | (19,814) | | | (19,814) |
Balance, June 30, 2020 |
| 402,491 | | $ | 1,532,940 | | $ | (1,150,228) | | $ | 382,712 |
| | | | | | | | | | | |
Balance, March 31, 2021 | | 459,188 | | $ | 1,589,763 | | $ | (1,196,014) | | $ | 393,749 |
Stock-based compensation |
| — | | | 212 | | | — | | | 212 |
Net loss |
| — | | | — | | | (5,989) | | | (5,989) |
Balance, June 30, 2021 |
| 459,188 | | $ | 1,589,975 | | $ | (1,202,003) | | $ | 387,972 |
| | | | | | | | | | | |
| | Common Stock | | | | | | | |||
| | and Additional | | | | | | | |||
| | Paid-in Capital | | Accumulated | | | | ||||
Three months ended September 30, 2019 and 2020: |
| Shares |
| Amount | | Deficit | | Total | |||
Balance, June 30, 2019 |
| 361,957 | | $ | 1,482,640 | | $ | (994,626) | | $ | 488,014 |
Stock-based compensation |
| — | | | 284 | | | — | | | 284 |
Exercise of stock options |
| 147 | | | 151 | | | — | | | 151 |
Shares issued for acquisition of mineral property interests | | 354 | | | 724 | | | — | | | 724 |
Net loss | | — | | | — | | | (11,465) | | | (11,465) |
Balance, September 30, 2019 |
| 362,458 | | $ | 1,483,799 | | $ | (1,006,091) | | $ | 477,708 |
| | | | | | | | | | | |
Balance, June 30, 2020 | | 402,491 | | $ | 1,532,940 | | $ | (1,150,228) | | $ | 382,712 |
Stock-based compensation |
| — | | | 30 | | | — | | | 30 |
Sale of flow-through common shares | | 6,298 | | | 7,767 | | | — | | | 7,767 |
Shares issued for acquisition of mineral property interests | | 53 | | | 70 | | | — | | | 70 |
Net loss |
| — | | | — | | | (9,778) | | | (9,778) |
Balance, September 30, 2020 |
| 408,842 | | $ | 1,540,807 | | $ | (1,160,006) | | $ | 380,801 |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Common Stock | | | | | | |
| | Common Stock | | | | | | |
| ||||||
| | and Additional | | | | | | |
| | and Additional | | | | | | |
| ||||||
| | Paid-in Capital | | Accumulated | | | |
| | Paid-in Capital | | Accumulated | | | |
| ||||||||
Nine months ended September 30, 2019 and 2020: |
| Shares |
| Amount | | Deficit | | Total |
| |||||||||||||||
Balance, December 31, 2018 |
| 344,560 | | $ | 1,457,422 | | $ | (971,476) | | $ | 485,946 | | ||||||||||||
Six months ended June 30, 2020 and 2021: |
| Shares |
| Amount | | Deficit | | Total |
| |||||||||||||||
Balance, December 31, 2019 |
| 400,339 | | $ | 1,530,702 | | $ | (1,031,223) | | $ | 499,479 | | ||||||||||||
Stock-based compensation |
| — | |
| 481 | |
| — | |
| 481 | |
| — | |
| 302 | |
| — | |
| 302 | |
Exercise of stock options |
| 405 | |
| 411 | |
| — | |
| 411 | |
| 60 | |
| 61 | |
| — | |
| 61 | |
Units issued in connection with registered direct offering , net of issuance costs | | 16,129 | | | 22,910 | | | — | | | 22,910 | | ||||||||||||
Sale of shares in ATM offering | | 1,010 | | | 1,851 | | | — | | | 1,851 | | ||||||||||||
Shares issued for acquisition of mineral property interests | | 354 | | | 724 | | | — | | | 724 | | ||||||||||||
Shares issued for debt refinancing | | 2,092 | | | 1,875 | | | — | | | 1,875 | | ||||||||||||
Net loss | | — | | | — | | | (34,615) | | | (34,615) | | | — | | | — | | | (119,005) | | | (119,005) | |
Balance, September 30, 2019 |
| 362,458 | | $ | 1,483,799 | | $ | (1,006,091) | | $ | 477,708 | | ||||||||||||
Balance, June 30, 2020 |
| 402,491 | | $ | 1,532,940 | | $ | (1,150,228) | | $ | 382,712 | | ||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | |
Balance, December 31, 2019 | | 400,339 | | $ | 1,530,702 | | $ | (1,031,223) | | $ | 499,479 | | ||||||||||||
Balance, December 31, 2020 | | 416,587 | | $ | 1,548,876 | | $ | (1,183,548) | | $ | 365,328 | | ||||||||||||
Stock-based compensation |
| — | | | 332 | | | — | | | 332 | |
| — | | | 439 | | | — | | | 439 | |
Sale of flow-through common shares | | 6,298 | | | 7,767 | | | — | | | 7,767 | | | 12,601 | | | 10,785 | | | — | | | 10,785 | |
Exercise of stock options | | 60 | | | 61 | | | — | | | 61 | | ||||||||||||
Shares issued for debt refinancing | | 2,092 | | | 1,875 | | | — | | | 1,875 | | ||||||||||||
Shares issued for acquisition of mineral property interests | | 53 | | | 70 | | | — | | | 70 | | ||||||||||||
Sale of shares for cash | | 30,000 | | | 29,875 | | | — | | | 29,875 | | ||||||||||||
Net loss |
| — | | | — | | | (128,783) | | | (128,783) | |
| — | | | — | | | (18,455) | | | (18,455) | |
Balance, September 30, 2020 |
| 408,842 | | $ | 1,540,807 | | $ | (1,160,006) | | $ | 380,801 | | ||||||||||||
Balance, June 30, 2021 |
| 459,188 | | $ | 1,589,975 | | $ | (1,202,003) | | $ | 387,972 | |
The accompanying notes are an integral part of these consolidated financial statements.
5
MCEWEN MINING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 2021
(tabular amounts are in thousands of U.S. dollars, unless otherwise noted)
MCEWEN MINING INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands of U.S. dollars)
| | | | | | | |
| | Nine months ended September 30, | | ||||
|
| 2020 |
| 2019 | | ||
Cash flows from operating activities: | | | | | | | |
Net loss | | $ | (128,783) | | $ | (34,617) | |
Adjustments to reconcile net loss from operating activities: | | | | | | | |
Impairment of mineral property interests and plant and equipment (note 9) | |
| 83,805 | |
| — | |
Loss from investment in Minera Santa Cruz S.A., net of amortization (note 10) | |
| 1,139 | |
| 6,775 | |
Loss (gain) on disposal of fixed assets | |
| — | |
| 134 | |
Depreciation and amortization | |
| 16,232 | |
| 18,158 | |
Loss (gain) on investments (note 6) | | | 619 | | | (4,972) | |
Income and mining tax (recovery) | |
| (1,276) | |
| (2,575) | |
Stock-based compensation | |
| 332 | |
| 481 | |
Revision of estimates and accretion of asset retirement obligations (note 12) | | | 1,776 | | | 1,817 | |
Foreign exchange (gain) loss | | | (11) | | | 329 | |
Decrease (increase) in other assets related to operations | |
| 6,572 | |
| (13,139) | |
(Decrease) increase in liabilities related to operations | | | (5,678) | | | 5,693 | |
Cash used in operating activities | | $ | (25,273) | | $ | (21,916) | |
| | | | | | | |
Cash flows from investing activities: | | | | | | | |
Additions to mineral property interests and plant and equipment | | $ | (9,304) | | $ | (27,027) | |
Proceeds from sale of investments, net of investments (note 6) | |
| 1,266 | |
| 4,204 | |
Dividends received from Minera Santa Cruz S.A. (note 10) | |
| 282 | |
| 4,045 | |
Cash used in investing activities | | $ | (7,756) | | $ | (18,778) | |
| | | | | | | |
Cash flows from financing activities: | | | | | | | |
Proceeds from sale of units, net of issuance costs (note 13) | | $ | — | | $ | 22,910 | |
Sale of flow-through common shares, net of issuance costs (note 13) | | | 9,825 | | | — | |
Proceeds of at-the-market share sale (note 13) | | | — | | | 1,851 | |
Proceeds of exercise of stock options | | | 61 | | | 411 | |
Payment of finance lease obligations | | | (1,626) | | | (1,564) | |
Cash provided by financing activities | | $ | 8,260 | | $ | 23,608 | |
Effect of exchange rate change on cash and cash equivalents | | | 11 | |
| (329) | |
(Decrease) in cash, cash equivalents and restricted cash | |
| (24,758) | |
| (17,415) | |
Cash, cash equivalents and restricted cash, beginning of period | |
| 46,500 | |
| 30,489 | |
Cash, cash equivalents and restricted cash, end of period (note 18) | | $ | 21,742 | | $ | 13,074 | |
| | | | | | | |
Supplemental disclosure of cash flow information: | | | | | | | |
Cash received (paid) during year for: | | | | | | | |
Interest paid | | $ | (3,850) | | $ | (3,911) | |
Interest received | | | 158 | | | 60 | |
| | | | | |
| Six months ended June 30, | ||||
| 2021 |
| 2020 | ||
Cash flows from operating activities: | | | | | |
Net loss | $ | (18,455) | | $ | (119,005) |
Adjustments to reconcile net loss from operating activities: | | | | | |
Impairment of mineral property interests and plant and equipment (Note 8) |
| — | |
| 83,805 |
Loss from investment in Minera Santa Cruz S.A., net of amortization (Note 9) |
| 2,427 | |
| 3,721 |
Gain on sale of mineral property interests (Note 5) |
| (2,270) | |
| — |
Depreciation and amortization |
| 10,006 | |
| 11,629 |
Loss on investments (Note 5) | | — | | | 620 |
Unrealized foreign exchange loss (gain) and adjustment to estimate (Note 11) |
| 334 | |
| (969) |
Income and mining tax (recovery) |
| (3,037) | |
| (1,124) |
Stock-based compensation |
| 439 | |
| 302 |
Revision of estimates and accretion of asset retirement obligations (Note 11) | | 1,416 | | | 666 |
Change in non-cash working capital items: | | | | | |
Decrease in other assets related to operations |
| 3,647 | |
| 6,705 |
Decrease in liabilities related to operations | | (2,580) | | | (6,449) |
Cash used in operating activities | $ | (8,073) | | $ | (20,099) |
| | | | | |
Cash flows from investing activities: | | | | | |
Additions to mineral property interests and plant and equipment | $ | (20,372) | | $ | (8,503) |
Proceeds from disposal of property and equipment (Note 5) | | 492 | | | — |
Proceeds from sale of investments, net of investments |
| — | |
| 305 |
Dividends received from Minera Santa Cruz S.A. (Note 11) |
| 7,561 | |
| 282 |
Cash used in investing activities | $ | (12,319) | | $ | (7,916) |
| | | | | |
Cash flows from financing activities: | | | | | |
Proceeds from sale of shares, net of issuance costs (Note 12) | $ | 29,875 | | $ | — |
Sale of flow-through common shares, net of issuance costs (Note 12) | | 11,966 | | | — |
Proceeds of exercise of stock options | | — | | | 61 |
Payment of finance lease obligations | | (30) | | | (1,057) |
Cash provided by (used in) financing activities | $ | 41,811 | | $ | (996) |
Effect of exchange rate change on cash and cash equivalents | | — | |
| 969 |
Increase (decrease) in cash, cash equivalents and restricted cash |
| 21,419 | |
| (28,042) |
Cash, cash equivalents and restricted cash, beginning of period |
| 24,438 | |
| 46,500 |
Cash, cash equivalents and restricted cash, end of period (Note 17) | $ | 45,857 | | $ | 18,458 |
| | | | | |
Supplemental disclosure of cash flow information: | | | | | |
Cash received (paid) during period for: | | | | | |
Interest paid | $ | (2,449) | | $ | (2,570) |
Interest received | | 13 | | | 151 |
Total cash, cash equivalents, and restricted cash | $ | (2,436) | | $ | (2,419) |
The accompanying notes are an integral part of these consolidated financial statements.
6
MCEWEN MINING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SeptemberJUNE 30, 20202021
(tabular amounts are in thousands of U.S. dollars, unless otherwise noted)
NOTE 1 NATURE OF OPERATIONS AND BASIS OF PRESENTATION
McEwen Mining Inc. (the “Company”) was organized under the laws of the State of Colorado on July 24, 1979. The Company is engaged in the exploration, development, production and sale of gold and silver and exploration forand development of copper.
The Company operates in the United States, Canada, Mexico and Argentina. The Company owns a 100% interest in the Gold Bar gold mine in Nevada, the Black Fox gold mine in Ontario, Canada, the El Gallo gold project and the Fenix silver-gold project in Sinaloa, Mexico, the Los Azules copper deposit in San Juan, Argentina and a portfolio of exploration properties in Nevada, Canada, Mexico and Argentina. It also owns a 49% interest in Minera Santa Cruz S.A. (“MSC”), owner of the producing San José silver-gold mine in Santa Cruz, Argentina, which is operated by the joint venture majority owner Hochschild Mining plc.
The interim consolidated financial statements included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and are unaudited. While information and note disclosures normally included in financial statements which are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted pursuant to such rules and regulations, the Company believes that the information and disclosures included are adequate and not misleading.
In management’s opinion, the unaudited Consolidated Statements of Operations and Comprehensive Loss (“Statement of Operations”) for the three and ninesix months ended SeptemberJune 30, 20202021 and 2019,2020, the unauditedConsolidated Balance Sheets as at SeptemberJune 30, 20202021 and audited Consolidated Balance Sheets as at December 31, 2019,2020, the unaudited Consolidated Statement of Changes in Shareholders’ Equity for the three and ninesix months ended SeptemberJune 30, 20202021 and 2019,2020, and the unaudited Consolidated Statements of Cash Flows for the ninesix months ended SeptemberJune 30, 20202021 and 2019,2020, contained herein, reflect all adjustments, consisting solely of normal recurring items, which are necessary for the fair presentation of the Company’s financial position, results of operations and cash flows on a basis consistent with that of the Company’s prior audited consolidated financial statements. However, the results of operations for the interim periods may not be indicative of results to be expected for the full fiscal year. Therefore, these financial statements should be read in conjunction with the audited financial statements and notes thereto and the summary of significant accounting policies included in the Company’s annual report on Form 10-K for the year ended December 31, 2019.2020. Except as noted below, there have been no material changes in the footnotes from those accompanying the audited consolidated financial statements contained in the Company’s Form 10-K for the year ended December 31, 2019.2020. The consolidated financial statements include the accounts of the Company and its wholly ownedwholly-owned subsidiaries. Inter-company accounts and transactions have been eliminated.
7
MCEWEN MINING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 2021
(tabular amounts are in thousands of U.S. dollars, unless otherwise noted)
NOTE 2 SIGNIFICANT ACCOUNTING POLICIES
Risks and Uncertainties
COVID-19
On March 11,The Company continues to closely monitor and respond, as possible, to the World Health Organization (“WHO”) declared theongoing COVID-19 virus a global pandemic. As a resultthe situation continues to rapidly change globally, ensuring the health and safety of the pandemic, manyCompany’s employees and contractors is one of the Company’s top priorities. Many jurisdictions including the United States, Canada, Mexico, and Argentina institutedhave varied but continued restrictions onto travel, public gatherings, and certain business operations. Even absent of government-mandated shut-downs,Unlike the Company was required to suspend operations at its mines to protect the health and safety of its employees and contractors. This resulted in temporary shutdowns of allyear 2020, there were no suspension mandated or a portion of operations at all of the Company’s mine sites at the start of Q2 2020. Since that date, all ofotherwise for the Company’s operations including El Galloduring 2021. In addition, vaccination rates in Mexico, have successfully recommenced operations. Incountries where the third quarter, operations at the San José mine were again in a ramp-up phase as a result of the ongoing countrywide restrictions on the movement of people. ResumptionCompany operates continues to increase.
The Company’s results of operations, at normal capacity is expected towards the end of the year.
7
MCEWEN MINING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September 30, 2020
(tabular amounts are in thousands of U.S. dollars, unless otherwise noted) (Continued)
The temporary shutdowns adversely impacted the Company’s operations,financial position, and cash flow, and liquidity in the second quarter of 2020 and some of these effects continued to be felt in the third quarter. In addition to the adverse effect on revenue, the Company incurred costs in connection with the shutdowns and subsequent ramp-up. This, in turn,flows were adversely affected its liquidity.in 2020 due to COVID-19. The long-termcontinuing impact of the COVID-19 outbreakpandemic on the Company’s results of operations, financial position and cash flows will depend on future developments, including the duration and spread of the outbreak, variants of the COVID-19 virus, the availability and relateddistribution of vaccinations, and government advisories, restrictions, and restrictions. These developmentsfinancial assistance offered. To ensure a safe working environment for the Company’s employees and contractors, and to prevent the spread of COVID-19, the Company continues to reinforce safety measures at all sites and offices including contact tracing, restricting non-essential travel, and complying with public health orders. The impact of COVID-19 on the global financial markets, and the overall economy and the Company are highly uncertain and cannot be predicted. Achieving and maintainingMaintaining normal operating capacity is also dependantdependent on the continued availability of supplies and contractors, which isare out of the Company’s control. If the financial markets and/or the overall economy arecontinue to be impacted, for an extended period, the Company’s results of operations, financial position and cash flows may be further affected. As the situation continues to evolve, the Company will continue to monitor market conditions closely and respond accordingly.
TheDuring the six months ended June 30, 2021, the Company is not able to estimate the duration of the pandemichas raised $12.7 million and potential impact on its business if disruptions or delays$31.5 million through a Canadian Development Expenses (“CDE”) flow-through common share issuance and an equity financing, and raised $20.2 million in business developments and shipments of product occur. In addition,Canadian Exploration Expenditures (“CEE”) financings during 2020. However, a severe prolonged economic downturn could result in a variety of risks to the business, including impeding access to capital markets when needed on acceptable terms, if at all. As the situation continues to evolve, the Company will continue to closely monitor market conditions and respond accordingly. The Company has completed various scenario planning analyses to consider the potential impacts of COVID-19 on its business, including volatility in commodity prices, temporary disruptions and/or curtailments of operating activities (voluntary or involuntary).
Going Concern
The accompanying interim financial statements have been prepared on the going concern basis of accounting, which assumes However, there is no assurance that the Companythese measures will continue as a going concern and which contemplates the realization of assets and satisfaction of liabilities and commitmentsprevent adverse effects from COVID-19 in the normal course of business. In the preparation of the interim financial statements, management is required to identify when events or conditions indicate that substantial doubt may exist about the Company’s ability to continue as a going concern. Substantial doubt about the Company’s ability to continue as a going concern would exist when relevant conditions and events, considered in aggregate, indicate that the Company will not be able to meet its obligations as they become due for a period of at least, but not limited to, 12 months from the most recent balance sheet date. When the Company identifies conditions or events that raise potential for substantial doubt about its ability to continue as a going concern, the Company considers whether its plans that are intended to mitigate those relevant conditions or events will alleviate the potential substantial doubt.future.
The Company refinanced its senior secured term loan facility (note 11) in June 2020 and also completed a flow-through financing (note 13) in September 2020 and remains in full compliance with its debt covenants as at September 30, 2020. However, based on the significant expected resource reduction at the Gold Bar mine, resulting in an initial revised mine plan which yields less cash flow, coupled with operational challenges at Black Fox, the commitment to develop the Froome access portal, flow-through spending requirements, and the disruptions to the Company’s operations caused by the COVID-19 pandemic, there is uncertainty about the Company’s ability to generate sufficient operating cash flow to both conduct further operation, exploration and development of its mineral properties and to remain in compliance with certain of its financial debt covenants, over the next 12 months. Non-compliance with these covenants would result in a breach under the Company’s debt agreement.
In response to this uncertainty, the Company is evaluating all options, including accessing capital markets, sale of certain assets, and expenditure reductions across the Company. The Company’s ability to continue as a going concern is dependent on the successful completion of one or a combination of these initiatives to ensure that the Company has sufficient liquidity in order to fund its operations and remain in compliance with its debt covenants. After considering its plans, management has concluded that there are no material uncertainties relating to events or conditions that cast substantial doubt upon the Company’s ability to continue as a going concern for a period of 12 months from the consolidated balance sheet date. The estimates used by management in reaching this conclusion are based on information available as at the date these financial statements were authorized for issuance and include internally generated cash flow forecasts. Accordingly, actual results could differ from these estimates and resulting variances may be material to management’s assessment.
8
MCEWEN MINING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SeptemberJUNE 30, 20202021
(tabular amounts are in thousands of U.S. dollars, unless otherwise noted) (Continued)
Recently Adopted Accounting Pronouncements
Accounting for Government Assistance: In June 2020, the Company analogized guidance to account for the COVID relief funds received from the United States Small Business Administration (SBA) and the Canada Revenue Agency (“CRA”). The ability to analogize standards from other GAAP sources is provisioned under ASC 105-05-2 when guidance is not provided for certain transactions under US GAAP. The adoption of the standard had a material impact on the financial statements as of September 30, 2020. Under this policy, the Company has recognized the income from the relief funds in the Statement of Operations, as the criteria for recognition of the funds have been met.
Changes to the Disclosure Requirements for Fair Value Measurement: In August 2018, the FASB issued ASU 2018- 13, “Fair Value Measurement (ASC 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement”. This update modifies the disclosure requirements for fair value measurements by removing, modifying, or adding disclosures. ASU 2018-13 is effective for fiscal years beginning after December 15, 2019. The adoption of ASU 2018-13 in 2020 did not have a material impact on the Company’s financial statements and related disclosures.
Recently Issued Accounting Pronouncements
Income Taxes: In December 2019, the FASB issued ASU 2019-12 “Income Taxes (Topic 740).” ASU 2019-12 simplifies the accounting for income taxes by reducing existing complexity in the accounting standards.standard. The update to the accounting standardsstandard is effective for the Company for the fiscal years beginning after December 15, 2020, with early adoption permitted. The Company is currently evaluating the effectadoption of this amendment and theASU 2019-12 in 2021 did not have a material impact it may have on the Company’s consolidated financial statements.statements and related disclosures.
NOTE 3 OPERATING SEGMENT REPORTING
McEwen Mining Inc.The Company is engaged in the exploration, development,a mining and minerals production and sale of gold and silver and exploration for copper, with operations locatedcompany focused on precious metals in the United States, Canada, Mexico, and Argentina. The Company’s chief operating decisionsdecision maker (“CODM”) reviews the operating results, assesses performance and makes decisions about the allocation of resources to these segments at the geographic region level or major mine/project where the economic characteristics of the individual mines or projects within a geographic region are not alike. As a result, these operating segments also represent the Company’s reportable segments. The Company’s business activities that are not considered operating segments are included in General and Administrative and other and are provided in this note for reconciliation purposes.
The CODM reviews segment income or loss, defined as gold and silver sales less production costs applicable to sales, depreciation and depletion, advanced projects and exploration costs for all segments except for the MSC segment, which is evaluated based on the attributable equity income or loss. Gold and silver sales and production costs applicable to sales for the reportable segments are reported net of intercompany transactions.
Production costs applicable to sales for the El Gallo project of $11.2 million for the nine months ended September 30, 2020 (same period in 2019 - $14.6 million) include $5.2 million of residual leaching spending in the period, net of $3.1 million capitalized in inventory (same period in 2019 - $5.7 million, net of $2.7 million capitalized in inventory) with the remainder representing costs recorded in the leach pad inventory balances in prior periods.
Capital expenditures include costs capitalized in mineral property interests and plant and equipment in the respective periods.
Significant information relating to the Company’s reportable operating segments for the periods presented is summarized in the tables below:
| | | | | | | | | | | | | | | | | | |
Three months ended June 30, 2021 |
| USA |
| Canada |
| Mexico |
| MSC |
| Los Azules |
| Total | ||||||
Revenue from gold and silver sales | | $ | 26,343 | | $ | 12,178 | | $ | 2,185 | | $ | — | | $ | — | | $ | 40,706 |
Production costs applicable to sales | | | (21,067) | | | (6,331) | | | (3,734) | | | — | | | — | |
| (31,132) |
Depreciation and depletion | | | (2,326) | | | (3,189) | | | — | | | — | | | — | | | (5,515) |
Gross profit (loss) | | | 2,950 | | | 2,658 | | | (1,549) | | | — | | | — | | | 4,059 |
| | | | | | | | | | | | | | | | | | |
Advanced projects | | | 116 | | | (564) | | | (375) | | | — | | | — | |
| (823) |
Exploration | | | (1,591) | | | (4,281) | | | (10) | | | — | | | (1,034) | | | (6,916) |
Income from investment in Minera Santa Cruz S.A. | | | — | | | — | | | — | | | (1,853) | | | — | |
| (1,853) |
Other operating | | | — | | | — | | | — | | | — | | | — | | | — |
Segment (loss) income | | $ | 1,475 | | $ | (2,187) | | $ | (1,934) | | $ | (1,853) | | $ | (1,034) | | $ | (5,533) |
General and Administrative and other | | | | | | | | | | | | | | | | | | (1,478) |
Loss before income and mining taxes | | | | | | | | | | | | | | | | | $ | (7,011) |
| | | | | | | | | | | | | | | | | | |
Capital expenditures | | $ | 353 | | | 10,775 | | | — | | | — | | | — | | $ | 11,128 |
9
MCEWEN MINING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SeptemberJUNE 30, 20202021
(tabular amounts are in thousands of U.S. dollars, unless otherwise noted) (Continued)
Significant information relating to the Company’s reportable operating segments is summarized in the tables below:
| | | | | | | | | | | | | | | | | | |
Three months ended September 30, 2020 |
| USA |
| Canada |
| Mexico |
| MSC |
| Los Azules |
| Total | ||||||
Revenue from gold and silver sales | | $ | 13,042 | | $ | 10,352 | | $ | 4,001 | | $ | — | | $ | — | | $ | 27,395 |
Production costs applicable to sales | | | (10,791) | | | (8,874) | | | (3,861) | | | — | | | — | |
| (23,526) |
Depreciation and depletion | | | (2,099) | | | (2,404) | | | (67) | | | — | | | — | | | (4,570) |
Gross profit (loss) | | | 152 | | | (926) | | | 73 | | | — | | | — | | | (701) |
| | | | | | | | | | | | | | | | | | |
Advanced projects | | | (240) | | | (2,784) | | | (1,003) | | | — | | | — | |
| (4,027) |
Exploration | | | (2,395) | | | (1,189) | | | (427) | | | — | | | (412) | | | (4,423) |
Income from investment in Minera Santa Cruz S.A. | | | — | | | — | | | — | | | 2,582 | | | — | |
| 2,582 |
Segment (loss) income | | $ | (2,483) | | $ | (4,899) | | $ | (1,357) | | $ | 2,582 | | $ | (412) | | $ | (6,569) |
General and Administrative and other | | | | | | | | | | | | | | | | | | (3,361) |
Loss before income and mining taxes | | | | | | | | | | | | | | | | | $ | (9,930) |
| | | | | | | | | | | | | | | | | | |
Capital expenditures | | $ | 106 | | | 488 | | | — | | | — | | | — | | $ | 594 |
| | | | | | | | | | | | | | | | | | |
Nine months ended September 30, 2020 |
| USA |
| | Canada | | Mexico | | MSC |
| Los Azules |
| Total | |||||
Revenue from gold and silver sales | | $ | 38,129 | | $ | 27,257 | | $ | 11,700 | | $ | — | | $ | — | | $ | 77,086 |
Production costs applicable to sales | | | (38,863) | | | (24,231) | | | (11,173) | | | — | | $ | — | |
| (74,267) |
Depreciation and depletion | | | (8,527) | | | (7,336) | | | (217) | | | — | | $ | — | | | (16,080) |
Gross (loss) profit | | | (9,261) | | | (4,310) | | | 310 | | | — | | | — | | | (13,261) |
| | | | | | | | | | | | | | | | | | |
Advanced projects | | | (789) | | | (5,609) | | | (3,066) | | | — | | $ | — | |
| (9,464) |
Exploration | | | (5,235) | | | (4,434) | | | (463) | | | — | | $ | (1,629) | |
| (11,761) |
Impairment of mineral property interests and plant and equipment (note 9) | | | (83,805) | | | — | | | — | | | — | | $ | — | | | (83,805) |
Loss from investment in Minera Santa Cruz S.A. | | | — | | | — | | | — | | | (1,139) | | $ | — | |
| (1,139) |
Other operating | | | (1,390) | | | (578) | | | — | | | — | | | — | | | (1,968) |
Segment loss | | $ | (100,480) | | $ | (14,931) | | $ | (3,219) | | $ | (1,139) | | $ | (1,629) | | $ | (121,398) |
General and Administrative and other | | | | | | | | | | | | | | | | | | (8,661) |
Loss before income and mining taxes | | | | | | | | | | | | | | | | | $ | (130,059) |
| | | | | | | | | | | | | | | | | | |
Capital expenditures | | $ | 4,712 | | $ | 4,428 | | $ | — | | $ | — | | $ | — | | $ | 9,140 |
| | | | | | | | | | | | | | | | | | |
Three months ended September 30, 2019 |
| USA |
| Canada |
| Mexico |
| MSC |
| Los Azules |
| Total | ||||||
Revenue from gold and silver sales | | $ | 16,577 | | $ | 11,147 | | $ | 4,967 | | $ | — | | $ | — | | $ | 32,691 |
Production costs applicable to sales | | | (12,156) | | | (7,550) | | | (3,878) | | | — | | | — | | | (23,584) |
Depreciation and depletion | | | (3,790) | | | (3,589) | | | (109) | | | — | | | — | | | (7,488) |
Gross profit | | | 631 | | | 8 | | | 980 | | | — | | | — | | | 1,619 |
| | | | | | | | | | | | | | | | | | |
Advanced projects | | | (46) | | | (384) | | | (1,710) | | | — | | | — | | | (2,140) |
Exploration | | | (4,253) | | | (8,691) | | | (2) | | | — | | | (749) | | | (13,695) |
Loss from investment in Minera Santa Cruz S.A. | | | — | | | — | | | — | | | (328) | | | — | | | (328) |
Segment loss | | $ | (3,668) | | $ | (9,067) | | $ | (732) | | $ | (328) | | $ | (749) | | $ | (14,544) |
General and Administrative and other | | | | | | | | | | | | | | | | | | 887 |
Loss before income and mining taxes | | | | | | | | | | | | | | | | | $ | (13,657) |
| | | | | | | | | | | | | | | | | | |
Capital expenditures | | $ | 1,190 | | $ | 2,500 | | $ | — | | $ | — | | $ | — | | $ | 3,690 |
10
MCEWEN MINING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September 30, 2020
(tabular amounts are in thousands of U.S. dollars, unless otherwise noted) (Continued)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Nine months ended September 30, 2019 |
| USA |
| Canada |
| Mexico |
| MSC |
| Los Azules |
| Total | ||||||||||||||||||||||||
Six months ended June 30, 2021 |
| USA |
| | Canada | | Mexico | | MSC |
| Los Azules |
| Total | |||||||||||||||||||||||
Revenue from gold and silver sales | | $ | 28,941 | | $ | 36,139 | | $ | 19,577 | | $ | — | | $ | — | | $ | 84,657 | | $ | 39,236 | | $ | 20,739 | | $ | 4,471 | | $ | — | | $ | — | | $ | 64,446 |
Production costs applicable to sales | | | (20,798) | | | (24,025) | | | (14,609) | | | — | | | — | | | (59,432) | | | (34,623) | | | (12,987) | | | (7,111) | | | — | | $ | — | |
| (54,721) |
Depreciation and depletion | | | (6,510) | | | (10,520) | | | (471) | | | — | | | — | | | (17,501) | | | (4,068) | | | (6,584) | | | — | | | — | | $ | — | | | (10,652) |
Gross profit | | | 1,633 | | | 1,594 | | | 4,497 | | | — | | | — | | | 7,724 | ||||||||||||||||||
Gross profit (loss) | | | 545 | | | 1,168 | | | (2,640) | | | — | | | — | | | (927) | ||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Advanced projects | | | (632) | | | (384) | | | (5,865) | | | — | | | — | | | (6,881) | | | 32 | | | (1,188) | | | (1,466) | | | — | | $ | — | |
| (2,622) |
Exploration | | | (6,155) | | | (15,174) | | | (2) | | | — | | | (2,386) | | | (23,717) | | | (2,455) | | | (7,716) | | | (17) | | | — | | $ | (1,684) | |
| (11,872) |
Impairment of mineral property interests and plant and equipment (Note 8) | | | — | | | — | | | — | | | — | | $ | — | | | — | ||||||||||||||||||
Loss from investment in Minera Santa Cruz S.A. | | | — | | | — | | | — | | | (6,775) | | | — | | | (6,775) | | | — | | | — | | | — | | | (2,427) | | $ | — | |
| (2,427) |
Other operating | | | — | | | — | | | — | | | — | | | — | | | — | ||||||||||||||||||
Segment loss | | $ | (5,154) | | $ | (13,964) | | $ | (1,370) | | $ | (6,775) | | $ | (2,386) | | $ | (29,649) | | $ | (1,878) | | $ | (7,736) | | $ | (4,123) | | $ | (2,427) | | $ | (1,684) | | $ | (17,848) |
General and Administrative and other | | | | | | | | | | | | | | | | | | (7,541) | | | | | | | | | | | | | | | | | | (3,644) |
Loss before income and mining taxes | | | | | | | | | | | | | | | | | $ | (37,190) | | | | | | | | | | | | | | | | | $ | (21,492) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Capital expenditures | | $ | 17,804 | | $ | 10,375 | | $ | — | | $ | — | | $ | — | | $ | 28,179 | | $ | 1,110 | | $ | 20,342 | | $ | — | | $ | — | | $ | — | | $ | 21,452 |
Geographic information
Geographic information includes the long-lived assets balance and revenues presented for the Company’s operating segments, as follows:
| | | | | | | | | | | | | | | | | | |
| | Long-lived Assets | | Revenue (1) | ||||||||||||||
| | September 30, | | December 31, | | Three months ended September 30, | | Nine months ended September 30, | ||||||||||
|
| 2020 |
| 2019 |
| 2020 |
| 2019 |
| 2020 | | 2019 | ||||||
USA | | $ | 49,299 | | $ | 135,854 | | $ | 13,042 | | $ | 16,577 | | $ | 38,129 | | $ | 28,941 |
Canada | | | 78,161 | | | 77,147 | | | 10,352 | | | 11,147 | | | 27,257 | | | 36,139 |
Mexico | | | 20,051 | | | 23,551 | | | 4,001 | | | 4,967 | | | 11,700 | | | 19,577 |
Argentina (2) | | | 300,252 | | | 302,598 | | | — | | | — | | | — | | | — |
Total consolidated (3) | | $ | 447,763 | | $ | 539,150 | | $ | 27,395 | | $ | 32,691 | | $ | 77,086 | | $ | 84,657 |
| | | | | | | | | | | | | | | | | | |
Three months ended June 30, 2020 |
| USA |
| Canada |
| Mexico |
| MSC |
| Los Azules |
| Total | ||||||
Revenue from gold and silver sales | | $ | 10,770 | | $ | 4,166 | | $ | 3,355 | | $ | — | | $ | — | | $ | 18,291 |
Production costs applicable to sales | | | (11,039) | | | (8,150) | | | (3,165) | | | — | | | — | | | (22,354) |
Depreciation and depletion | | | (2,565) | | | (2,184) | | | (63) | | | — | | | — | | | (4,812) |
Gross (loss) profit | | | (2,834) | | | (6,168) | | | 127 | | | — | | | — | | | (8,875) |
| | | | | | | | | | | | | | | | | | |
Advanced projects | | | (183) | | | (1,760) | | | (944) | | | — | | | — | | | (2,887) |
Exploration | | | (2,031) | | | (840) | | | (36) | | | — | | | (641) | | | (3,548) |
Loss from investment in Minera Santa Cruz S.A. | | | — | | | — | | | — | | | (1,045) | | | — | | | (1,045) |
Other operating | | | (1,390) | | | (578) | | | — | | | — | | | — | | | (1,968) |
Segment loss | | $ | (6,438) | | $ | (9,346) | | $ | (853) | | $ | (1,045) | | $ | (641) | | $ | (18,323) |
General and Administrative and other | | | | | | | | | | | | | | | | | | (1,521) |
Loss before income and mining taxes | | | | | | | | | | | | | | | | | $ | (19,844) |
| | | | | | | | | | | | | | | | | | |
Capital expenditures | | $ | 2,799 | | $ | 211 | | $ | — | | $ | — | | $ | — | | $ | 3,010 |
NOTE 4 OTHER OPERATING
During Q2 2020, the Company temporarily suspended operations at its Gold Bar and Black Fox mine sites as measures to combat COVID-19. Costs incurred while operations were suspended total $0.9 million at Gold Bar and $0.6 million at Black Fox during the nine months ended September 30, 2020. In addition, the Gold Bar operational shutdown was extended while the Company conducted a thorough review of its resource and mine plan during Q2 2020. Upon completion of this review, the Company commenced a controlled and phased ramp up of operations through the remainder of the second quarter. Costs incurred due to the resource review were $0.5 million.
1110
MCEWEN MINING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SeptemberJUNE 30, 20202021
(tabular amounts are in thousands of U.S. dollars, unless otherwise noted) (Continued)
NOTE 5 OTHER INCOME
The following is a summary of other income for the three and nine months ended September 30, 2020 and 2019:
| | | | | | | | | | | | |
| | Three months ended September 30, | | Nine months ended September 30, | ||||||||
|
| 2020 |
| 2019 |
| 2020 |
| 2019 | ||||
COVID Relief | | $ | 2,628 | | $ | — | | $ | 5,319 | | $ | — |
Unrealized and realized (loss) gain on investments (note 6) | | | — | | | 3,220 | | | (619) | | | 4,972 |
Foreign currency (loss) gain | | | (132) | | | 1,616 | | | 1,736 | | | 1,242 |
Other (expense) income, net | | | (406) | | | (63) | | | (365) | | | 69 |
Total other income | | $ | 2,090 | | $ | 4,773 | | $ | 6,071 | | $ | 6,283 |
In response to COVID-19, the United States and Canadian governments enacted significant relief measures to support businesses directly and adversely impacted by the pandemic. During 2020, the Company secured $1.9 million of relief from the US government under the paychecks protection (“PPP”) program. The funds are fully forgivable so long as sufficient eligible expenditures are incurred in a 24 week period. The income from the PPP program is recognized on a systematic basis as eligible forgivable expenditures are incurred. As at September 30, 2020, the full amount has been recognized as other income. The Company also secured $3.4 million of government relief in Canada through the Canadian Emergency Wage Subsidy program all of which has been recognized in other income.
| | | | | | | | | | | | | | | | | | |
Six months ended June 30, 2020 |
| USA |
| Canada |
| Mexico |
| MSC |
| Los Azules |
| Total | ||||||
Revenue from gold and silver sales | | $ | 25,088 | | $ | 16,905 | | $ | 7,698 | | $ | — | | $ | — | | $ | 49,691 |
Production costs applicable to sales | | | (28,071) | | | (15,357) | | | (7,313) | | | — | | | — | | | (50,741) |
Depreciation and depletion | | | (6,428) | | | (4,932) | | | (150) | | | — | | | — | | | (11,510) |
Gross (loss) profit | | | (9,411) | | | (3,384) | | | 235 | | | — | | | — | | | (12,560) |
| | | | | | | | | | | | | | | | | | |
Advanced projects | | | (548) | | | (2,826) | | | (2,063) | | | — | | | — | | | (5,437) |
Exploration | | | (2,840) | | | (3,245) | | | (36) | | | — | | | (1,217) | | | (7,338) |
Impairment of mineral property interests and plant and equipment (Note 8) | | | (83,805) | | | — | | | — | | | — | | | — | | | (83,805) |
Loss from investment in Minera Santa Cruz S.A. | | | — | | | — | | | — | | | (3,721) | | | — | | | (3,721) |
Other operating | | | (1,390) | | | (578) | | | — | | | — | | | — | | | (1,968) |
Segment loss | | $ | (97,994) | | $ | (10,033) | | $ | (1,864) | | $ | (3,721) | | $ | (1,217) | | $ | (114,829) |
General and Administrative and other | | | | | | | | | | | | | | | | | | (5,300) |
Loss before income and mining taxes | | | | | | | | | | | | | | | | | $ | (120,129) |
| | | | | | | | | | | | | | | | | | |
Capital expenditures | | $ | 4,606 | | $ | 3,940 | | $ | — | | $ | — | | $ | — | | $ | 8,546 |
Geographic Information
Geographic information includes the long-lived asset balances and revenues presented for the Company’s operating segments, as follows:
| | | | | | | | | | | | | | | | | |
| | Long-lived Assets | Revenue (1) | | Revenue (1) | ||||||||||||
| | June 30, | | December 31, | Three months ended June 30, | | Six months ended June 30, | ||||||||||
|
| 2021 |
| 2020 | 2021 |
| 2020 |
| 2021 | | 2020 | ||||||
USA | | $ | 42,435 | | $ | 46,801 | $ | 26,343 | | $ | 10,770 | | $ | 39,236 | | $ | 25,088 |
Canada | | | 93,039 | | | 78,986 | | 12,178 | | | 4,166 | | | 20,739 | | | 16,905 |
Mexico | | | 20,361 | | | 20,021 | | 2,185 | | | 3,355 | | | 4,471 | | | 7,698 |
Argentina (2) | | | 289,828 | | | 299,816 | | — | | | — | | | — | | | — |
Total consolidated | | $ | 445,663 | | $ | 445,624 | $ | 40,706 | | $ | 18,291 | | $ | 64,446 | | $ | 49,691 |
(1) | Presented based on the location from which the product originated. |
(2) | Includes Investment in MSC of $98.3 million as of June 30, 2021 (December 31, 2020 –$108.3 million). |
NOTE 6 INVESTMENTS4 OTHER INCOME
The following is a summary of the activity in investmentsother income for the ninethree and six months ended SeptemberJune 30, 20202021 and 2019:2020:
| | | | | | | | | | | | | | | | | | |
| | As at | | Additions/ | | | | Disposals/ | | Unrealized | | Fair value | ||||||
| | December 31, | | transfers during | | Net (loss) on | | transfers during | | (loss) on | | September 30, | ||||||
|
| 2019 |
| period |
| securities sold |
| period |
| securities held |
| 2020 | ||||||
Marketable equity securities | | $ | 1,885 | | $ | — | | $ | (619) | | $ | (1,266) | | $ | — | | $ | — |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | As at | | Additions/ | | Net gain | | Disposals/ | | Unrealized | | Fair value | | Three months ended June 30, | | Six months ended June 30, | ||||||||||||||
| | December 31, | | transfers during | | (loss) on | | transfers during | | gain on | | September 30, |
| 2021 |
| 2020 |
| 2021 |
| 2020 | ||||||||||
|
| 2018 |
| period |
| securities sold | | period | | securities held | | 2019 | ||||||||||||||||||
Marketable equity securities | | $ | 2,718 | | $ | 2,314 | | $ | 3,375 | | $ | (5,653) | | $ | 470 | | $ | 3,224 | ||||||||||||
Warrants | |
| 413 | | | — | | | — | | | (1,540) | | | 1,127 | | | — | ||||||||||||
Investments | | $ | 3,131 | | $ | 2,314 | | $ | 3,375 | | $ | (7,193) | | $ | 1,597 | | $ | 3,224 | ||||||||||||
COVID-19 Relief | | $ | 1,725 | | $ | 2,691 | | $ | 2,836 | | $ | 2,691 | ||||||||||||||||||
Unrealized and realized (loss) on investments (Note 5) | | | — | | | 279 | | | — | | | (619) | ||||||||||||||||||
Foreign currency (loss) gain | | | (194) | | | 60 | | | 97 | | | 1,868 | ||||||||||||||||||
Other income, net | | | 2,264 | | | 14 | | | 2,274 | | | 41 | ||||||||||||||||||
Total other income | | $ | 3,795 | | $ | 3,044 | | $ | 5,207 | | $ | 3,981 |
During the nine months ended September 30, 2020, the Company sold marketable equity securities for proceeds of $1.3 million (nine months ended September 30, 2019 - $5.7 million), and realized a loss of $0.6 million (nine months ended September 30, 2019 - realized a gain of $3.4 million).
The cost of marketable equity securities at September 30, 2020 was $nil (December 31, 2019 – $1.3 million).
1211
MCEWEN MINING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SeptemberJUNE 30, 20202021
(tabular amounts are in thousands of U.S. dollars, unless otherwise noted) (Continued)
During the three and six months ended June 30, 2021, the Company recognized $1.7 million and $2.8 million, respectively (three and six months ended June 30, 2020 - $2.7 million and $2.7 million, respectively) of other income through COVID-19 relief programs.
During Q2 2021, the Company recognized $2.3 million in other income from the sale of 2 projects in Nevada. Refer to Note 5 Investments for further details.
NOTE 5 INVESTMENTS
The following is a summary of the activity in investments for the six months ended June 30, 2021 and 2020:
| | | | | | | | | | | | | | | | | | |
| | As at | | Additions/ | | | | Disposals/ | | Unrealized | | Fair value | ||||||
| | December 31, | | transfers during | | Net gain (loss) on | | transfers during | | (loss) on | | June 30, | ||||||
|
| 2020 |
| period |
| securities sold |
| year |
| securities held |
| 2021 | ||||||
Marketable equity securities | | $ | — | | $ | 1,616 | | $ | — | | $ | — | | $ | — | | $ | 1,616 |
Warrants | |
| — | |
| 161 | |
| — | |
| — | |
| — | |
| 161 |
Investments | | $ | — | | $ | 1,777 | | $ | — | | $ | — | | $ | — | | $ | 1,777 |
| | | | | | | | | | | | | | | | | | |
| | As at | | Additions/ | | Net | | Disposals/ | | Unrealized | | Fair value | ||||||
| | December 31, | | transfers during | | (loss) on | | transfers during | | (loss) on | | June 30, | ||||||
|
| 2019 |
| period |
| securities sold | | year | | securities held | | 2020 | ||||||
Marketable equity securities | | $ | 1,885 | | $ | — | | $ | (619) | | $ | (1,266) | | $ | — | | $ | (0) |
On June 23, 2021, the Company closed the sale of 2 projects in Nevada, Limousine Butte and Cedar Wash, with Nevgold Corp. (“Nevgold”, and formerly Silver Mountain Mines Inc.). In addition to $0.5 million cash received as part of the consideration, the Company received 4,963,455 common shares and 2,481,727 warrants of Nevgold. Upon issuance, the common shares received by the Company represented 10% of the issued and outstanding shares of Nevgold. The warrants have an exercise price of $0.60 and are exercisable upon receipt until June 23, 2023. The common shares trade on the TSX Venture Exchange.
During the six months ended June 30, 2020, the Company sold marketable equity securities for proceeds of $1.3 million.
During the three months ended June 30, 2020, the Company sold marketable equity securities for proceeds of $1.2 million.
NOTE 76 RECEIVABLES, PREPAIDS AND OTHER ASSETS
The following is a breakdown of balances in receivables, prepaids and other assets as at SeptemberJune 30, 20202021 and December 31, 2019:2020:
| | | | | | | | | | | | |
|
| September 30, 2020 |
| December 31, 2019 |
| June 30, 2021 |
| December 31, 2020 | ||||
Government sales tax receivable | | | 1,453 | | | 2,658 | | | 1,776 | | $ | 1,810 |
Prepaids and other assets | | | 3,702 | | | 2,607 | | | 3,726 | | | 3,880 |
Receivables and other current assets | | $ | 5,155 | | $ | 5,265 | | $ | 5,502 | | $ | 5,690 |
Government sales tax receivable includes $0.7$0.6 million of Mexican value addedvalue-added tax (“VAT”) at SeptemberJune 30, 20202021 (December 31, 20192020 – $0.7$0.9 million). The CompanyCompany collected $1.1$1.0 million of VAT during the ninesix months ended SeptemberJune 30, 2021 (June 30, 2020 (September 30, 2019 – $1.3$0.5 million).
12
MCEWEN MINING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 2021
(tabular amounts are in thousands of U.S. dollars, unless otherwise noted)
NOTE 87 INVENTORIES
Inventories at SeptemberJune 30, 20202021 and December 31, 20192020 consisted of the following:
| | | | | | | | | | | | |
|
| September 30, 2020 |
| December 31, 2019 |
| June 30, 2021 |
| December 31, 2020 | ||||
Material on leach pads | | $ | 29,069 | | $ | 37,328 | | $ | 12,758 | | $ | 21,003 |
In-process inventory | |
| 4,283 | |
| 3,847 | |
| 6,098 | |
| 3,922 |
Stockpiles | |
| 586 | |
| 1,384 | |
| 2,736 | |
| 635 |
Precious metals | |
| 945 | |
| 1,038 | |
| 1,696 | |
| 1,344 |
Materials and supplies | |
| 4,818 | |
| 4,382 | |
| 4,858 | |
| 4,845 |
Inventories | | $ | 39,701 | | $ | 47,979 | | $ | 28,146 | | $ | 31,749 |
Less current portion | | | 34,244 | | | 38,376 | | | 25,430 | | | 26,964 |
Long-term portion | | $ | 5,457 | | $ | 9,603 | | $ | 2,716 | | $ | 4,785 |
During the first quarter of 2021, the inventory of Gold Bar and El Gallo were written down to their net realizable value by $2.2 million and by $0.8 million at El Gallo during the three months ended SeptemberJune 30, 2020 there were 0 inventory write downs to net realizable value.2021. During the ninethree and six months ended SeptemberJune 30, 2020, the inventory ofat the Black Fox Mine was written down to its net realizable value. The write-down wasvalue by $1.9 million and at Gold Bar during the first quarter of which $1.52020 by $1.2 million. Of these write-downs, a total of $2.9 million (three and six months ended June 30, 2020 – $2.6 million) was included in production costs applicable to sales (three and nine months ended September 30, 2019 - $nil). In addition, the inventory of the Gold Bar Mine was written down to its net realizable value. The write-down was $1.2 million, of which $1.1$0.1 million was included in production costs applicable to salesdepreciation and depletion (three and ninesix months ended SeptemberJune 30, 20192020 - $nil)$0.5 million) in the Statement of Operations.
NOTE 98 MINERAL PROPERTY INTERESTS AND PLANT AND EQUIPMENT
The applicable definition of proven and probable reserves is set forth in the SEC Industry Guide 7. If proven and probable reserves exist at the Company’s properties, the relevant capitalized mineral property interests and asset retirement costs are charged to expense based on the units of production method upon commencement of production. The Company’s Gold Bar, Black Fox and San José properties have proven and probable reserves estimated in accordance with SEC Industry Guide 7.
The Company reviews and evaluates its long-lived assets for impairment on a quarterly basis or when events or changes in circumstances indicate that the related carrying amounts may not be recoverable. Once it is determined that impairment exists, an impairment loss is measured as the amount by which the asset carrying value exceeds its estimated fair value.
As partThe evaluation resulted in an impairment charge of $83.8 million during the analysis conducted in Q1 2020, the Company determined that indicators of impairment existed for the long-lived assets at the Gold Bar mine and that the long-lived assets at the Gold Bar mine were not recoverable on an undiscounted basis. The fair value of the Gold Bar mine was estimated using the discounted cash flow method, coupled with an in-situ resource multiple for mineralized material not included in the life of mine plan. Future cash flows weresix months ended June 30, 2020.
13
MCEWEN MINING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SeptemberJUNE 30, 20202021
(tabular amounts are in thousands of U.S. dollars, unless otherwise noted) (Continued)
estimated based on estimated quantities of recoverable mineralized material, expected gold prices, estimated production levels, operating costs, capital requirements and reclamation costs, all based on the life-of-mine plan using the preliminary estimated resources. The in-situ resource multiple applied to the mineralized material not included in the life-of-mine plan was estimated by evaluating observable market transactions. The Company concluded that the carrying value of the long-lived assets at the Gold Bar mine was impaired and recorded a non-cash impairment charge reducing plant and equipment and mineral property interests by the amount of $83.8 million.
The following table sets forth a summary of the quantitative and qualitative information related to the unobservable inputs used in the calculation of the Company’s non-recurring Level 3 fair value measurement of the Gold Bar mine:
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The estimated future cash flows are based on numerous assumptions and uncertainties. It is possible that actual future cash flows will be significantly different than the estimates, as actual future quantities of recoverable minerals, gold prices, production levels and costs of capital are each subject to significant risks and uncertainties.
NOTE 109 INVESTMENT IN MINERA SANTA CRUZ S.A. (“MSC”) – SAN JOSÉ MINE
The Company accounts for investments over which it exerts significant influence but does not control through majority ownership using the equity method of accounting. In applying the equity method of accounting to the Company’s investment in MSC, MSC’s financial statements, which are originally prepared by MSC in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board, have been adjusted to conform with U.S. GAAP. As such, the summarized financial data presented under this heading is presented in accordance with U.S. GAAP.
A summary of the operating results for MSC for the three and ninesix months ended SeptemberJune 30, 20202021 and 20192020 is as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended September 30, | | Nine months ended September 30, | | | Three months ended June 30, | | Six months ended June 30, | ||||||||||||||||
|
| 2020 | | 2019 | | 2020 | | 2019 | |
| 2021 | | 2020 | | 2021 | | 2020 | ||||||||
Minera Santa Cruz S.A. (100%) | | | | | | | | | | | | | |||||||||||||
Minera Santa Cruz S.A. (100%) | | | | | | | | | | | | | |||||||||||||
Revenue from gold and silver sales | | $ | 70,195 | | $ | 74,530 | | $ | 154,666 | | $ | 189,348 | | | $ | 70,396 | | $ | 47,081 | | $ | 123,699 | | $ | 84,471 |
Production costs applicable to sales | | | (41,512) | | (43,345) | | | (100,230) | | | (119,392) | | | | (40,888) | | | (30,402) | | | (77,256) | | | (58,718) | |
Depreciation and depletion | | | (7,107) | | | (18,158) | | | (22,084) | | | (50,083) | | | | (9,779) | | | (7,650) | | | (16,732) | | | (14,977) |
Gross profit | | | 21,576 | | 13,027 | | | 32,352 | | | 19,873 | | | | 19,729 | | | 9,029 | | | 29,711 | | | 10,776 | |
Exploration | | | (2,814) | | (1,482) | | | (7,855) | | | (7,373) | | | | (2,941) | | | (2,175) | | | (5,177) | | | (5,041) | |
Other expenses | | | (6,509) | | | (5,394) | | | (17,651) | | | (8,926) | | | | (14,684) | | | (8,925) | | | (20,220) | | | (11,142) |
Net income before tax | | $ | 12,253 | | $ | 6,151 | | $ | 6,846 | | $ | 3,574 | | ||||||||||||
Net income (loss) before tax | | $ | 2,104 | | $ | (2,071) | | $ | 4,314 | | $ | (5,407) | |||||||||||||
Current and deferred tax expense | | | (4,922) | | | (4,512) | | | (2,989) | | | (8,350) | | | | (1,937) | | | 1,884 | | | (3,566) | | | 1,933 |
Net income (loss) | | $ | 7,331 | | $ | 1,639 | | $ | 3,857 | | $ | (4,776) | | | $ | 167 | | $ | (187) | | $ | 748 | | $ | (3,474) |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Portion attributable to McEwen Mining Inc. (49%) | | | | | | | | | | | | | |||||||||||||
Portion attributable to McEwen Mining Inc. (49%) | | | | | | | | | | | | | |||||||||||||
Net income (loss) | | $ | 3,592 | | $ | 803 | | $ | 1,890 | | $ | (2,340) | | | $ | 81 | | $ | (92) | | $ | 366 | | $ | (1,703) |
Amortization of fair value increments | |
| (1,255) | |
| (2,551) | |
| (3,891) | |
| (6,922) | | |
| (2,019) | |
| (1,251) | |
| (3,090) | |
| (2,636) |
Income tax recovery | | | 245 | | | 1,420 | | | 862 | | | 2,487 | | | | 85 | | | 298 | | | 297 | | | 618 |
Income (loss) from investment in MSC, net of amortization | | $ | 2,582 | | $ | (328) | | $ | (1,139) | | $ | (6,775) | | ||||||||||||
Loss from investment in MSC, net of amortization | | $ | (1,853) | | $ | (1,045) | | $ | (2,427) | | $ | (3,721) |
14
Table(1) Other expenses include foreign exchange, accretion of Contents
MCEWEN MINING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Septemberasset retirement obligations, other finance related expenses, and COVID-19 related expenses of $4.4 million and $11.9 million for the three and six months ended June 30, 2020
(tabular amounts are in thousands of U.S. dollars, unless otherwise noted) (Continued)2021.
Shutdown costs related to the COVID-19 pandemic for MSC were recognized in other expenses and totaled $nil during the three months ended September 30, 2020 and $7.2 million for the nine months ended September 30, 2020.
The income or loss from investment in MSC attributable to the Company includes the amortization of the fair value increments arising from the initial purchase price allocation and related income tax recovery. The income tax recovery reflects the impact of the devaluation of the Argentine peso against the U.S. dollar on the peso-denominated deferred tax liability recognized at the time of acquisition.acquisition, as well as income tax rate changes over the periods.
Changes in the Company’s investment in MSC for the ninesix months ended SeptemberJune 30, 20202021 and year ended December 31, 20192020 are as follows:
| | | | | | | | | | | |
|
| Nine months ended September 30, 2020 |
| Year ended December 31, 2019 | June 30, 2021 |
| December 31, 2020 | ||||
Investment in MSC, beginning of period | | $ | 110,183 | | $ | 127,814 | $ | 108,326 | | $ | 110,183 |
Attributable net gain (loss) from MSC | | | 1,890 | | | (2,097) | |||||
Attributable net income from MSC | | 366 | | | 2,745 | ||||||
Amortization of fair value increments | |
| (3,891) | |
| (9,448) |
| (3,090) | |
| (5,390) |
Income tax recovery | | | 862 | | | 2,791 | | 297 | | | 1,128 |
Dividend distribution received | |
| (282) | |
| (8,877) |
| (7,561) | |
| (340) |
Investment in MSC, end of period | | $ | 108,762 | | $ | 110,183 | $ | 98,338 | | $ | 108,326 |
During the three and ninesix months ended SeptemberJune 30, 2020,2021, the Company received $nil$2.6 million and $0.3$7.6 million, respectively, in dividends from MSC respectively (three and ninesix months ended SeptemberJune 30, 20192020 – $2.0 million$nil and $4.0$0.3 million, respectively).
14
MCEWEN MINING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 2021
(tabular amounts are in thousands of U.S. dollars, unless otherwise noted)
A summary of the key assets and liabilities of MSC on a 100% basis as at SeptemberJune 30, 2020,2021, before and after adjustments to fair value on acquisition and amortization of the fair value increments arising from the purchase price allocation, are as follows:
| | | | | | | | | | | | | | | | | | |
As at September 30, 2020 | | Balance excluding FV increments | | Adjustments | | Balance including FV increments | ||||||||||||
As at June 30, 2021 | | Balance excluding FV increments | | Adjustments | | Balance including FV increments | ||||||||||||
Current assets | | $ | 95,364 | | $ | 854 | | $ | 96,218 | | $ | 84,938 | | $ | 437 | | $ | 85,375 |
Total assets | | $ | 190,746 | | $ | 110,885 | | $ | 301,631 | | $ | 177,194 | | $ | 101,013 | | $ | 278,207 |
| | | | | | | | | | | | | | | | | | |
Current liabilities | | $ | (44,761) | | $ | — | | $ | (44,761) | | $ | (44,327) | | $ | — | | $ | (44,327) |
Total liabilities | | $ | (75,190) | | $ | (4,478) | | $ | (79,668) | | $ | (74,196) | | $ | (3,331) | | $ | (77,527) |
NOTE 1110 DEBT
On August 10, 2018, the Company finalized a $50.0 million senior secured three yearthree-year term loan facility with Royal Capital Management Corp., as administrative agent, and the lenders party thereto. Interest on the loan accrued at the rate of 9.75% per annum with interest due monthly and was secured by a lien on certain of the Company’s and its subsidiaries’ assets.
On June 25, 2020, the Company entered into an Amended and Restated Credit Agreement (“ARCA”) which refinanced the outstanding $50 million and which terms differed in material respects from the old loan as follows:
● | Sprott Private Resource Lending II (Collector), LP replaced Royal Capital Management Corp. as the administrative agent. |
● | Sprott Private Resource Lending II (Collector), LP replaced certain lenders. An affiliate of Robert McEwen remains as a lender. |
● | Scheduled repayments of the principal |
● | The minimum working capital maintenance requirement was reduced from $10.0 million under the original term loan to $nil at June 30, 2020 to December 31, 2020 and from $10.0 million to $2.5 million at March 31, 2021 and until the end of 2021. The working capital requirement increases to $5.0 million at March 31, 2022, $7.0 million at June 30, 2022, and $10 million at September 30, 2022 and each fiscal quarter thereafter. |
● | The Company issued 2,091,700 shares of common stock valued at $1,875,000 to the lenders as consideration for the maintenance, continuation, and extension of the maturity date of the loan. The value of the shares plus the unamortized costs of the original term loan are being amortized over the modified term of the loan. |
15
MCEWEN MINING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SeptemberJUNE 30, 20202021
(tabular amounts are in thousands of U.S. dollars, unless otherwise noted) (Continued)
The remaining principal terms of the original agreement remain unchanged. The Company was in compliance with all covenants as at June 30, 2021.
A reconciliation of the Company’s long-term debt for the ninesix months ended SeptemberJune 30, 20202021 and for the year ended December 31, 20192020 is as follows:
| | | | | | | | | | | | | |
|
| Nine months ended September 30, 2020 |
| Year ended December 31, 2019 | |
| Six months ended June 30, 2021 |
| Year ended | ||||
Balance, beginning of period | | $ | 49,516 | | $ | 49,206 | | | $ | 48,160 | | $ | 49,516 |
Interest expense | |
| 4,003 | |
| 5,185 | | |
| 2,757 | |
| 5,394 |
Interest payments | |
| (3,650) | |
| (4,875) | | |
| (2,417) | |
| (4,875) |
Debt amendment - Equity-based fees | | | (1,875) | | | — | | ||||||
Bonus Interest - Equity based financing fee | | | — | | | (1,875) | |||||||
Balance, end of period | | $ | 47,994 | | $ | 49,516 | | | $ | 48,500 | | $ | 48,160 |
Less current portion | | | — | | | 10,000 | | | | — | | | — |
Long-term portion | | $ | 47,994 | | $ | 39,516 | | | $ | 48,500 | | $ | 48,160 |
During the nine months ended September 30, 2020, $nil of interest was capitalized in plant and equipment (nine months ended September 30, 2019 – $0.6 million, capitalized to Gold Bar construction).
NOTE 1211 ASSET RETIREMENT OBLIGATIONS
The Company is responsible for the reclamation of certain past and future disturbances at its properties. The most significant properties subject to these obligations are the Gold Bar and Tonkin properties in Nevada, the Timmins properties in Canada and the El Gallo Project in Mexico.
A reconciliation of the Company’s asset retirement obligations for the ninesix months ended SeptemberJune 30, 20202021 and for the year ended December 31, 20192020 are as follows:
| | | | | | | | | | | | | |
|
| September 30, 2020 |
| December 31, 2019 |
| June 30, 2021 |
| December 31, 2020 |
| ||||
Asset retirement obligation liability, beginning balance | | $ | 32,201 | | $ | 29,402 | | $ | 34,000 | | $ | 32,201 | |
Settlements | |
| (185) | |
| (513) | |
| (866) | |
| (267) | |
Accretion of liability | |
| 1,389 | |
| 1,680 | |
| 991 | |
| 1,901 | |
Adjustment reflecting updated estimates | |
| 673 | |
| 1,012 | |
| 425 | |
| (54) | |
Foreign exchange revaluation | | | (286) | | | 620 | | | 334 | | | 219 | |
Asset retirement obligation liability, ending balance | | $ | 33,792 | | $ | 32,201 | | $ | 34,884 | | $ | 34,000 | |
Less current portion | | | 2,860 | | | 2,610 | | | 4,883 | | | 3,232 | |
Long-term portion | | $ | 30,932 | | $ | 29,591 | | $ | 30,001 | | $ | 30,768 | |
The Company’s reclamation expenses for the periods presented consisted of the following:
| | | | | | | | | | | | |
| | Three months ended September 30, | | Nine months ended September 30, | ||||||||
|
| 2020 |
| 2019 | | 2020 | | 2019 | ||||
Reclamation adjustment reflecting updated estimates | | $ | 411 | | $ | — | | $ | 614 | | $ | 88 |
Reclamation accretion | | | 475 | | | 495 | | | 1,389 | | | 1,295 |
Total | | $ | 886 | | $ | 495 | | $ | 2,003 | | | 1,383 |
| | | | | | | | | | | | |
| | Three months ended June 30, | | Six months ended June 30, | ||||||||
|
| 2021 |
| 2020 | | 2021 | | 2020 | ||||
Reclamation adjustment reflecting updated estimates | | $ | — | | $ | — | | $ | 425 | | $ | 203 |
Reclamation accretion | | | 505 | | | 457 | | | 991 | | | 914 |
Total | | $ | 505 | | $ | 457 | | $ | 1,416 | | | 1,117 |
16
MCEWEN MINING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SeptemberJUNE 30, 20202021
(tabular amounts are in thousands of U.S. dollars, unless otherwise noted) (Continued)
NOTE 1312 SHAREHOLDERS’ EQUITY
Equity Issuances
SeptemberAmendment to the Articles of Incorporation
On June 30, 2021, the Company filed Articles of Amendment to its Amended and Restated Articles of Incorporation with the Colorado Secretary of State providing for an increase in its authorized capital to increase the number of shares of common stock that the Company can issue from 500,000,000 to 675,000,000. The Amendment was approved by the Company’s shareholders at the annual meeting held on June 28, 2021.
Equity Financing
On February 9, 2021, the Company completed a registered direct offering of common stock with several existing and new institutional investors and issued 30,000,000 shares priced at $1.05 per share for gross proceeds of $31.5 million. The purpose of this financing was to fund the continued development of the Froome deposit, which is part of the Fox Complex in Timmins, Ontario, and to strengthen the Company’s balance sheet and working capital position. Total issuance costs amounted to $1.7 million for net proceeds of $29.9 million.
Flow-Through Shares Issuance – Canadian Development Expenses (“CDE”)
On January 29, 2021, the Company issued 12,600,600 flow-through common shares priced at $1.01 per share for gross proceeds of $12.7 million. The purpose of this offering was also to fund the continued development of the Froome deposit. The total proceeds were allocated between the sale of tax benefits and the sale of common shares. The total issuance costs related to the issuance of the flow-through shares was $0.7 million, which were accounted for as a reduction to the common shares. The net proceeds of $12.0 million were allocated between the sale of tax benefits in the amount of $1.2 million and the sale of common shares in the amount of $10.8 million.
The Company is required to spend these flow-through share proceeds on flow-through eligible CDE as defined by subsection 66.2(5) of the Income Tax Act (Canada). As of June 30, 2021, the Company had reached the total $12.7 million CDE spend requirement.
Flow-Through Shares Issuance – Canadian Exploration Expenditures (“CEE”)
On December 31, 2020, Flow-throughthe Company issued an additional 7,669,900 flow-through common shares priced at $1.28 per share for gross proceeds of $9.8 million. The purpose of this offering was to fund exploration activities on the Company’s properties in the Timmins region of Canada. NaN issuance costs were incurred as part of this issuance. Proceeds of $9.8 million were allocated between the sale of tax benefits in the amount of $2.1 million and Restricted cashthe sale of common shares in the amount of $7.7 million.
On September 10, 2020, the Company issued 6,298,166 flow-through common shares priced at $1.65 per share for gross proceeds of $10.4 million. The purpose of this offering was to fund exploration activities on the Company’s properties in the Timmins region of Canada. The total proceeds were allocated between the sale of tax benefits and the sale of common shares. The total issuance costs related to the issuance of the flow-through shares was $0.6 million, which are accounted for as a reduction to the common shares. The net proceeds of $9.8 million waswere allocated between the sale of tax benefits in the amount of $2.0 million and the sale of common shares in the amount of $7.8 millionmillion.
The Company is required to spend these flow-through share proceeds on flow-through eligible Canadian exploration expenditures (“CEE”)CEE as defined by subsection 66(15)66.1(6) of the Income Tax Act (Canada). As of June 30, 2021, the Company had incurred a total of $7.7 million in eligible CEE ($1.9 million in 2020 and accordingly recorded the proceeds$5.8 million as restricted cash on the Consolidated Balance Sheets as at September 30, 2020.of Q2 2021). The Company expects to fulfill its CEE commitments by the end of 2022.
17
MCEWEN MINING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 2021
(tabular amounts are in thousands of U.S. dollars, unless otherwise noted)
All 21,706,250 and 8,064,516 warrants issued under the November 2019 and March 2019 offerings remain outstanding and unexercised as at June 30, 2021.
Shares issuedStock Options
The Company’s Amended and Restated Equity Incentive Plan (“Plan”) allows for acquisitionequity awards to be granted to employees, consultants, advisors, and directors. The Plan is administered by the Compensation Committee of mineral property interest
During the three months ended September 30, 2020,Board of Directors (“Committee”), which determines the Company issued a totalterms pursuant to which any award is granted. The Committee may delegate to certain officers the authority to grant awards to certain employees (other than such officers), consultants and advisors. On April 16, 2021, the Board approved an amendment to the Plan which increased the number of 53,600 shares of common stock reserved for issuance by 12.5 million shares to a maximum of 30.0 million shares. This includes shares issued under the Plan before it was amended, with no more than 0.5 million shares subject to grants of options to an individual in exchangea calendar year. The Plan provides for the acquisitiongrant of mineral interests in Nevada.
Stock-based compensation
Duringincentive options under Section 422 of the three months ended SeptemberInternal Revenue Code (the “Code”), which provide potential tax benefits to the recipients compared to non-qualified options. At June 30, 2021, 5,716,150 options were awarded under the Plan (June 30, 2020 4,796,550– 4,963,516 awards).
NaN stock options were granted to officers, directors and certain employees at a weighted average exercise price of $1.25 per share.
Stock option expense forexercised during the three and ninesix months ended SeptemberJune 30, 2020 was $0.3 million, (September 30, 2019 – $0.3 million and $0.5 million, respectively).
2021. During the nine months ended September 30,same period in 2020, the Company issued 60,000 shares of common stock for proceeds of $0.1 million upon the exercise of the same number of stock options at a weighted average exercise price of $1.06 per share. During the nine months ending September 30, 2019, the Company issued 405,000 shares of common stock for proceeds of $0.4 million upon the exercise of the same number of stock options at a weighted average exercise price of $1.01 per share.
June 2020 Amended and Restated Credit Agreement
Pursuant to the ARCA executed on June 25, 2020, the Company issued 2,091,700 shares of common stock during Q2 2020 to the lenders as consideration for the maintenance, continuation, and the extension of the maturity date of the loan. The Company valued the shares at $1.9 million.
March 2019 Registered Offering
On March 29, 2019, the Company issued 14,193,548 Units at $1.55 per Unit, for net proceeds of $20.3 million (net of issuance costs of $1.7 million). Each Unit consisted of 1 share of common stock and one-half of one warrant. Each whole warrant is exercisable at any time for 1 share of common stock at a price of $2.00, subject to customary adjustments, expiring three years from the date of issuance. The warrants issued under the offering are not listed for trading.
On March 29, 2019, the Company also issued 1,935,484 Subscription Receipts at $1.55 per Subscription Receipt to certain executive officers, directors, employees and consultants. Upon shareholder and NYSE approval on May 23, 2019, the
17
MCEWEN MINING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September 30, 2020
(tabular amounts are in thousands of U.S. dollars, unless otherwise noted) (Continued)
Subscription Receipts were converted into 1,935,484 Units for net proceeds of $2.6 million (net of issuance costs of $0.4 million). All Units issued under the offering have identical terms.
At-the-market (“ATM”) Offering
Pursuant to an equity distribution agreement dated November 8, 2018, the Company was permitted to offer and sell from time to time shares of its common stock having an aggregate offering price of up to $90.0 million, with the net proceeds to fund working capital and general corporate purposes. During the three months ended March 31, 2019, the Company issued an aggregate of 1,010,545 shares of common stock for gross and net proceeds of $1.9 million. The Company terminated the agreement on March 13, 2019.
Shareholders’ Distributions
Pursuant to the ARCA (Note 11), the Company is prevented from paying any dividends on its common stock, so long as the loan is outstanding.
NOTE 1413 NET LOSS PER SHARE
Basic net loss per share is computed by dividing the net loss attributable to common shareholders by the weighted average number of common shares outstanding during the period. Potentially dilutive instruments are not included in the calculation of diluted net loss per share for the three and ninesix months ended SeptemberJune 30, 20202021 and 2019,2020, as they would be anti-dilutive.
For the ninesix months ended SeptemberJune 30, 2020,2021, all of the outstanding options (8,808,001)(5,716,150) and all of the outstanding warrants (29,770,766) were excluded from the computation of diluted loss per share (September(June 30, 20192020 – 5,672,9444,436,784 outstanding options and 8,064,15029,770,766 outstanding warrants).
NOTE 1514 RELATED PARTY TRANSACTIONS
The Company recorded the following expense in respect to the related parties outlined below during the periods presented:
| | | | | | | | | | | | | | | | | | | | | | | | |
|
| Three months ended September 30, |
| Nine months ended September 30, |
| Three months ended June 30, |
| Six months ended June 30, | ||||||||||||||||
| | 2020 |
| 2019 | | 2020 |
| 2019 | | 2021 |
| 2020 | | 2021 |
| 2020 | ||||||||
Lexam L.P. | | $ | — | | $ | 36 | | $ | 87 | | $ | 113 | | $ | — | | $ | — | | $ | 11 | | $ | 76 |
REVlaw | | | 34 | | | 56 | | | 122 | | | 184 | | | 107 | | | 50 | | | 142 | | | 88 |
18
MCEWEN MINING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 2021
(tabular amounts are in thousands of U.S. dollars, unless otherwise noted)
The Company has the following outstanding accounts payable balances in respect to the related parties outlined below:
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | September 30, 2020 | | December 31, 2019 | | | | | | | | June 30, 2021 | | December 31, 2020 | ||||
Lexam L.P. | | | | | | | | $ | 71 | | $ | 65 | | | | | | | | $ | 64 | | $ | 72 |
REVlaw | | | | | | | | | 53 | | | 12 | | | | | | | | | 379 | | | 90 |
An aircraft owned by Lexam L.P. (controlled by Robert R. McEwen, limited partner and beneficiary of Lexam L.P. and the Company’s Chairman and Chief Executive Officer) has been made available to the Company to expedite business travel. As Chairman and Chief Executive Officer of the Company, Mr. McEwen must travel extensively and frequently on short notice. Mr. McEwen is able to charter the aircraft from Lexam L.P. at a preferential rate approved by the Company’s independent board members under a policy whereby only the variable expenses of operating this aircraft for business related travel are eligible for reimbursement by the Company.
REVlaw is a company owned by Carmen Diges, General Counsel of the Company. The legal services of Ms. Diges as General Counsel and other support staff, as needed, are provided by REVlaw in the normal course of business and have been recorded at their exchange amount.
An affiliate of Mr. McEwen participated as a lender in the $50.0 million term loan by providing $25.0 million of the total $50.0 million funding and continued as such under the ARCA. During the three and ninesix months ended SeptemberJune 30, 2020,2021, the Company paid $0.6 million and $1.8$1.2 million respectively, (three and ninesix months ended SeptemberJune 30, 20192020 – $0.6 million and $1.8$1.2 million, respectively) in interest to this affiliate.Furthermore, pursuant to the ARCA, 1,045,850 shares of common stock valued at $0.9 million were issued to the affiliate. The payments to the affiliate of Mr. McEwen are on the same terms as the non-affiliated lender (Note 11).
18
MCEWEN MINING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September 30, 2020
(tabular amounts are in thousands of U.S. dollars, unless otherwise noted) (Continued)
NOTE 1615 FAIR VALUE ACCOUNTING
As required by accounting guidance, assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
Warrants
Upon initial recognition, the warrants received as part of the sale to Nevgold (see Note 5) transaction were fair valued using the Black-Scholes valuation model as they are not quoted in an active market. The warrants received have been accounted for as equity investment at cost. Average volatility of 94.6% was determined based on a selection of similar junior mining companies. The warrants are exercisable upon receipt and have an exercise price of $0.60 and expire June 23, 2023. As of June 30, 2021, 0 warrants related to the Nevgold transaction have been exercised.
Assets and liabilities measured at fair value on a recurring basis.
The following table identifies certain of the Company’s assets and liabilities measured at fair value on a recurring basis (at least annually) by level within the fair value hierarchy as at SeptemberJune 30, 20202021 and December 31, 2019,2020, as reported in the Consolidated Balance Sheets:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Fair value as at September 30, 2020 |
| Fair value as at December 31, 2019 | | Fair value as at June 30, 2021 |
| Fair value as at December 31, 2020 | ||||||||||||||||||||||||||||
|
| Level 1 |
| Level 2 |
| Total |
| Level 1 |
| Level 2 |
| Total |
| Level 1 |
| Level 2 |
| Total |
| Level 1 |
| Level 2 |
| Total | ||||||||||||
Marketable equity securities | | $ | — | | $ | — | | $ | — | | $ | 1,885 | | $ | — | | $ | 1,885 | | $ | 1,616 | | $ | — | | $ | 1,616 | | $ | — | | $ | — | | $ | — |
Total investments | | $ | 1,616 | | $ | — | | $ | 1,616 | | $ | — | | $ | — | | $ | — |
19
MCEWEN MINING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 2021
(tabular amounts are in thousands of U.S. dollars, unless otherwise noted)
The Company’s investments consisted of marketableMarketable equity securities which werethat the Company holds are exchange-traded and are valued using quoted market prices in active markets and as such wereare classified within Level 1 of the fair value hierarchy. The fair value of the investments wasis calculated as the quoted market price of the marketable equity security multiplied by the quantitynumber of shares held by the Company.
The fair value of financial assets and liabilities held at June 30, 2021 were assumed to approximate their carrying values due to their historically negligible credit losses.
Debt is recorded at a carrying value of $48.5 million (December 31, 2020 – $48.2 million). The debt is not traded on quoted markets and approximates its fair value based on recent refinancing.
Impairment of Mineral Property
During the ninesix months ended SeptemberJune 30, 2021, there were no indicators of impairment for the Company’s long-lived assets and the Company did not record any impairments. During the six months ended June 30, 2020, the Company recorded an impairment of long-lived assets at the Gold Bar Minemine totaling $83.8 million based onusing Level 3 inputs. See Note 9 for details.
Debt is recorded at an amortized cost of $47.9 million (December 31, 2019 – $49.5 million). The debt is not traded on quoted markets.
The fair value of other financial assets and liabilities were assumed to approximate their carrying values due to their historically negligible credit losses.
NOTE 1716 COMMITMENTS AND CONTINGENCIES
In addition to the commitments for payments on operating and finance leases and the repayment of long-term debt (Note 11), as at SeptemberJune 30, 2020,2021, the Company has the following commitments and contingencies:
Reclamation Obligations
As part of its ongoing business and operations, the Company is required to provide bonding for its environmental reclamation obligations of $20.1 million in Nevada pertaining primarily to the Tonkin and the Gold Bar properties and $11.2$11.9 million (C$14.914.7 million) in Canada with respect to the Black Fox Complex. In addition, under Canadian regulations, the Company was required to deposit approximately $0.1 million with respect to its Lexam properties in Timmins, which is recorded as non-current restricted cash (Note 18)17).
Surety Bonds
As at SeptemberJune 30, 2020,2021, the Company hashad a surety facility in place to cover all its bonding obligations, which include $20.1 million of bonding in Nevada and $11.2$11.9 million (C$14.914.7 million) of bonding in Canada. The terms of the facility carry an average annual financing fee of 2.3% and require a deposit of 11%. The surety bonds are available for draw downdraw-down by the beneficiary in the event the Company does not perform its reclamation obligations. If the specific reclamation requirements are met, the beneficiary of the surety bonds will release the instrument to the issuing entity. The Company believes it is in compliance with all applicable bonding obligations and will be able to satisfy future bonding requirements, through existing or alternative means, as they arise. As at SeptemberJune 30, 20202021, the Company heldrecorded $3.6 million in restricted cash as a deposit against the surety facility.
19
MCEWEN MINING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September 30, 2020
(tabular amounts are in thousands of U.S. dollars, unless otherwise noted) (Continued)
Streaming Agreement
As part of the acquisition of the Black Fox Complex in 2017, the Company assumed a gold purchase agreement (streaming contract) related to production from certain land claims. The Company is obligated to sell 8% of gold production from the Black Fox mine and 6.3% from the adjoining Pike River property (Black Fox extension) to Sandstorm Gold Ltd. at the lesser of market price or $561 per ounce (with inflation adjustments of up to 2% per year) until 2090.
20
MCEWEN MINING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 2021
(tabular amounts are in thousands of U.S. dollars, unless otherwise noted)
The Company records the revenue from these shipments based on the contract price at the time of delivery to the customer. During the three and ninesix months ended SeptemberJune 30, 2020,2021, the Company recorded revenue of $0.2 million and $0.9$0.6 million, respectively, (for the three and ninesix months ended SeptemberJune 30, 20192020 – $0.4$0.2 million and $1.2$0.7 million, respectively) related to the gold stream sales.
Flow-through Eligible Expenses
In January 2021, the Company closed a flow-through share issuance to fund the development at the Froome deposit. As of June 30, 2021, the Company incurred the full required spend of $12.7 million in CDE (during Q2 2021, the Company incurred the remaining $4.8 million in CDE requirement).
In 2020, the Company completed 2 flow-through share issuances. The total proceeds of $18.3 million will be used to incur qualifying CEE in the Timmins region of Ontario by December 31, 2022. As of June 30, 2021, the Company has incurred $7.3 million of the required CEE spend ($1.9 million in 2020).
NOTE 1817 CASH, CASH EQUIVALENTS AND RESTRICTED CASH
The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported in the Consolidated Balance Sheets to the amounts disclosed in the Consolidated Statements of Cash flowsFlows:
| | | | | | | | | | | | |
| | September 30, 2020 | | December 31, 2019 | | June 30, 2021 | | December 31, 2020 | ||||
Cash and cash equivalents | | $ | 7,954 | | $ | 46,452 | | $ | 42,232 | | $ | 20,843 |
Restricted cash - current (Note 13) | | | 10,193 | | | - | ||||||
Restricted cash - non-current (Note 17) | | | 3,595 | | | 48 | ||||||
Restricted cash - non-current | | | 3,625 | | | 3,595 | ||||||
Total cash, cash equivalents, and restricted cash | | $ | 21,742 | | $ | 46,500 | | $ | 45,857 | | $ | 24,438 |
Restricted cash includes proceeds received from the Flow Through Financing (Note 13) of $10.2 million completed on September 10, 2020 and $3.6 million associated with deposits related to ourthe Company’s reclamation obligations and surety facility (Note 17)16).
NOTE 18 SUBSEQUENT EVENTS
McEwen Copper Inc. (“McEwen Copper”)
On July 6, 2021, the Company announced its wholly-owned subsidiary which holds 100% of the Los Azules Copper project will be raising a financing for the continued development of this project, as well as to fund a modest exploration program for its Elder Creek Copper exploration properties in Nevada. McEwen Copper is seeking to raise up to $80 million in a private offering and Rob McEwen has committed the first $40 million dollars of this financing.
2021
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
In the following discussion, “McEwen Mining”, the “Company”, “we”, “our”, and “us” refers to McEwen Mining Inc. and as the context requires, its consolidated subsidiaries.
The following discussion updates our plan of operation for the foreseeable future. It also analyzes our financial condition at SeptemberJune 30, 20202021 and compares it to our financial condition at December 31, 2019.2020. Finally, the discussion analyzes our results of operations for the three and ninesix months ended SeptemberJune 30, 20202021 and compares those to the results for the three and ninesix months ended SeptemberJune 30, 2019.2020. With regard to properties or projects that are not in production, we provide some details of our plan of operation. We suggest that you read this discussion in conjunction with MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS and our audited consolidated financial statements contained in our annual report on Form 10-K for the year ended December 31, 2019.2020.
The discussion contains financial performance measures that are not prepared in accordance with United States Generally Accepted Accounting Principles (“US GAAP” or “GAAP”). Each of the following is a non-GAAP measure: cash gross profit, cash costs, cash cost per ounce, all-in sustaining costs, all-in sustaining cost per ounce, average realized price per ounce, and liquid assets. These non-GAAP measures are used by management in running the business and we believe they provide useful information that can be used by investors to evaluate our performance, our ability to generate cash flows and our liquidity. These measures do not have standardized definitions and should not be relied upon in isolation or as a substitute for measures prepared in accordance with GAAP. Cash Costs equals Production Costs Applicable to Sales and is used interchangeably throughout the document.this report.
For a reconciliation of these non-GAAP measures to the amounts included in our Statements of Operations for the three and ninesix months ended SeptemberJune 30, 20202021 and 20192020 and to our Balance Sheets as of SeptemberJune 30, 20202021 and December 31, 20192020 and certain limitations inherent in such measures, please see the discussion under “Non-GAAP Financial Performance Measures”, on page 38.
This discussion also includes references to “advanced-stage properties”, which are defined as properties for which advanced studies and reports have been completed indicating the presence of mineralized material or proven and probable reserves, or that have obtained or are in the process of obtaining the required permitting. Our designation of certain properties as “advanced-stage properties” should not suggest that we have or will have proven or probable reserves at those properties as defined by the Guide 7.
OVERVIEW
We were organized under the laws of the State of Colorado on July 24, 1979. We are engaged in the exploration, development, production and sale of gold and silver and exploration for copper.
We operate in the United States, Canada, Mexico and Argentina. We own a 100% interest in the Gold Bar mine in Nevada, the Black Fox gold mine in Ontario, Canada, the El Gallo Project and the Fenix silver-gold project in Sinaloa, Mexico, the Los Azules copper deposit in San Juan, Argentina, and a portfolio of exploration properties in Nevada, Canada, Mexico and Argentina. We also own a 49% interest in Minera Santa Cruz S.A. (“MSC”), owner of the producing San José silver-gold mine in Santa Cruz, Argentina, which is operated by the joint venture majority owner, Hochschild Mining plc.
In this report, “Au” represents gold; “Ag” represents silver; “oz” represents troy ounce; “t” represents metric tonne; “gpt” represents grams per metric tonne; “ft.” represents feet; “m” represents meter; “sq.” represents square; and C$ refers to Canadian dollars. All of our financial information is reported in United States (U.S.) dollars, unless otherwise noted. Throughout this Management’s Discussion and Analysis (“MDA”), the reporting periods for the three months ended SeptemberJune 30, 20202021 and 20192020 are abbreviated as Q3/20Q2/21 and Q3/19Q2/20, respectively, and the reporting periods for the ninesix months ended SeptemberJune 30, 20202021 and 20192020 are abbreviated as 9M/20H1/21 and 9M/19H1/20, respectively.
In addition, in this report, gold equivalent ounces (“Au Eq. oz”) includes gold and silver ounces calculated based on a 94:68:1 silver to gold ratio for the first quarter of 2020, 104:2021, 68:1 silver to gold ratio for the second quarter of 2020, 79:2021, 94:1 silver to gold
21 ratio for the first quarter of 2020 and 104:1 for the second quarter of 2020.
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ratio for the third quarter of 2020, 75:1 silver to gold ratio for the first quarter of 2019, 88:1 for the second quarter of 2019, and 87:1 for the third quarter of 2019. Beginning with the second quarter of 2019, we adopted a variable silver:gold ratio for reporting that approximates the average price during each fiscal quarter.
Note: We ceased active mining and processing at the El Gallo mine in the second quarter of 2018. We use the term “El Gallo Project” to refer to the ongoing reclamation and residual heap-leaching that isheap leaching taking place at this formerly-producingformerly producing mine.
Reliability of Information: MSC, the owner of the San José mine, is responsible for and has supplied to us all reported results from the San José mine. The technical information regarding the San José mine contained herein is, with few exceptions as noted, based entirely on information provided to us by MSC. Our joint venture partner, which is a subsidiary of Hochschild Mining plc, and its affiliates other than MSC do not accept responsibility for the use of project data or the adequacy or accuracy of this document.
Response to the COVID-19 Pandemic
On March 11, 2020,We are continuing to closely monitor and respond, as possible, to the World Health Organization (“WHO”) declaredongoing COVID-19 pandemic. As the COVID-19 virus a global pandemic. During late March and early April, our operations were disrupted by temporary shutdownssituation continues to protect our workforce fromrapidly evolve, ensuring the spread of the virus. An update of our operations is as follows:
During the shutdown periods, rigorous policies and procedures have been implemented at each site to minimize potential health and safety risks to our workforce.
The temporary shutdowns continue to adversely impact our mine operations, cash flow,of the Company’s employees and liquidity and are expected to continue to have adverse consequences to us beyond Q3/20. In addition to the adverse effect on production and revenue, we have incurred costs in connection with the shutdowns and subsequent ramp-up at each operation. Our liquidity and financial condition have been adversely affected and we are at an increased risk of not having sufficient cash flow to fund our operations as well as an increased risk of default under our debt agreement. Achieving and maintaining normal operating capacitycontractors is also dependent on the continued availability and logistical delivery of supplies, which remains outone of our control. top priorities. Many jurisdictions including the United States, Canada, Mexico, and Argentina have varied but continued restrictions to travel, holding public gatherings, and certain business operations.
The long-term impact of the COVID-19 outbreakpandemic on our results of operations, financial position and cash flows will depend on future developments, including the duration and spread of the outbreak, andvariants of the COVID-19 virus, related advisories and restrictions. Management is actively monitoring the global situation on our financial condition, liquidity, operations, suppliers, industry and workforce.
In response to the need of protecting our employees and our company, we formed our COVID-19 Task Team. The Task Team consists of management members from each operating site and office and have coordinated steps to prevent a wider spread of the virus, while exchanging information with associations, governments and industry peers. We have implemented preventative measures to ensure a safe working environment for our employees and contractors and to prevent the spread of COVID-19. These measures include:
● | Continuing to reinforce safety measures at all sites and offices, including contact tracing, restricting non-essential travel, and complying with public health orders, |
● | Facilitating the access to vaccinations at our sites by coordinating with local health authorities, |
● | Performing functions remotely as advised by certain jurisdictions. Our head office in Toronto, Canada was shut down on March 13, 2020. As of June 30, 2021, all corporate employees have continued to perform their functions remotely. |
The governments of the United States, Canada, MexicoDuring Q2/21 and Argentina have enacted or proposed legislation to provide relief to companies and/or individuals affected by the enforced reduction in operations. In Q3/20 and 9M/20,H1/21, we secured $nil and $1.9 million of relief from the US government under the paycheck protection program (“PPP”). The funds are fully forgivable so long as eligible expenditures are incurred in a 24-week period. In Q3/20 and 9M/20, we also secured $1.9qualified for $1.7 million and $3.4$2.8 million, respectively, of governmentin COVID-19 relief in Canadafunds through the Canadian government’s Canadian Emergency Wage Subsidy (“CEWS”) program.and Canadian Emergency Rent Subsidy (“CERS”) programs.
2223
Index to Management’s Discussion and Analysis:
| |
| |
| |
| |
| |
| |
28 | |
| |
| |
| |
| |
| |
| |
| |
| |
34 | |
34 | |
34 | |
| |
| |
37 | |
37 | |
38 | |
| |
| |
43 |
24
OPERATING AND FINANCIAL HIGHLIGHTS
Highlights for Q3/20Q2/21 are included below and discussed further under Consolidated Financial Performance:
COVID-19 shutdownsOperational Highlights & Impacts
● |
● |
Performance
● |
● | Mining at Black Fox has transitioned to the Froome mine deposit, with commercial production expected in Q4/21. |
● |
Cash Flow and Results of Operations
● |
● | Revenues of |
23
● | We reported a cash gross |
gross profit of $4.1 million. We reported a net loss of |
● | We |
Exploration and Reserves
● |
● |
(1) |
As used here and elsewhere in this report, this is a Non-GAAP financial performance measure. See “Non-GAAP Financial Performance Measures” beginning on page 38. |
(2) | At our 49% attributable interest. |
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SELECTED CONSOLIDATED FINANCIAL AND OPERATING RESULTS
The following tables present select financial and operating results of our company for the three and ninesix months ended SeptemberJune 30, 20202021 and 2019:2020:
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended September 30, | | Nine months ended September 30, | | Three months ended June 30, | | Six months ended June 30, | ||||||||||||||||
| | 2020 |
| 2019 |
| 2020 |
| 2019 | | 2021 |
| 2020 |
| 2021 |
| 2020 | ||||||||
| | (in thousands, except per share) | | (in thousands, except per share) | ||||||||||||||||||||
Revenue from gold and silver sales(1) | | $ | 27,395 | | $ | 32,691 | | $ | 77,086 | | $ | 84,657 | | $ | 40,706 | | $ | 18,291 | | $ | 64,446 | | $ | 49,691 |
Production costs applicable to sales | | $ | (23,526) | | $ | (23,584) | | $ | (74,267) | | $ | (59,432) | | $ | (31,132) | | $ | (22,354) | | $ | (54,721) | | $ | (50,741) |
Loss before income and mining taxes | | $ | (9,930) | | $ | (13,657) | | $ | (130,059) | | $ | (37,190) | | $ | (7,011) | | $ | (19,844) | | $ | (21,492) | | $ | (120,129) |
Net loss(2) | | $ | (9,778) | | $ | (11,465) | | $ | (128,783) | | $ | (34,615) | | $ | (5,989) | | $ | (19,814) | | $ | (18,455) | | $ | (119,005) |
Net loss per share(2) | | $ | (0.02) | | $ | (0.03) | | $ | (0.32) | | $ | (0.10) | | $ | (0.01) | | $ | (0.05) | | $ | (0.04) | | $ | (0.30) |
Cash (used in) operating activities | | $ | (5,174) | | $ | (12,764) | | $ | (25,273) | | $ | (21,916) | ||||||||||||
Cash provided by (used in) operating activities | | $ | 7,563 | | $ | (8,191) | | $ | (2,580) | | $ | (20,099) | ||||||||||||
Cash additions to mineral property interests and plant and equipment | | $ | 801 | | $ | 2,543 | | $ | 9,304 | | $ | 27,027 | | $ | 10,287 | | $ | 3,000 | | $ | 20,372 | | $ | 8,503 |
(1) | Excludes revenue from the San José mine, which is accounted for under the equity method. |
(2) | Results for the |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended September 30, | | Nine months ended September 30, | | Three months ended June 30, | | Six months ended June 30, | ||||||||||||||||
| | 2020 |
| 2019 |
| 2020 |
| 2019 | | 2021 |
| 2020 |
| 2021 |
| 2020 | ||||||||
| | (in thousands, except per ounce) | | (in thousands, except per ounce) | ||||||||||||||||||||
Produced - gold equivalent ounces(1) | | | 30.4 | | | 45.9 | | | 84.6 | | | 128.1 | | | 40.7 | | | 19.2 | | | 71.3 | | 54.2 | |
100% owned operations | | | 14.5 | | | 21.5 | | | 44.9 | | | 60.6 | | | 22.5 | | | 10.2 | | | 36.4 | | 30.4 | |
San José mine (49% attributable) | | | 15.9 | | | 24.4 | | | 39.7 | | | 67.5 | | | 18.2 | | | 9.0 | | | 34.9 | | 23.8 | |
Sold - gold equivalent ounces(1) | | | 30.5 | | | 45.8 | | | 85.5 | | | 129.3 | | | 40.6 | | | 22.4 | | | 70.8 | | 54.9 | |
100% owned operations | | | 14.5 | | | 22.6 | | | 45.6 | | | 63.0 | | | 22.5 | | | 10.8 | | | 36.3 | | 31.1 | |
San José mine (49% attributable) | | | 16.0 | | | 23.2 | | | 39.9 | | | 66.3 | | | 18.1 | | | 11.6 | | | 34.5 | | 23.8 | |
Average realized price ($/Au Eq. oz)(2)(3) | | $ | 1,925 | | $ | 1,478 | | $ | 1,732 | | $ | 1,372 | | $ | 1,830 | | $ | 1,733 | | $ | 1,808 | | $ | 1,641 |
P.M. Fix Gold ($/oz) | | $ | 1,909 | | $ | 1,472 | | $ | 1,735 | | $ | 1,364 | | $ | 1,817 | | $ | 1,711 | | $ | 1,805 | | $ | 1,645 |
Cash cost per ounce ($/Au Eq. oz sold):(2) | | | | | | | | | | | | | | | | | | | | | | | | |
100% owned operations | | $ | 1,583 | | $ | 1,027 | | $ | 1,622 | | $ | 924 | | $ | 1,286 | | $ | 2,170 | | $ | 1,407 | | $ | 1,641 |
San José mine (49% attributable) | | $ | 1,269 | | $ | 915 | | $ | 1,232 | | $ | 883 | | $ | 1,105 | | $ | 1,280 | | $ | 1,097 | | $ | 1,207 |
AISC per ounce ($/Au Eq. oz sold):(2) | | | | | | | | | | | | | | | | | | | | | | | | |
100% owned operations | | $ | 1,713 | | $ | 1,289 | | $ | 1,967 | | $ | 1,272 | | $ | 1,447 | | $ | 2,719 | | $ | 1,565 | | $ | 2,086 |
San José mine (49% attributable) | | $ | 1,538 | | $ | 1,204 | | $ | 1,536 | | $ | 1,179 | | $ | 1,500 | | $ | 1,476 | | $ | 1,418 | | $ | 1,535 |
Cash gross profit(2) | | $ | 3,869 | | $ | 9,107 | | $ | 2,819 | | | 25,225 | ||||||||||||
Cash gross profit (loss)(2) | | $ | 9,574 | | $ | (4,063) | | $ | 9,725 | | | (1,050) | ||||||||||||
Silver : Gold ratio(1) | | | 79 : 1 | | | 87:1 | | | 86 : 1 | | | 84:1 | | | 68 : 1 | | | 104:1 | | | 68 : 1 | | 100:1 |
(1) | Silver production is presented as a gold equivalent; silver:gold ratio of |
(2) | As used here and elsewhere in this report, this is a Non-GAAP financial performance measure. See “Non-GAAP Financial Performance Measures” beginning on page 38. |
(3) | On sales from 100% owned operations only, excluding sales from our stream. |
(4) | Average for the Q2/21 period. |
CONSOLIDATED PERFORMANCE
For Q3/20,In Q2/21, we reported a net loss of $9.8$6.0 million (or $0.02$0.01 per share) compared to a $11.5loss of $19.8 million loss in Q3/19 (or $0.03$0.05 per share). Exploration expenses decreased $9.3 million in the 2020 period, as we tried to conserve capital.quarter ended June 30, 2020. The $2.6 million income from our investmentimprovement in MSC resulting from improved operations at the San José mine contributed to the reduced loss. These were partially offsetQ2/21 is primarily driven by a $2.3$13.5 million decreaseincrease in gross profit a $2.7 million reduction in other income and a $2.0 million decrease in income and mining tax compared to 2019.
The larger drill program for Q3/19 was also due to flow-through exploration commitments that needed to be expended in 2019. MSC’s results benefited from significantlyincreased production and sales and a higher average realized gold price.
Cash gross profit (a non-GAAP measure) of $9.6 million for Q2/21 increased by $13.6 million from the $4.1 million Q2/20 cash gross loss. The change is attributed to increased production and silver prices (30% and 58%sales in Q2/21, higher average realized gold prices and silver prices, respectively, in Q3/20 compareddecreased per ounce cash costs as operations at Gold Bar significantly improved and as the Fox Complex ramped up activities at the Froome mine. See “Non-GAAP Financial Performance Measures” for a reconciliation to Q3/19) and lower depreciation and depletion expenses due to lower mineralized material mined and processed.gross (loss) profit, the nearest GAAP measure.
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Lower gross profit was the result of less gold and silver ounces produced and sold and higher cash cost per ounce which were partially offset by higher average realized gold prices. Other income was lower in Q3/20 due to $nil gain on investments ($3.2 million gain in Q3/19) and a $0.1 million foreign currency loss ($1.6 million foreign currency gain in Q3/19), both partially offset by $2.6 million COVID relief received in Q3/20 ($nil in Q3/19).
In Q2/19, we adopted a variable silver:gold ratio for reporting gold equivalent ounces produced and sold, which approximates the average market ratio during the current period. We had previously we used a fixed 75:1 silver:gold ratio. The change in the silver:gold ratio primarily impacts gold equivalent ounces produced and sold as well as cash cost and all-in sustaining cost per gold equivalent ounce for the San José mine.
Production from our 100% owned mines were 14,500of 22,500 gold equivalent ounces (GEOs) in Q3/20, which decreasedQ2/21 increased by 7,000 gold equivalent ounces, or 33%,12,300 GEOs compared to Q3/19.Q2/20. The decline reflectsincreases relative to the ramp-upprior period at the Fox Complex (4,900 more GEOs) and Gold Bar (8,000 more GEOs) operations were in line with our expectations given the transition to normal capacity being phased overFroome production at the quarterFox Complex and the improvement of operations as a result of increased efficiencies at the Gold Bar mine (4,200 fewer ounces), where day and night shifts only resumed during September, and the Black Fox mine (1,700 fewer ounces). In addition, there was lower expectedmine. The decrease in production from residual leaching at the El Gallo Project (1,100project (600 fewer ounces).GEOs relative to Q2/20) is in line with our expectation as residual heap leach operations wind down.
Our share of the San José mine production was 15,900 gold equivalent ounces18,200 GEOs in Q3/20,Q2/21 which was 8,500 ounces, or 35%, lower102% higher than the 9,000 GEOs produced in Q3/19. Although the mine was able to restart operations in late April, the operations remain below capacity due to government imposed travel restrictions to combat the spread of COVID-19. This continues to pose significant challenges in mobilizing personnel to the mine site.Q2/20.
CONSOLIDATED FINANCIAL REVIEW
Revenue from gold and silver sales in Q3/20 decreasedQ2/21 of $40.7 million increased by 16% to $27.4123% or $22.4 million compared to Q3/19,reflecting 8,100, or 36%, fewer gold equivalent ouncesQ2/20. The increase reflects 11,700 more GEOs sold from our 100% owned mines, partly offsetoperations. The increase in revenues was also positively impacted by a higher average realized gold price per ouncein the quarter compared to same period in 2019Q2/20 ($1,925/1,830/oz in Q3/Q2/21; $1,733/oz in Q2/20).
The increase in sales in Q2/21 relative Q2/20 or $447/oz higher).The decrease in gold equivalent ouncesincludes 8,200 and 4,300 more GEOs sold in Q3/20 is due to lower production reflecting the phased ramp-up to normal capacity at thefrom Gold Bar and Blackthe Fox mines noted above.Complex, respectively.
Revenue from gold and silver sales in 9M/20 decreasedH1/21 of $64.4 million increased by 9% to $77.1 million30% compared to 9M/19,reflecting 17,400, or 28%, fewerrevenues of $49.7 million in H1/20. The increase reflects the sale of 5,200 more gold equivalent ounces sold from our 100% owned mines, whichmines. The increase in revenues was partly offsetalso positively impacted by a higher average realized gold price per ouncein the H1/21 compared to same period in 2019H1/20 ($1,732/1,808/oz in 9M/H1/21; $1,641/oz in H1/20).
The increase in sales in H1/21 relative to H1/20 or $360/oz higher). The decrease in gold equivalent ounces sold in 9M/20 is mainly due to lower production in the secondincludes 6,400 and third quarters of 2020 as result of the temporary shutdown and phased ramp-up of operations due to the COVID-19 pandemic; partially offset by increased production at1,000 more GEOs from the Gold Bar mine in the first quarter of 2020 comparedand Fox Complex operations, respectively, and 2,100 fewer GEOs from El Gallo as operations continue to the same period of 2019, when the Gold Bar mine was in pre commercial production.wind down.
Production Costs applicable to sales in Q3/20remained consistent at $23.5Q2/21 increased by 39% to $31.1 million compared to Q3/19, despite 36% less gold equivalent ounces sold, which was almost totallyQ2/20.The increase is driven by an increase in sales production in the quarter partially offset by a significantly higherdecrease in the consolidated cash cost per ounce at all our operations (details insold. Refer to the “Operations Review” section).“Results of Operations” sections for further details.
Production Costs applicable to sales in 9M/20H1/21 increased by 25%8% to $74.3$54.7 million compared to 9M/19, despite 28% less gold equivalent ounces sold, which was more than offset by a significantly higherH1/20. Despite the increase in sales volume relative to H1/20, consolidated cost per ounce decreased as a result of improved grades at all our operations (details in the “Operations Review” section).
DepreciationFox Complex and depletion for Q3/20 decreased by 39% to $4.6 million compared to Q3/19, reflecting fewer gold ounces sold from all our sites and a lower depreciable and depletable asset base after theincreased efficiencies at Gold Bar impairment in the first quarter.
Depreciation and depletion for 9M/20 decreased by 8% to $16.1 million compared to 9M/19, reflectingfewer gold ounces sold from the Black Fox mine and the El Gallo Project, which was partly offset by slightly more gold ounces sold from the Gold Bar mine in 9M/20.Bar.
Advanced projects costs for Q3/Q2/21 and H1/21 of $0.8 million and $2.6 million, respectively,decreased from the $2.9 million and $5.4 million, respectively, spent in Q2/20 and 9M/H1/20. Costs during Q2/21 included continued spending for the Fox Complex expansion PEA, and the Fenix project in Mexico. Expenditures during H2/20 increasedalso included costs related to $4.0Froome developments.
Exploration costs of $6.9 million and $9.5$11.9 million or 88%for Q2/21 and 38% higher,H1/21, respectively, increased by $3.4 million and $4.5 million, compared to the same periods in 2020.Exploration activities ramped up in 2021 following the funding received from our 2020 flow-through share programs. The funds are being used to expand high potential target areas and are incurring eligible Canadian exploration expenditures (“CEE”) in the Timmins region of 2019. Advanced projectsOntario. Refer to Note 12 to the Consolidated Financial Statements, Shareholders’ Equity.
Loss from investment in Q3/MSC of $1.9 million and $2.4 million in Q2/21 and H1/21, respectively, increased by $0.8 million and decreased by $1.3 million relative to Q2/20 and 9M/H1/20, included spending forrespectively. The Q2/21 change is largely driven by higher than expected costs related to COVID-19, in Q1/21. The change from H1/20 to H1/21 is driven by an increase in attributable net income partially offset by an increase in the fair value amortization.
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advancing the Froome project in Timmins, Ontario, expenditures related to property holding payments and other spending for the Fenix project in Mexico and engineering and permit work at the Gold Bar South property in Nevada.
Exploration costs of $4.4 million and $11.8 million, respectively for Q3/20 and 9M/20, decreased by 68% and 50%, compared to the same periods of 2019.Exploration activities decreased since we did not have any flow-through spending requirements to satisfy during the first eight months in 2020. During 9M/19, $11.0 million of flow-through qualifying exploration expenditures were incurred compared to $0.4 million during 9M/20.
General and administrative expenses of $2.5 million and $6.8 million in Q3/20 and 9M/20, respectively, decreased by 4% and 15% compared to 2019 as a result of the reduction of corporate activities in 2020.
Income from investment in MSC of $2.6 million in Q3/20 compared to a loss of $0.3 million in Q3/19, while a loss from investment in MSC of $1.1 million in 9M/20 compared to a loss of $6.8 million in the same period of 2019. Improved performance in Q3/20 and 9M/20 reflects significantly higher gross profit of $21.6 million and $32.4 million, respectively, on a 100% basis, compared to $13.0 million and $19.9 million in Q3/19 and 9M/19, and lower current and deferred income and mining tax expense of $3.0 million in 9M/20, compared to $8.4 million in 9M/19. Higher gross profit in Q3/20 was partially offset by higher exploration expenses ($2.8 million compared to $1.5 million in Q3/19). Higher gross profit and lower current and deferred income and mining tax expense in 9M/20 were partially offset by $7.2 million of other expenses incurred during the shutdown of operations in 2020 ($nil in 2019). Higher gross profit in 2020 was due primarily to higher average realized gold and silver prices, despite fewer gold equivalent ounces sold and $10.2 million and $15.5 million operating costs due to the COVID-19 pandemic in Q3/20 and 9M/20, respectively.
Revision of estimates and accretion of asset retirement obligations of $0.9 million and $2.0$0.5 million in Q3/20 and 9M/20Q2/21 remained consistent relative to Q2/20. The H1/21 balance of $1.4 million increased by 79% and 45% respectively, compared to Q3/19 and 9M/19,$0.3 million from H1/20 due primarily to reclamation adjustments reflecting updated estimates of $0.4 million and $0.6 million in 2020, compared to $nil and $0.1 million in 2019.
Impairment of Gold Bar mine mineral property interests and plant and equipment carrying value for 9M/20 was $83.8 million. During the first quarter of 2020, we performed a comprehensive review of our Gold Bar mine and determined that indicators of impairment existed. A recoverability test was performed and we concluded that the carrying value of the long-lived assets for the Gold Bar mine was impaired based on a reduction in preliminary estimated resources and expected future production.
Other operating of $nil and $2.0 million in Q3/20 and 9M/20 compared to $nil in the same periods of 2019. Other operating relate to the expenses of the temporary suspension or curtailment of our operations at the Gold Bar and Black Fox mines resulting from the pandemic.estimate updates.
Interest and other finance expense,expenses, net was $2.0 million and $5.6of $1.9 million in Q3/20Q1/21 remained consistent relative to Q1/20. The H1/21 balance decreased by $1.2 million, driven by the amortization of the flow-through premium as eligible CDE and 9M/20 compared to $0.7 million and $3.9 million in Q3/19 and 9M/19. The increase in Q3/20 was mainly due to $0.3 million higher interest expense for the debt facility and other finance expense. The increase in 9M/20 is due primarily to the capitalization of $0.6 million of interest expense for the debt facility whichCEE expenditures were capitalized to the Gold Bar mine construction in 2019, while $nil was capitalized in 2020 as the mine is in full production, and other finance expense.incurred.
Other income of $2.1$3.8 million and $6.1$5.2 million for Q3/in Q2/21 and H1/21, increased by $0.8 million and $1.3 million compared to the same periods of 2020. The Q2/21 and H1/21 balances relate to proceeds from COVID-19 relief programs in Canada and income from the sale of certain property. Please see Note 5 to the Consolidated Financial Statements, Investments. The Q2/20 and 9M/H1/20 respectively, decreased by $2.7balances relate largely to the proceeds received from both the Canadian and $0.2 million when compared to Q3/19 and 9M/19. Other income in Q3/20 decreased mainly due to $nil gain on investments ($3.2 million gain in Q3/19) and a $0.1 million foreign currency loss ($1.6 million foreign currency gain in Q3/19). Both were partially offset by $2.6 million COVID relief funds in Q3/20 ($nil in Q3/19). Other income in 9M/20 decreased mainly due to a $0.6 million loss on investments ($5.0 million gain in 9M/19) partly offset by $5.3 million COVID relief funds in Q3/20 ($nil in Q3/19).U.S. governments for COVID-19 support.
Income and mining tax recovery of $0.2$1.0 million and $1.3$3.0 million, respectively, for Q3/20Q2/21 and 9M/20,H1/21, increased compared to $2.2$0.1 million and $2.6$1.1 million in the same periods of 2019.2020. The changesincrease in the income and mining tax recovery in the 2021 periods is primarily reflectdue to the fluctuations offlow-through share premium amortization partially offset by lower recoveries from the weakening Argentine and Mexican pesos against the U.S. dollar, causing fluctuations to the Company’s deferred tax liabilities denominated in the respective foreign currency.currencies.
27
LIQUIDITY AND CAPITAL RESOURCES
Our cash balance at September 30, 2020 of $18.1 million, which includes cash and cash equivalents balance as at June 30, 2021 of $7.9$42.2 million, and current restricted cash of $10.2increased from $20.8 million decreased from $46.5 millionas at December 31, 2019 ($46.5 million cash and cash equivalents).2020. The decreaseincrease in cash and cash equivalents as at SeptemberJune 30, 2020 is mainly2021 was primarily due to $25.3cash provided from financing activities of $41.8 million, $7.5 million in dividends received from MSC, offset by $8.1 million in cash used in operations, including a $5.2 million reduction in accounts payable and accrued liabilities, and $9.3$20.4 million invested in mineral property, interests and plant and equipment. Restricted cash represents remaining exploration commitments of $10.2 million from the flow-through financing completed on September 10, 2020. For more details on our flow-through financing refer to Note 13 to the Consolidated Financial Statements, Shareholders’ Equity.
Cash from financing activities included gross proceeds of $12.7 million (net proceeds of $12.0 million) from the issuance of Canadian development expenditures (“CDE”) flow-through shares on January 29, 2021 and gross proceeds of $31.5 million (net proceeds of $29.9 million) from a registered direct equity offering on February 9, 2021. We are required to spend the flow-through share proceeds on CDE flow-through eligible Canadian exploration expenditures (“CEE”) as defined by subsection 66(15)66.2(5) of the Income Tax Act (Canada). We expectAs of June 30, 2021, we have met the CDE spend requirement. For more details on our flow-through share financing refer to fulfill our CEE commitments in 2021.Note 12 to the Consolidated Financial Statements, Shareholders’ Equity.
Working capital as at SeptemberJune 30, 20202021 of $21.6$30.0 million decreasedincreased by $21.6$22.0 million from December 31, 2019, reflecting2020. The change is largely attributed to the decreaseincrease in cash and cash equivalents and current restricted cash of $28.4 million anddriven by the decrease of $4.1 million in our heap leach pad inventory balances. These factors were partly offset by $10.0 million of current debt as of December 31, 2019 reclassified to non-current liabilities due to the two-year extension of the principal repayments under the Amended and Restated Credit Agreement (“ARCA”) closed on June 25, 2020. For more details on the ARCA, please refer to Note 11 to the Consolidated Financial Statements, Debt.financing activities discussed above.
Cash used in operations during 9M/20 was $25.3in H1/21 of $8.1 million compared to $21.9decreased from the $20.1 million cash used in operations in 9M/19,H1/20. The $12.0 million variance is primarily driven by the change was due to$16.1 million reduction in net loss versus the lower revenue from the salesame period last year (H1/20 loss; net of 28% fewer ounces and higher production costs applicable to sales in 2020. Both lower revenue and higher production costs applicable to sales in 2020 were partially offset by a 26% higher average realized price per ounce sold, lower exploration spending due to not having any flow-through spending commitments during the first eight months of 2020 and an increase in other income as a result of COVID-19 relief funds.Q1/20 impairment charge).
Cash used in investing activities of $7.8$12.3 million in 9M/20 decreased significantly comparedH1/21 increased relative to $18.8the $7.9 million used in 9M/19, withH1/20. The change is largely attributed to the reduction primarily dueincreased capital development costs incurred at the Froome mine deposit at the Fox Complex, as we transition to $17.7 million less spending for mineral property interests and plant and equipment as the construction of the Gold Bar mine was completedproduction in May 2019. This decrease was2021, partially offset by lower proceeds from sale of investments ($1.3a $7.6 million in 2020 compared to $4.2 million in 2019) and lower dividendsdividend received from MSC in 9M/20 ($0.3 million in 2020 compared to $4.0 million in 2019).the H1/21 period.
During 9M/20,H1/21, we spent $9.3$20.4 million on mineral property and plant and equipment predominately for(an increase of $11.9 million relative to the H1/20 period). The additions were primarily related to capital development costs at the Black Fox mine and infill drilling at the Gold Bar mine.Froome project as we are on schedule to transition to commercial production in Q4/21.
Financing activities provided $8.3$41.8 million in cash in 9M/20, with $9.8H1/21, primarily from $12.0 million comingprovided from the net proceeds from the “CDE” flow-through financingshare raise completed in September 2020 (less the issuance costs); compared to $23.6January 2021 and $29.8 million generated in 9M/19, with $22.9 million comingprovided from the March 2019 Registered Offering.February 2021 registered direct common stock offering.
Going concern
The accompanying interim financial statementsWe believe we have been prepared onsufficient liquidity along with funds generated from ongoing operations, to fund anticipated cash requirements for operations, capital expenditures and working capital purposes for the going concern basis of accounting, which assumes that the Company will continue as a going concern and which contemplates the realization of assets and satisfaction of liabilities and commitments in the normal course of business. In the preparation of the interim financial statements, management is required to identify when events or conditions indicate that substantial doubt may exist about the Company’s ability to continue as a going concern. Substantial doubt about the Company’s ability to continue as a going concern would exist when relevant conditions and events, considered in aggregate, indicate that the Company will not be able to meet its obligations as they become due for a period of at least, but not limited to,next 12 months from the balance sheet date. When the Company identifies conditions or events that raise potential for substantial doubt about its ability to continue as a going concern, the Company considers whether its plans that are intended to mitigate those relevant conditions or events will alleviate the potential substantial doubt.
In June 2020, the Company refinanced its senior secured term loan facility (for more information refer to Note 11 to the Consolidated Financial Statements, Debt) and in September 2020, the Company completed a flow through financing (for more information refer to Note 13 to the Consolidated Financial Statements, Shareholder’s Equity ). The Company wasmonths.
28
also in full compliance with its debt covenants as at September 30, 2020. However, based on the significant expected resource reduction at the Gold Bar mine, resulting in an initial revised mine plan which yields less cash flow, operational challenges at Black Fox, the capital investment commitment required to develop the Froome access portal and the disruptions to the Company’s operations caused by the COVID-19 pandemic, there is uncertainty about our ability to both generate sufficient operating cash flow to conduct further operation, exploration and development of our mineral properties and to remain in compliance with certain of our debt covenants over the next 12 months. Non-compliance with these covenants would result in a breach under the Company’s debt agreement.
In response to this uncertainty, we are evaluating all options, including accessing capital markets, sale of certain assets, and expenditure reductions across the Company. Our ability to continue as a going concern is dependent on the successful completion of one or a combination of these initiatives to ensure that we have sufficient liquidity in order to fund our operations and remain in compliance with our debt covenants. After considering these plans, management has concluded that there are no material uncertainties relating to events or conditions that cast substantial doubt upon the our ability to continue as a going concern for a period of 12 months from the consolidated balance sheet date. The estimates used by management in reaching this conclusion are based on information available as at the date these financial statements were authorized for issuance, and include internally generated cash flow forecasts. Accordingly, actual results could differ from these estimates and resulting variances may be material to management’s assessment.
29
OPERATIONS REVIEW
U.S.A. Segment
The U.S.A. segment is comprised of the Gold Bar mine and certainother exploration properties.properties in Nevada, U.S.A.
Gold Bar Mine
The following table sets out certain operating results for the Gold Bar mine for the three and ninesix months ended SeptemberJune 30, 20202021 and 2019. As the Gold Bar mine achieved commercial production on May 23, 2019, the comparatives for cash costs, cash cost per ounce, all-in sustaining costs and all-in sustaining costs per ounce for the nine months ended September 30, 2019 include sales and costs from pre-commercial production during the first months of 2019:2020.
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended September 30, | | Nine months ended September 30, | | Three months ended June 30, | | Six months ended June 30, | ||||||||||||||||
|
| 2020 |
| | 2019 |
| 2020 |
| 2019 |
| 2021 |
| | 2020 |
| 2021 |
| 2020 | ||||||
Operating Results | | (in thousands, unless otherwise indicated) | | (in thousands, unless otherwise indicated) | ||||||||||||||||||||
Mined mineralized material (t) |
| | 222 |
| | 631 |
| | 715 |
| | 1,302 |
| | 646 |
| | 65 |
| | 1,110 |
| | 492 |
Average grade (gpt Au) |
| | 0.73 |
| | 0.88 |
| | 0.70 |
| | 0.93 |
| | 0.73 |
| | 0.82 |
| | 0.74 |
| | 0.69 |
Processed mineralized material (t) |
| | 229 |
| | 867 |
| | 812 |
| | 1,690 |
| | 727 |
| | 108 |
| | 1,129 |
| | 583 |
Average grade (gpt Au) |
| | 0.73 |
| | 0.92 |
| | 0.68 |
| | 0.91 |
| | 0.76 |
| | 0.77 |
| | 0.76 |
| | 0.66 |
Gold ounces: | | | | | | | | | | | | | ||||||||||||
Produced |
| | 6.8 |
| | 11.0 |
| | 22.0 |
| | 21.0 | ||||||||||||
Sold |
| | 6.8 |
| | 11.2 |
| | 22.1 |
| | 20.5 | ||||||||||||
Silver ounces: | | | | | | | | | | | | | ||||||||||||
Produced |
| | 0.1 |
| | 0.2 |
| | 0.5 |
| | 0.4 | ||||||||||||
Sold |
| | 0.0 |
| | 0.3 |
| | 0.6 |
| | 0.3 | ||||||||||||
Gold equivalent ounces: | | | | | | | | | | | | | | | | | | | | | | | | |
Produced |
| | 6.8 |
| | 11.0 |
| | 22.0 |
| | 21.0 |
| | 14.1 |
| | 6.1 |
| | 21.5 |
| | 15.2 |
Sold |
| | 6.8 |
| | 11.2 |
| | 22.1 |
| | 20.5 |
| | 14.4 |
| | 6.2 |
| | 21.7 |
| | 15.3 |
Revenue from gold and silver sales | | $ | 13,042 | | $ | 16,577 | | $ | 38,129 | | $ | 28,941 | | $ | 26,343 | | $ | 10,770 | | $ | 39,236 | | $ | 25,088 |
Cash costs(1) | | $ | 10,791 | | $ | 12,156 | | $ | 38,863 | | $ | 20,798 | | $ | 21,067 | | $ | 11,039 | | $ | 34,623 | | $ | 28,071 |
Cash cost per ounce ($/Au Eq. oz sold)(1) | | $ | 1,585 | | $ | 1,088 | | $ | 1,762 | | $ | 1,014 | | $ | 1,463 | | $ | 1,772 | | $ | 1,598 | | $ | 1,840 |
All‑in sustaining costs(1) | | $ | 12,043 | | $ | 13,795 | | $ | 47,031 | | $ | 24,613 | | $ | 23,314 | | $ | 15,336 | | $ | 37,374 | | $ | 34,985 |
AISC per ounce ($/Au Eq. oz sold)(1) | | $ | 1,769 | | $ | 1,235 | | $ | 2,132 | | $ | 1,200 | | $ | 1,619 | | $ | 2,462 | | $ | 1,725 | | $ | 2,293 |
Silver : gold ratio | |
| 79 : 1 | |
| 87 : 1 | |
| 86 : 1 | |
| 83 : 1 | |
| 68 : 1 | |
| 104 : 1 | |
| 68 : 1 | |
| 100 : 1 |
(1) | As used here and elsewhere in this report, this is a Non-GAAP financial performance measure. Cash costs for the Company’s 100% owned operations equal Production costs applicable to sales. See “Non-GAAP Financial Performance Measures” beginning on page 38 for additional information. |
In Q3/20, 2021 compared to 2020
Gold Bar produced 6,80014,064 and 21,479 gold equivalent ounces. Full operations with dayounces in Q2/21 and night shifts resumedH1/21, respectively. This reflects a 132% and 41% increase from the 6,061 and 15,194 gold equivalent ounces produced in September. The slower ramp up at Gold Bar, after the COVID-19 related shut down, was due to the Company completing drilling, assaying,Q2/20 and a new in-house resource model to develop a plan forward that includes mining from Gold Bar South. During the quarter,H1/20, respectively. In H1/21, we progressed several key business improvement initiatives intended to support the turnaround of our operations, which include mining optimization evaluations, improvingimproved contractor mining efficiencies, assessing material handlingprocessing optimizations, and processing alternatives,ore control. In Q2/20 and further definition drilling at the Gold Pick. A new reserve estimate and feasibility study update for Gold Bar are expected to be announced towards the end of the fourth quarter.H1/20, production results were negatively impacted by COVID-19 related operation suspensions.
Revenue from gold and silver sales decreasedof $26.3 million increased in Q3/20Q2/21 by $3.5$15.6 million compared to Q3/19,Q2/20, reflecting the decreasea 131% increase in gold equivalent ounces produced and sold, which was partially offset by higher average realized gold prices in 2020.
sold. Revenue from gold and silver sales significantly increased were $39.2 million in 9M/20 by $9.2 millionH1/21 compared to 9M/19, mainly$25.1 million in H1/20, due to higher average realized gold pricesthe operation suspensions discussed above.
Production costs applicable to sales of $21.1 million in 2020, coupled with a slightQ2/21 increased by $10.1 million from $11.0 million in Q2/20. The increase inis primarily attributed to the number ofincrease in gold equivalent ounces produced and sold. Production costs applicable to sales were $34.6 million in H1/21, compared to $28.1 million in H1/20, reflecting 63% more gold equivalent ounces sold in 2020.H1/20 and higher drawdown of gold ounces from our inventories.
Cash cost and AISC per gold equivalent ounce were $1,463 and $1,619 in Q2/21 respectively; and $1,772 and $2,462 in Q2/20, respectively. Cash costs and AISC per GEO decreased by 18% and 35% relative to the 2020 periods. The cost decrease is driven by the increase in production and by the significant operational improvements we have been continuing to work through the past year. We expect to see this trend continue into H2/2021.
Cash cost and AISC per gold equivalent ounce were $1,598 and $1,725 in H1/21 and $1,840 and $2,293 in H1/20. The decrease in cash cost per GEO is driven by the improvement operations discussed above.
29
Exploration Activities – Nevada
In Q2/21 and H1/21, we incurred $1.3 million and $1.7 million, respectively, ($1.6 million and $2.0 million in Q2/20 and H1/20, respectively) in exploration expenditures in the Gold Bar mine reached commercial production in May 2019.area. Drilling activities during 2021 were focused primarily on the Ridge deposit located west of the active Pick mine. Exploration efforts focused on de-risking known mineralization and on potential deposit expansion.
Additional exploration activities at the Atlas Pit (formerly Old Gold Bar) are targeting potential unmined mineralization and extending known mineralized structures. Geologic mapping and modelling identified several drill targets for a Phase I program. Activities at the Tonkin property include evaluating regional geology and mineralization controls, outcropping oxide mineralization and collecting samples for metallurgical test work.
Ongoing exploration activities at the Tonkin, East Pick, Cabin, Pot Canyon, and Gold Canyon targets are planned to continue through H2/21.
Exploration at Gold Bar South has successfully advanced the project and is expected to contribute to Gold Bar mine’s future production.
30
Production costs applicable to sales were $10.8 million in Q3/20, compared to $12.2 million in Q3/19, reflecting 39% fewer gold ounces sold in Q3/20, partly offset by higher costs of the gold ounces drawn down from the heap leach and in-circuit inventory balances. Production costs applicable to sales were $38.9 million in 9M/20, compared to $20.8 million in 9M/19, due primarily to a 8% increase in gold ounces sold in 9M/20 and the higher costs of the gold ounces drawn down from our inventories as noted above.
Cash cost and AISC per gold equivalent ounce of $1,585 and $1,769 in Q3/20 were negatively impacted by lower tonnes mined and placed on the heap leach pad, as noted above, and slower than expected ramp up after the temporary suspension caused by the COVID-19 pandemic in the second quarter.
Cash cost and AISC per gold equivalent ounce of $1,762 and $2,132 in 9M/20 were also significantly impacted by $4.5 million of pre-strip costs, $1.3 million of in-mine exploration expenditures and a $1.0 million write-down of the stockpile, heap leach and in-circuit inventory balances earlier in the year.
Gold Bar mine impairment
In Q1/20, we recorded an impairment charge of $83.8 million based on the preliminary revised mine plan, which indicated a significant reduction in contained ounces relative to the 2018 reserve estimate. The impairment charge reduced the carrying value of the Gold Bar mine mineral property interests and plant and equipment.
Evaluation of the resource estimate continued in the third quarter of 2020 and a new reserve estimate and feasibility study update for Gold Bar are expected to be announced towards the end of the fourth quarter of 2020.
Exploration Activities – Nevada
In Q3/20 and 9M/20, we spent $2.4 million and $5.2 million, respectively, on exploration activities in and around the Gold Bar mine, compared to $4.3 million and $6.2 million spent on same activities in Q3/19 and 9M/19.
Exploration drilling was conducted in and around the Pick pit in Q3/20 and increased our confidence in the revised geologic model and demonstrated potential near mine exploration opportunities.
Drilling at the Gold Bar South satellite deposit continued in Q3/20. We verified and extended mineralization toward the north and south of the deposit. Permitting for development and production from Gold Bar South is also in progress and we expect to start mining this satellite deposit in the second half of 2021.
31
Canada Segment
The Canada segment is comprised of the Black Fox Complex gold assets, which includes the Black Fox goldunderground mine, andthe Froome underground mine, the Grey Fox Stock and FroomeStock advanced-stage projects, the Stock mill, and other gold exploration properties located in Timmins, Ontario, Canada.
Black Fox Minemine and Froome mine
The Black Fox mine currently has less than one year remainingproduction continues to wind down as production shifts to the Froome mine. Commercial production at the Froome mine is expected to be reached in its expectedQ4/21. More underground exploration drilling on the East and West Flanks is planned with the objective of extending the Froome deposit near existing and planned infrastructure. The deposit remains open at depth. Potential exists for echelon mineralization in the hanging-wall and footwall.
In Q2/21, work progressed on efforts to expand the Fox Complex with a PEA examining the potential for increasing gold production and mine life. We planThe PEA will analyze mining from several potential deposits that could be economically processed at the Stock Mill. The results of the PEA are expected to continue our near-mine exploration efforts, even when operations commence at Froome, with the goal of increasing resources, converting resources to reserves and extending the mine life.be released in H2/21.
The following table sets out certainsummarizes the operating results for the Black Fox mine for the three and ninesix months ended SeptemberJune 30, 20202021 and 2019:2020:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended September 30, | | Nine months ended September 30, | | Three months ended June 30, | | Six months ended June 30, | |||||||||||||||||
|
| 2020 |
| 2019 |
| 2020 |
| 2019 |
| 2021 |
| 2020 |
| 2021 |
| 2020 |
| ||||||||
Operating Results | | (in thousands, unless otherwise indicated) | | | (in thousands, unless otherwise indicated) | | |||||||||||||||||||
Mined mineralized material (t) |
| | 67 |
| | 48 |
| | 139 |
| | 145 |
| | 57 |
| | 32 |
| | 104 |
| | 72 |
|
Average grade (gpt Au) |
| | 3.00 |
| | 4.82 |
| | 3.28 |
| | 5.05 |
| | 3.06 |
| | 2.25 |
| | 3.14 |
| | 3.55 |
|
Processed mineralized material (t) |
| | 70 |
| | 58 |
| | 167 |
| | 164 |
| | 71 |
| | 41 |
| | 118 |
| | 97 |
|
Average grade (gpt Au) |
| | 2.96 |
| | 4.02 |
| | 2.95 |
| | 4.99 |
| | 3.27 |
| | 2.15 |
| | 3.26 |
| | 2.95 |
|
Gold equivalent ounces: | | | | | | | | | | | | | | | | | | | | | | | | | |
Produced |
| | 5.8 |
| | 7.4 |
| | 16.3 |
| | 25.8 |
| | 7.1 |
| | 2.2 |
| | 12.3 |
| | 10.5 |
|
Sold | | | 5.6 | | | 8.0 | | | 16.8 | | | 28.0 | | | 6.9 | | | 2.6 | | | 12.2 | | | 11.2 | |
Revenue from gold and silver sales | | $ | 10,352 | | $ | 11,147 | | $ | 27,257 | | $ | 36,139 | | $ | 12,178 | | $ | 4,166 | | $ | 20,739 | | $ | 16,905 | |
Cash costs | | $ | 8,874 | | $ | 7,550 | | $ | 24,231 | | $ | 24,025 | | $ | 6,331 | | $ | 8,150 | | $ | 12,987 | | $ | 15,357 | |
Cash cost per ounce ($/Au Eq. oz sold) | | $ | 1,581 | | $ | 941 | | $ | 1,440 | | $ | 859 | | $ | 917 | | $ | 3,121 | | $ | 1,066 | | $ | 1,369 | |
All‑in sustaining costs | | $ | 9,230 | | $ | 10,939 | | $ | 29,450 | | $ | 37,097 | | $ | 7,514 | | $ | 8,700 | | $ | 15,614 | | $ | 20,219 | |
AISC per ounce ($/Au Eq. oz sold) | | $ | 1,644 | | $ | 1,363 | | $ | 1,750 | | $ | 1,326 | | $ | 1,088 | | $ | 3,332 | | $ | 1,282 | | $ | 1,803 | |
Silver : gold ratio | |
| 79 : 1 | |
| 87 : 1 | |
| 86 : 1 | |
| 83 : 1 | |
| 68 : 1 | |
| 104 : 1 | |
| 68 : 1 | |
| 100 : 1 | |
(1) As used here and elsewhere in this report, this is a Non-GAAP financial performance measure. Cash costs for the Company’s 100% owned operations equal Production costs applicable to sales. See “Non-GAAP Financial Performance Measures” beginning on page 38 for additional information.
2021 compared to 2020
Production in Q3/Q2/21 and H1/21 was 7,073 and 12,300 GEOs, respectively, compared to 2,202 GEOs in Q2/20 and 9M/20 were 5,80010,530 GEOs in H1/20. The Froome mine contributed 6,573 GEOs in H1/21 and 16,300 gold equivalent ounces, respectively, or 22% and 37% fewer ounces comparedwe expect this to the same periods of 2019. Production decreased mainly due to lower gold grades of processed mineralized materialincrease throughout H2/21 as we reach commercial production capacity anticipated in Q3/Q4/21. In Q2/20 and 9M/H1/20, and despite 21% and 2% increases in tonnes processed. We expect production to trend higher in the fourth quarter and mining from Black Fox to continue into the first quarter of 2021, with the potential of extending further into the year, while we transition to mining the Froome deposit.results were negatively impacted by COVID-19 related operation suspensions.
Revenue from gold and silver sales decreasedincreased in Q3/20Q2/21 and 9M/20H1/21 by $0.8$8.0 million and $8.9$3.8 million, respectively, compared to Q3/19Q2/20 and 9M/19, reflecting the decrease in gold equivalent ouncesH1/20. The increase reflects more GEOs produced and sold which was partially offset byand higher average realized gold pricesprice in 2021 versus 2020.
Production costs applicable to sales increased by $1.3of $6.3 million decreased from $8.2 million, or 18%by 22% in Q3/20,Q2/21, compared to Q3/19, despite fewer gold ounces produced and sold.Q2/20. The 68% increasedecrease in cash cost per gold equivalent ounceGEO in Q3/20 reflects the impact of 26% lowerQ2/21 was driven by improved average grade of the mineralized material processedmilled grades and increased mill throughput resulting in Q3/20more production in Q2/21 as compared to Q3/19. In addition, production costs applicable to sales included underground development costs that were not capitalized given the mine life is less than one year.Q2/20.
31
Production costs applicable to sales increased marginallydecreased by $0.2$2.4 million, or 1%by 15% in 9M/20H1/21 compared to 9M/19, despite fewer gold ounces producedH1/20. The decrease in costs is primarily driven by improved average grades as we ramped up production at the Froome mine (only Black Fox was mined in the same period last year), as well as improved contractor cost efficiencies.
All-in sustaining costs decreased in Q2/21 and H1/21 by $1.2 million and $4.6 million, respectively, compared to the same periods in 2020. The decrease in AISC per GEO in the 2021 periods was largely driven by lower cash costs due our improved average grades, mining contractor efficiencies and increased GEOs sold. In addition, there were sustaining capital development costs related to the Black Fox mine in Q2/20 and H1/20, whereas minimal costs were incurred in Q2/21 and H1/21. AISC results were also negatively impacted by COVID-19 related suspensions in 2020.
Froome Mine
The 68% increase in cash cost per gold equivalent ounce in 9M/20, reflects the impact of 41% lower average gradeFroome deposit, which is part of the mineralized material processedoverall Fox Complex, is accessed from two declines at the bottom of the Black Fox pit and situated approximately one-half mile west of the Black Fox mine. As with the ore from the Black Fox mine, Froome ore is hauled approximately 20 miles to the Stock Mine mill for processing.
Underground development successfully reached the Froome ore in 9M/20Q2/21. Plans remain on schedule to reach commercial production in Q4/21. To date, ore extracted from the Froome mine produced grades that are consistent with the resource model and mine plan. The low-cost and bulk mining method is expected to bridge production while the Grey Fox and Stock projects are advanced towards production. Exploration will continue at Black Fox through 2021.
We are targeting higher production and lower cost profiles at the Fox Complex. We intend to leverage the potential for operational synergies through shared resources and infrastructure, a longer life of mine and expanded production scale for the combined projects.
Exploration Activities
We remain focused on our principal exploration goal of cost-effectively discovering and extending gold deposits adjacent to our existing operations to contribute to near-term gold production. We incurred $3.5 million and $6.3 million in Q2/21 and H1/21, respectively, for exploration initiatives, compared to 9M/19.$0.8 million and $3.2 million of exploration expenditures in Q2/20 and H1/20.
Exploration activities ramped up following the proceeds received from the flow-through share programs in 2020. Exploration efforts were focused around the Stock West and Stock Main (historical mine) targets.
Black Fox mine
In Q2/21, underground drilling at the Black Fox Mine continued to return encouraging high-grade intercepts at 160 West and 130 East targets areas proximal to the main ramp. Underground diamond drilling is being completed to identify additional mineralization adjacent to the Black Fox orebody where mineralization remains unconstrained in multiple directions.
Grey Fox project
Activities at the Grey Fox project included drilling shallow targets which focused on the re-interpretation of local veining trends at the Whiskey Jack and Gibson targets. We expect the resource model to be updated in H2/21 in line with our PEA study.
Stock Property
The Stock exploration area sits adjacent to our Stock mill, which currently processes ore from our Black Fox and Froome mines. This facility processed ore from the historical underground Stock mine, which operated intermittently from the early 1980s until 2004, producing a total of 137,000 ounces of gold.
32
All-in sustaining costs decreased by $1.7 millionThe Stock West mineralized zone was discovered in mid-2019; in 2020 exploration activities were focused on follow-up drilling. Initial results suggest the potential to define a significant new zone of mineralization 1/2 mile (800m) from our Stock processing facility. In Q2/21, four drill rigs were secured at Stock in an effort to infill and expand the known dimensions of the gold mineralization. A total of 65,626 feet (or 20,008 meters) of surface exploration drilling was completed in Q2/21 at Stock West and Stock Main with the primary focus at the Stock West mineralized zone. Two drill rigs also completed 6,106 feet or 16% and $7.6 million or 20% in Q3/20 and 9M/20, respectively, compared(1,861) meters to Q3/19 and 9M/19, mainly due to significantly lower in-mine exploration expenses, capitalizedtest the depth extension of shoots below the historical underground mine development costs and capital expenditures.
Advanced-Stage Properties – Froome ProjectStock mine.
Part of the Black Fox Complex located in Ontario, Canada, the Froome deposit is located approximately one-half mile west of the Black Fox mine and approximately 20 miles from the Black Fox (Stock Mine) mill, where we expect the ore will be processed.
The Froome deposit is being developed as an underground mine and will be accessed from the bottom of the Black Fox pit. We commenced the development of the underground access to the Froome deposit in late February 2020 and as of September 30, 2020 have advanced 47% of the way. The plan is to reach the main deposit in the second quarter of 2021 and begin production in the fourth quarter of 2021. Production from the Froome deposit will strategically supplement Black Fox production while we assess potential additional resources at the Black Fox, Grey Fox and Stock projects for future development and production.
The estimated mine life of Froome is two years once production begins following a one-year ramp-up construction phase. We expect that operational synergies through shared resources and infrastructure with the ongoing production of the Black Fox Complex would improve cash flow for both sites.
Exploration Activities – Timmins
In 2020, we continued to focus on growing the resources and reserves adjacent to our existing operations in order to contribute to near-term gold production. We incurred $1.2 million and $4.4 million in Q3/20 and 9M/20, respectively, for exploration initiatives, compared to $8.7 million and $15.2 million of exploration expenditures in Q3/19 and 9M/19. We had flow-through exploration commitments to satisfy in 2019, which also resulted in a larger drill program for 2019.
In Q3/20, we completed a flow-through financing, which provided gross proceeds of $10.4 million for exploration activities in the Timmins region over the next one to two years. The initial focus is on two high-potential targets, Stock West and Whiskey Jack. Both of these targets returned very encouraging results during the 2018-2019 drilling campaigns and we are looking forward to continue exploration at these exciting discoveries, with the objective of defining additional resources.
Whiskey Jack Target
Drilling 650 feet (200 m) north of existing resource blocks at the Grey Fox deposit in 2019 resulted in the discovery of a new zone called Whiskey Jack. The 2020 drilling has been designed to: a) test for extensions of the gold mineralization, which is open at depth and along strike, and b) infill the central discovery area with 100 ft (30 m) spaced drilling, in order to assess gold distribution. Drilling commenced in September 2020.
Black Fox Mine
A total of 53,400 feet (16,300 meters) of underground diamond drilling was completed at the Black Fox Mine during Q3/20, focused on refining the known limits of several ore blocks adjacent to the existing Black Fox ore body.
Black Fox Complex Expansion – Economic Study
We have engaged an independent engineering group to complete a Preliminary Economic Assessment (PEA) on the Grey Fox - Black Fox, Froome, Stock and Timmins resources utilizingusing our existing centralcentralized milling capacity. The PEA is expected to be completed in fourth quarter of 2020.capacity at Stock. The objective of the PEA is to developdetermine a planpotential low cost, near term business case to increase production and life of mine for the Black Fox Complex over a 10-year life. Production growth is envisionedComplex. The PEA activities in H1/21 included ongoing drilling, preliminary modelling of mineralization, baseline work to start ramping upsupport permitting, environmental, mine planning and tradeoff studies, metallurgical assessment reviews and process flowsheet assessments, and preliminary cash-flow analyses. The PEA will include resource estimates and an underground design which are expected to be completed in 2022.
H2/21.
33
Mexico Segment
The Mexico segment includes the El Gallo Project (formerly “El Gallo 1” or “El Gallo Mine”) and the advanced-stage Fenix Project, located in Sinaloa.Sinaloa, Mexico.
El Gallo Project
Current activities at the El Gallo Project are limited to residual leaching as part of closure and reclamation plans.
The economics of residual leaching are measured by incremental revenues exceeding incremental costs. Residual leaching is expected to continue as long as incremental revenues exceed incremental costs. Incremental residual leaching costs for Q3/20 and 9M/20 were $3.1 million or $1,505 per gold equivalent ounce sold and $8.3 million or $1,242 per gold equivalent ounce sold, respectively, compared to $2.8 million or $832 and $8.4 million or $581 per gold equivalent ounce sold in the same periods of 2019.
The following table summarizes certain operating results at the El Gallo Project for the three and ninesix months ended SeptemberJune 30, 20202021 and 2019:2020:
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended September 30, | | Nine months ended September 30, | | Three months ended June 30, | | Six months ended June 30, | ||||||||||||||||
|
| 2020 |
| 2019 |
| 2020 |
| 2019 |
| 2021 |
| 2020 |
| 2021 |
| 2020 | ||||||||
Operating Results | | (in thousands, unless otherwise indicated) | | (in thousands, unless otherwise indicated) | ||||||||||||||||||||
Gold ounces: | | | | | | | | | | | | | | | | | | | | | | | | |
Produced |
| | 1.9 |
| | 3.0 |
| | 6.5 |
| | 13.8 |
| | 1.2 |
| | 1.9 |
| | 2.5 |
| | 4.6 |
Sold |
| | 2.0 |
| | 3.3 |
| | 6.6 |
| | 14.5 |
| | 1.1 |
| | 1.9 |
| | 2.4 |
| | 4.6 |
Silver ounces: | | | | | | | | | | | | | | | | | | | | | | | | |
Produced |
| | 3.5 |
| | 3.4 |
| | 4.7 |
| | 6.0 |
| | 4.7 |
| | 0.5 |
| | 4.9 |
| | 1.2 |
Sold |
| | 3.1 |
| | 6.6 |
| | 5.0 |
| | 6.8 |
| | 4.5 |
| | 1.9 |
| | 4.5 |
| | 1.9 |
Gold equivalent ounces: | | | | | | | | | | | | | | | | | | | | | | | | |
Produced |
| | 2.0 |
| | 3.1 |
| | 6.6 |
| | 13.8 |
| | 1.3 |
| | 1.9 |
| | 2.5 |
| | 4.6 |
Sold |
| | 2.1 |
| | 3.4 |
| | 6.7 |
| | 14.5 |
| | 1.2 |
| | 1.9 |
| | 2.5 |
| | 4.6 |
Revenue from gold and silver sales | | $ | 4,001 | | $ | 4,967 | | $ | 11,700 | | $ | 19,577 | | $ | 2,185 | | $ | 3,355 | | $ | 4,471 | | $ | 7,698 |
Silver : gold ratio | |
| 79 : 1 | |
| 87 : 1 | |
| 86 : 1 | | | 83 : 1 | |
| 68 : 1 | |
| 104 : 1 | |
| 68 : 1 | | | 100 : 1 |
ProductionCash costs and revenue decreased in Q3/20All-in-sustaining costs and 9M/20, compared to Q3/19Cash cost and 9M/19, reflecting decreasing recoveries, as expected, asAISC per gold equivalent ounce
As the El Gallo Project has been inProject’s gold production and sales are the result of residual leaching since mid-2018.activities, we have ceased relying on and disclosing, cash cost and all-in sustaining cost per gold equivalent ounce as key metrics for the operation. Incremental residual leaching costs included production costs less inventory movements.
Incremental residual leaching costs for the Q2/21 period were $2.7 million, or $2,395 per gold equivalent ounce resulting in a $0.8 million write-down of the heap leach and in-circuit inventory balances. The residual leaching activities at El Gallo are expected to wind down in early 2022.
2021 compared to 2020
Production and revenue, as expected, decreased in Q2/21 and H1/21, compared to Q2/20 and H1/20, as we begin to wind down our operation as a residual heap leach production.
The decrease in revenue, due to a decrease in production, was partially offset by a significantly higher average realized gold price during Q3/20Q2/21 and 9M/20,H1/21, compared to the same periods of 2019.2020.
Advanced-Stage Properties – Fenix Project
StrengtheningIn December 2020, we announced the positive results of a feasibility study for the development of our 100%-owned Fenix Project, which includes the El Gallo Gold and El Gallo Silver deposits.
The study envisions a 9.5-year mine life with an after-tax IRR of 28% using $1,500/oz gold and $17/oz silver, prices have renewed our focus on advancing the Fenix Projectwith an estimated initial capital expenditure of $42 million for Phase 1 and the Feasibility Study$24 million for Phase 2. The project implementation is expectedenvisioned in two distinct phases: Phase 1 (years 1 to be published in the fourth quarter of 2020.
Mine permitting continued6) - gold production from heap leach reprocessing, and Phase 2 (years 7 to progress during 2020, building upon the environmental permit approval for in-pit tailings storage in the Samaniego pit and the additional approval for the process plant for phase 1 received in September 2019.10) - silver production from open-pit mining.
We incurred $0.7 million and $1.9 million in Q3/20 and 9M/20, respectively, on activities required to advance the Fenix Project as well as property holding payments for land titles. This compares to $0.5 million and $2.1 million spent during Q3/19 and 9M/19. The Fenix Project PEA is available for review on our website and SEDAR (www.sedar.com).
34
The Fenix Project feasibility study was published on February 16, 2021. The feasibility study is available for review on our website and SEDAR (www.sedar.com).
The key environmental permits for Phase 1 were received in 2019, including the approval for an in-pit tailings storage facility and process plant construction.
The Company incurred $0.8 million and $2.1 million in Q2/21 and H1/21, respectively, ($0.5 million and $1.2 million in Q2/20 and H1/20 respectively) on activities required to advance the Fenix Project and is currently evaluating multiple strategic alternatives, including the potential divestiture of our Mexican business unit.
35
MSC Segment, Argentina
The MSC segmentSegment is comprised of a 49% interest in the San José mine, located in Santa Cruz, Argentina.
MSC – Operating Results
The following table sets out certain operating results for the San José mine for the three and ninesix months ended SeptemberJune 30, 20202021 and 20192020 on a 100% basis:
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended September 30, | | Nine months ended September 30, | | Three months ended June 30, | | Six months ended June 30, | ||||||||||||||||
|
| 2020 |
| 2019 |
| 2020 |
| 2019 |
| 2021 |
| 2020 |
| 2021 |
| 2020 | ||||||||
Operating Results | | (in thousands, except otherwise indicated) | | (in thousands, except otherwise indicated) | ||||||||||||||||||||
San José Mine—100% basis | | | | | | | | | | | | | | | | | | | | | | | | |
Mined mineralized material (t) |
| | 126 |
| | 140 |
| | 305 |
| | 400 |
| | 142 |
| | 73 |
| | 238 |
| | 179 |
Average grade mined (gpt) | | | | | | | | | | | | | | | | | | | | | | | | |
Gold |
| | 4.6 |
| | 6.9 |
| | 5.8 |
| | 6.8 |
| | 4.8 |
| | 5.3 |
| | 5.2 |
| | 6.6 |
Silver |
| | 336 |
| | 498 |
| | 403 |
| | 476 |
| | 321 |
| | 370.1 |
| | 338 |
| | 449 |
Processed mineralized material (t) |
| | 129 |
| | 147 |
| | 291 |
| | 399 |
| | 145 |
| | 77.5 |
| | 246 |
| | 162 |
Average grade processed (gpt) | | | | | | | | | | | | | | | | | | | | | | | | |
Gold |
| | 4.7 |
| | 6.6 |
| | 5.6 |
| | 6.8 |
| | 4.7 |
| | 5.0 |
| | 5.4 |
| | 6.4 |
Silver |
| | 313 |
| | 456 |
| | 362 |
| | 450 |
| | 304 |
| | 329 |
| | 321 |
| | 401 |
Average recovery (%): | | | | | | | | | | | | | | | | | | | | | | | | |
Gold |
| | 90.2 |
| | 89.2 |
| | 89.5 |
| | 88.5 |
| | 87.3 |
| | 89.8 |
| | 89.0 |
| | 89.2 |
Silver |
| | 89.9 |
| | 89.4 |
| | 89.2 |
| | 88.2 |
| | 87.4 |
| | 89.2 |
| | 88.4 |
| | 88.8 |
Gold ounces: | | | | | | | | | | | | | | | | | | | | | | | | |
Produced |
| | 17.6 |
| | 27.7 |
| | 47.2 |
| | 76.8 |
| | 19.1 |
| | 11.3 |
| | 38.4 |
| | 29.6 |
Sold |
| | 17.6 |
| | 26.1 |
| | 47.3 |
| | 75.0 |
| | 18.8 |
| | 15.1 |
| | 37.5 |
| | 29.7 |
Silver ounces: | | | | | | | | | | | | | | | | | | | | | | | | |
Produced |
| | 1,165 |
| | 1,925 |
| | 3,024 |
| | 5,087 |
| | 1,239 |
| | 732 |
| | 2,244 |
| | 1,858 |
Sold |
| | 1,192 |
| | 1,852 |
| | 3,060 |
| | 5,041 |
| | 1,239 |
| | 904 |
| | 2,236 |
| | 1,868 |
Gold equivalent ounces: | | | | | | | | | | | | | | | | | | | | | | | | |
Produced |
| | 32.4 |
| | 49.8 |
| | 81.0 |
| | 137.7 |
| | 37.2 |
| | 18.3 |
| | 71.3 |
| | 48.6 |
Sold |
| | 32.7 |
| | 47.4 |
| | 81.3 |
| | 135.3 |
| | 37.0 |
| | 23.8 |
| | 70.4 |
| | 48.6 |
Revenue from gold and silver sales | | $ | 70,195 | | $ | 74,530 | | $ | 154,666 | | $ | 189,348 | | $ | 70,396 | | $ | 47,081 | | $ | 123,699 | | $ | 84,471 |
Average realized price: | | | | | | | | | | | | | | | | | | | | | | | | |
Gold ($/Au oz) | | $ | 2,002 | | $ | 1,542 | | $ | 1,873 | | $ | 1,424 | | $ | 1,903 | | $ | 1,893 | | $ | 1,757 | | $ | 1,796 |
Silver ($/Ag oz) | | $ | 29.30 | | $ | 18.54 | | $ | 21.59 | | $ | 16.39 | | $ | 27.99 | | $ | 20.55 | | $ | 25.83 | | $ | 16.67 |
Cash costs | | $ | 41,512 | | $ | 43,345 | | $ | 100,230 | | $ | 119,392 | | $ | 40,888 | | $ | 30,402 | | $ | 77,256 | | $ | 58,718 |
Cash cost per ounce ($/Au Eq. oz sold) | | $ | 1,269 | | $ | 915 | | $ | 1,232 | | $ | 883 | | $ | 1,105 | | $ | 1,280 | | $ | 1,097 | | $ | 1,207 |
All‑in sustaining costs | | $ | 50,311 | | $ | 57,016 | | $ | 124,968 | | $ | 159,449 | | $ | 55,481 | | $ | 35,047 | | $ | 99,872 | | $ | 74,657 |
AISC per ounce ($/Au Eq. oz sold) | | $ | 1,538 | | $ | 1,204 | | $ | 1,536 | | $ | 1,179 | | $ | 1,500 | | $ | 1,476 | | $ | 1,418 | | $ | 1,535 |
Silver : gold ratio | | | 79 : 1 | |
| 87 : 1 | |
| 90 : 1 | |
| 84 : 1 | | | 68 : 1 | |
| 104 : 1 | |
| 68 : 1 | |
| 98 : 1 |
(1) As used here and elsewhere in this report, this is a Non-GAAP financial performance measure. Cash costs for the Company’s 100% owned operations equal Production costs applicable to sales. See “Non-GAAP Financial Performance Measures” beginning on page 38 for additional information.
The analysis below compares the operating and financial results of MSC on a 100% basis.
Q3/202021 compared to Q3/192020
Gold and silver production decreasedboth increased by 36% and 39%, respectively,69% in Q3/20Q2/21 compared to Q3/19 as a result of a 12% decreaseQ2/20. The increase is attributed to an increase in processed mineralized material coupled with 28% and 31% decreases in the average grades of gold and silver, respectively, of the mineralized materialslightly offset by lower processed in Q3/20.grades. The decreaseincrease in processed mineralized material, reflected the impact of operating below capacity throughout the entire period, as the ongoing countrywide restrictions on the movement of people resulted in the ramp-up being phased over a significant period of time with full production expected toward the end of the year.turn, primarily results from reduced interruptions from government-mandated suspensions from COVID-19.
Gold and silver production decreasedincreased by 39%30% and 41%21%, respectively, in 9M/20H1/21 compared to 9M/19 dueH1/20. The increase is attributed to a 27% decreasean increase in processed mineralized material and 17% and 19% decreases in the average grades of gold and silver of the mineralized materialslightly offset by lower processed in 9M/20, mainly due to the same operational and labor challenges noted above.grades.
3536
Revenue from gold and silver sales decreasedincreased by 6%50% and 18%46% in Q3/20Q2/21 and 9M/20H1/21 respectively, compared to Q3/19Q2/20 and 9M/19,H1/20, reflecting feweran increase in gold equivalent ounces sold due to lower production as noted above, partly offset by highersold. Significant increases in average realized price of gold (30% and 32% higher in Q3/20 and 9M/20, respectively, comparedsilver prices contributed to the same periods of 2019) and silver (58% and 32% higherincrease in Q3/20 and 9M/20, respectively, compared to 2019).revenues in the 2021 periods. Revenues on concentrate sales include adjustments from prior sales’ provisional invoice amounts.
Cash costs in Q3/20Q2/21 and 9M/20 decreasedH1/21 increased by $1.8$10.5 million, or 4%34%, and $19.2$18.5 million, or 16%32%, respectively, compared to Q3/19Q2/20 and 9M/19, reflecting lower tonnesH1/20. The change is attributed to increased tons of mineralized material processed and fewerincreased gold equivalent ounces produced and sold. All-in sustainingsold in the 2021 period. Notwithstanding the aggregate increase, cash costs for Q3/20 and 9M/20per ounce decreased by $6.7 million or 12% and $34.5 million or 22%, comparedslightly due to the same periodsdiminished impact of 2019, mainly due to lower cash costs, coupled with lower capitalized underground mine development and sustaining capital investmentCOVID-19 interruptions in plant and equipment.2021.
Cash cost and All-in sustaining costper gold equivalent ouncesold were higher for Q3/ in Q2/21 and H1/21 remained consistent relative to the Q2/20 and 9M/H1/20 compared to the same periods in 2019, as lower aggregate cash costs and AISC were spread over 31% and 40% fewer gold equivalent ounces sold, respectively, as noted above.periods.
Investment in MSC
Our 49% attributable share of operations from our investment in MSC was income of $2.6 million and a loss of $1.1$1.9 million and $2.4 million in Q3/20Q2/21 and 9M/20,H1/21, respectively, compared to a loss of $0.3$1.0 million and $6.8$3.7 million in Q3/19Q2/20 and 9M/19.H1/20. The change between Q2/21 and Q2/20 is largely driven by an $0.8 million increase in the fair value amortization. The H1/21 change relative to the H1/20 period is largely driven by the increase in gross profit (due to higher realized metal prices and increased GEOs sold) offset by an increase in other expenditures from financing activities.
On a 100% basis, improved performance reflects significantly higher gross profit of $21.6 million and $32.4 millionWe are currently evaluating strategic alternatives for our investment in Q3/20 and 9M/20, respectively, compared to $13.0 million and $19.9 million in Q3/19 and 9M/19 and lower current and deferred income and mining tax expense of $3.0 million in 9M/20, compared to $8.4 million in 9M/19. Higher gross profit in Q3/20 were partially offset by higher exploration expenses ($2.8 million compared to $1.5 million in Q3/19). Higher gross profit and lower current and deferred income and mining tax expense in 9M/20 were partially offset by $7.2 million of other expenses incurred during the shutdown of operations in 2020 ($nil in 2019).
Higher gross profit in 2020 was due primarily to higher average realized gold and silver prices. In addition, there were lower production costs applicable to sales and depreciation and depletion expense mainly as a result of fewer gold equivalent ounces sold. These all were partially offset by $10.2 million and $15.5 million operating costs due to the COVID-19 pandemic in Q3/20 and 9M/20, respectively. The additional costs include labor costs for idle employees, additional transportation and accommodation costs to maintain social distancing and additional personal protective equipment.
In Q3/20, on a 100% basis, MSC generated a cash gross profit of $28.7 million and incurred $6.1 million of development and other capital expenditures, $2.8 million of exploration spending and $6.5 million of other expenditures. Other expenditures primarily included $5.2 million of financial expenses and foreign exchange losses.
In 9M/20, on a 100% basis, MSC generated a cash gross profit of $54.4 million and incurred $18.7 million of development and other capital expenditures, $7.9 million of exploration spending and $17.7 million of other expenditures. Other expenditures primarily included $7.2 million related to costs of suspending activities in connection with the COVID-19 pandemic, $6.6 million of financial expenses, as noted above, and foreign exchange losses.MSC.
MSC Dividend Distribution (49%)
We received $nil$2.6 million and $0.3$7.6 million in dividends from MSC in Q3/20Q2/21 and 9M/20,H1/21, compared to $2.0 million and $4.0$0.3 million in dividends received during the same periods in 2019. For more details on our Investment in MSC, refer to Note 10 to the Consolidated Financial Statements, Investment in Minera Santa Cruz S.A. (“MSC”) — San José mine.2020.
36
Los Azules Segment, Argentina
The Los Azules project is a copper exploration project located in San Juan, Argentina.
On July 6, 2021, the Company announced its wholly-owned subsidiary which holds 100% of the Los Azules ProjectCopper project will be raising a financing for the continued development of this project, as well as to fund a modest exploration program for its Elder Creek Copper exploration properties in Nevada. McEwen Copper is seeking to raise up to $80 million in a private offering and Rob McEwen has committed the first $40 million dollars of this financing. A PEA was completed on Los Azules in 2017. Please refer to our website at www.mcewenmining.com for further details.
During Q3/20,In H1/21, preliminary engineering work to advance the environmental baseline monitoring work continued as planned. We expect to continue environmental studies the restproposed low altitude all-year access route was completed. Most of the yearsurveying and staking of the mining rights was completed to gather further information necessaryprepare for consolidation of all the Environmental Impact Assessment formining rights into a single mining group. Site surveying and staking at the next development phase.
The preliminary economic assessment for the Los Azules Project,Escorpio IV and Mercedes areas were completed and announced in September 2017, is available on our website at www.mcewenmining.com.January 2021.
37
NON-GAAP FINANCIAL PERFORMANCE MEASURES
We have included in this report certain non-GAAP financial performance measures as detailed below. In the gold mining industry, these are common performance measures but do not have any standardized meaning and are considered non-GAAP measures. We use these measures in evaluating our business and believe that, in addition to conventional measures prepared in accordance with GAAP, certain investors use such non-GAAP measures to evaluate our performance and ability to generate cash flow. Accordingly, they are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. There are limitations associated with the use of such non-GAAP measures. We compensate for these limitations by relying primarily on our U.S. GAAP results and using the non-GAAP measures supplementally.
The non-GAAP measures are presented for our wholly ownedwholly-owned mines and the San José mine. The GAAP information used for the reconciliation to the non-GAAP measures for the San José mine may be found in Note 10,9, Investment in Minera Santa Cruz S.A. (“MSC”) – San José Mine. We do not control the interest in or operations of MSC and the presentations of assets and liabilities and revenues and expenses of MSC do not represent our legal claim to such items. The amount of cash we receive is based upon specific provisions of the Option and Joint Venture Agreement (“OJVA”) and varies depending on factors including the profitability of the operations.
The presentation of these measures, including those for MSC, has limitations as an analytical tool. Some of these limitations include:
● | The amounts shown on MSC’s individual line items do not represent our legal claim to its assets and liabilities, or the revenues and expenses; and |
● | Other companies in our industry may calculate their cash gross profit, cash costs, cash cost per ounce, |
Cash Gross Profit or Loss
Cash gross profit or loss is a non-GAAP financial measure and does not have any standardized meaning under GAAP. We use cash gross profit to evaluate our operating performance and ability to generate cash flow; we disclose cash gross profit as we believe this measure provides valuable assistance to investors and analysts in evaluating our ability to finance our ongoing business and capital activities. The most directly comparable measure prepared in accordance with GAAP is gross profit or loss. Cash gross profit is calculated by adding back the depreciation and depletion expense to gross profit or loss.
The following tables present a reconciliation of cash gross profit or loss to the most directly comparable GAAP measure, gross profit or loss:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||||||
| | Three months ended September 30, 2020 | | Nine months ended September 30, 2020 | | Three months ended June 30, 2021 | | | Six months ended June 30, 2021 | | | | |||||||||||||||||||||||||||||||||||||||||||||||||||
| | Gold Bar | | Black Fox | | El Gallo | | Total (100% owned) | | Gold Bar | | Black Fox | | El Gallo | | Total (100% owned) | | Gold Bar | | Black Fox | | El Gallo | | Total (100% owned) | | | Gold Bar | | Black Fox | | El Gallo | | Total (100% owned) | | | | | | | | | | | ||||||||||||||||||||
| | (in thousands) | | (in thousands) | | (in thousands) | | | (in thousands) | | | | |||||||||||||||||||||||||||||||||||||||||||||||||||
Gross profit (loss) | | $ | 152 | | $ | (926) | | $ | 73 | | $ | (701) | | $ | (9,261) | | $ | (4,310) | | $ | 310 | | $ | (13,261) | | $ | 2,950 | | $ | 2,658 | | $ | (1,549) | | $ | 4,059 | | | $ | 545 | | $ | 1,168 | | $ | (2,640) | | $ | (927) | | | | | | | | | | | | |||
Add: Depreciation and depletion | | | 2,099 | | | 2,404 | | | 67 | | | 4,570 | | | 8,527 | | | 7,336 | | | 217 | | | 16,080 | | | 2,326 | | | 3,189 | | | — | | | 5,515 | | | | 4,068 | | | 6,584 | | | — | | | 10,652 | | | | | | | | | | | ||||
Cash gross profit (loss) | | $ | 2,251 | | $ | 1,478 | | $ | 140 | | $ | 3,869 | | $ | (734) | | $ | 3,026 | | $ | 527 | | $ | 2,819 | | $ | 5,276 | | $ | 5,847 | | $ | (1,549) | | $ | 9,574 | | | $ | 4,613 | | $ | 7,752 | | $ | (2,640) | | $ | 9,725 | | | | | | | | | | |
38
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended September 30, 2019 | | Nine months ended September 30, 2019 | | Three months ended June 30, 2020 | | | Six months ended June 30, 2020 | ||||||||||||||||||||||||||||||||||||||||
| | Gold Bar | | Black Fox | | El Gallo | | Total (100% owned) | | Gold Bar | | Black Fox | | El Gallo | | Total (100% owned) | | Gold Bar | | Black Fox | | El Gallo | | Total (100% owned) | | | Gold Bar | | Black Fox | | El Gallo | | Total (100% owned) | ||||||||||||||||
| | (in thousands) | | (in thousands) | | (in thousands) | | | (in thousands) | ||||||||||||||||||||||||||||||||||||||||
Gross profit | | $ | 631 | | $ | 8 | | $ | 980 | | $ | 1,619 | | $ | 1,633 | | $ | 1,594 | | $ | 4,497 | | $ | 7,724 | |||||||||||||||||||||||||
Gross (loss) profit | | $ | (2,834) | | $ | (6,168) | | $ | 127 | | $ | (8,875) | | | $ | (9,411) | | $ | (3,384) | | $ | 235 | | $ | (12,560) | ||||||||||||||||||||||||
Add: Depreciation and depletion | | | 3,790 | | | 3,589 | | | 109 | | | 7,488 | | | 6,510 | | | 10,520 | | | 471 | | | 17,501 | | | 2,565 | | | 2,184 | | | 63 | | | 4,812 | | | | 6,428 | | | 4,932 | | | 150 | | | 11,510 |
Cash gross profit | | $ | 4,421 | | $ | 3,597 | | $ | 1,089 | | $ | 9,107 | | $ | 8,143 | | $ | 12,114 | | $ | 4,968 | | $ | 25,225 | |||||||||||||||||||||||||
Cash gross (loss) profit | | $ | (269) | | $ | (3,984) | | $ | 190 | | $ | (4,063) | | | $ | (2,983) | | $ | 1,548 | | $ | 385 | | $ | (1,050) |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended September 30, | | Nine months ended September 30, | | Three months ended June 30, | | Six months ended June 30, | ||||||||||||||||
| | 2020 | | 2019 | | 2020 | | 2019 | | 2021 | | 2020 | | 2021 | | 2020 | ||||||||
San José mine cash gross profit (100% basis) | | (in thousands) | | (in thousands) | ||||||||||||||||||||
Gross profit | | $ | 21,576 | | $ | 13,027 | | $ | 32,352 | | $ | 19,873 | | $ | 19,728 | | $ | 9,029 | | $ | 29,711 | | $ | 10,776 |
Add: Depreciation and depletion | | | 7,107 | | | 18,158 | | | 22,084 | | | 50,083 | | | 9,779 | | | 7,650 | | | 16,732 | | | 14,977 |
Cash gross profit | | $ | 28,683 | | $ | 31,185 | | $ | 54,436 | | $ | 69,956 | | $ | 29,507 | | $ | 16,679 | | $ | 46,443 | | $ | 25,753 |
Cash Costs and All-In Sustaining Costs
The terms cash costs, cash cost per ounce, all-in sustaining costs, and all-in sustaining cost per ounce used in this report are non-GAAP financial measures. We report these measures to provide additional information regarding operational efficiencies on an individual mine basis, and believe these measures provide investors and analysts with useful information about our underlying costs of operations.
Cash costs consist of mining, processing, on-site general and administrative expenses, community and permitting costs related to current operations, royalty costs, refining and treatment charges (for both doré and concentrate products), sales costs, export taxes and operational stripping costs, but exclude depreciation and amortization, which are non-cash items. The sum of these costs is divided by the corresponding gold equivalent ounces sold to determine a per ounce amount.
All-in sustaining costs consist of cash costs (as described above), plus accretion of retirement obligations and amortization of the asset retirement costs related to operating sites, environmental rehabilitation costs for mines with no reserves, sustaining exploration and development costs, sustaining capital expenditures and sustaining lease payments. Our all-in sustaining costs exclude the allocation of corporate general and administrative costs. Following is additional information regarding our all-in sustaining costs:
● | Sustaining operating costs represent expenditures incurred at current operations that are considered necessary to maintain current annual production at the mine site and include mine development costs and ongoing replacement of mine equipment and other capital facilities. Sustaining capital costs do not include costs of expanding the project that would result in improved productivity of the existing asset, increased existing capacity or extended useful life. |
● | Sustaining exploration and development costs include expenditures incurred to sustain current operations and to replace reserves and/or resources extracted as part of the ongoing production. Exploration activity performed near-mine (brownfield) or new exploration projects (greenfield) are classified as non-sustaining. |
The sum of all-in sustaining costs is divided by the corresponding gold equivalent ounces sold to determine a per ounce amount.
Costs excluded from cash costs and all-in sustaining costs, in addition to depreciation and depletion, are income and mining tax expense, all corporate financing charges, costs related to business combinations, asset acquisitions and asset disposal, impairment charges and any items that are deducted for the purpose of normalizing items.
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The following tables reconcile these non-GAAP measures to the most directly comparable GAAP measure, production costs applicable to sales; the El Gallo project results are excluded from this reconciliation as the economics of residual leaching operations are measured by incremental revenue exceeding incremental costs. Incremental residual leaching costs for Q3/20the three and 9M/20six months ended June 30, 2021 were $3.1$2.7 million or $1,505$2,395 per gold equivalent ounce sold and $8.3$5.3 million or $1,242$2,204 per gold equivalent ounce sold, respectively, compared to $2.8$2.4 million or $832$1,262 and $8.4$5.2 million or $581$1,124 per gold equivalent ounce sold in the same periods of 2019.2020.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |||||||||||
| | Three months ended September 30, 2020 | | | | | Nine months ended September 30, 2020 | | Three months ended June 30, 2021 | | | | | Six months ended June 30, 2021 | | | ||||||||||||||||||||||||||||||||||||||
| | Gold Bar | | Black Fox | | Total | | | | | Gold Bar | | Black Fox | | Total | | Gold Bar | | Black Fox | | Total | | | | | Gold Bar | | Black Fox | | Total | | | | | | | | | ||||||||||||||||
| | (in thousands, except per ounce) | | | | | (in thousands, except per ounce) | | (in thousands, except per ounce) | | | | | (in thousands, except per ounce) | | | ||||||||||||||||||||||||||||||||||||||
Production costs applicable to sales - Cash costs (100% owned) |
| $ | 10,791 | | $ | 8,874 | | $ | 19,665 | | | | | $ | 38,863 | | $ | 24,231 | | $ | 63,094 |
| $ | 21,067 | | $ | 6,331 | | $ | 27,398 | | | | | $ | 34,623 | | $ | 12,987 | | $ | 47,610 | | | | | | | | | | |||
Mine site reclamation, accretion and amortization | | | 230 | | | 101 | | | 331 | | | | | | 738 | | | 295 | | | 1,033 | | | 159 | | | 116 | | | 276 | | | | | | 316 | | | 654 | | | 970 | | | | | | | | | | |||
In‑mine exploration | | | 474 | | | 90 | | | 564 | | | | | | 1,315 | | | 707 | | | 2,022 | | | 775 | | | 667 | | | 1,441 | | | | | | 960 | | | 1,243 | | | 2,203 | | | | | | | | | | |||
Capitalized underground mine development (sustaining) | | | — | | | — | | | — | | | | | | — | | | 3,646 | | | 3,646 | | | — | | | — | | | — | | | | | | — | | | 231 | | | 231 | | | | | | | | | | |||
Capital expenditures on plant and equipment (sustaining) | | | 75 | | | 61 | | | 136 | | | | | | 4,663 | | | 322 | | | 4,985 | | | 421 | | | 270 | | | 692 | | | | | | 543 | | | 243 | | | 785 | | | | | | | | | | |||
Sustaining leases | | | 473 | | | 104 | | | 577 | | | | | | 1,452 | | | 249 | | | 1,701 | | | 892 | | | 129 | | | 1,021 | | | | | | 892 | | | 256 | | | 1,148 | | | | | | | | | | |||
All‑in sustaining costs | | $ | 12,043 | | $ | 9,230 | | $ | 21,273 | | | | | $ | 47,031 | | $ | 29,450 | | $ | 76,481 | | $ | 23,314 | | $ | 7,514 | | $ | 30,828 | | | | | $ | 37,333 | | $ | 15,614 | | $ | 52,947 | | | | | | | | | | |||
Ounces sold, including stream (Au Eq. oz)(1) | | | 6.8 | | | 5.6 | | | 12.4 | | | | | | 22.1 | | | 16.8 | | | 38.9 | | | 14.4 | | | 6.9 | | | 21.3 | | | | | | 21.7 | | | 12.2 | | | 33.8 | | | | | | | | | | |||
Cash cost per ounce ($/Au Eq. oz sold) | | $ | 1,585 | | $ | 1,581 | | $ | 1,583 | | | | $ | 1,762 | | $ | 1,440 | | $ | 1,622 | | $ | 1,463 | | $ | 917 | | $ | 1,286 | | | | $ | 1,598 | | $ | 1,066 | | $ | 1,407 | | | | | | | | | | | | | ||
AISC per ounce ($/Au Eq. oz sold) | | $ | 1,769 | | $ | 1,644 | | $ | 1,713 | | | | $ | 2,132 | | $ | 1,750 | | $ | 1,967 | | $ | 1,619 | | $ | 1,088 | | $ | 1,447 | | | | $ | 1,723 | | $ | 1,282 | | $ | 1,564 | | | | | | | | | | | | |
(1) | Total gold equivalent ounces sold for |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended September 30, 2019 | | Nine months ended September 30, 2019 | | Three months ended June 30, 2020 | | Six months ended June 30, 2020 | ||||||||||||||||||||||||||||
| | Gold Bar | | Black Fox | | Total | | Gold Bar | | Black Fox | | Total | | Gold Bar | | Black Fox | | Total | | Gold Bar | | Black Fox | | Total | ||||||||||||
| | (in thousands, except per ounce) | | (in thousands, except per ounce) | | (in thousands, except per ounce) | | (in thousands, except per ounce) | ||||||||||||||||||||||||||||
Production costs applicable to sales - Cash costs (100% owned) | | $ | 12,156 | | $ | 7,550 | | $ | 19,706 | | $ | 20,798 | | $ | 24,025 | | $ | 44,823 | | $ | 11,039 | | $ | 8,150 | | $ | 19,189 | | $ | 28,071 | | $ | 15,357 | | $ | 43,428 |
Mine site reclamation, accretion and amortization | | | 489 | | | 155 | | | 644 | | | 860 | | | 475 | | | 1,335 | | | 156 | | | 99 | | | 255 | | | 507 | | | 194 | | | 701 |
In‑mine exploration | | | — | | | 955 | | | 955 | | | — | | | 3,430 | | | 3,430 | | | 841 | | | 191 | | | 1,032 | | | 841 | | | 617 | | | 1,458 |
Capitalized underground mine development (sustaining) | | | — | | | 1,711 | | | 1,711 | | | — | | | 7,286 | | | 7,286 | | | — | | | — | | | — | | | — | | | 3,646 | | | 3,646 |
Capital expenditures on plant and equipment (sustaining) | | | 663 | | | 470 | | | 1,133 | | | 1,533 | | | 1,610 | | | 3,143 | | | 2,798 | | | 211 | | | 3,009 | | | 4,588 | | | 261 | | | 4,849 |
Sustaining leases | | | 487 | | | 98 | | | 585 | | | 1,422 | | | 271 | | | 1,693 | | | 502 | | | 49 | | | 551 | | | 978 | | | 144 | | | 1,122 |
All‑in sustaining costs | | $ | 13,795 | | $ | 10,939 | | $ | 24,734 | | $ | 24,613 | | $ | 37,097 | | $ | 61,710 | | $ | 15,336 | | $ | 8,700 | | $ | 24,036 | | $ | 34,985 | | $ | 20,219 | | $ | 55,204 |
Ounces sold, including stream (Au Eq. oz)(1) | | | 11.2 | | | 8.0 | | | 19.2 | | | 20.5 | | | 28.0 | | | 48.5 | | | 6.2 | | | 2.6 | | | 8.8 | | | 15.3 | | | 11.2 | | | 26.5 |
Cash cost per ounce ($/Au Eq. oz sold) | | $ | 1,088 | | $ | 941 | | $ | 1,027 | | $ | 1,014 | | $ | 859 | | $ | 924 | | $ | 1,772 | | $ | 3,121 | | $ | 2,170 | | $ | 1,840 | | $ | 1,369 | | $ | 1,641 |
AISC per ounce ($/Au Eq. oz sold) | | $ | 1,235 | | $ | 1,363 | | $ | 1,289 | | $ | 1,200 | | $ | 1,326 | | $ | 1,272 | | $ | 2,462 | | $ | 3,332 | | $ | 2,719 | | $ | 2,293 | | $ | 1,803 | | $ | 2,086 |
(1) | Total gold equivalent ounces sold for |
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| | | | | | | | | | | | |
| | Three months ended September 30, | | Nine months ended September 30, | ||||||||
|
| 2020 |
| 2019 |
| 2020 |
| 2019 | ||||
San José mine cash costs (100% basis) | | (in thousands, except per ounce) | ||||||||||
Production costs applicable to sales - Cash costs | | $ | 41,512 | | $ | 43,345 | | $ | 100,230 | | $ | 119,392 |
Mine site reclamation, accretion and amortization | | | 113 | | | 301 | | | 359 | | | 859 |
Site exploration expenses | |
| 2,820 | | | 1,482 | | | 6,603 | | | 7,373 |
Capitalized underground mine development (sustaining) | |
| 4,292 | | | 8,150 | | | 13,411 | | | 20,061 |
Less: Depreciation | | | (229) | | | (672) | | | (916) | | | (1,732) |
Capital expenditures (sustaining) | |
| 1,803 | | | 4,410 | | | 5,281 | | | 13,496 |
All‑in sustaining costs | | $ | 50,311 | | $ | 57,016 | | $ | 124,968 | | $ | 159,449 |
Ounces sold (Au Eq. oz) | | | 32.7 | | | 47.4 | | | 81.3 | | | 135.3 |
Cash cost per ounce ($/Au Eq. oz sold) | | $ | 1,269 | | $ | 915 | | $ | 1,232 | | $ | 883 |
AISC per ounce ($/Au Eq. oz sold) | | $ | 1,538 | | $ | 1,204 | | $ | 1,536 | | $ | 1,179 |
| | | | | | | | | | | | |
| | Three months ended June 30, | | Six months ended June 30, | ||||||||
|
| 2021 |
| 2020 |
| 2021 |
| 2020 | ||||
San José mine cash costs (100% basis) | | (in thousands, except per ounce) | ||||||||||
Production costs applicable to sales - Cash costs | | $ | 40,888 | | $ | 30,402 | | $ | 77,256 | | $ | 58,718 |
Mine site reclamation, accretion and amortization | | | 117 | | | 111 | | | 216 | | | 246 |
Site exploration expenses | |
| 2,411 | | | 917 | | | 5,251 | | | 3,783 |
Capitalized underground mine development (sustaining) | |
| 6,642 | | | 2,674 | | | 11,314 | | | 9,119 |
Less: Depreciation | | | (430) | | | (344) | | | (826) | | | (687) |
Capital expenditures (sustaining) | |
| 5,853 | | | 1,287 | | | 6,661 | | | 3,478 |
All‑in sustaining costs | | $ | 55,481 | | $ | 35,047 | | $ | 99,872 | | $ | 74,657 |
Ounces sold (Au Eq. oz) | | | 37.0 | | | 23.8 | | | 70.4 | | | 48.6 |
Cash cost per ounce ($/Au Eq. oz sold) | | $ | 1,105 | | $ | 1,280 | | $ | 1,097 | | $ | 1,207 |
AISC per ounce ($/Au Eq. oz sold) | | $ | 1,500 | | $ | 1,476 | | $ | 1,418 | | $ | 1,535 |
Average realized price
The term average realized price per ounce used in this report is also a non-GAAP financial measure. We prepare this measure to evaluate our performance against market (London P.M. Fix). Average realized price is calculated as gross sales of gold and silver, less streaming revenue, divided by the number of net ounces sold in the period, less ounces sold under the streaming agreement.
The following table reconciles the average realized prices to the most directly comparable U.S. GAAP measure, revenue from gold and silver sales. Ounces of gold and silver sold for the San José mine are provided to us by MSC.
| | | | | | | | | | | | | | | | | | | | | | | ||
| | Three months ended September 30, | | Nine months ended September 30, | | Three months ended June 30, | | Six months ended June 30, | ||||||||||||||||
| | 2020 |
| 2019 |
| 2020 |
| 2019 | | 2021 |
| 2020 |
| 2021 |
| 2020 | ||||||||
Average realized price - 100% owned | | (in thousands, except per ounce) | | (in thousands, except per ounce) | ||||||||||||||||||||
Revenue from gold and silver sales | | $ | 27,395 | | $ | 32,691 | | $ | 77,086 | | $ | 84,657 | | $ | 40,706 | | $ | 18,291 | | $ | 64,446 | | $ | 49,691 |
Less: revenue from gold sales, stream | | | 202 | | | 380 | | | 883 | | | 1,231 | | | 214 | | | 179 | | | 569 | | | 681 |
Revenue from gold and silver sales, excluding stream | | $ | 27,193 | | $ | 32,311 | | $ | 76,203 | | $ | 83,426 | | $ | 40,492 | | $ | 18,112 | | $ | 63,877 | | $ | 49,010 |
Gold equivalent ounces sold | | | 14.5 | | | 22.6 | | | 45.6 | | | 63.0 | | | 22.5 | | 10.8 | | | 36.3 | | | 31.1 | |
Less: gold ounces sold, stream | | | 0.4 | | | 0.7 | | | 1.6 | | | 2.2 | | | 0.4 | | | 0.3 | | | 1.0 | | | 1.2 |
Gold equivalent ounces sold, excluding stream | | | 14.1 | | | 21.9 | | | 44.0 | | | 60.8 | | | 22.1 | | | 10.5 | | | 35.3 | | | 29.9 |
Average realized price per Au Eq. oz sold, excluding stream | | $ | 1,925 | | $ | 1,478 | | $ | 1,732 | | $ | 1,372 | | $ | 1,830 | | $ | 1,733 | | $ | 1,808 | | $ | 1,641 |
| | | | | | | | | | | | | | | | | | | | | | | ||
| | Three months ended September 30, | | Nine months ended September 30, | | Three months ended June 30, | | Six months ended June 30, | ||||||||||||||||
|
| 2020 |
| 2019 |
| 2020 |
| 2019 |
| 2021 |
| 2020 |
| 2021 |
| 2020 | ||||||||
Average realized price - San José mine (100% basis) | | (in thousands, except per ounce) | | (in thousands, except per ounce) | ||||||||||||||||||||
Gold sales | | $ | 35,265 | | $ | 40,203 | | $ | 88,602 | | $ | 106,728 | | $ | 35,728 | | $ | 28,499 | | $ | 65,947 | | $ | 53,337 |
Silver sales | | | 34,930 | |
| 34,327 | | | 66,064 | |
| 82,620 | | | 34,668 | |
| 18,582 | | | 57,752 | |
| 31,134 |
Gold and silver sales | | $ | 70,195 | | $ | 74,530 | | $ | 154,666 | | $ | 189,348 | | $ | 70,396 | | $ | 47,081 | | $ | 123,699 | | $ | 84,471 |
Gold ounces sold | |
| 17.6 | |
| 26.1 | | | 47.3 | |
| 75.0 | |
| 18.8 | |
| 15.1 | | | 37.5 | |
| 29.7 |
Silver ounces sold | |
| 1,192 | |
| 1,852 | | | 3,060 | |
| 5,041 | |
| 1,239 | |
| 904 | | | 2,236 | |
| 1,868 |
Gold equivalent ounces sold | |
| 32.7 | |
| 47.4 | | | 81.3 | |
| 135.3 | |
| 37.0 | |
| 23.8 | | | 70.4 | |
| 48.6 |
Average realized price per gold ounce sold | | $ | 2,002 | | $ | 1,542 | | $ | 1,873 | | $ | 1,424 | | $ | 1,903 | | $ | 1,893 | | $ | 1,757 | | $ | 1,796 |
Average realized price per silver ounce sold | | $ | 29.30 | | $ | 18.54 | | $ | 21.59 | | $ | 16.39 | | $ | 27.99 | | $ | 20.55 | | $ | 25.83 | | $ | 16.67 |
Average realized price per gold equivalent ounce sold | | $ | 2,146 | | $ | 1,574 | | $ | 1,901 | | $ | 1,400 | | $ | 1,903 | | $ | 1,982 | | $ | 1,757 | | $ | 1,737 |
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Liquid assets
The term liquid assets is also a non-GAAP financial measure. We report this measure to better understand our liquidity in each reporting period.
Liquid assets is calculated as the sum of the Balance Sheet line items of cash and cash equivalents, restricted cash, investments, and investments,receivables plus ounces of doré held in precious metals inventories valued at the London PM Fix spot price at the corresponding period. The following table summarizes the calculation of liquid assets as at SeptemberJune 30, 20202021 and 2019:2020:
| | | | | | | | | | | | |
| | September 30, | | June 30, | ||||||||
|
| 2020 |
| 2019 |
| 2021 |
| 2020 | ||||
| | (in thousands) | | (in thousands) | ||||||||
Cash and cash equivalents | | $ | 7,954 | | $ | 4,262 | | $ | 42,232 | | $ | 18,410 |
Restricted cash | | | 10,193 | | | 8,764 | | | 3,625 | | | — |
Investments | | | - | | | 3,224 | | | 1,777 | | | — |
Trade receivables | | | - | | | 882 | ||||||
Receivables from marketable securities sales | | | - | | | 928 | | | - | | | 960 |
Precious Metals valued at market value (1)(2) | | | 676 | | | 1,284 | | | 1,306 | | | 592 |
Total liquid assets | | $ | 18,823 | | $ | 18,462 | | $ | 48,940 | | $ | 20,844 |
(1) | As at |
(2) | Precious metals valued at cost, inclusive of ounces to be delivered under the streaming agreement, equals |
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CRITICAL ACCOUNTING POLICIES
Critical accounting policies and estimates used to prepare our financial statements are discussed with our Audit Committee as they are implemented and on an annual basis.
The were no significant changes in our Critical Accounting Policies since December 31, 20192020. For further details on the Company’s accounting policies, refer to the December 31, 2020 10-K.
FORWARD-LOOKING STATEMENTS
This report contains or incorporates by reference “forward-looking statements”, as that term is used in federal securities laws, about our financial condition, results of operations and business. These statements include, among others:
● | statements about our anticipated exploration results, costs and feasibility of production, production estimates, receipt of permits or other regulatory or government approvals and plans for the development of our properties; |
● | statements regarding the potential impacts of the COVID-19 pandemic, government responses to the continuing pandemic, and our response to those issues; |
● | statements regarding strategic alternatives that we are, or may in the future, evaluate in connection with our business; |
● | statements concerning the benefits or outcomes that we expect will result from our business activities and certain transactions that we contemplate or have completed, such as receipt of proceeds, increased revenues, decreased expenses and avoided expenses and expenditures; and |
● | statements of our expectations, beliefs, future plans and strategies, anticipated developments and other matters that are not historical facts. |
These statements may be made expressly in this document or may be incorporated by reference to other documents that we will file with the SEC. Many of these statements can be found by looking for words such as “believes”, “expects”, “anticipates”, “estimates” or similar expressions used in this report or incorporated by reference in this report.
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Forward-looking statements and information are based upon a number of estimates and assumptions that, while considered reasonable by management, are inherently subject to significant business, economic and competitive uncertainties, risks and contingencies, and there can be no assurance that such statements and information will prove to be accurate. Therefore, actual results and future events could differ materially from those anticipated in such statements and information.
We caution you not to put undue reliance on these forward-looking statements, which speak only as of the date of this report. Further, the forward-looking information contained in this document or incorporated herein by reference is a statement of our present intention and is based on present facts and assumptions, and may change at any time and without notice, based on changes in such facts or assumptions. Readers should not place undue reliance on forward-looking statements.
Risk Factors Impacting Forward-Looking Statements
Important factors that could prevent us from achieving our stated goals and objectives include, but are not limited to, those set forth in the “Risk Factors” section in our report on Form 10-K and other reports filed with the SEC, and the following:
● | our ability to raise funds required for the execution of our business strategy; |
● | the effects of pandemics such as COVID-19 on health in our operating jurisdictions and the |
43
● | our ability to secure permits or other regulatory and government approvals needed to operate, develop or explore our mineral properties and projects; |
● | decisions of foreign countries, banks and courts within those countries; |
● | unexpected changes in business, economic, and political conditions; |
● | operating results of MSC; |
● | fluctuations in interest rates, inflation rates, currency exchange rates, or commodity prices; |
● | timing and amount of mine production; |
● | our ability to retain and attract key personnel; |
● | technological changes in the mining industry; |
● | changes in operating, exploration or overhead costs; |
● | access and availability of materials, equipment, supplies, labor and supervision, power and water; |
● | results of current and future exploration activities; |
● | results of pending and future feasibility studies or the expansion or commencement of mining operations without feasibility studies having been completed; |
● | changes in our business strategy; |
● | interpretation of drill hole results and the geology, grade and continuity of mineralization; |
● | the uncertainty of reserve estimates and timing of development expenditures; |
● | litigation or regulatory investigations and procedures affecting us; |
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● | changes in federal, state, provincial and local laws and regulations; |
● | local and community impacts and issues including criminal activity and violent crimes; |
● | accidents, public health issues, and labor disputes; |
● | our continued listing on a public exchange; |
● | uncertainty relating to title to mineral properties; |
● | changes in relationships with the local communities in the areas in which we |
● | decisions by third parties over which we have no control. |
We undertake no responsibility or obligation to update publicly these forward-looking statements, except as required by law and may update these statements in the future in written or oral statements. Investors should take note of any future statements made by or on our behalf.
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Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Our exposure to market risks includes, but is not limited to, the following risks: changes in foreign currency exchange rates, equity price risks, commodity price fluctuations, credit risk, interest rate risk and inflationary risk. We do not use derivative financial instruments as part of an overall strategy to manage market risk.
Further, our participation in the joint venture with Hochschild for the 49% interest held at MSC creates additional risks because, among other things, we do not exercise decision-making power over the day-to-day activities at MSC; however, implications from our partner’s decisions may result in us having to provide additional funding to MSC or result in a decrease in our percentage of ownership.
Foreign Currency Risk
In general, the devaluation of non-U.S. dollar currencies with respect to the U.S. dollar has a positive effect on our costs and liabilities which are incurred outside the U.S. while it has a negative effect on our assets denominated in non-U.S. dollar currency. Although we transact most of our business in U.S. dollars, some expenses, labor, operating supplies and property and equipment are denominated in Canadian dollars, Mexican pesos or Argentine pesos.
Since 2008, the Argentine peso has been steadily devaluing against the U.S. dollar by 10% to 40% on an annual basis. During the ninesix months ended SeptemberJune 30, 2020,2021, the Argentine peso devalued 21%12% compared to a devaluation of 52%15% in the same period of 2019.2020.
During the ninesix months ended SeptemberJune 30, 2020,2021, the Mexican peso devalued 15%,by 0.1% compared to it staying relatively flata devaluation of 18% against the U.S Dollar in the same period in 2019.2020.
The Canadian dollar experienced a 3% depreciationappreciation against the U.S. dollar for the ninesix months ended SeptemberJune 30, 2020,2021, compared to a 3% appreciation5% depreciation in the comparable period of 2019.2020.
The value of cash and cash equivalents denominated in foreign currencies also fluctuates with changes in currency exchange rates. Appreciation of non-U.S. dollar currencies results in a foreign currency gain on such investments and a depreciation in non-U.S. dollar currencies results in a loss. We have not utilized material market risk-sensitive instruments to manage our exposure to foreign currency exchange rates but may do so in the future. We hold portions of our cash reserves in non-U.S. dollar currencies.
Based on our Canadian cash balance of $7.4$1.7 million (C$9.82.0 million) at SeptemberJune 30, 2020,2021, a 1% change in the Canadian dollar would result in a gain/loss of less than $0.1 million in the Consolidated Statements of Operations. We also hold negligible portions of our cash reserves in Mexican and Argentina pesos, with the effect that a 1% change in these respective currencies would result in gains/losses immaterial for disclosure.
Further, we are also subject to foreign currency risk on the fluctuation of the Mexican peso on our VAT receivable balance. As of SeptemberJune 30, 2020,2021, our VAT receivable balance was Mexican peso 15,350,664,12,732,326, equivalent to approximately $0.7$0.6 million, for which a 1% change in the Mexican peso would have resulted in a gain/loss of less than $0.1 million in the Consolidated Statements of Operations.
Equity Price Risk
We have in the past sought and will likely in the future seek to acquire additional funding by sale of common stock or other equity securities. Movements in the price of our common stock have been volatile in the past and may also be volatile in the future. As a result, there is a risk that we may not be able to sell equity securities at an acceptable price to meet future funding requirements.
We have invested and may continue to invest in shares of common stock of other entities in the mining sector. Some of our investments may be highly volatile and lack liquidity caused by lower trading volumes. As a result, we are inherently exposed to fluctuations in the fair value of our investments, which may result in gains or losses upon their valuation.
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Commodity Price Risk
We produce and sell gold and silver, therefore changes in the market price of gold and silver have and could in the future significantly affect our results of operations and cash flows. Change in the price of gold and silver could materially affect our revenues. Based on our revenues from gold and silver sales of $77.1$64.4 million for the ninesix months ended SeptemberJune 30, 2020,2021, a 10% change in the price of gold and silver would have had an impact of approximately $7.7$6.4 million on our revenues. Changes in the price of gold and silver can also affect the provisionally-pricedprovisionally priced sales that we make under agreements with refiners and other purchasers of our products. At SeptemberJune 30, 2020,2021, we had no gold or silver sales subject to final pricing.
We have in the past and may in the future hold a portion of our treasury in gold and silver bullion, where the value is recorded at the lower of cost or market. Gold and silver prices may affect the value of any bullion that we hold in treasury.
We do not hedge any of our sales and are therefore subject to all changes in commodity prices.
Credit Risk
We may be exposed to credit loss through our precious metals and doré sales agreements with Canadian financial institutions and refineries if these customers are unable to make payment in accordance with the terms of the agreements. However, based on the history and financial condition of our counterparties, we do not anticipate that any of the financial institutions or refineries will default on their obligation. As of SeptemberJune 30, 2020,2021, we do not believe we have any significant credit exposure associated with precious metals and our doré sales agreements.
In Mexico, we are exposed to credit loss regarding our VAT receivable if the Mexican tax authorities are unable or unwilling to make payments in accordance with our monthly filings. Timing of collection on VAT receivables is uncertain as VAT refund procedures require a significant amount of information and follow-up. The risk is mitigated to the extent that the VAT receivable balance can be applied against future income taxes payable. However, at this time we are uncertain when, if ever, our Mexican operations will generate sufficient taxable operating profits to offset this receivable against taxes payable. We continue to face risk on the collection of our VAT receivables, which amount to $0.7$0.6 million as at SeptemberJune 30, 2020.2021.
In Nevada and Ontario, Canada we are required to provide security to cover our projected reclamation costs. As at SeptemberJune 30, 2020,2021, we have surety bonds of $31.3$32.4 million in place to satisfy bonding requirements for this purpose. The bonds have an annual fee of 2.3% of their value and require a deposit of 11% of the amount of the bond. Although we do not believe we have any significant credit exposure associated with these bonds or the deposit, we are exposed to the risk that the surety may default in returning our deposit or that the surety bonds may no longer be accepted by the governmental agencies as satisfactory reclamation coverage, in which case we would be required to replace the surety bonding with cash.
Interest rate risk
Our outstanding debt consists of various equipment leases and the senior secured credit facility. As the debt is at fixed rates, we consider our interest rate risk exposure to be insignificant at this time.
Inflationary Risk
Argentina has experienced a significant amount of inflation over the last nineten years and has been classified as a highly inflationary economy. ASC 830 defines a hyperinflationary economy as one where the cumulative inflation rate exceeds 100% over the last three years preceding the reporting period. In this scenario, ASC 830 requires companies to change the functional currency of its foreign subsidiaries operating in a highly inflationary economy, to match the company’s reporting currency. In our case, the functional currency of all our Argentine subsidiaries has always been our reporting currency, the U.S. dollar. As such, we do not expect the classification of Argentina’s economy as a highly inflationary economy to change our financial reporting methodology.
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Item 4. CONTROLS AND PROCEDURES
(a) | We maintain a system of controls and procedures designed to ensure that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934, as amended (“Exchange Act”), is recorded, processed, summarized and reported, within time periods specified in the SEC’s rules and forms and to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. As of |
(b) | There were no changes in our internal control over financial reporting during the quarter ended |
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PART II OTHER INFORMATION
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On September 10, 2020, we sold 6,298,166 shares of our common stock in a transaction that was not registered under the Securities Act of 1933, as amended (the “Securities Act”). The shares were sold to institutional investors pursuant to an Underwriting Agreement with Cantor Fitzgerald Canada Corporation, as representative of the underwriters listed therein, for gross proceeds of $10.4 million, before deducting underwriting discounts and commissions and other estimated offering expenses payable by us. We paid the underwriters discounts and commissions of $0.4 million in connection with the sale.
The common stock sold in the transaction was not registered under the Securities Act in reliance on the exemption provided by Rule 903 of Regulation S promulgated under the Securities Act. The sale of the common stock was made in an offshore transaction, was not offered or sold to a “U.S. Person” within the meaning of Regulation S and offering restrictions were implemented.
Item 4. MINE SAFETY DISCLOSURES
At McEwen Mining, safety is a core value, and we strive for superior performance. Our health and safety management system, which includes detailed standards and procedures for safe production, addresses topics such as employee training, risk management, workplace inspection, emergency response, accident investigation and program auditing. In addition to strong leadership and involvement from all levels of the organization, these programs and procedures form the cornerstone of safety at McEwen Mining, ensuring that employees are provided a safe and healthy environment and are intended to reduce workplace accidents, incidents and losses, comply with all mining-related regulations and provide support for both regulators and the industry to improve mine safety.
The operation of our Gold Bar mine is subject to regulation by the Federal Mine Safety and Health Administration (“MSHA”) under the Federal Mine Safety and Health Act of 1977 (the “Mine Act”). MSHA inspects our Gold Bar mine on a regular basis and may issue citations and orders when it believes a violation has occurred under the Mine Act. While we contract a majority of the mining operations at Gold Bar to an independent contractor, we may be considered an “operator” for purposes of the Mine Act and may be issued notices or citations if MSHA believes that we are responsible for violations.
We are required to report certain mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K, and that required information is included in Exhibit 95 filed with this report.
Item 5. OTHER INFORMATION
As previously reported on Form 8-K filed on October 1, 2020, Anna Ladd-Kruger was appointed as our Chief Financial Officer, effective September 29, 2020. On October 2, 2020, we finalized the terms and conditions of her employment and memorialized those terms in an offer letter (the “Offer Letter”). This summary of the terms of the Offer Letter is provided in lieu of an amendment to the Form 8-K, as stated in the original filing.
Ms. Ladd-Kruger will be paid a salary of CAD $320,000 per year and is entitled to participate in all employee benefit plans consistent with other senior executives of the Company. Ms. Ladd-Kruger is also entitled to earn a performance bonus in the discretion of the Compensation Committee of the Board of Directors based on achievement of certain key performance indicators. The target for this bonus is 60% of Ms. Ladd-Kruger’s annual salary.
The Offer Letter provides certain severance benefits and change of control protections. If Ms. Ladd-Kruger is terminated by the Company without cause during her first year of employment, we would be obligated to provide her with twelve months’ notice or pay in lieu of such notice. If Ms. Ladd-Kruger is terminated without cause following the first year of her employment, she would be entitled to the greater of (i) three weeks notice for the first year of employment, plus an additional three weeks notice for every completed year thereafter, to a maximum of twelve weeks, or pay in lieu of such
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notice, or (ii) her minimum entitlement under the Ontario Employment Standards Act, 2000, as amended. If we terminate her employment without cause following a change in control of the company (as such term is defined in the Offer Letter), we would be obligated to pay her an amount equal to 18 months of salary, plus her target bonus and required benefits.
A copy of the Offer Letter is filed with this report as Exhibit 10.1 and the summary of the Offer Letter in this report is expressly qualified by reference to such Exhibit.
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Item 6. EXHIBITS
The following exhibits are filed or incorporated by reference with this report:
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3.1.1 |
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3.1.2 | | |
3.1.3 | | |
3.2 | | |
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31.1 | | |
31.2 | | |
32 | | |
95 | | |
101 | | The following materials from McEwen Mining Inc.’s Quarterly Report on Form 10-Q for the quarter ended |
104 | | The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended |
| | |
* | | Compensatory plan or arrangement |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| MCEWEN MINING INC. |
| |
| /s/ Robert R. McEwen |
Date: | By: Robert R. McEwen, |
| Chairman and Chief Executive Officer |
| |
| /s/ Anna Ladd-Kruger |
Date: | By: Anna Ladd-Kruger, |
| Chief Financial Officer |
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