McEwen Mining Inc. (MUX) Q3 2019 Earnings Report, Transcript and Summary

Hello, ladies and gentlemen. Welcome to McEwen Mining Q3 2019 Operating and Financial Results Conference Call. Present in our Toronto office is today are Rob McEwen, Chairman and Chief Owner; Chris Stewart, President and Chief Operations Officer; Meri Verli, Chief Financial Officer; Sylvain Guérard, Senior Vice President of Exploration. After the speaker's presentation, there will be a question-and-answer session. [Operator Instructions] I will now turn the phone over to Rob McEwen, Chief Owner.

Thank you, operator. Welcome, fellow shareowners, ladies and gentlemen. Today, we're going to talk about third quarter results, about our fourth quarter and 2020, and also about the exploration and success we've enjoyed this year. Leading the discussions will be Sylvain. He'll be followed by Chris, who'll talk about production; Meri about finance; and I will follow with concluding remarks. So I'd like to pass the call over to Sylvain to talk about our exploration success this year. Sylvain Guérard: Thank you, Rob. Good morning everybody. I'm more than happy to discuss our exploration results today. Things are going well and we had an outstanding quarter generating numerous highly-positive results at all our active exploration sites in Timmins and Nevada. Please refer to figure provided in the presentation of this conference call. Starting in Timmins at our Stock mill property, this is on figure 1 to 3, we have reported high-grade gold intersection on the depth extension of the Stock Mine including 18 gram per tonne over 9.1 meter, which includes 120 gram per tonne over 1.2 meters. Those are true width. These impressive results reinforce our belief that the strong mineralized system is continuing at depth. Drilling along the 3-kilometer mine trend has also generated some truly spectacular results at the Stock East target. Such as 84 grams over 5.6 meters that include 417 grams per tonne over 1.1 meters and 35 grams per tonne over 5.9 meters, including 74 grams per tonne over 2.7 meters, again those are true widths. And this is reinforcing the presence of a high-grade – or of high-grade shoots within the wider and lower-grade mineralized interval. To the west of the Stock Mine now at the Stock West target, we have drilled and just recently reported very exciting new results. Our recent intersection over this new target area are significant grades over significant interval and include core land drill composites such as 6.7 gram per tonne gold over 39 meter; 5.6 gram per tonne over 30 meter that, include mine gram over 13; and 5.6 gram per tonne over 29.1 meter, including 15 gram per tonne over 5.1 meter. The true widths of these drill intersections are estimated to about 20 to 25 meter. Our results suggest that the Stock property is a top-quality exploration project with excellent potential to host economic organization just next to our mill and all infrastructure. Drilling continued with five rigs at the Stock West and East targets. At Black Fox now it's on figure 4, our drilling is focused on the Grey Fox area where we increased the indicated resource by 105,000 ounces to a total of 567,000 ounces grading 7.1 gram per tonne gold in July. Since that time, we continue to drill the 147 Northeast zone to upgrade and extend the resource. Our drilling is also targeting new zones of mineralization in the Grey Fox area and very encouraging wide zone of visual mineralization hosting visible gold that were intersected at the Grey pit. We believe that each of these targets may represent new mineralized shoot and have the potential to contribute to the growth of the existing resource at Grey Fox. At the Black Fox Mine, our underground drilling keeps intersecting with the shoots of the west of the mine. Underground development is ongoing to provide better drill intersection in gold to further define and extend mineralization over this area. Drilling in Q4 in 2020 is ongoing and plan to test extension to the west along structure control in mineralization. Drilling also continued on the deep Central zone. Moving now to Nevada, that's figure 6. At the satellite Gold Bar South deposit that is located three miles Southeast of the Gold Bar heap leach facility and which hosts an indicated resource of 100,000 ounces at shallow depth our drilling was positive intersecting mineralization outside of the projected open pit. We have been intersecting a zone of grading plus two gram per tonne gold mineralization near the bottom of the projected open pit floor. In addition our drilling to better define the limits of the lateral mineralization has also been successful intersecting significant mineralization outside the planned open pit including recent shallow intersections such as one gram over 27 meter, up to 125 meters out of the planned pit. Exploration drilling also took place at a few targets near our mine including at Pot Canyon located 1.5 miles northwest of the Gold Bar Mine adjacent to the recently acquired Gold Bar -- Gold Canyon internal plain. At Pot Canyon near-surface excess mineralization was confirmed with best intersection returning up to 0.96 grams per tonne over 64 meter. This is core land. We have also initiated exploration to target the deep potential of the property for large high-grade sulfide mineralization as the one reported by Barrick to the Northwest of our Gold Bar property at the Gold Rush and Fourmile's discovery. Two deep hole has been completed: one over the west property area near the Wall Fault, which is an extension of the Cortez Fault and the second all-drill to the Southeast of the Gold Bar Mine area. Both holes have intersected the deep-targeted rock unit. And then the stop sender necessary to gold system were obtained in the first hole. And acid are pending for the second hole. In conclusion, the excellent exploration drilling results in payments over the past 18 months continue to support McEwen's 2017 decision to acquire the Black Fox and Stock properties that struggled to prime segment of the Destor-Porcupine Fault zone within the Timmins region. We are increasing our resources and keep generating highly positive results near our mine and mill furtjerthat will further contribute to the growth of our resources and reserve base and will provide us with additional mining development opportunities. In Nevada, our drilling was focused at Gold Bar South to increase confidence in the resource and to advance with the reserve estimate. Our timetable is to generate a reserve estimation by end of year or early 2020 and to be mining Gold Bar South in addition to Gold Bar in late 2021. We remain very excited about the potential of our projects to increase our resources and reserves at both Black Fox and Gold Bar. Thank you. And on this over to Chris to talk about our operations.

Thank you, Sylvain. Good morning, everyone. The third quarter has shown positive results with operational improvements at Gold Bar and steady production performance at El Gallo and San Jose. We continue to have some operational challenges at Black Fox but we expect to have a strong Q4 as a higher grade ore which was pushed out of Q3 due to the challenges we faced in the first half of the year becomes accessible. We're on track to achieve our revised guidance of 169,000 to 178,000 gold equivalent ounces for 2019. During Q3, we produced 35,000 ounces of gold and 947,000 ounces of silver for a total of 46000 gold equivalent ounces using a gold:silver ratio of 87:1 for the quarter. For the nine months ended September 30, 2019, we have produced 128,000 ounces, which is in line with our revised guidance of 169,000 to 176,000 gold equivalent ounces for the year. At Gold Bar our newest mine in Nevada gold production is ramping up as planned as more orders are placed on the heap leach pad. In Q3, we reached 11,000 gold ounces of production, which is a 39% increase from Q2 when we produced 7,500 gold ounces. Gold Bar reported its first ingot on February 16, 2019 and declared commercial production on May 23, 2019. The operations saw improvements during the third quarter achieving several key performance benchmarks for ore production, crushing throughput and gold production. And as a consequence, gold output is increasing during the second half of 2019. Production for the month of September reached almost 5,000 gold ounces, which is in line with our plan on approaching the design capacity of the process plant. Gold Bar had cash cost of $1,088 and all-in sustaining cost of $1,235 per ounce during the quarter. The increase in our cost per ounce is driven largely by modifications we had to make to our ore-handling system in order to achieve the targeted throughput while handling high-clay content ore and less-than-favorable weather conditions. Economic studies and permitting work are underway with the objective of incorporating Gold Bar sales into the overall mine plan this year. We anticipate having permits in place by the end of 2020 and we could look to start open-pit development in 2021. At the Black Fox Mine in Canada, our team recorded a production of 7,400 gold ounces in Q3. Production decreased for the quarter, primarily due to insufficient working areas and delays in advancing the underground development, which pushed higher-grade stopes out into Q4 and early 2020. Production year-to-date for the Black Fox Mine is in line with our revised guidance. Cost per ounce for the quarter at Black Fox was $941 for cash cost and $1,363 for all-in sustaining costs. We continue to explore multiple targets at Black Fox near our existing infrastructure and remain highly focused on our exploration goal to cost-effectively grow adjacent gold zone that will contribute to near-term gold production and extend the mine life. At the San José Mine in Argentina production is on track to achieve the guided ounces for 2019. Our attributable production in Q3 was 13,500 gold ounces and 943,000 silver ounces for a total of 24,000 gold equivalent ounces. In Q3, 2019, gold production increased by 15% and silver production by 27% from Q3 of 2018, reflecting higher grade -- higher average grade of the process material. Also have noted the recoveries at San José for the first three quarters of 2019 have averaged an increase of 1.7% over the same period in 2018. At the El Gallo complex in Mexico, residual leaching activities are continuing. Our operation team achieved Q3 production of 3,100 ounces. Year-to-date, El Gallo gold production is in line with our revised guidance, which was increased to 16,000 ounces for the year. Cash costs at El Gallo were $1,153, and all-in sustaining costs, $1,177 per ounce for the third quarter. The increase in cash cost and all-in sustaining cost per ounce was expected as fixed costs are spread over a decreasing number of ounces sold. The Fenix project during Q3. We received the environmental permit approval for in-pit tailing storage and terminal approval for the process plant for Phase 1, which would include the construction of a carbon-in-leach mill circuit. We incurred $1.7 million on activities required to advance the project. Work on the Fenix Project feasibility study continued during Q3, with the study expected to be completed in Q4 2019. At our Los Azules copper project in Argentina, our activity is focused on technical site investigations and permitting work. During the third quarter of 2019, we continued on preliminary engineering and developing cost estimates to advance the proposed low-altitude all-year-around Northern access route for Los Azules. The environmental baseline monitoring work continued along with other items, which were identified as necessary to develop a conforming environmental impact assessment submission. The environmental work included geological mapping of the tailings to Amazon. I will now turn the presentation over to Meri our Chief Financial Officer. Thank you.

Thank you, Chris. Good morning everyone and thank you for joining us today. In the third quarter, the company reported a net loss of $11.5 million or $0.03 per share. The net loss included approximately $14 million spent on exploration. Gross profit for the third quarter was $1.6 million or $9.1 million net of depreciation and depletion and comparable to fiscal 2018. In the first nine months of the year, the company had total production of 18 -- 128,000 gold equivalent ounces and is on track to produce between 170,000 to 174,000 gold equivalent ounces. The company's operating loss year-to-date was $11.6 million higher than the same period in 2018, reflecting lower gross profit from our 100% owned operations. The San José Mine is expected to meet its production guidance for the year. Today, the company has received $7 million of dividends from Minera Santa Cruz with $3 million received subsequent to September 30th. Our gross profit from operation was expected to be lower than 2018 due to lower planned ounces at El Gallo, which transitioned to residual leaching in May 2018 and also due to higher depletion and depreciation. Q3 was the first full quarter of commercial production at Gold Bar with over 11,000 ounces produced, which was slightly lower than planned. The increased cash cost and all-in sustaining cost per ounce at Gold Bar was expected and reflecting improvements and repairs to the conveying systems and process plant. During Q4 2019, we expect to produce between 42,000 to 46,000 gold equivalent ounces. Cash cost and all-in sustaining cost are expected to be higher at Gold Bar due to the same reason, continuing improvements and repairs to the conveying system and process plan. Cash cost and all-in sustaining at Black Fox are expected to approximate the original guidance for the year. We closed the third quarter with cash of over $13 million and positive working capital of almost $17 million. Working capital saw a decline due to $4 million of the term loan coming due in the next 12 months. Declines in working capital were offset by the buildup of heap leach inventory at our Gold Bar Mine, the benefits of which together with increased production plan, we should see in the last quarter of 2019 and into 2020. In addition the company's highly leveraged to gold and silver prices. $100 increase in the price of gold will generate an additional revenue of over $2 million for the last quarter of 2019 from our 100%-owned operations and a similar increase in the San José Mine revenues and profits. At this point I'll thank you again for taking the time to join us today and I'll turn the presentation over to Rob.

Thank you, Meri. I'd like to start off by saying this year has been a very disappointing year. We got hit really hard in the first half by some very unusual event that led to a very disappointing performance. In fact, it was so hard that what happened in the first half, we raised $70 million of revenue from our projections for this year. And that set off a series of events. We borrowed some money back in August of 2018. I'll run through a couple of excuses, which I'm sorry, but I'll share with you. We took out the loan, thinking we had the -- everything in hand, that Gold Bar would come on stream, on time as promised, Black Fox will be producing, neither of those happened. And then Argentina came along and imposed an export tax. And then there was a smelter that our partner was using and it went bankrupt and we are unsecured. There was a $20 million hit to the joint venture. Then we had operating problems at Black Fox, a fire, a flood in Gold Bar. I'm sorry. I can only laugh a little bit when I think about it. But in the third quarter we started seeing improving performance at Gold Bar. And as you heard from Sylvain, we saw excellent exploration results occurring at Black Fox. So, the fourth quarter, we're coming back on to where we -- after two painful revisions of our guidance, it looks like we're going to come on target for the fourth quarter. And then for 2020 we're looking at some 70,000 ounces coming out -- approximately 60,000, 70,000 ounces coming out of Gold Bar. Black Fox, we're going to cut back our production there and we're going to concentrate on drilling inside the mine. We think there's some excellent potential on the west side of the mine and the mine suffers from not having a good geological model which we've been working to build. And once we have that in place, we think that we can put a mine plan on and create a profitable mine plan there and a longer life than its current very short life. We're also thinking that the Black Fox property has the opportunity to provide us with multiple sources of production, not only from the Froome deposit which we've just started development on. We've -- we're doing our drive our tunnel over to that. It will take about a year. And as you heard from Chris, we expect to see production coming out of this deposit in 2021. We have the Grey Fox deposit to the South end of the Black Fox property -- Black Fox Mine property which -- that's probably a three to four-year of production story. And then over at Stock, some very exciting news in Stock West, but some good grade in Stock East and Stock Keep. That -- we've learned that that mine is considered temporarily suspended by the regulators and would take little to start-up given we put a mine plan on it. So what might be possible three, four years down the road is Black Box could be -- it is very conceptual, but producing 100,000 to 120,000 ounces a year with a good life. These are shallow lines and deposits in a district that is known for having deep roots. So it's -- as I look at it I think we are -- we have a chance. We're optimistic about the future because you have to be after the first half of this year. But next year we're looking at production in the range of 190,000 to 200,000 ounces which was what we were hoping to do this year. And I just want to jump to another topic about us. When I first got involved after leaving Goldcorp, I bought into a company called US Gold and it had a small number of shares outstanding. It had a property in Nevada and that was it. We did -- we listed it -- it traded over the counter. We listed it on Toronto raised some money. And the stock in 2006 ran from $0.36 to over $9. We had 50 million shares outstanding and we got up over $9. And so there was a market cap of about $450 million. In 2009, we raised some money to do more work in Nevada and bring on our Mexican exploration and we were up to 106 million shares. Two years later we raised some additional funds and we're now up to 136 million shares. And our share price went over $9. That gave us a market capital of $1.2 billion. The gold market peaked in 2011. In January of 2012, we merged US Gold with Minera Andes to form McEwen Mining. And that combination we were up to 186 million shares. But we had a source of production out of Argentina, we had a large copper deposit, and we had this development pipeline in Nevada and also in Mexico. The gold market fell apart and everybody was raising money and we needed some money for exploration and development of our projects. So, we did a rights issue. I believe that giving our -- all of our shareholders the opportunity to participate in the financing was what we should be doing. Unfortunately, rights issues are very long, cumbersome and expensive, and you do it at a very significant discount to market to ensure that the rights issue is completed successfully. At the end of the rights -- the $60 million rights offering, our share count went up to 297 million. And then we've done several financings. One in 2017, October, to buy the Black Fox mine for $0.06 on $1. We looked at it, and thought this was a big promising land position in the middle of a very prolific gold district, with a mine that could only be described as a turnaround situation. It was going to require work, but it was the exploration there that was quite intriguing. And I'd have to say, based on the past two years of exploration, it's -- as Sylvain said, it's showing us that our thoughts about the potential have been justify. We did a flow-through financing, which for our non-Canadian shareholders, is a tax-deferred method of raising money, where you can sell your stock at a premium. In this case, at a 24% premium to market, we raised $10 million. Then in the summer of 2018, our share price was around $2.60. I thought it was low. We looked at our projections -- financial projections that we're comfortable, maybe a little tight, but we're comfortable. We could do -- we could handle the debt. We raised $50 million rather than doing equity in hindsight. I should've -- we should've raised equity and not put that pressure of debt on us before we had Gold Bar up and running. A few months later, we did another flow-through funding to finance, again, the exploration on our Black Fox properties. And when we bought Black Fox, not only did it come with 1.25 million ounces and production of 50,000 ounces, but it was high cost. It was short life, but it also had a mill that was an operating mill with excess capacity, and we had visions of increasing our production there from various sources. So we raised some flow-through money at a 26% premium to market. We're now up to 345 million shares. As I said, the first half of this year chopped huge chunk of our revenue out of our forecast, and the debt that we've taken on in the summer of 2018 had some covenants, one of which was working capital. And if you went below that level of working capital, the interest rate would spike, and you'd have to declare a default, neither of which are good news for share prices. And at the end of March, we raised $25 million. $22 million of that came from one shareholder, and the other $3 million came from insiders. So we're at about 362 million shares. Today, our market cap is a little over $500 million, and we're looking at our debt today, looking to rework it, extend the term, possibly lower the interest rates. But I can say that we have advanced -- we have a better asset package than we had back in 2005, than we had in 2011, than we've had any time before this. We have some production growth. At Los Azules, we've advanced significantly. We continue to believe that's a wildcard in our portfolio. We have advanced Mexico, and we've been extending the life in Nevada, and we hope to do the same in Timmins. But I'd also like to apologize to all the shareholders for what has happened this year. It has not been a pleasant time at all, but there's a light ahead a long tunnel, and we're getting close to the end of the tunnel and into the sunshine. So thank you for your patience. If you want to yell at me or anybody else on this call, please feel free to do so. It's perfectly justified. I'd like to open up for questions and answers.

[Operator Instructions] Your first question comes from the line of Bhakti Pavani from Alliance Global Partners. Your line is open.

Just a quick question on Black Fox. In your prepared remarks, you did mention that you plan to cut down production. What would be or what sort of production range should we be modeling for next year, given the issues?

30,000 to 37,000 ounces, Bhakti.

Okay. That’s to…

It's to give us room underground to explore to the west of the mine and at depth. Right now the miners are right on top of the geologists and you can't get a good geological model out of that. It's just 10-a-month because of the issues earlier in the year.

Got it. And moving to exploration, you have had such phenomenal results at Stock, at Grey Fox. What are your thoughts about exploration going into next year? Do you see a big budget of $18 million that you had this year? Or do you expect to cut down on the budget?

We'd like to hit it hard and go at the same level as this year. It's generating good results, and we're getting very encouraged by what we're seeing in a couple of areas.

And then keep in mind that we have a mill that's got a capacity of 2,400 tonnes a day. Currently, can't fill with the resources that we have. So exploration needs to be a real focus, because as Rob said, you look at three to four years down the road. And if you can fill a mill even at 2,200 tonnes a day at five grams, you're going to get 110,000 ounces 120,000 ounces out of that.

And given your exploration focus, do you still intend to focus specifically on Stock and Grey Fox? Or do you think there is a resource expansion opportunity at Black Fox itself?

Definitely, there's opportunity at Black Fox. If you look at some of our presentations on the west side of Black Fox around the 300 level 500, 600 level. And then down at the deficit 800 meters, you'll see multiple intercepts of double-digit grams per tonne. And there are a few that are triple-digits into the hundreds of grams per tonne. The challenge that Black Fox has it's not a uniform ore body. It's somewhat like we called nuggety or fragmented. And so it's getting the right mining method. More important, getting the mine plan to be to really focus on the location and then the extraction method out of there. So not with the mine, I think there's lots of room there. I mean, our deepest hole is 1,050 meters and it's running at 55 grams over 1.1 meters. Over on the west out of the 300 level, you've got 25 grams over three meters; you've got 83 grams over five meters almost; there's a 396 grams over three meters; 34 grams over three meters; 12 grams over seven meters; 180 grams over 1.2 meters; 30 grams over eight meters. I mean lots of encouragement sitting out there. Sylvain Guérard: Bhakti, it's Sylvain here. Just to add to our exploration. The Black Fox Mine, the west extension that's clearly a place to expand existing organization. And as discussed with better drill platform, we'll be in a better position to drill the west extension. And our plan for next year -- earlier this year, I was not sure I would be asking for the same type of money, but our results are really positive at all sites, and we'll keep doing what we've been building out over the last few years. So the mine itself, but -- at Black Fox -- the Grey Fox area, we see a strong potential there to keep increasing the existing resource. We had 100,000 ounces in July and we think we'll be adding -- or providing an update by year-end from the 147 Northeast target. And we're also drilling other -- what we believe will be new shoots over this area that will also contribute to that and we do it like target called Gibson just to the west of Grey Fox, which is also encouraging. And Stock is better than expected. It's really good. We get good results not far from existing development from the Stock Mine to the East. We will also have greater resource there. And what we've been reporting to the west, it's completely new. It was never drilled before and those are really significant grade over -- significant with -- into a new target area that remained open in all directions. So this is clearly an exciting target. And Gold Bar, we just keep advancing with what we've been starting. Keep in mind, all of this exploration is less than two years and actively or reactively real exploration happening. So we are going to build up. In year three, we have really solid foundation. We are in the process -- an exploration process and also what I would call a discovery process happening at those sites.

Got it. That's very helpful. A quick question on Gold Bar, you did said, for the next year the production is expected to be 65,000 to 70,000 ounces. Just kind of curious, at full production, what's kind of the average cash cost and all-in sustaining cost are you modeling? Or do you expect?

If you go back to the feasibility study, those are kind of the numbers that we're still targeting towards. We expect we'll see a bit of a bump next year as we continue to sort of clean up some of the issues we have around our ore-handling system and ADR. But I don't have it in front of me, but I think it was in and around sort of $910 or $920 cash cost, and all-in sustaining was around $960, $970 kind of thing.

Got it, got it. And could you maybe talk about how the grade is kind of moving along in comparison to your reserve model? And what kind of further improvements do you think could be done in order to put the mine up to full production levels?

Sorry, I missed the start of your question there. Could you repeat that?

I said -- yes. How are the grades trending along in comparison to their reserve model? And with regards to improvements with the ore-handling system, could you maybe provide some additional color on what other things needs to be done before the mine moves to full production?

Yes, no problem. So we're just early in the pit. We've mined a lot of the Cabin pits, and the ore grades have been reconciling well with the model that we have with respect to the Cabin pits , which is where the bulk of our ores come from and that's the high-clay content ore as well. We had a lot of stripping to do to get into the top of the picked pit. So -- so far, things are looking okay. With respect to the ore-handling system, we've got a number of modifications we need. Unfortunately, when we started out, we had, again, the high-clay content ore, we had a very wet winter last year, and we were trying to ramp up the system. They don't mix very well. And then you add in some coal, and everything was getting jammed up. So we've made a number of modifications, adding airy cans and changing the sort of construction of the shoots, adding in slides. We've done a lot of sort of rewiring for troubleshooting, which has decreased our downtime. And if you look at our -- sort of our performance over -- from when we went into commercial production in May, and moving into June, July, August, we had steadily improved our throughputs. And in September, we're up to around 7,000 ton per day through the crusher. Our target was 7,200 ton per day. We have been using some raw ore -- around the side, we have some old waste piles that were left by prior operators back in the day and the grade of that stuff was actually similar to what we're mining out of our pits. So we've been supplementing, while we're sort of ramping up to our full production, which we're more or less there now with this sort of raw ore that we put along the edges of the pad to increase our gold ounces and inventory. So I think we're -- the throughput right now is more or less on target of where we need to be and we anticipate with the modifications that we can make we should be able to see ourselves actually, put more tonnes on the pad than we originally had planned. So that's what we're attempting to do there now.

Okay, thanks. Thank you very much. That’s it from my side.

Your next question comes from the line of Heiko Ihle from H.C. Wainwright. Your line is open.

Thanks for taking my question. This is Tyler Bisset on for Heiko. So you guys have spent $13.7 million on exploration during Q3. This compares with $23.7 million year-to-date or about $5 million on average for Q1 and Q2. Obviously with Black Fox at $18 million, you're spending quite a bit. But can you help us better understand and anticipate the exploration cash flow for Q4? It seems like there's about $8.8 million of restricted cash from the flow financing left. So that's the bottom baseline here I think?

Yes, I don't think so. So there is around $8.8 million of restricted cash. However there is a chunk of money that for expenses that we have incurred already and drilling down already from flow-through funds. So there is approximately $4.7 million in our payables and accruals. Really to the end of the year in Q4 we will have probably another $4 million from flow-through spending so meaning surface and some underground at Black Fox and maybe some spending at Stock as well. And I would say maybe another $700,000 at Gold Bar.

Okay great. Thanks. And you mentioned exploration costs for next year should be about the same as this year. But do you expect those costs to be weighted heavier in the second half of the year similar to this year? Or maybe more evenly spread out?

More evenly spread out.

Okay great. And at San José it looks like earnings from mining operations came in at $6.4 million for the quarter. Assuming steady gold prices is that fair figure to use for Q4? Clearly the site is delivering. Is there anything operationally that is going to be different or better in Q4 than Q3 such as continued improvement in recoveries?

I would think they will be similar. I would say they will be similar to the third quarter. Of course they will also help by the gold price. And so that does -- and gold and silver price actually which does have an impact. But I would think operational they will be, they should be similar.

And just curious when do you expect recoveries to start to flatten out at San Jose? And at what level? A – Rob McEwen: I'd expect they remain where they are. The fourth quarter is usually the strongest quarter and the first quarter is usually the weakest quarter at San José.

Thank you. A – Rob McEwen: You’re welcome.

[Operator Instructions] Your next question comes from the line of Mike Kozak from Cantor Fitzgerald. Your line is open.

Good afternoon, everyone. A few questions for me. First Rob, I think, you mentioned that the target or the plan is to produce 30,000 to 37,000 ounces next year at Black Fox. My question is what -- how should we think about sustaining capital at Black Fox next year? Is it going to be another capital-spend heavy year in 2020? Or are those expenses going to kind of normalize or go down a bit?

I'd expect it will be high.

Okay. And then also you mentioned at Black Fox -- ideally you don't want to spend another call it $18 million there in exploration next year. Are you able to capitalize any of that? Or is most of that going to be expensed?

No. Actually almost all of it will be expensed.

Okay. And then, I guess, and also at Black Fox, you've had a few months now with the relocated crusher. Have you seen the grades delivered to the mill improve at all with the improved ore handling? Or still too early to tell?

Now with respect to the grades we're seeing at the mill we haven't seen a big change there. The big driver behind making that change was for sure -- to ensure we aren't losing any gold along the way by crushing too finely at the mine. But the real incentive was from a cost perspective and we've renegotiated our haulage contract with a new trucking company and then we've taken over crushing ourselves and we've essentially seen a 50% reduction in those combined costs. So you're looking at a payback. We've invested about $1.5 million into this endeavor and the payback is essentially one year on that. So it made a lot of sense from a cost perspective for the overall business but also just to ensure that we're taking whatever measures we can to ensure we aren't losing gold anywhere.

Got it. And then the last one and I just want to make sure I got this right. I'm just skimming through your financials. It looks like two -- is it two days ago you removed the working capital covenants on the debt to -- so that you don't have to have positive working capital on that covenant anymore. Is that correct?

Yes. Yes that is correct. And that was for December 31 and September 30 next year. September 30 is when our bullet payments come to you.

Got it. Okay. Thanks very much guys.

Welcome.

Your next question comes from the line of Jake Sekelsky from Roth Capital Partners. Your line is open.

Hey, Rob and Thanks for taking my questions.

Happy to take.

Just starting at Black Fox. Can you maybe just provide us with some high-level color on where you see the medium-term mine plan heading? It seems like a lot of the exploration focuses on outlining additional mill feed some of which is obviously stream free which is important. I guess what I'm wondering is should we expect to see any potential production scenarios? Or anything released from you guys next year? Or is that a little bit further down the road?

When we talk about next year we'd be seeing Froome as it approaches production in early 2020 --2021 rather. And -- but Grey Fox and Stock they'd be conceptual mine plans. We've done some very early work on that right now but that will advance with the resource updates that we're going to be providing at the end of the year on both of those areas.

Okay. And are those conceptual mine plans something you think you'd release? Or would those be something that will be more internal just for your information going forward?

We could be happy to show you what we're -- our initial thoughts are after we've got the updates on our resource numbers out.

It makes sense. Okay. And just swinging over to Gold Bar you guys have the two deep holes complete now. What's the thinking there? Do you plan on putting any additional deep holes in or is the focus going to shift more towards regional exploration as Gold Bar South comes into the mine plan over the next couple of years? Sylvain Guérard: Sylvain here. We will keep doing what we have been doing this year. Basically, we have still a Gold Bar South that needs to be further drilled. We are generating intersection outside of the planned pit area and we want to keep advancing with that as part of next year plan. And we also have many targets close to our mines mostly are early-stage target but proximal to our operations that need to be drilled. And as we did this year we will allocate a small portion of our global budget probably the same type of budget than this year to continue with the evaluation of the deep potential. As you know this is a district-size target that we are dealing with there at Gold Bar. We have mineralization or the footprint of the mineralization, it's 12 by five kilometer. It's a large area. And so far, we have three deep holes on this property that reach the deepest stratigraphy in the Roberts Mountain. We've been successful at intersecting this targeted unit at that. We've seen alteration. We are not on a new discovery there on the depth potential, but we get a very important information coming from this drilling. And we'll keep, as I said, advancing the shallow upside as a priority, but also keep a portion of our budget dedicated to the big potential as well.

That makes sense. That’s all from me. I’ll hop back in the queue. Thanks.

Thanks, Jake.

[Operator Instructions] Your next question comes from the line of Jared Chase, [ph] Private Investor. Your line is open.

Good morning, Rob.

Good morning, Jared.

I have been following you since Gold Corp, and the Timmins area reminds me a great deal of Red Lake. And since we had a nonrecurring problem this year, it will not be repeated. But my interest right now is Los Azules in Argentina, the 26th largest copper mine in the world. Now I didn't know, did you have any assessment of how much silver is in that mine? And to a lesser extent, gold? Because as you know that now, silver is a bi-product of other mines, like copper, lead, zinc, et cetera. Do you have an assessment how much silver is in that Los Azules mine?

Yes, Jared. There's -- the resources are in the indicated and inferred category, and there's approximately 190 million ounces of silver, albeit it's low grade. There's 5.5 million ounces of gold, again, low grade. And then there is just under 30 billion pounds of copper.

That's a lot.

It is a lot.

Now...

Yes?

As you said, Rob, it's a wild card. But the other question is that these individuals that have been asking is operational. Now as a market person I'm interested in what you've done regarding a $300 million expense from Primero of $35 million CAD 167000 for a great deal in Timmins. That's what impresses me. Okay? Now based on Los Azules there's a few hungry people out there with a lot of money like China and Chile whose demands are adequated and even your partner of many years Hocschild have you been approached by these people? And secondly, could you really state the criteria that you require when you do a deal?

Happy to. We had past discussions with a senior base metal producer. What we were looking for was recovering part of the cash we put in. We were looking for $100 million upfront that the partner would advance the project to feasibility and then into production and we would continue with an interest of 20% or 25% of the property going forward. The PEA that we prepared in 2015 with Hatch engineering envisioned a mine with a 36-year life. This deposit isn't in production. You mentioned the 26th largest. If it were to be in production today it would rank as the 26th largest. And based on the preliminary economic assessment, it would be producing in the first 13 years 415 million pounds of copper a year at $1.14 a pound which would put it in the lowest cost quartile for the industry globally. If -- I heard some projections yesterday about the growth of the Southeast Asian countries, which have a population of aggregate of about 2.4 billion people and China is about 1.3 billion. And at least this forecaster was looking and saying that in the next 10 years Southeast Asia, the Southeast Asian countries will have a GDP equal to China, even if they grow at half the rate China has been growing at. They're urbanizing. They're electrifying. They're going to be needing lots of base metals. Copper is going to be [indiscernible]. So, I think the outlook for copper is good and China and the Southeast Asian countries are developing their own markets and it's no longer just the place where the Western world outsourced manufacturing. They have their own demands and their societies and economies are growing. So Los Azules we advanced a lot this year. We got an agreement between Chile and Argentina. It's across the border. We've mapped out roots and had conversations with communities on either side of the border, one going out through Chile to the Pacific. The Northern route would -- dramatic that we've mapped out and are going to begin construction on either late this year or the beginning of next year will permit us to get in on a low-altitude -- lower-altitude route that would be opened 12 months of the year as opposed to what we currently have is a four to five-month window and then extremely expensive snow clearing and probably a very dangerous route in if we were to go in the existing way. So roots, we'll have a video out shortly, showing the mine and how it's going to develop the access. Happy to provide you with an update that we've provided. You want to send me an e-mail or provide your e-mail now? We'll put it up on the web, so that all can see it. And they can see how much work has been done there. What we've been doing is trying to take steps that would de-risk the project and make it more attractive to a potential joint venture partner.

Right

A larger balance sheet than we have.

Just for one more question. I'd like to put this in your mind, you have been voted the Top Executive for three years running; secondly Neumeyer of First Majestic ran second; and Bristow of Randgold Barrick third. The reason why I'm saying this is, when Barrick took over Randgold, they inherited a very astute CEO, Mark Bristow. The stock of Barrick prior to that merger was dead in the water with no possibility single-digits. The stock has -- for the year 2019 has almost doubled. The reason why I'm saying this is, Bristow has a lot -- people have a lot of confidence in Bristow what he did with Randgold. Without Randgold Barrick would be nothing. Here's what I'm thinking if I may. I'm not really interested in operational. That's what you guys are all about. I mean I have confidence in your astute ability especially yours since Goldcorp. What I'm saying right now is have you had any thought however remote that, if I were a CEO of a company that is undervalued and profitable, I would say Rob welcome. Now what I'm saying right now is there any possibility however remote you can do what Barrick did with Randgold and you will be the surviving CEO of a merged company, whether they take you over or you take them over and you would head a very, very accretive company and this will shorten the lifespan of your plan to join the S&P 500. You don't have to answer. I just want to put this in your head. And as I said before, I'm a very large shareholder and I expect to double my position. If you can put the money that you have into this company that's good enough for me. So ultimately with the nonrecurring problems we had in 2019 is certainly one to be repeated every year. So, that's what I'd like to say. And I will send you my email. I'd like to get that information as you alluded to. Do you have any other thoughts on what I've been saying?

Well, first I was wondering, if you're going to ask me to hire Mark Bristow.

No, no. But I was just trying to say that you, Neumeyer and Bristow are one, two, three as far as capable CEOs or whatever. So, again, I'd like to repeat that the market was very impressed with Barrick getting Bristow to head their company and the stock has reflected that. Now, any company that you will – to have the CEO, Chief Holder, whatever you call it, would have nothing but positive consequences. That's what I think, because I know what you've done with Goldcorp. And as I said before, Timmins reminds me a great deal of Red Lake. So I'm not concerned. I'm not concerned at all about the stock price and it's a bargain. It's a bargain. So again, Rob, anything you want to add to what I'm saying, if not, I'll just be watching very, very carefully about the progress of the company.

Thank you, Jared. One, I'd like to agree with you that I think Timmins is very much like Red Lake when we were building Goldcorp. Two, I think the time to be combining with companies is now and I've been disappointed that we've had the challenges we had this year, because it hurt our currency value. But in order to move towards our goal and also to have the visibility in the market, I think companies are going to have to come together and expand their operational base. So I'm on the same page.

Thank you.

You're welcome.

Your next question comes from the line of James Elkins [ph], a private investor. Your line is open.

Hi, Rob. This is Carl [ph]. I haven’t spoken to you for a couple of years but I've been with the company since it was called US Gold and I participated in the rights offering. And boy I'll tell you what, it's just us slicing down deals in 2011. I don't think I've ever been as worried about the finances to-date. Question for you, as last time we had the Argentina upset regarding the capital control. So we couldn't get money out. So I'm wondering if you're anticipating that to happen again. And secondly, most importantly, I want to know if you've changed your outlook for 5,000 ounces of gold or moved your timetable up a little bit that might help me our a lot. I'll listen for Rob sakes.

Thank you. The Argentina – currently, we're getting money out of Argentina. The election has just occurred. The new government will go in take power in January. The country is desperate for foreign currency, foreign reserves. They have an export tax on right now. They've been changing some of the banking rules. It hasn't restricted the outflow of cash at this point. I think the government is going to have to show signs and take steps to encourage foreign investment, which the country desperately needs. I'm hoping there's a -- and maybe it's a false hope, but a change in the approach of the government. The government that was defeated was pro-business, but they just found themselves. There was a slight of capital from the country and they had to grab export dollars wherever they could. It's difficult to predict what Argentina is going to do, but looking at their financial situation there, our Los Azules property is one of the large copper deposits -- one of the few large copper deposits, they want to see developed there. If they're going to attract any foreign capital, they're going to have to be much more accommodating. And in terms of $5,000 yes. I still believe in that. You just look around the world, the amount of debt that's been put in place, the amount of money floating around. The -- if you want to call it, there's a bubble in everything right now, except for the precious metals. And it's coming.

Thank you. That's helps.

Thank you. Definitely, we have the afterwards.

Thank you, guys.

Your next question comes from the line of Whit Tehan from HHMM LLc. Your line is open.

Hey! Rob. It's Whit Tehan. And it's great to hear your voice. Always love following your company, as you always create wealth for me and my investors, and just great to hear your voice man. So, I'm doubling down on this dip here you got. My question really stems around the price of gold. And if you can -- are you going to be bringing more ounces on exploration-wise, moving forward as the price rises do you have some things in the pipeline that are -- you haven't explored -- your exploration is what, I'm really curious about moving forward?

Thank you, Whit. And it's good to hear from you.

Hey, great to hear your voice Rob. Thank you.

We will have resource updates, coming out on Gold Bar, Black Fox, Grey Fox, Stock, at the end of the year beginning of the next year. And we're anticipating -- the exploration has been going very well. So, we expect to see an increase on those fronts. And a better sense of when those might be, we could turn them into production ounces. But that's about three, four years old. In most cases other than Gold Bar which we hope to get a permit by year-end and bringing that on-stream. And other than Froome, we'll be producing at Black Fox. So yes we're -- there are a number of fronts, where we're advancing the exploration, and also the growth in the resources.

Great, great, good to hear your voice and it's really all I had to ask continued success and look forward to following the story and following you my man. I love your expression when you say "Free money in the ground" You say I'm not exactly sure of the order. But we always say, "Free money in the ground."

There's gold there. Gold is money, the ultimate.

Yes, there. Thanks, Rob.

Thank you, Whit.

Thank you.

There are no further questions at this time. Mr. Rob McEwen, I turn the call back over to you.

Thank you, Operator. I'd like to thank everybody on the call for joining us today. And stay tuned, we'll have more exploration results out shortly, all the best.

Ladies and gentlemen, this concludes today's conference call. You may now disconnect.