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 from 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.
El Gallo 1: El Gallo 1 achieved its first gold pour in September 2012. Commercial production was accomplished on January 1, 2013. In 2014, El Gallo 1 is forecasted to produce 37,500 gold equivalent ounces (37,000 gold oz and 25,000 silver oz), with approximately 20,000 gold eq. being produced in the second half of the year.
Key Operational Facts (El Gallo 1)
||Sinaloa State, Mexico
||350 (including contractors)
|Estimated Mine Life
||Crushing and heap leach
||4500 tonnes per day
||31,129 gold eq. oz
El Gallo 2: El Gallo 2 is projected to produce an average of 95,000 gold equivalent ounces per year (5.2 million ounces of silver and 6,100 ounces of gold) at an approximate cash cost of $750 per gold equivalent ounce (including all pre-strip and Mexican royalties). All-in sustaining costs have been estimated at approximately $800 per gold equivalent ounce (including an estimated $5 million per year on exploration). Gold equivalent ounces have been calculated by converting silver into gold using a 60:1 exchange ratio.
On January 21, 2014, the Company announced that the Secretariat of Environment and Natural Resources (SEMARNAT) for the State of Sinaloa, Mexico had approved McEwen Mining'sEnvironmental Impact Statement (EIS) and Change of Land Use permit for El Gallo 2. These are the major permits required before construction can proceed.
The Company has made a temporary decision to defer the construction of El Gallo 2 due to low silver prices. The Company believes silver prices would have to equal $23-25 per ounce before the rate of return would be high enough to move forward with construction. In order to prepare for a possible construction decision later this year, the Company has been evaluating possible debt financing alternatives while advancing the construction of the ball mill, which is the longest lead time item associated with the project. The ball mill is 75% complete and expected to be delivered in Q4 2014.
Studies have now been completed in order to reduce the estimated capital expenditures associated with El Gallo 2. Approximately $20 million in savings is expected in the following areas: 1) reduction in leach tanks, 2) smaller process plant / refinery, 3) modular crushers, and 4) reduction in 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 mine.
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 Financial & Operating Results", released on March 10, 2014 by McEwen Mining Inc. To access the news release click here. (2) A news release titled “McEwen Mining Q1 2014 Financial & Operating Results” released on May 8, 2014 by McEwen Mining Inc. To access the news release click here. (3) A news release titled “McEwen Mining Q2 2014 Production Results” released on July 17, 2014 by McEwen Mining Inc. 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.