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Operations
Operations

Gold Bar Feasibility Study

Following an infill drill program of approximately 13,300 ft (4,000 m) designed to increase the resource confidence level and to further help drive stronger mine economics, in 2015 McEwen Mining completed an updated Feasibility Study for the Gold Bar Project (the report was filed on SEDAR on December 4, 2015 and is also available for download here). The scope of the study is a conventional owner operated open pit mine with run-of-mine oxide heap leach processing.  

Highlights of the Feasibility Study

(All amounts in US dollars)

Capex $60 million
Pay-back period 3 years @ $1,150/oz gold, 2 years @ $1,300/oz gold
After-tax IRR20% @ $1,150/oz gold, 36% @ $1,300/oz gold
Mine Life Production 13 million tons @ 1.1 gpt diluted grade  for 325,000 oz gold
Production Profile 65,000 oz gold/ year
Cash Cost $728/oz
NPV $30 million
Updated in-pit resource estimate 611,000 oz M&I and 111,000 oz Inferred

Financial Analysis

The Feasibility Study's base case uses a gold price of $1,150 per ounce of gold and generates an after-tax net present value (NPV5%) of $30 million, an IRR of 20% and an average after-tax cash flow from operations of $22.5 million per year of operation. Feasibility Study results are disclosed on an after-tax basis, taking into consideration all internal tax attributes available to the Company at the time of the study. 

After Income Tax            Base Case
($1,150 oz gold)
Upside Case
($1,300 oz gold)
IRR (%)             20                        36        
NPV @ 5% Discount ($ millions)             30             67
Average Annual Cash Flow ($ millions)             22.5                        31.5           
Average Operating Margin Per Ounce ($)             395                        537           
Payback Period (years)             3                        2           

Capital and Operating Costs

Initial capital is estimated at $60.4 million, including $4.8 million for contingencies. Additional capital expenses such as a heap leach expansion and reclamation and closure obligations bring the total LoM capital required to $79.4 million, including an additional $1.5 million for contingencies. The Feasibility Study assumes an owner operated fleet of mining trucks and shovels and that all new equipment will be leased for this operation.

Operating costs were estimated based on process design criteria, equipment lease rates, labor, reagent, on-site power generation, fuel, explosives, maintenance, and other miscellaneous costs. All costs are in Q3 2015 dollars. Average cash cost and all-in cost are $728/oz and $995/oz respectively.

  Initial
Capital
($ millions)
Sustaining
Capital
($ millions)
Reclamation
and Closure
($ millions)
Mine      
            Mine Equipment                             2.9              2.8  
            Site Development                        1.5               
            Capitalized Pre-striping             4.6    
            Mine Contingency             0.7   0.1  
Process      
            Screening/Pad Equipment 2    
            Process Plant  10.5 0.4  
            Heavy Mobile Equipment            0.6               
            Process Contingency            0.8 0.01  
Leach Pad                 
            Mobilization, Administration, EPCM 1             0.9             
            Pad             10.1  4.5  
            Ponds                        0.3               
            Diversion Channels            0.1            0.05  
            Miscellaneous 0.3    
            Leach Pad Contingency            1.2             0.5             
Owner and Infrastructure      
            Water Supply System             2.5    
            On-site Power Generation System                        0.8           

            Other Infrastructure                        10.1               
            Owners Costs                        8             0.03  
            Owner and Infrastructure Contingency                  2.2               
Mine Reclamation                                                             
           Mine Closure                                      8.8 
           Closure Contingency     0.8
Total Capital Cost (Without Contingency) 55.5 8.6 8.8
          Contingency 4.8 0.7 0.8
          Total Capital Cost 60.4 9.3 9.7

Further Optimization, Cost Reductions and Project Potential

The Company believes there are opportunities to further improve the economics of the Gold Bar Project through continued exploration, capital cost reductions and potential process plant engineering synergies with our El Gallo Mine in Mexico.

In 2015 a drill program consisting of 38 in-fill holes was completed at Gold Bar. In addition to upgrading our mineral resource confidence, several holes returned significant results including 4.65 gpt gold over 41.1 m and 2.2 gpt gold over 52 m. Once the mine permit is received for the project, several priority targets will be aggressively tested with the objective of expanding the known resource and reserve life.

Capital cost estimates for the project at this level of study are conservative. Until permit approval decision, which is anticipated for the second half of 2017, the Company will study ways to reduce capital expenditures. For example the El Gallo Mine uses an ADR plant of a very similar size and design to the one required at Gold Bar. By reusing the engineering design we may be able to realize significant savings. Other key areas of focus to reduce costs will be the ancillary infrastructure and activities related to the heap leach pad construction.

McEwen Mining will continue to optimize areas relating to leach kinetics, permeability and blasting fragmentation with the aim of increasing the proportion of RoM ore versus agglomerated ore reporting to the leach pad. This could lower operational costs and increase pad loading efficiency. Metallurgical test work is ongoing while permitting progresses.

Gold Bar technical information on this page was derived from the technical report titled “NI 43-101 Technical Report Gold Bar Project Feasibility Study, Eureka County, Nevada” dated December 3, 2015 with an effective date of September 19, 2015, prepared by SRK Consulting and signed by Breese Burnley, PE, Kent Hartley, PE, Brooke Miller, CPG, Jay Pennington, CPG, Daniel Sepulveda, SME-RM, Justin Smith, SME-RM, PE, Mark Willow, SME-RM, CEM, all of whom are qualified persons and all of whom are independent of McEwen Mining, each as defined by NI 43-101. To access the report click here.

Cautionary Notes

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.

This website contains certain forward-looking statements and information and investors are encouraged to review our "Cautionary Note Regarding Forward Looking Statement". 

 

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