Canadian gold and silver producer McEwen Mining Inc. (MUX, Financial) closed the first quarter with EPS of 1 cent, a 125% decrease on a year-over-year basis. In the first quarter of 2016 the company reported an EPS of 4 cents. McEwen Mining’s total number of shares outstanding is approximately 312 million, which leads to a loss of $3 million for the first quarter of 2017.
In its first-quarter report McEwen Mining said that “the net loss was mainly due to a $6.4 million decrease in sales of gold and silver by its El Gallo mine coupled with a $6.7 million increase in exploration costs, mostly related to the drilling campaign performed at the Los Azules project, compared to the same period during 2016.”
Los Azules is a 100%-owned open pit copper exploration project located in the San Juan Province (Argentina) adjacent to the border with Chile. The surveys to define the mineral deposit are under way through drillings that are expected to be completed sometime between July and December 2017.
McEwen Mining has two producing mines, the El Gallo mine and the San José mine.
El Gallo is an open pit mine located in the Sinaloa state of Mexico with a life of mine of more than 2½ years. In the first quarter of 2017, the company produced 9,808 ounces of gold equivalent at El Gallo mine, down 51.2% year over year, at a total cash cost of $564 per ounce of gold equivalent (up 30.6% compared to the first quarter of 2016) and at an AISC of $668 per ounce of gold equivalent on a co-product basis (up 25.6% year over year). The company recorded earnings of $8.2 million from mining operations at El Gallo mine.
The San José mine is an underground mine co-ownership with Hochschild Mining (McEwen Mining owns 49% of the mine), with a life of mine of more than five years. At the San José mine, McEwen Mining produced 19,925 ounces of gold equivalent ounces, up 11.6% year over year, at a cash cost of $915 per ounce of gold equivalent (up 20.1% compared to the first quarter of 2016) and at an AISC of $1,165 per ounce of gold equivalent on a co-product basis (up 24.5% year over year). McEwen Mining recorded earnings of $5.7 million from mining operations at the San José mine.
In the first quarter, revenues came in at $14.833 million, a 30% decrease on a year-over-year basis, backed on 12,147 ounces of gold equivalent sold at the El Gallo 1 mine at an average realized price of $1,220 per ounce of gold and at an average realized price of $17.54 per ounce of silver.
The company reported that in the first quarter of 2017 the cash used in operating activities was $6.850 million versus cash flow of $14.708 million provided by operations in the comparable period of 2016. This was due to “a reduction in the number of ounces sold from the El Gallo mine, coupled with lower VAT collection from our Mexican operations and the increase in metals inventory,” the company says.
As of the last quarter of 2016, McEwen Mining had cash on hand and securities of an estimated $44.219 million.
The company says that “production for 2017 is expected to be 49,700 ounces of gold and 24,000 ounces of silver from the El Gallo mine, and 50,000 ounces of gold and 3,300,000 ounces of silver from the San José mine. Using a silver-to-gold ratio of 75:1 for the year 2017, this represents projected consolidated production of 144,000 gold equivalent ounces.”
The company has 630,239 ounces of gold proved and probable reserves and 14,357,000 ounces of silver proved and probable reserves.
McEwen Mining is trading at $2.67 per share, with a price-book (P/B) ratio of 1.83, a price-sales (P/S) ratio of 13.25 and a price-earnings (P/E) ratio of 44.68. The forward P/E ratio is 14.31. The stock lost 8.6% year to date.
Disclosure: I have no position in McEwen Mining.
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