McEwen Mining suspends cash distribution

McEwen Mining Inc. [MUX-TSX, NYSE] said Thursday March 7 that it has elected to suspend the dividend distribution of one-half cent per share, an amount that would have been paid on March 15, 2019 to shareholders of record on March 8, 2019.

“We have been experiencing operating issues at our Black Fox mine and with the start-up of our Gold Bar mine,” said McEwen Chairman Rob McEwen.

“While viewed as temporary, these issues have resulted in much lower revenue in the quarter than planned,” he said. “As result, we decided the prudent and responsible course of action was to conserve our cash and suspend the distribution.”

On Thursday, McEwen shares eased 3% or $0.07 to $2.21. The 52-week range is $2.16 and $3.28.

McEwen aims to qualify for inclusion in the S&P 500 Index by creating a profitable gold and silver producer with a focus on the Americas, including the U.S., Canada, Mexico and Argentina.

It’s key assets are the San Jose mine in Santa Cruz, Argentina, the Black Fox mine in Timmins, Ontario, the El Gallo Fenix project in Mexico, the Gold Bar mine in Nevada (currently under construction), and the Los Azules copper project in San Juan, Argentina.

Robert McEwen, the Bay Street financier who owns 24% of McEwen Mining, has said he hopes to see the company increase its production from 175,000 ounces in 2018 to at least 220,000 ounces by 2020.

Due to its location in the heart of Nevada’s Cortez Trend, the company has high hopes for the Gold Bar mine, which was expected to produce 55,000 ounces of gold in 2019, increasing to 60,000 ounces in 2020. The initial gold pour, weighing 390 ounces, was on February 16, 2019.

Measured and indicated resources at Gold Bar now stand at 721,000 ounces. On top of that is 197,000 ounces of inferred material.

The Gold Bar South property, consisting of 109 mining claims and located 5 km from Gold Bar, contains an indicated resource of 101,000 ounces gold and 5,000 ounces of inferred material.

The company hopes to extend the life of the mine beyond seven years by drilling four high priority targets under existing and former open pits and exploring for deeper Carlin-type gold discoveries at the site.

However, McEwen recently said operating activities have been impacted by heavy snowfall and being understaffed, particularly delaying the ramp-up of the crushing plant. As a result, the company said it expected to achieve commercial production in the second quarter of 2019. Costs have also been higher than anticipated due to an increase in the amount of waste stripping.

The Black Fox Complex is located along a 7-km section of the fabled Destor Porcupine Fault, a geological formation, also known as the Golden Highway, which hosts many world class gold deposits. The Black Fox Mine is a key component of the complex, which also includes the Black Fox-Stock mill, and the nearby Froome and Grey Fox deposits. The complex is estimated to contain an indicated resource of 1.34 million ounces of gold in four deposits (Black Fox, Froome, Tamarack and Grey Fox) of which Tamarack is the largest. Located about 500 metres east of main production ramp, it hosts 127,000 ounces of grade 5.08 g/t gold equivalent.

The open pit and underground operations at the Black Fox mine have produced 835,000 ounces of gold to date. Black Fox is expected to produce 50,000 gold ounces, with cash and all-in sustaining cost per ounce pegged at between US$905 and US$1,080 an ounce respectively.

So far in 2019, the mine has faced some challenges in reaching targeted productivity levels, although the company has said it believes these issues are temporary and should not impact planned output in 2019.