McEwen Mining Q3 2026 Earnings Call Transcript

McEwen Mining (TSX:MUX) reported third-quarter financial results on Tuesday. The transcript from the company’s third-quarter earnings call has been provided below.

This transcript is brought to you by Benzinga APIs. For real-time access to our entire catalog, please visit https://www.benzinga.com/apis/ for a consultation.

View the webcast at https://events.q4inc.com/attendee/688664022/guest

Summary

McEwen Mining reported a challenging quarter with unacceptable financial performance but remains on track to double gold production by 2030.

Operational issues at the Gold Bar, Fox and San José mines were highlighted, with corrective measures in place and improvements seen in October’s production numbers.

The company’s strategic focus includes transitioning to new, more profitable mines like Stock and extending mine lives, with construction projects underway in Mexico.

The Los Azules copper project is progressing with key developments in permitting and financing despite weather-related access delays.

The company ended the quarter with $49 million in cash and plans to finance growth with minimal share dilution, leveraging a strong asset base.

Full Transcript

Ian Ball

Thank you, Rob. First, obviously it was a very difficult quarter. I would call it a very unacceptable quarter. You know, as a mining company, as a gold company, you have to make money. And we did not do that. And there’s some very specific reasons which I believe we’re on the route to fixing. But that does not hold the disappointment that we felt with putting out a result yesterday. Despite the difficult quarter, we still are on track to double our gold production by 2030.

So nothing in that sense has changed. But I do want to take some time to talk about some of the issues that we had at each of the sites, what we’re doing to correct them, where we’re at now, and a little bit about the transition we’re seeing from our old mines to our new mine. So I do want to spend some time first on Gold Bar because the issues that we started to see there began in Q2. They fed into Q3. And that was happening for a number of reasons. One, I would say there was a lack of oversight that we mentioned in our press release. From there, a lack of detail. There was delayed decision making. And from there we made a number of personnel changes, promoted various people who were on this call to higher up. And that is to correct this as soon as possible.

Because it is a heap leach mine and not a mill, it does take time for those changes to take effect. And we didn’t start seeing higher output until the end of September into October. And that’s why we released the October production numbers. And for Gold Bar, October was the highest production month in the last 15 months for that mine. Can we do better? Absolutely. There’s still a lot of improvement we could do at Gold Bar, but it is now back generating positive cash flow for the month of October.

We’ve seen a positive trend continue into November. At Fox, it was a situation where that mine, the Froome mine at the Fox complex was scheduled to come to an end. We did find some incremental ore and it was decided earlier on in the year to do development into that ore area. But most of that development cost was occurred in Q3. Despite us mining there for another six to nine months, we could not spread it out over our AISC. So with that and the fact that the mill had excess capacity, we decided to draw down on a low grade stockpile to feed the mill.

Both of those items elevated the AISC. Both are temporary. And we showed in October that the costs for the month are now back within guidance and we suspect that they will be there and move lower as we transition into the new Stock mine which I’ll touch upon in a second. And lastly at San José where we have a 49% interest, as probably many know, Latin America, particularly in Argentina into Chile, experienced significant snowfalls this year, record amounts. And this caused increased moisture at the mill. Typically the better grades at San José are associated with clay-like content. But with the moisture this was causing issues at the plant. So they moved over to more sulfide-rich stockpiles which were lower grade.

Because the grade was lower, typically the gold and silver recoveries are also lower. So it was a bit of a compounding effect why you saw the elevated cost and the lower production at San José. So what could be some good news? If I’m an investor looking at this scenario and saying, well, why would I want to continue on with this company? And that’s a very good question. What I would say is, one, these are temporary issues and you probably are thinking to yourself, I’ve heard this before from this company. You promise me you’re going to make changes and you put out another unacceptable quarter. And I would share that frustration. And what I’m saying today is we do think with all the changes that we have made, we are in a position to make money and to build out the portfolio as we see it.

At Stock, we’re just coming into the ore zone this month. Stock should be a more profitable mine than Froome. It has much better gold recoveries. There’s no royalty, there’s no haul to the mill. We can mill at 30% increased capacity over Froome because the rock is softer. So we should start to see the benefits of that take hold in December and the beginning of the new year. We’re also seeing at a lot of our operations going from short mine life to much longer mine lives.

Froome and Froome West were a couple of years. Stock is eight and a half to nine years. Grey Fox, which is part of the Fox complex, is another 15 years. We’re transitioning Gold Bar from being a three to four year mine life, with Trinity, Windfall and Lookout, to be a decade plus. We are now starting construction of our mill in Mexico and that’s expected to go for 10 to 20 years depending upon the future permits we would receive there. So this quarter is a bit of a transition. We do think we can finance the growth with minimal share dilution going forward. So much as there was a lot of negative, there’s still a lot of positive to be seen here. And we’ll be happy to take any operating questions you have at the end of the call. I am going to hand it over to Michael Manning, our Managing Director of Los Azules, because despite this being a financial operating call, the developments at Los Azules obviously have a big impact on our overall valuation.

Michael Manning (Managing Director of Los Azules)

Thank you, Ian. Good morning everyone. Four topics on Los Azules: the work towards a final investment decision, permits, the winter, and financing the FID work. The engineering cost estimate and execution plan that form the basis for the decision are on track for completion around the end. Metso has started work on the main process plant packages under limited notices to proceed. Four international engineering firms bid for the EPCM contract. We expect to finish evaluating the bids before year end and will award once final terms are negotiated.

Metallurgical test work, including 10-meter column leach tests, continues to favorably support the heap leach design. Two dates so nobody confuses them. Around year end we complete the technical and economical basis. The decision itself with full project financing is targeted for mid-2027. We are also updating the feasibility study. Three things drive it: better geotechnical results than we expected, a higher long-term copper price in line with analyst consensus, and current costs from our recent bids. It’s not a redesign. The project stays broadly the same. The base case does not use Newton as was the case in the feasibility.

It is conventional bio-heap leaching as used at many mines in Chile and Peru, some at higher altitude than ours, Quebrada Blanca and Del Abra among them. We see potential for more copper over longer mine life. Lenders and investors in our financing process will work from this updated technical report. We target publishing it in February 2027. Permits. In September we received the environmental approval to connect Los Azules to Argentina’s national grid within three weeks of the public hearing in Calingasta. Calingasta is the community where we’re operating in. It covers the high altitude section of the line which is common to the supply alternatives we are considering so we can build it whichever we choose. Basic engineering for the line and substations is complete and advanced enough to tender.

We also obtained land use approvals for the 3,000-bed construction camp and the Candadito camp and environmental approval to explore the neighboring Marissa One property that we acquired some months back. One permit is outstanding, the water concession. Our application is complete. The authority has no open information requests and we await the Provincial Water Council’s decision and we are cautiously optimistic. The winter. The Andes had the heaviest snowfall in more than two decades and it has delayed the reopening of our access road. Road crews expect to reach site in early 2027. Snow melt in spring weather could push it later. Site works will start later than planned and that may affect the construction schedule. However, it does not affect the engineering cost work for FID which is done off site and with information we already have. We are assessing options to recover the lost time including more camp capacity so more people can work at site sooner.

They cost money and we are weighing that against the time recovered. Our target to first copper remains 2030, holding. It depends on site access and the recovery measures we choose. And on completing the FID work, securing project financing and customary approvals. I will add additional precisions once we have out the technical report. Safety through all of this, Los Azules closed the third quarter without a reportable incident or a lost time injury.

Financing. In August, commitments under McEwen Copper’s term loan facility increased to 240 million, funding continued engineering and early works. At quarter end, McEwen Copper had $157.8 million in cash and cash equivalents and $138.9 million in working capital. The term loan is bridge funding. It does not build the mine, obviously. For construction, we are working on three sources. The first is senior project debt. Société Générale is sole financial advisor for the project debt financing.

In late October it sent an indicative senior debt term sheet to a group of export credit agencies and development finance institutions. Their feedback will shape the final structure. The second is equity at the McEwen Copper level from strategic investors. The third is a potential initial public offering of McEwen Copper. Preparations continue in parallel. None of the construction financing is committed today. That is normal before the FID basis is complete and you should hear it from me.

We continue to target FID and full project financing in mid-2027. On McEwen’s 46.3%, new equity will be raised at the McEwen Copper level. To the extent McEwen does not subscribe, its percentage goes down — by how much depends on the amount of debt and the equity price and neither is set yet. We aim to raise that equity at higher prices than past rounds so that future coupling fees are accretive to McEwen as earlier rounds were. Community. In a recent door-to-door survey of 2,529 residents in 10 communities near the project, 97% said they accept Los Azules and 90% said they trust it. From 2023 to mid-2026, the project sourced 27.7 million in goods and services from suppliers in Calingasta and Barreal. That’s an 11,000-people community, the nearest towns. In September, Los Azules was named outstanding mining company in corporate social responsibility at Argentina Mining Norte.

So what to watch: the FID basis around year end; the EPCM award; the updated feasibility study targeted for February 2027; site access in early 2027 and the updated schedule; the lenders’ feedback; and FID with full project financing in mid-2027. Thank you so much. And back to you Rob.

Rob McEwen

Thank you, Mike. So despite our reduced cash flow during the quarter, we do have an adequate treasury, as Ian said, to cover our organic growth. And we’re looking to double our production by 2030 to 250 to 300,000 ounces. In terms of our liquidity, at the end of the quarter we had 49 million in cash and a further 10 million in marketable securities. And then early in October we closed on a sale of non-core profits and raised that added a further 55 million.

We have the asset base, our gold assets in all categories resources, 5.8 million ounces. That is a solid foundation to allow us to build longer life mines and, as Ian said, at a lower cost. We also have a world-class copper project that Michael just spoke about which, if you put it on a gold equivalent basis, is equivalent to a 56 million ounce gold deposit with very attractive costs. We do think there’s some room to improve on that asset and the technical work is being done and we’ll see the results of that early in the new year.

And for those reasons I’m optimistic about our growth. I’ve invested over $290 million between McEwen Inc. and McEwen Copper, my own money, because I believe in the assets that we have. Mining I found over the years comes with its challenges every once in a while and we’re going to overcome those and move forward. So at this point. Operator, I’d like to welcome questions from the audience.

OPERATOR

We will now begin the question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from Jake Sikelski with Alliance Global Partners. Your line is now open. Please go ahead.

Rob McEwen

Hello, Jake.

Jake Sikelski (Analyst at Alliance Global Partners)

Hi Rob and team. Thanks for taking. Hey, Rob. So just looking at the Los Azules timeline, I’m curious if the adverse weather has affected anything here. And have any delays on that front been built into the current timeline for the FID? Any color there would be helpful.

Rob McEwen

Sure. I’ll ask Mike to answer your question, Jake.

Michael Manning (Managing Director of Los Azules)

Hey Jake, how are you doing? Jake, we had, I would say, three to four months delay on getting normally to site and we want to start build out the camp early and that obviously has impact. So that means that now we need to be more aggressive in terms of scaling up camp capacity. And as you have seen and heard, we are now targeting a 3,000 bed camp instead of a 2,500 bed camp as before. So that will be part of the mitigation. So we are going to have more people working over the construction timelines than before in order to claw that back.

Now how the rest of the summer is going and what does it mean in terms of snow melt and potential access? I think that we will be in a much better position once we have our feasibility out. But that’s a 1 in 25 year event and you had seen lots of impacts on the Chilean side and also another mine operations in Argentina. We are cautiously optimistic that we can claw back the time we have lost due to inclement weather conditions.

Jake Sikelski (Analyst at Alliance Global Partners)

Okay, that’s helpful. And then just looking at the quarter at San Jose, I mean we saw much higher dividends in 2026 than originally expected. Should we expect the JV to sort of revert back to retaining cash flow as the project gets back steady state here over the next quarter? How should we be thinking about dividends heading into 27 here?

Perry (Chief Financial Officer)

Sure. This is Perry. I can take that, Jake. So I would say as far as San Jose, we’re not expecting any further dividends for the balance of 2026. But I could say, you know, their closure obligations I, I think are substantially or fully met at this point. So I think, you know, barring need for, you know, significant capital development because of a discovery, I would say, you know, we expect further additional dividends in 2027. You know, the quantum will be relative to silver prices.

Obviously we saw, you know, very high silver prices late last year going into 2026, first half. But overall, you know, we think, you know, they will recover the production a large part of the production in Q4 this year. And their cash balance was very healthy at the end of the third quarter. I think about 135 million in cash, approximately. So I would say look for a similar profile next year compared to this year.

Jake Sikelski (Analyst at Alliance Global Partners)

Got it. Okay, that’s all for me. Thanks again.

OPERATOR

Your next question comes from the line of Joseph Rieger with Roth Capital Partners. Your line is now open. Please go ahead.

Joseph Rieger (Analyst at Roth Capital Partners)

Hey, Rob and team. Hey, thanks for taking the questions. One kind of, like, accounting question for me. You guys expensed some stuff from El Gallo, and I think the Fox complex is advanced projects category. Can you give us any guidance on what that might look like in Q4 and for next year? Obviously, it’s been a bit higher than in prior years.

Perry (Chief Financial Officer)

Hi, Joe. It’s Perry. So, in terms of El Gallo, we just started earthworks for construction of the mill. I think you’ll see modest spend in Q4, but we won’t get into the heavy spend until the EPCM contracts are finalized. So you’ll see, I think, more consistent spend on that in the first half of 2027.

Joseph Rieger (Analyst at Roth Capital Partners)

Okay. And will all that be expensed in advanced projects?

Perry (Chief Financial Officer)

No, you’ll see that capitalized as we work through that project.

Joseph Rieger (Analyst at Roth Capital Partners)

Okay. Okay. And then given the production of, you know, over 3,000 gold equivalent ounces at Gold Bar in October, are you expecting that kind of like 3,000 per month to continue for the rest of the quarter, or was there, you know, some buildup on the pad that kind of came through well in October, but maybe it’s more moderate the rest of the quarter?

Ian Ball

Yeah, I can address that. Joe, I would say, Ian Ball speaking. So there’s nothing special about October. The grade was average. We just basically were more efficient with our mining. You know, we moved more ore tons to the leach pad, and we do expect to see a similar amount in November and December as well. As, you know, early budgeting is showing that, you know, we would expect to see that, you know, every month or on average every month in 2027 as well.

Joseph Rieger (Analyst at Roth Capital Partners)

Okay. All right, thanks. I’ll turn it over.

OPERATOR

Reminder, if you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. Your next question comes from the line of Heiko Ihle with H.C. Wainwright. Your line is now open. Please go ahead.

Rob McEwen

Hello, Heiko.

Heiko Ihle (Analyst at H.C. Wainwright)

Thank you guys for taking my question. How are you at San Jose? You hinted at this on the call, and you also discussed it in the release. You were talking about the snowfall, the weather, and just the excess moisture. And, you know, essentially, it sort of screwed up the plant a little bit. And I just want to see, what have we seen so far in Q4? Because, I mean, you’re only discussing Q3 all on a wet front. And is there maybe any changes you can make to the plant to avoid those blockages in the future and just sort of help us out on what we should envision on, you know, like a cost, production guidance type of thing for Q4, maybe even beyond, if you’d be so kind.

Ian Ball

Yeah. So it’s Ian speaking again. So just on the plant, we have not had those conversations with Hochschild, any modifications. I would say this is the first time they’ve ever seen this type of moisture buildup over the 20 years that the plant’s been operating. So, you know, will they need to recalibrate the plant for one off? I don’t have the answer for you at this point. My gut tells me probably not that they won’t do it. But that said, going into Q4, you know, the fourth quarter is typically very strong for San Jose.

And, you know, speaking to the team at site there, you know, they fully expect that they can have a very strong fourth quarter and meet their production guidance for the year. I think they did a very good job operating under a very difficult situation because there was more than just the moisture as well as the plants even getting to site, you know, having these record high snowfall and getting people in and out because it is a fly-in, fly-out camp.

So, you know, you see that, you know, Michael’s been speaking about it regarding in the high Andes. It was sort of, you know, all over the country. But that said, you know, we are expecting a very strong Q4 in line with what they’ve traditionally produced.

Heiko Ihle (Analyst at H.C. Wainwright)

So essentially in our models, we should, I don’t want to say ignore the whole thing, but very much put it on the back burner going forward. That’s fair to say.

Ian Ball

No. Yeah, I expect that everything’s going to pick up in the fourth quarter. You know, they’re going to move back to the clay material. So that automatically increases the grade. The recoveries should go back to normal, except obviously with lower grade. Typically, you know, there’s a fixed tail that comes with those recoveries. And we saw that in the quarter. That fixed tail will reverse. We’ll continue with a higher grade. So the recoveries should just jump back up to where they were in Q2 and Q1.

And as you saw sort of prior to Q3, San Jose was actually running at record rates — highest throughput, highest production due to the mill expansion — that we’ve seen in quite some time. So I think this is really unfortunately just a one off due to the weather.

Heiko Ihle (Analyst at H.C. Wainwright)

Yeah, completely different question. I’m in Zurich right now at a conference and in two different meetings the topic of diesel prices came up in regards to costs for drilling. Can you maybe give us a dollar impact on, I mean, I guess how much you spend on diesel and what the delta is now versus, call it, Q1? And maybe, you know, how we could model it out going forward as well. But you want to maybe give us rounded numbers or, like, at least, like, a quantifiable measurement?

Perfect. That’s helpful. I’ll get back to queue. Thank you guys.

Rob McEwen

Thanks, Heiko.

OPERATOR

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

Rob McEwen

Thank you very much, Operator. We’re getting on top of the issues that caused the problem in the third quarter and we look forward to sharing those with you in the next quarter. Thank you.

OPERATOR

This concludes today’s call. Thank you for attending. You may now disconnect.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company’s SEC filings and official press releases. Corporate participants’ and analysts’ statements reflect their views as of the date of this call and are subject to change without notice.