McEwen Mining Inc. (MUX, Financial) fell 2.23% to $2.19 per share on the New York Stock Exchange following the results on earnings and sales for the second quarter of 2018.
The miner closed the quarter, which ended June 30, with a loss of 2 cents or $5.4 million and missed expectations by 1 cent. The result marked a worsening on a year-over-year basis since McEwen Mining closed the corresponding quarter of fiscal 2017 with a loss of 1 cent or $1.7 million.
Higher precious metal prices per ounce, sales volumes and lower fixed costs per unit sold as production increased, couldn’t fully offset a higher charge on the quarterly income statement for exploration activity expenses of $9.92 million, as well as general and administrative expenses. During the quarter, the amount spent on explorations and construction permits was shared by the Black Fox Complex in Canada (64%), Los Azules in Argentina ( 21%) and on the Gold Bar Mine in Nevada (13%.)
The loss was dropped on a revenue of $34.18 million, which was a 126.2% growth from the prior-year quarter. Besides a more favorable environment for commodity prices, the growth in the company’s turnover was also backed by a 45% year-over-year increase in the consolidated production of 47,258 ounces of gold equivalent.
Because of the increased throughput, the All-In Sustaining Cost, or AISC, per ounce of metal sold fell 2% to an average of $1,005.40. The decline is on a year-over-year basis.
As a consequence of the high amount of funds used by the miner to advance the projects in Canada, Nevada, Mexico and Argentina, the free cash flow was negative. Only in the first half of 2018, the company made investments for $26.3 million. That was the main reason why the treasury available in cash on hand, securities and precious metals decreased in the second quarter by nearly 22% to $34.5 million from the same quarter of 2017.
McEwen Mining is a debt-free company.
In addition, the company informed the shareholders that the Gold Bar Mine will start to produce the metal sometime during the first trimester of 2019. As a result, McEwen Mining believes the asset can reach an annual gold production of 66,000 ounces over the next three years. The yearly production level is an average.
From El Gallo Mine in Mexico, the miner is projecting a production of 32,000 ounces of gold equivalent for the entire year of 2018. Black Fox Mine is anticipated to contribute with 48,000 ounces of equivalent gold and San José mine with 91,000 ounces of gold equivalent.
For full fiscal 2018, McEwen has forecasted to spend a total of $18.4 million for maintenance and exploration activities that its team is undertaking at its Canadian asset Black Fox. More than 40% of the total budgeted amount has already been spent in the first six months of the current year.
For the 52 weeks, the stock in McEwen Mining has fallen 14% and is now trading underneath the 50-SMA line but slightly over the 100 and 200-SMA lines.
The 52-week range is $1.82 to $2.86 per share. The market capitalization is $738.62 million. The price-book ratio is 1.45 times versus an industry median of 2.06 times, and the EV-to-Ebitda ratio is 9.07 versus an industry median of 9.9 times.
The recommendation rating is 2 out of 5, and the average target price is $3.52 per share.
(Disclosure: I have no positions in McEwen Mining.)
