McEwen Mining Inc. (MUX) Q4 2019 Earnings Report, Transcript and Summary

Hello, ladies and gentlemen. Welcome to McEwen Mining Q4 and Full Year 2019 Operating and Financial Results Conference Call. Present today from the company 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 call over to Mr. Rob McEwen, Chief Owner.

Thank you, Operator. Good afternoon. For our shareholders, past and present, our management and myself, last year was a terrible year. We all know our share price fell out of the sky and I want to start this call with a very sincere apology to everyone. We gave you guidance throughout the year for our operational performance and we failed miserably. We did not deliver. By the end of the year, it was impossible to believe any forecasts we provided for operations. This was very unfortunate because considerable success was made on the exploration front at Black Fox. This success was completely overshadowed by the bad news from operations. I know it’s going to take many quarters of delivering on guidance before we gain your confidence. And I can say that last year was the worst year I have ever experienced in business and I’m sure the experience was very unpleasant for you, and I want to assure you that we’re working hard not to repeat it. Today, we’re going to provide our perspectives on our 2019 operating, financial and exploration results and talk about what 2020 looks like. I will now turn the call over to Meri, who will start by providing a high level overview of our financial results.

Thank you, Rob. Good afternoon, everyone. During 2019, our consolidated production was 174,400 gold equivalent ounces, approximately equal to our production last year and total sales were 175,500 ounces. Our total sales were comprised of 85,100 gold equivalent ounces from our 100% own mine, Black Fox, Gold Bar and El Gallo, and 90,300 ounces were attributable to our 49% interest in the San Jose mine. 2019 revenue from our 100% owned mines totaled $170 million approximately 9% lower than in 2018. If we included the revenue attributable to our 49% interest in San Jose that would have added $129 million. But revenue from San Jose is not included in our income statements because we use the equity method of accounting for this asset. We have created a new metric that is designed to help you evaluate our operations ability to generate cash flow. It is a non-GAAP measure disclosed in our Form 10-K called cash gross profit. Cash gross profit is calculated by adding back depletion and depreciation to gross profit. For 2019 cash gross profit from our 100% owned operation was $33.7 million, compared to GAAP gross profit of $9 million. Cash gross profit attributable to our 49% interest in San Jose was $51 million, compared to GAAP gross profit of $16.6 million. However, we do not consolidate San Jose as mentioned earlier. During 2018, we received $8.9 million in dividends from our interest in San Jose. I’ll now discuss the main components contributing to our net loss in 2019. During the year, we invested $37.7 million in exploration, with 90% spent at the Black Fox Complex and the balance at the Gold Bar in Nevada. Depreciation and depletion expenses were $24.8 million. We spent $9.5 million on growth project, including spending for advancing the Froome project in Timmins, Ontario. Phoenix project in Mexico, engineering and permit work at the Gold Bar South property in Nevada and pre-production expenditures at the Gold Bar mine. We included a loss of $8.8 million on our 49% investment in the San Jose joint venture company, bringing the book value of our investment in the joint venture to $110 million. We incurred interest expense of $6.8 million related primarily to our debt and G&A expenses of $12.8 million. We also realized the gain on the sale of marketable securities of $5.3 million, a gain on the recovery of taxes of $3.8 million and $2 million in other income. In total, our consolidated net loss for 2018 was $59.7 million or $0.17 per share. Financing activities during 2019 included the issuance of 54.9 million common shares and 29.8 million warrants for gross proceeds of 77 million for an average of $1.4 per share. Share issuances for cash during 2019 resulted in equity dilution of 16% based on shares outstanding at the end of 2018. At December 31, 2019, liquid assets increased to $49.7 million from $37.8 million at the end of 2018. Working capital increased to $43.2 million from $23.4 million at the end of 2018, debt outstanding remained at $50 million. Looking ahead to 2020, we expect a significant reduction in our exploration expenses to $110 million, spending on growth projects of approximately $14 million primarily at the Black Fox Complex, debt repayment and interest expense will increase to $14.7 million. We are currently making adjustments to our budgets given the impact in lower than planned production from Gold Bar mine in 2020, but we do not have details yet of these changes. I’ll now turn the call over to Chris Stewart for a discussion on mining operations.

Thank you, Meri. I’ll start by going over the operational highlights for each operation starting with San Jose. Our San Jose joint venture mine in Argentina had a good year in 2019, meeting our guidance for gold and silver production. For 2020, our share of production from San Jose is expected to be 45,700 ounces of gold and 3.2 million ounces of silver for a total of 82,000 gold equivalent ounces and average gold silver ratio of 88:1. Midpoint cash cost and all-in sustaining costs are $975 and $1,225 per gold equivalent ounces, respectively. Moving to Mexico, our El Gallo heap leach is still residual leaching. During 2019 we produced 16,333 gold equivalent ounces and an attractive residual leaching cost of $688 for gold equivalent ounces sold. In 2020, our guidance is 12,000 gold equivalent ounces. Moving to the Timmins area, our Black Fox mine encountered several one-off events at the beginning of 2019 that we have discussed in detail in prior quarters. Due to these challenges production was delayed and mining flexibility was restricted during 2019. As a result, reduced our -- we reduced our production guidance during the year. Total production was 35,700 gold equivalent ounces in 2019, compared to 48,900 gold equivalent ounces in 2018. Of note is that despite the reduction in ounces, our team was able to decrease our cash cost to $825 per GEO from $845 in 2018, and to contain the increase in our all-in sustaining costs to $1,225 per gold equivalent ounces from 1,137 per gold equivalent ounces in 2018. Looking ahead to 2020 our Black Fox, our production guidance was 35,000 gold ounces to 40,000 gold ounces, and midpoint cash costs and all-in sustaining costs at $1,075 per gold equivalent ounces and $1,200 per gold equivalent ounces, respectively. This guidance was given with the benefit over two years of operating expertise since the acquisition and a revise forecasting approach, which includes risk factors assigned to each mining area planned during the year. With respect to capital spending at Black Fox we are actively developing the access ramp from the Black Fox open pit to nearby Froome orebody. Froome is expected to have associated development expenses of $21 million over approximately the next 15 months and to provide ore production for approximately two years, beginning in Q4 of 2020. The mineralization of Froome is different from Black Fox and that it is much thicker and more homogeneous, thus enabling more productive transfers mining method, which should reduce our costs. The schematic on the slide illustrates the difference between the Log Natumi mining methods, which is used at Black Fox and the transverse mining method, which we will be employing at Froome, using the transverse mining method, our internal studies and schedules call for Froome to produce 65,000 gold equivalent ounces in 2022 and 45,000 gold ounces in 2023. Froome cash costs are estimated to be approximately $850 and all-in sustaining cost $926 per ounce. With Froome the life of the Black Fox Complex is extended to 2023. Moreover, our objective is to expand production by drawing ore from multiple sources to fill our mill and extend the mine life substantially. Today we’re going to introduce a conceptual plan, which is at various stages of engineering. Key to our plan is the exploration success that Sylvain and his team had delivered over the last two years. I’m going to turn it over to Sylvain to discuss the exploration and resource definition at Black Fox, Grey Fox and Stock properties. Sylvain Guérard: Thank you, Chris. Key highlights from our 2019 exploration program in Timmins include discovery of Stock West, an important new zone of mineralization. A significant increase and indicated resource at Grey Fox and highly positive drill intersection at several targets in the area, and positive drill results near existing access mining areas at Black Fox. A bit more detail about Stock West, our drilling last year led to the discovery and the early definition of an impressive new zone of mineralization. We have a total of 31 drill holes into this area mineralized intersection average around 5 gram per tonne gold over average width ranging from 15 meters to 20 meters. These strong drill results occur in an area measuring 265 meter along strike and 200 meter vertically. The new mineralized zone is located less than 350 meter from existing underground development and less than a kilometer from our mill. The Stock West zone remains open in all directions and our 2020 exploration program is designed to produce an initial mineral resource estimate and also to test the extension of the mineralization in order to access the potential size of the discovery. Additionally, at Stock, the historical Stock mine is an opportunity to explore below the existing working. Review and interpretation of the historical data and drill program planning are currently underway. Moving to Grey Fox, drilling generated a high rate of success, leading to an increase of 33% or 155,000 ounces to the indicated resource estimate for a total of 620,000 ounces at an average grade of 7.2 gram per tonne gold. Our approach was to focus on drilling mineralized cross structures that were previously not well understood or drill tested, which led us to multiple exciting intersection over a 1.5 square kilometer area. Outside of the resource areas at the Whiskey Jack target, drill results including a recent intersection of 53 gram per tonne gold over 6.7 meter indicate a strongly mineralized system with very good potential to define a new zone of mineralization. We built [Audio Gap] resource at Grey Fox. At the Black Fox mine now, we have underground drill platforms to explore the width and depth extension of the mine. High grade results were intersected on the upper Western extension of the mine such as 79 gram per tonne over 2.6 meter, 41 gram per tonne over 3.3 meter and 78 gram per tonne over 1.8 meter. These positive drill results indicate the potential to extend mining in this area. Mineralization contains high grade drill intersection, extending as far as 120 meter to the west of the nearest mining face. A high grade intersection of 105 gram per tonne over 1.5-meter was also recently intersected close to mining development on the depth extension of the mine. The intersection is halfway down plunge towards the deepest 55 gram per tonne exploration at the mine 1,050 meter level, suggesting continuity of the high grade mineralization on the depth extension of the mine. On this back to Chris.

Thanks, Sylvain. As you have heard, our rate of exploration success suggests that the Black Fox mine has the potential to produce for several more years. Our vision is to use the window we have during the next 12 months to 24 months to begin putting in place the development needed to produce from two to three deposits concurrently. By stacking multiple sources of production, we could reach 100,000 to 125,000 ounce production level in five years. Grey Fox has grown since the acquisition. We are commencing the feasibility study on the project, looking initially at an open pit mine that would eventually transition to an underground operation similar to our current Black Fox mine. This schematic illustrates potential open pits on the contact in 147 zones, which is the extent of what we have studied so far. The 147 Northeast Zone also comes to surface and it may be included in the open pit plan. Preliminary analysis shows that the two high grade pits around 3 grams per tonne would provide significant ore feed for our mill over a five-year to seven-year life. We anticipate having the feasibility study completed in Q4 of this year. Currently, permitting is being carried out simultaneously with the feasibility study work. This schematic shows the developments involved with gaining access to the Old Stock mine, an additional development to access the Stock West zone. We envision a portal and a new ramp from surface to access the Old mine workings, as the existing shaft is no longer usable for personnel transport. Fuel drifts would be developed to connect the Stock West zone to the existing mine. Great benefit we have in Stock is that this is a permanent site. Therefore, we can quickly develop an underground mining plan. At the moment it seems that this plan could be implemented relatively soon after access to Froome has established. The exploration program of 2019 to find a mineral inventory at Stock West and we’re planning to continue to exploration at this zone and to complete a compliant resource estimate in 2020. Moving to Gold Bar, we produced 30,700 gold equivalent ounces in 2019, compared to our original guidance of 55,000 ounces. Cash costs and all-in sustaining costs were $1,101 per gold equivalent ounces and $1,282 per gold equivalent ounces, respectively. It is important to understand the various factors that contributed to the shortfall of 24,300 ounces versus our original plan and the higher cost we incurred. There were five principal reasons. First was delay, commercial production was planned to begin in March 2019, but was not achieved until May, which resulted in fewer ounces on the heap leach pad and less time to recover them. Second was gold grade, we moved approximately the number of tonnes we planned in 2019, but in order to achieve that we needed the mine some lower grade stockpiles and the pre-stripping in the Pick pit contained lower grading tonnes than predicted in our model. Third was recovery, experts in the field of heap leach believe we will achieve the expected ultimate recovery on crushed and agglomerate material, and we expect it to take much longer to reach that number. Also as a factor, whether decision to selectively Stock run a mine material, which by definition will not recover, as well as crushed material. Fourth, was our decision to exploit the Cabin Creek orebody ahead of our original scheduled to improve cash flows. This decision caused several complications with the ore handling system because of the higher clay content and wet winter weather. And fifth were deficiencies to overcome with the engineering and construction of the mine infrastructure. For example, and amount of preg-robbing carbon containing material was used in the heap leach pad construction. Piping areas and the process plant resulted in carbon attrition that also cause preg-robbing on the heap leach pad. Recently, we have encountered another significant hurdle like Gold Bar. Our initial experience mining for the two Cabin Creek pits was positive in the sense that they contained about 8% more gold than was predicted by our reserve model. This is not unusual and that was a pleasant result for us. Recently, we have transitioned to mining almost exclusively from the Pick deposit, specifically the Pick West pit. There’s quite a bit of waste dripping associated with Pick West and we have been working our way closer to the ore zones advancing about 120 foot bench per month. Our experienced mining from Pick West has been that the reconciliation to the reserve model has been very poor for ore tones, as well as gold grade. The pit has now advanced to a point where we are mining some better material and what we see is our actual tonnes are still down relative to the model and grade is up although we don’t have enough data yet to reliably predict the differences. This triggered a reevaluation of the resources reserved modeling, which we have been advancing at the maximum pace possible. We have an initial draft resource interpretation completed and while our geological team does not think it was optimized, we know enough to understand that the resource reserve estimates will likely decrease and the mine plan will change. There are several mitigating circumstances that may partially offset the reduction in containing balances which I will mention so people are aware. First, fewer ore tonnes to process and higher gold grades potentially gives us a higher margin on each tonne of ore placed on the heap leach, higher grades also tend to recover better. And secondly, certain capital costs such as an expansion of the heap leach pad may not need to take place. As some of you will appreciate a geologic explanation of what we see in the pit that was caused us to refine our modeling criteria for gold Pick. I’m going to hand over the discussion to Sylvain to present you with some details. Sylvain Guérard: Thank you, Chris. We’ve been using new information from pit mapping and in-pit drilling to revise and refine our resource model for Gold Bar. Previous modeling rely mainly on bidding control, which mean the gold mineralization was mostly distributed and confined to specific favorable beds of the Gold Bar deposit. Recently a better understanding of the structural controls to locate and control mineralization was developed as a key component to the bidding control, resulting in what we believe is a more robust model. The updated structural control mineralization led to this indication of several near mine targets that were not incorporated in previous or current resource models due to low drill density. McEwen geological and resource teams are working with SRK Consulting to incorporate the revised structural and mineralization control in addition to the bidding control, and update the mineral resource of the Gold Pick deposit. The preliminary model have been completed and McEwen and SRK are continuing work adjust and optimize the model. The revised model is expected to be completed in Q2. We are also working to incorporate the Gold Bar South satellite deposit into mine plan. Gold Bar South provides an attractive opportunity to add a new ore source to the Gold Bar mine. It is a near surface deposit located to the Southeast of the leach pad. During 2019, Gold Bar South was drilled and the resource was upgraded to measure an indicated category, totaling now 63,000 ounces gold at an average grade of 1.1 gram per tonne. There is upside potential to grow the resource and additional drilling is planned over the Southeast -- the South extension which remained open and over the North portion of the deposit which has recently become fully accessible for drilling. Over to Rob.

Thank you, Sylvain. Let me leave you with four thoughts. Gold Bar is still facing challenges, so as a result, we’re reworking the gold reserves and resources along with the mine plan. This will take us some time and we are moving as quickly as possible to resolve this issue. Second, San Jose is forecast to deliver another solid year. However, the very recent big change in the silver gold ratio, if it were to persist, the mine will be generating fewer dividends. Three, exploration at the Black Fox complex has grown our existing resources and discovered a new resource. We are optimistic that our investment in exploration has provided us with the opportunity to increase production and extend the mine life on the Black Fox property. Before the massive injection of capital now being deployed to combat the spread and deal with the adverse economic damage being caused by the Coronavirus, we’ll over time be extremely inflationary. I believe that in an environment with zero interest rates and this new worldwide quantitative easing will over this year accelerate the flow of investment dollars into gold. Now I’d like to open the session for questions.

[Operator Instructions] Our first question comes from Jake Sekelsky with ROTH Capital Partners. Your line is open.

Hey, Rob and team, thanks for taking my questions. And I appreciate you guys hosting the call today in light of what’s going on in the world.

You’re welcome, Jake.

Just a few quick questions on my end, starting at Gold Bar. I know details here are still the work in process. But I’m just wondering should we expect 2020 guidance to be issued at Gold Bar once the updated reserve and mine plan are out. I’m just trying to get a handle on what things might look like going forward?

Absolutely. But that won’t be for a month or more.

Okay. That’s helpful. And looking at Gold Bar South, I know you guys are talking about potentially bringing that into the mine plan. How quickly would you say that can be brought online if that’s the decision that’s made over the next couple quarters?

We’re moving forward with the permitting and that’s supposed to be about a year, maybe a little bit longer. Once we get the permit, then we’d open it up. Nice thing about Gold Bar South, it’s located at a lower altitude and we’ve had issues processing the ore during the winter and mining up on the hill. Just due to snow in that. So it’s lower altitude. It’s a slight uphill drive from to the pad but at the same distance. So you don’t have the weather impacting it as much.

Okay. That’s helpful. And then just at Black Fox, it looks like explorations still the focus here and in Froome starting to look like the next leg of growth. Are there -- I am just wondering, are there any remaining permits you guys need there to move forward with that conceptual mine plan that was spoken about earlier?

Over at Stock, the mine is permitted. It’s currently the status is temporarily suspended. It’s a shallow mine, now goes down at about 330 meters. It has been dewatered in the past and we heard the last time they dewatered it took about four months to do that. We don’t know the state of the underground and that’s why Chris was talking about driving a ramp off to it and then linking up with the underground system to provide ventilation and other access. So in terms of timing, we’d like to get a better handle on the Stock West zone to put some more drilling in there. So we could come forward with a more comprehensive plan. But what we’ve already seen so far is wide widths, consistent grades, both in close proximity to the existing workings of the old mine. We’re also seeing values at depth below the old workings, and in fact, we have a drill hole down there, that’s about 600 meters below the past workings, it was quite an attractive grade, suggesting that the orebody continues below. We’re also looking at areas around the existing workings that appear to have resources that weren’t mined.

Okay. So it sounds like it can be advanced fairly quickly.

Yes.

Okay. That’s all I had on my end. Thanks again for hosting the call and taking my questions.

Thank you, Jake.

And your next question is from Heiko Ihle with H.C. Wainwright. Your line is open.

Hey, guys. I’m going to build a little bit on the question that Jake asked. So I went through your MD&A on SEDAR this morning and on page 44, you state and this is a quote with respect to the Gold Bar mine a significant reduction in cash flow results from changes to the reserve estimate the mine plan, as discussed on page 45. Maybe necessary to curtail the far suspend operational expenditures and will raise capital through various financing methods? I guess sort of the question here, is this risk mitigation are there real contingency plans you guys are already looking at? And if you are looking at certain scenarios, I mean, can just sort of give us an idea at least of like a base negative and hopeful case scenario, and what kind of gold prices to use in those scenarios, please?

Sure. Thank you, Heiko. You were reading from the risk factors we set out in the 10-K.

Correct. It was the MD&A in -- on SEDAR?

Yeah. It’s repeated in the 10-K, but…

Okay.

In there, there is concern that we could be losing ounces and tonnage, the tonnage initially seems to be its very preliminary but we think there’ll be a reduction in tonnage announced. We don’t know the extent.

Okay. Fair enough. And still you haven’t answered this one yet either. You don’t know the spent on exploration activities at Gold Bar for 2020 right, I mean, you quoted 2018 and 2019, and release for 2020 it just sort of work in progress because nobody knows.

We had some numbers, but a lot of things being thrown up in the air. We don’t know what -- I think the entire industry and for that matter, all industries are being disrupted by Coronavirus. So it’s becoming a little difficult to predict. What is the impact if the site was infected and shutdown for a while.

Fair enough. Look actually just -- to the very lead through to my next question, because I was going to ask more or less exactly that. What precaution and or changes for the organization has happened thus far is everybody working from home? Is the office about to shutdown? I mean, travel international travel especially is extremely curtailed as frankly, it should be. What changes has been made and should we expect to see anything out of you guys in the next couple of weeks in regards to the update? Thank you for taking my questions.

We haven’t had any reported incidences of Coronavirus in the firm. I thought I might have been exposed to it during the PDAC. But my 14 days has passed and no symptoms. Our offices operating on a skeleton staff right now. Chris has plans in place that are operations to deal with anything occurring there. As you mentioned, international travels been stopped, most travels been stopped at the moment and we’re taking it very seriously. Chris, would you like to add anything to that?

No. Thanks, Rob. Heiko, yeah, we’re more or less following along as other mining companies are ensuring that our mine sites and operations are protected. We’re checking temperatures of people coming to the site. We’ve restricted visitors. So no unnecessary visitors are allowed on site. And yeah, we put a lot of information to our people as well links to sort of keep track of this and we were providing updates to our people on sites on a daily basis. And we’ve educated them on self monitoring if they have travelled we’re putting them on for 14 days to self quarantine and monitor themselves. But we’re taking all the proper precautions to ensure that we can hopefully avoid having this crop up at our operations level.

You’re welcome. Thank you guys and stay safe.

You too, Heiko. Thank you.

Your next question is from Adam Graf with B. Riley. Your line is open.

Hey, guys. Just a quick question following up on corona preparedness, have you guys taken account of supplies, grinding media, cyanide, other spare parts in case supply chains get cut off that you can continue operation without running out of a key supply?

Over to you, Chris.

Yeah. Thanks. And we’ve been in contact and we’re continuing to be in regular contact with our suppliers. And as of now again, they’re taking similar precautions as to what we are and they’re open for business. With respect to you know stockpiling or cyanide, we don’t have containment to have additional cyanide on site a lot of these chemicals, you have your containments and that’s what you have and you can’t get permits overnight to essentially store more. So we are relying on our supplier network to continue. And as those virus spreads pretty hard to determine what the overall impact will be to our business, but we’re certainly maintaining regular contact with our suppliers ensuring that we’re getting -- stockpiling what we can on site within reason and we’ll have to sort keep monitoring this and make adjustments as we go here.

Thank you.

You’re welcome, Adam.

Your next question comes from Bhakti Pavani with Alliance Global Partners. Your line is open.

Good morning, guys.

Hi, Bhakti.

Just a quick one, last year you have some very high grade drill intercepts at Black Fox mine. I’m curious, are you guys planning to go back and explore more this year in your exploration budget for 2020? Sylvain Guérard: Yes. Bhakti, that’s a good question. And yes, we have recently, good success on the West flank at the Black Fox mine. As we’ve been developing on the ground to provide better access to drill the West and depth extension of the mine, though we’ve been running there and we have got positive intersection [Audio Gap] 1050 meter and level and we have a new hit high grade intersection of 105 gram per tonne in between where we are mining right now in the deepest intersection. Again, typical Black Fox, high grade mineralization we’ll be strongly demonstrating that the system remain open and mining can extend both on the west potentially on the west flank, and also on the depth extension of the mine. And we keep drilling on the ground, so we have 4 rigs drilling underground.

Got it. And in the past you have kind of talked about Froome being an additional deposit where the production would be coming from in addition to Black Fox Mine. Do you still seeing that exploration results that you have in place or do you think [Technical Difficulty] in 2022 you would be exclusively mining from Froome deposit at this point?

Your question - back to you if I understand well, it’s about the mining of Froome or explorations around Froome.

It’s combined with both, I mean the Black Fox, the mineral reserves update that you published yesterday, it has about less than two years of mine life at Black Fox. And Froome is expected to come online in fourth quarter of 2020. So I’m wondering given the exploration results at the Black Box Mine itself, do you see the mine life extending beyond the end of next year or do you think you would be exclusively mining from Froome starting 2022?

Chris, do you want that part of our conceptual plans. If you like please go over that again?

Yes. Sure. So the -- yes, I mean, we’ve had a lot of exploration success looking at on the western flank, we’ve got a lot of really good holes 150 meters away from current development. So we’re pretty excited about what we’re seeing on the western flank, but we do need to continue to drill that build that into a new resource and then reserve and what we view was Stock, we think we can sort of keep Black Fox moving along until Froome comes into play, and then Froome gives us a couple years of production. And then at that point in time right now our current plan barring a whole bunch of more success and growing the resource significantly, our plan is to essentially slow down or stop at Black Fox and give the drills and opportunities to really drill and build that resource. We believe is, we’re pretty bullish on Black Fox, and believe there is a lot more gold there, but we need the time to allow the drills to get there instead of drilling on top of development on top of mining, which is not efficient as everyone knows when you’re trying to run a mine. So Froome is planning to do 1500 tonnes per day, it does have a bit of a harder work index than Black Fox and our mills capacity is around 2400 tons per day. So we do have some flexibility when we’re in Froome, as we can pick up some additional or a Black Fox we have certainly looked to put that through the mill, but our main focus at Black Fox once we get Froome started would be build our resources into what we think you can actually be.

Got it. That’s very helpful. Thank you. And with regards to development of Froome, could you maybe walk us through how long would it take for the development to complete, and what else needs to be done before you bring Froome into production in fourth quarter of 2021, I’m sorry?

Sorry, so Froome are basically driving twin drifts, we call them portals in the fall, and we just got started dragging the drift here in March. We have sold the contractor down slightly right off the start because we’ve got about 5000 ounces on the western edge of the Black Fox pit, which is in our mine plan for 2020 for the underground. So we’ve actually got them to color the drifts and where we’re going to drive the ramps to access those ounces because we can’t get there from the current underground workings. So we’ve got that done and now they’ll be heading down the hill over free and you know that we expect they’ll take us till the end of - we should be down there late Q1 2021, and I’m of course we have the mine to develop and get the stoping set up. And we’d be looking at moving into production in Q4 2021. With respect to -- there is no permits required everything for that we’re ready to go it’s basically just get down there and get ourselves set up and then we can start mining. We’re already have our ventilation set up, that’s why we’re driving twin ramps, so that we’ll have fresh air and return air can escape ways and everything will be all set and we’re driving the position the ramps will come grade in sort of the bottom third of the mine, so that we can basically hit the high grade zone, and the thicker zones right off the bat to ramp up her production quickly.

And just one more follow up if I correctly understand you previously mentioned the production from Froome is going to be 65,000 ounces the first year and 45 in the second year. Correct?

Correct.

Okay. Moving to Gold Bar, I know you said that you are evaluating and remodeling the reserve for the Gold Pick deposit. The Gold Ridge is kind of small. What are your thoughts on re-evaluating or re-determining the resource there?

Yes. What we are focusing right now, Bhakti, is -- as a priority aspect, the Pick model, but right after that we keep doing the same type of exercise with the inflammation we have at Gold Ridge. The big advantage if you want that we have right now at a Gold Pick is having access to new exposure in the pit. We also have of course the mining going on and grid control information, so a lot more details than what we had in the past and we are using this information to be incorporated to the model to really update and refund the understanding of what we have there regarding style of mineralization and controls.

Got it and just one follow up. Did you guys mine at Gold Pick at all during this time?

No. Not yet. The mining is at Gold Pick West currently.

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

Thank you.

Your next question comes from John Tumazos with John Tumazos Very Independent Research. Your line is open.

Thank you. Those the Stock indicated resource of 121,000 ounces include the benefit of the good drill results in the past year, or how much of it doesn’t include? Sylvain Guérard: Hi, John. This is Sylvain speaking. Yes. This is Stock East only and this is an upgrade of the resources. There is still scenario for open pit and on the ground that we’ll be looking at. We have a lot better than city and have during over this these East deposit or targets if you want. As you know, our focus at Stock has been over three kilometers strike land that include the old Stock mine, we see good potential right below the old mining there you know compiling the information, circle information, this mine have been shut down in low gold prices. And there is a bunch of good intersections just below the mine. So that’s probably the first place we’ll be looking at in the short-term when we haven’t Stock, and going to the West as you know, this Stock West is a significant new discovery, we don’t know still the real size or potential of the zone. We want to go back into two main objectives. One is to in fill Stock West to bring it to a resource estimate and also during the extension of this new discovery to assess size potential. So there is three kilometers strike land with the mine in the middle and good potential right below the mines. And going to the West side, we believe we had this is the big price with Stock West, and we still have Stock East this new upgraded resource that we have that includes some high grade mineralization into a lower grade larger envelope of mineralization.

Directing this question to Rob if I may. Given that you don’t have a production forecast for the moment from Gold Bar and the Black Fox complex is going to be in a transition from the old mine to Froome, and the evaluation of Grey Fox. Do you think you should significantly cut the exploration spending and put a project on ice just in case the Nevada or Ontario output isn’t as good as you wish it was. A fewer balls in the air given the uncertainty?

Absolutely, John. We’ve been looking to rationalize our portfolio of properties. And focusing - it seems that Black Fox which was considered not to have a lot of future by many, we’ve had good exploration results they’re likely could build production, and Gold Bar which was going to be with Star is a little handicapped at the moment and hobbling along. So we’re just looking to rein in some of our expenditures on exploration in other areas, and focusing that we have the funds to develop these other sources of production.

So, do you think that the dewatering and further evaluation of Stock should continue or be put on hold pending the subsequent performance in Nevada and Black Fox?

We’re thinking about those matters. We’ll have a better way of evaluating that once we get the Gold Bar numbers in hand.

Sure I apologize for posing the question while you’re in the evaluation phase.

No. No. No. It’s a very rational question to ask.

Thank you.

Where the focus needs to be. So Sylvain did you want to add something here? Sylvain Guérard: Yes. Maybe, John, I can add a few points to this questions. And, you know, I agree the investment and exploration over the last two years actually have been quite important. But really quickly this allow us to focus our efforts and caution only in the few areas where we’ve been quite successful. As you know, Block Fox mine itself that we keep drilling on the ground. And we see a potential to extend mineralization and hopefully mining. Then we focus on the Grey Fox area where we’ve been quite successful, increasing significant resource of significant grade with mineralization coming to surface on our mine properties. So that gives us a pretty interesting opportunity for open pit mining to start with at Grey Fox, and Stock have been moving up if you want as a project faster than expected, especially with the Stock with discovery. So right now our focuses is only at the Black Fox mine talk with as a discovery. And we don’t really see a need to any additional significant exploration right now at Grey Fox because we have a critical mass that allow us to keep advancing studies toward development. At Stock West we would like to bring it to a resource stage. And based on it, we can really support additional studies and potential dewatering or development of the Stock project. In Gold Bar all of the exploration that we are planning at Gold Bar this year will be mine ex or near-mine exploration to keep drilling into the pits or around the pits to get answers back into it, or increase and Gold Bar Stock because gold bar Stock its quality spotlight deposit. Silica-rich are very, very limited to the alteration there sub-cropping and decent grade not far from our operation and that floor elevation so we see that as quite attractive and Gold Bar South is open to the salt. The last section to the salt is in mineralization. And the northern areas only partially drill so we see growth potential there

Thank you. Sylvain Guérard: You’re welcome.

Your next question is from Adam Graf with B. Riley. Your line is open.

Hey guys. Just a quick follow up question regarding the slide here number seven with your conceptual plans for tenants. You guys talked about it a little bit before, you guys clarified that Froome is permitted and Stock because it was never officially closed it is permitted. Does that include all of Stock the potential for the open pit, Stock West, etc and then obviously in between in this conceptual plan between, you know, Stock and Froome is Grey Fox and what if any permitting is necessary there?

Froome is permitted, Stock combine is permitted if we were to go underground to Stock West that would be permanent - that’s permanent going underground Stock East. We don’t know if that’s open pit or underground, if you were underground, we’ll be connecting with the existing mine. So that’s the permit wouldn’t be an issue, but if you want an open pit, it would be an issue. Only in that it would take time. And then Grey Fox is on our property, and no permit.

No permit. Okay. Okay. So it sounds to me it’s really just about planning, engineering, drill density versus any type of regulatory hurdles per se?

Well, on Grey Fox, you’d have to deal with water containment just where and run off enough to satisfy the regulators about that. But yes…

What kind of a process is that Rob? Could that delay Gray Fox or swap around some of your conceptual plan here?

It could take a - you need to have some studies done and that might take the better part of three quarters of the year. There is just water and archaeological issues to satisfy.

Well, do you guys expect to sort of give us periodic revisions on this conceptual plan as your knowledge and plans evolve?

Absolutely. We see that this is a bit of a light at the end of the tunnel.

Yes. I think it would be very helpful to analysts in the market to stay up-to-date on how the potential year can be unlocked?

Change the story significantly. We will be doing it eagerly Adam.

Thank you.

You’re welcome.

Your next question comes from Bill Powers [ph], Private Investor. Bill, your lines open.

Thank you. Thank you for hosting this call Rob. And I appreciate your candor beginning of the call most certainly. But I guess I have a few questions and I guess I’ll start with kind of an easy one. For Grey Fox, when you did the call in December, I believe it was Ken, who had mentioned that he had found up to 12 significant or potentially strikes along Grey Fox, I guess would be or right around by Whiskey Jack. And he also had mentioned that in from what I can read from the most recent press releases, is that the width seems to be wider than what you would have been finding previously. I guess on this topic one, I guess, is that something that you’ve seen continue and was this incorporated into the most recent resource update? Sylvain Guérard: For the question, Bill, thank you. And you’re right about Grey Fox. We’ve been successful intersecting memorization, we have a very good job condescending and model there. And our focus have been testing Northeast Southwest trending structures that are quite high grade, and we’ve been adding a new zone 147 Northeast, it’s on the slide there. It’s a new discovery that we made in 2018 and we’ve been advancing and there is about 100,000 ounces of new monsters found right in the middle of this Grey Fox area. In addition to that, we’ve been also advancing with on many trends or structures and the main ones are again shown on the slide there. And we have a high rate of drill success, so we know that more drilling will certainly bring more success. And we will keep increasing the resource assuming additional investment. Currently we spend 620,000 ounces, and this is only an indicated category I’m not including in for here, and the greatest 7.2 grams per tonne, which is pretty good. As I mentioned, some of the them in addition come to surface so we have started points where we could potentially drive and go for example, or potential eventually open pit mining there. So we see Grey Fox quite a key asset in addition to what we have on the rest of the property at Black Fox and Froome, but currently, you know, this is highly exciting. But there is already a significant resource defined there, and as I mentioned are probably good enough to advance with permitting and studies to see what’s the best way forward. And in parallel with that, we are quite excited by Stock using the old mine to quickly fast track and reactivate and really trying to define what we are dealing with the Stock with discovery. This is a zone that was never ever taught or dwell in the past. That was first drill in the middle of the summer, the grade is good, thickness is good, it’s a good style of mineralization that include high grade as part of those wide zone of five grams averaging intersection. So we see this as the probably the most exciting new discovery we have in our complex right now.

Yes. And as far as - so as far as cost wise, that would be I guess on par with Froome as far as bringing that or would you estimate that would be a far lower cost than something like Gray Fox as far as remediating the Stock property is that the initial estimate as far as the way you would see it? Sylvain Guérard: Maybe I turn to Chris or Rob

Well, it is still early.

Okay.

We haven’t been fixed on the numbers yet.

Okay. The other question I had was regarding black box, according to your press release from yesterday or this morning, it appears that you had some areas that went came out of the resource or reserve estimate, because they were inaccessible. And could you - and it looks like I was a little surprised given the drill intercepts that you had along the west, that you didn’t have a little bit bigger of a growth. But could you give a little color on how much came out and how much was added? I’m guessing it’s probably in your reserve report, but I wasn’t able to locate it quickly?

Yes. We will look at the numbers…

Yes. I…

Chris may be you want to talk about those answers that are not mineable. And regarding increase in growth of the resource, the issue we were facing is access to drill more to the west side of the mine, so we didn’t have proper drilling platforms. Now we do and we are adding holes to the Western and the depth extension and this will contribute to awfully adding an increasing the resource.

In respect I am sorry go ahead.

No go ahead.

No I say it was easy you would think so I would say that he would estimate that it was a how many approximately how many ounces came on mine board is just what really question was in at Black Fox, I guess going into the most recent reserve update?

And also so what we did was an evaluation in 2019 of the reserves are Black Fox, and about 16,000 ounces came out of the reserve as they are no longer mineable. So we had areas essentially when you sort of went and redid the math and look at the cost of rehabilitating. Right now, Black Fox were down to two mining for lack of a better word, I use sort of kibbles and bits around the mine, we have a couple main areas with some decent strike length and new stokes, but a lot of it is we’re sort of running around, picking up little stokes here in there, to gather the remaining ounces that were sort of left behind, given the increase in gold price, we’re able to make some of these stokes economic. But at the same time, there’s a number of stokes in there that were in the old workings of the mine, be it cave-ins, ground failures and stuff that essentially it doesn’t make it worthwhile going to get that to stokes that’s got 500 ounces, it doesn’t pay you to go get it, we have to do all this work. So we reevaluate it all that and remove those ounces and then so the growth here you’re actually seeing probably a bit more growth than what you sort of looks like on first floss when you’re just looking at the numbers given we removed ounces. We added them back in and when you consider, we mined 35,000 ounces at the end of the day. Our reserve is down to I guess 66. They’re about 65. So we lost a bit, but we added back in, so the western flank now we’ve had a lot of drilling successes, so very mentioned, but we need to increase the density get the proper drill platforms to drill it properly, which we now have in place, we worked hard on that in the latter half of 2019. So the exploration groups actually got proper drill stations to be drilling out of the drill sort of perpendicular to the ore body, so that we can get good results. So that’s what they’re working on now is basically trying to build out and we will have an update on 2020 and given the success so far, we’re optimistic that we can add some more ounces back in even when we’re mining you know, 30 and you can also this year,

Yes -- okay, and would you consider doing a like a midyear reserve update on given the importance of Black Fox to the operations at this point?

I’d say there is a lot of factors around that, again with Coronavirus, and that we need to shut her off down at some point here. And it’s pretty hard to sort of give you any color on that. Well, certainly, as things progress if the drill performance out of the bit and get the footage and everything coming together. We’ll certainly try and keep people apprised of our progress on Black Fox for sure, because yes, it is, right now, it’s our single source of production demo the demos camps.

Yes. And one last quick question. I know, there has been the Fenix project, there has been getting that the study out the door. I know there has been some difficulty with that as far as that goes, is that still on track for I guess first quarter, or the first half of this year?

Yes. So the feasibility studies is complete. And you know, the outcomes are not significantly different than that of the PDA.

Okay.

Right now if we’re not going to construct it, then there is not a lot of benefits to publishing that right now.

Okay. That’s fine. And I would just wanted to say thanks again for holding this call. I would also recommend, you know, just as a quick side note, as far as potentially since you’re not going to be going to any conferences, or there are probably no conferences. I think everyone learned a lot from the December drilling update. And I don’t know whether doing one of those once the quarter would be greatly appreciated until because I’m guessing that the public communication is going to be reduced, given the availability, but I certainly would like to see more updates rather than fewer. If you could possibly manage that, that would be greatly appreciated. Thank you very much.

Thank you for that suggestion Bill. Thank you for your question.

And our last question comes from Gary Mitsa [ph], Shareholder. Your line is open.

Thank you for taking this call. I’ve listened to all this stuff for a year since I first bought when you took over the company, Mr. McEwen, I appreciate your effort. My questions don’t have to do with all the mining stuff, because I don’t really understand that as much as I probably should. My main questions have to do with where are the stock price is sitting right now? New York Stock Exchange has a $1 limit as to when you stay on exchange, is that correct?

That’s correct.

How long does that last for?

Oh, it may change with what’s happened recently, but they usually notify you after a certain period with your stock below. If your stock…

Okay. My question is, if that point is reached, do you have any idea as to whether or not you would do a reverse split on the stock? Because I know what’s happened with reverse split stocks in the past with companies that have done that. Is that anywhere in your plans, or you considering that or are you not at liberty to say what you’re planning to do on that because…

We’re recently below $1 and hope not to stay down there. But if there were 30 consecutive days below $1, then the New York Stock Exchange will advise you that they don’t want you on the stock exchange, but you have six months to remedy that situation.

Okay. I understand that now. You have six months to remedy the situation. The question is how do you go about remedying that because it does not appear the way the economy is and with this virus thing and everything that’s going on? To be honest with you, I do not expect the McEwen Stock to be over $1. And in your future, sitting probably around the $0.75 mark and that’s been where it’s been hanging for a while. People just start not investing. And this is no reflection on you or the company, but it’s just a situation where it is people are just cashing out running for the hills. That’s why my estimate on it is that the Stock is probably not going to reach that dollar thresholds in the near term, even though hopefully it will in the longer-term. My question again, comes back to have you taken that into consideration as to what you may have planned to either stay on New York stock exchange or whatever else option available at that point?

Well, it’s always our intention to stay on the New York Stock Exchange. We’ve only recently gone below $1. This year, we haven’t been notified by the New York Stock Exchange. And a share consolidation would be a last resort. And just by way of a bit of history, your long-term shareholder, you might remember we got when the gold share market just absolutely died back in 2015 hit its bottom. We were below $1 and didn’t stay there and satisfied the New York requirements to remain listed on the exchange. And I don’t share your belief at the moment we’ll stay below $1 that’s something…

Well, I hope you’re right on that, but I just don’t see people buying anything right now, and I don’t see them buying anything in the near term future?

I would agree with you that in the very near future, all eyes are focused on Coronavirus and trying to stay avoiding it, and the economic repercussions of it. But your governments around the world they are making very large commitments to pump large amounts of money into the system drop interest rates. They’re working hard to ensure that this damage that’s being sustained right now can be mitigated. And that, to me is making their balance sheets look increasingly problematic.

So I understand how pumping money into the system works. I’m not too keen on understanding everything with all the gold reports that I see in here every time I listen to this report, but I am very familiar with how money going into the system works. I just have one other question because I didn’t hear anything at all mentioned today about Los Azules, which to me is, as I looked at everything is -- I still think it’s a very significant holding, but I haven’t heard a word about it today, anything new on it?

No price coppers down to 240. We’re looking to put a road in to the site, an alternative road that would give us 12 months access rather than the current four or five months access or be some work done this year on the road to give the access. I think that’s a critical component of moving that forward. Argentina is still trying to figure out what it wants to do. It is experiencing high inflation just recently put a new government in. They would like to promote mining. Just unfortunate right now that base metals are under a lot of pressure and…

Right.

The actions that they have taken have discouraged a lot of foreign capital investment in their country.

Hey. Thank you very much for taking my question. Appreciate it. Thanks again.

You’re welcome Gary. Thank you for being a shareholder.

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

Thank you, Operator. This one leave you a message you wish that everyone stays healthy right now. Thank you very much.

Ladies and gentlemen this does conclude today’s conference call, and thank you for your participation and you may now disconnect.