The El Gallo complex is located in Mexico’s Sinaloa State, along the foothills of the Sierra Madres. McEwen Mining announced the initial discovery holes form the El Gallo silver/gold discovery in November 2008. The complex includes the El Gallo and Palmarito silver deposits and the Magistral gold deposit, located within a 13 km (8 mile) radius.
Phase 1: El Gallo Phase I achieved its first gold pour in September 2012. Commercial production was accomplished on January 1, 2013. Production is expected to average about 50,000 ounces of gold per year at a cost of $800 per ounce.
In Q3 2013 the El Gallo 1 mine produced 8,027 gold equivalent ounces, consisting of 7,934 gold ounces and 4,868 silver ounces. The mine remains on track to meet its production guidance of 27,300 gold equivalent ounces in 2013. Total cash costs for Q3 equaled $747 per gold equivalent ounce, and all-in sustaining costs totaled $1,066 per gold equivalent ounce.
El Gallo 1 is currently being expanded from 3,000 to 4,500 tonnes per day. The expansion is ahead of schedule with completion expected at the end of Q1 2014 versus the earlier estimate of end of Q2 2014. The cost to complete the expansion has been reduced to $3 million from $5 million. The cost is lower than expected due to a large contingency that was initially included but has since been reduced. The increased capacity, combined with higher grades as mining moves deeper in the pit, is expected to increase production from 27,300 gold equivalent ounces in 2013, to 37,500 gold equivalent ounces in 2014 and 75,000 gold equivalent ounces by 2015.
Key Operational Facts (Phase 1)
Phase 2: A feasibility study was completed in September 2012. Phase 2 is estimated to contribute an additional 105,000 ounces of gold equivalent for a total of 135,000 ounces of gold equivalent per year. The Company estimates a $600 per ounce cash cost with the start date of 2014. The Capex for Phase 2 is approximately $180 Million.
||Sinaloa State, Mexico
||350 (including contractors)
|Estimated Mine Life
||Crushing and heap leach
||4500 tonnes per day
|2013 Production Estimate
||27,310 gold oz
|Life of Mine Avg. Production
||50,000 oz per year
Studies are being conducted in order to reduce the estimated capital expenditures related to El Gallo 2 by $20 million from the initial $180 million estimate. Savings are expected in the following areas: 1) reduction in the number of leach tanks, 2) smaller Merrill Crowe process plant / refinery, 3) modular crushers, and 4) reduction in number of transformers. These changes are expected to have minimal impact on annual production. To date $10 million of the final construction cost has been spent. Provided the company realizes on these projected savings and factoring in the funds that have been spent to date, approximately $150 million would be required in order to complete the mill scenario.
McEwen Mining also conducted follow-up tests to help determine if heap leaching is a viable process alternative to milling. The follow-up work confirms earlier test results, which suggest silver recoveries through heap leaching would be between 55-60%. While the heap leaching alternative would substantially reduce the estimated initial capital, it would also decrease production from an estimated 105,000 gold equivalent ounces to approximately 60,000 gold equivalent ounces. The Company has not made a decision on the final process method as this will be determined by timing of permits, availability of capital and precious metal prices.
The Environmental Impact Statement (EIS) permit for El Gallo 2 was approved by the federal Mexican Secretariat of Environment and Natural Resources (SEMARNAT). The final Change of Land Use permit is being reviewed by the state government and a decision is expected during Q1 2014. This final permit would allow construction and operations to commence at El Gallo 2 under the mill scenario.
Current resources for the complex total 893,271 ounces of gold in the measured and indicated categories and 78,480 ounces of gold in the inferred. Silver resources total 63.9 million ounces in the measured and indicated categories and 14.5 million ounces in the inferred.
The El Gallo information on this page was derived from: (1) news release titled “McEwen Mining Q3 2013 Results", released on November 8, 2013 by McEwen Mining Inc. To access the news release click here. (2) News release titled "McEwen Mining Inc.: Lower Metal Prices and Higher Cost of Capital Drives Decision to Reduce Forecast Production Growth from 290,000 to 255,000 Gold Equivalent Oz in 2016; Capital Requirements Now Significantly Reduced; Los Azules Sale Deferred" released on June 10, 2013. To access the news release click here. And,(3) technical report titled "Resource Estimate for the El Gallo Complex, Sinaloa State, Mexico" dated August 30, 2013 with an effective date of June 30, 2013, prepared by John Read, C.P.G., and Luke Willis, P. Geo. Both Mr. Read and Mr. Willis are not considered independent of the Company as defined in Section 1.5 of NI 43-101. To access the report click here.
McEwen Mining reports its resource estimates in accordance with standards of the Canadian Institute of Mining, Metallurgy and Petroleum referred to in Canadian National Instrument 43-101 ("NI 43-101"). These standards are different from the standards generally permitted in reports filed with the SEC. Under NI 43-101, McEwen Mining reports measured, indicated and inferred resources, measurements which are generally not permitted in filings made with the SEC. According to Canadian NI 43-101 criteria, the estimation of measured resources and indicated resources involve greater uncertainty as to their economic feasibility than the estimation of proven and probable reserves. Under SEC Industry Guide 7 criteria, measured, indicated and inferred resources are considered Mineralized Material. The SEC considers that in addition to greater uncertainty as to the economic feasibility of Mineralized Material compared to proven and probable reserves, there is also greater uncertainty as to the existence of Mineralized Material. U.S. investors are cautioned not to assume that measured or indicated resources will be converted into economically mineable reserves. The estimation of inferred resources involves far greater uncertainty as to their existence and economic viability than the estimation of other categories of resources.
Mineral resources which are not mineral reserves do not have demonstrated economic viability.