OREANDA-NEWS. McEwen Mining Inc. (NYSE:MUX) (TSX:MUX) is pleased to announce consolidated quarterly production of 39,555 gold equivalent ounces(1), which accounts for 27,888 ounces gold and 875,006 ounces silver.  The Company reported net income of $8.4 million(2) and $21.3 million as well as earnings from mining operations of $19.3 million(3) and $38.8 million(3) for the three and six months ended June 30, 2016, respectively.

The Company generated $4.8 million and $19.5 million of net cash flow from operations for the three and six months ended June 30, 2016 respectively.  During the quarter we purchased a royalty on our El Gallo property for $5.3 million which reduced our cash flow but increased our future leverage to higher gold and silver prices.

We ended the second quarter of 2016 with liquid assets of $55.7 million composed of cash of $36.7 million, precious metals of $14.3 million and marketable securities of $4.7 million.  The Company has no debt. As at August 2, 2016 we had liquid assets of $51.8 million.

Table 1: Q2 Comparative Financial Results

  Q2 2016 Q2 2015 Year to Date Guidance
FY2016
Corporate Total        
Gold ounces produced   27,888     28,483     56,863     99,500  
Silver ounces produced   875,006     801,119     1,548,773     3,337,000  
Gold equivalent ounces produced(1)   39,555     39,164     77,513     144,000  
Gold equivalent total cash cost ($/oz)(1)(3) $ 719   $ 713   $ 663   $ 780  
Gold equivalent co-product AISC ($/oz)(1)(3) $ 942   $ 1,048   $ 873   $ 935  
Gold equivalent all-in cost ($/oz)(1)(3) $ 1,201   $ 1,151   $ 1,046     -  
El Gallo Mine – Mexico        
Gold ounces produced   15,536     17,208     35,551     54,500  
Silver ounces produced   7,815     8,775     14,263     37,000  
Gold equivalent ounces produced(1)   15,640     17,325     35,741     55,000  
Gold equivalent total cash cost ($/oz)(1)(3) $ 465   $ 351   $ 445   $ 780  
Gold equivalent co-product AISC ($/oz)(1)(3) $ 495   $ 546   $ 517   $ 840  
San Jos? Mine(4) - Argentina        
Gold ounces produced   12,352     11,275     21,312     45,000  
Silver ounces produced   867,191     792,344     1,534,510     3,300,000  
Gold equivalent ounces produced(1)   23,915     21,839     41,772     89,000  
Gold equivalent total cash cost ($/oz)(1)(3) $ 849   $ 933   $ 806   $ 780  
Gold equivalent co-product AISC ($/oz)(1)(3) $ 1,075   $ 1,215   $ 1,006   $ 990  

Footnotes:

  1. Silver production is presented as a gold equivalent. Gold equivalent calculations are based on prevailing spot prices at the beginning of the year. The gold to silver ratio used for 2015 and 2016 is 75:1.
  2. All amounts are reported in US dollars unless otherwise stated.
  3. Earnings from mining operations, total cash costs, all-in sustaining costs (AISC), all-in costs, average realized prices, and liquid assets, are non-GAAP financial performance measures with no standardized definition under U.S. GAAP. Please see page 35 of the Company’s quarterly report on form 10-Q for the quarter ended June 30, 2016. See “Cautionary Note Regarding Non-GAAP Measures” for additional information, including definitions of these terms.
  4. The San Jos? Mine is owned by Minera Santa Cruz S.A. (“MSC”), which is a joint venture 49% owned by McEwen Mining Inc. and 51% owned and operated by Hochschild Mining plc. Figures include only the portion attributable to us from our 49% interest in MSC.
  5. See “Cautionary Note Regarding Non-GAAP Measures” for additional information about “Advanced-stage Projects”.

Table 2: Q2 Comparative Production and Financial Results


  		 Q2 2016 Q2 2015
     
Gold equivalent ounces sold   34,373     36,016  
El Gallo Mine   11,593     13,577  
San Jos? Mine   22,780     22,439  
     
Average realized prices(3)    
Gold ($/oz) $ 1,267   $ 1,172  
Silver ($/oz) $ 18.08   $ 15.34  
     
(Millions of U.S. dollars except per share amounts)    
Earnings from Mining Operations(3)   19.3     13.4  
Earnings from mine operations per share   0.07     0.05  
     
Cash Flow from Operations   4.8     0.4  
Cash flow from operations per share   0.02     0.00  
     
Net Income (loss)   8.4     (14.1 )
Net Income (loss) per share   0.03     (0.05 )
     

Operating & Financial Highlights

Production Costs 
Consolidated total cash costs, all-in sustaining costs (AISC) and all-in costs per gold equivalent ounce in Q2 were $719, $942 and $1,201, respectively. At the El Gallo Mine total cash costs and AISC were $465 and $495 per gold equivalent ounce, respectively. At the San Jos? Mine total cash costs and AISC were $849 and $1,075 per gold equivalent ounce, respectively.  The all-in costs per gold equivalent ounce in Q2 include the $5.5 million purchase for the royalty on our El Gallo properties plus an exploration property in Mexico acquired in May 2016. These additions were partly offset by the $1.2 million decrease in exploration expenses as well as lower property holding costs incurred during 2016.

Production
Production in Q2 totaled 39,555 gold equivalent ounces, which includes 15,640 gold equivalent ounces from the El Gallo Mine and 12,352 gold ounces and 867,191 silver ounces attributable to us from our 49%(4) interest in the San Jos? Mine.

Ounces Sold
Sales in Q2 totaled 34,373 gold equivalent ounces, accounting for 23,179 gold ounces and 839,602 silver ounces.

Earnings from Mining Operations
Earnings from mining operations were $19.3 million or $0.07 per share for Q2, compared to earnings of $13.4 million or $0.05 per share for the six months ended June 30, 2015 (“Q2 2015”).

Cash Flow
Net cash provided by operations was $4.8 million or $0.02 per share for Q2, compared to net cash flow generated of $0.4 million or $nil per share in Q2 2015.

Net Income (loss)
Consolidated net income was $8.4 million or $0.03 per share for Q2, compared to a net loss of $14.1 million or $0.05 per share loss in Q2 2015.  This is a result of an increase in net income from our investment in Minera Santa Cruz (“MSC”), and lower all-in sustaining costs at the El Gallo Mine compared to Q2 2015.

Average Realized Prices
The average realized prices of gold and silver sold during Q2 were $1,267 and $18.08 per ounce, respectively.

Production and Cost Guidance
Our 2016 production guidance remains 99,500 gold ounces and 3.3 million silver ounces, or approximately 144,000 gold equivalent ounces, at total cash costs and AISC of $780 and $935 per gold equivalent ounce, respectively.

Treasury
We ended the second quarter of 2016 with liquid assets of $55.7 million composed of cash of $36.7 million, precious metals of $14.3 million and marketable securities of $4.7 million.  The Company has no debt. As at August 2, 2016 we had liquid assets of $51.8 million.

Return of Capital (Yield)

The next semi-annual return of capital installment of a ? cent per share will be distributed to shareholders of record on August 24, 2016. The distribution will be paid on August 29, 2016.

Redemption of Exchangeable Shares

At our Annual Meeting held on June 6, 2016, shareholders of the outstanding shares of McEwen Mining – Minera Andes Acquisition Corp. (TSX:MAQ) (the “Exchangeable Shares”) voted to allow the early redemption of their shares. On August 22, 2016 we will cause each remaining Exchangeable Share to be redeemed in exchange for one common share of McEwen Mining Inc. Notice has been mailed to holders of Exchangeable Shares. Holders of Exchangeable Shares may continue to exercise their normal retraction rights at any time before August 22, 2016.

El Gallo Mine, Mexico (100%) 

The El Gallo Mine delivered production results in line with guidance accounting for 15,640 gold equivalent ounces, compared to 17,325 gold equivalent ounces during the same period in 2015. Production in Q2 was lower than the prior quarter due to lower ore grades, as we previously forecasted (2.3 gpt in Q2 2016 vs. 3.6 gpt in Q1 2016).  This decrease in the grade is the result of moving from the higher grade Samaniego pit to the lower grade Lupita pit. Our full year guidance for El Gallo remains 55,000 gold equivalent ounces out of which 35,741 have been produced in the six months ended June 30th, 2016.  As such, the rate of production will be reduced in the second half of the year.

For 2016, we have budgeted $3.7 million for sustaining costs and capital expenditures, and $2.9 million for exploration activities.  During Q2 we spent $1.8 million at the El Gallo Mine, which mostly related to an expansion of the heap leach pad that was completed during the second quarter of 2016, and $0.8 million in exploration activities aligned with our plan. 

San Jose Mine, Argentina (49%) 

Our attributable production from San Jos? in Q2 was 12,352 gold ounces and 867,191 silver ounces, for a total of 23,915 gold equivalent ounces. Compared to Q2 2015, gold production was up 10% and silver production was up 9%. Tax reforms, including the elimination of export tax on dor? and concentrate, and other macroeconomic developments in Argentina, as well as the devaluation of the Argentinean Peso, have resulted in a significant improvement of operations and cash flows at San Jos?. As a result, we received $2.8 million in dividends from MSC(4) in Q2 and we have received $5.4 million in dividends year-to-date against an original dividend forecast of $7.5 million for 2016 (in comparison, the Company received $500,000 in dividends for all of 2015).  The Company expects to receive additional dividends throughout the year provided gold and silver prices remain at current or higher levels.

The 2016 exploration budget has been increased from $4.5 million to $6.5 million. This is the first time in several years that a significant budget has been allocated to exploration.

Gold Bar Advanced-Stage Project(5), Nevada, U.S. (100%)

As outlined in our Feasibility Study dated September 19, 2015, the Gold Bar asset, the upside case for Gold Bar at $1,300/oz gold provides improved economics over the original base case of $1,150/oz as outlined below (see chart below).

Table 3: Sensitivity Analysis on Gold Bar

  Base Case
$1,150/oz gold		 Upside Case
$1,300/oz gold
IRR   20 %   36 %
NPV@5% Discount Rate(2) $30 million $67 million
Average Annual Cash Flow $22.5 million $31.5 million
Average Operational Profit Margin  $395/oz $537/oz
Payback Period 3 years 2 years

The Company estimates that we will receive a permitting decision from the Bureau of Land Management during the first quarter of 2017.  This final permit, once received, will allow us to begin construction of the mine, which we have estimated to take 12 months.  Production is estimated to begin the following year in 2018.  For 2016, we have budgeted approximately $4.7 million to be spent towards advancing the project closer to the production stage, of which $1.3 million has been spent during the six month period ended June 30, 2016.  Mine permitting and engineering activities continue to advance at Gold Bar. 

El Gallo Silver Advanced-stage Project(5), Mexico (100%)

During the quarter, we completed a positive internal economic scoping study on a new development plan for the El Gallo Silver project.  Given prevailing silver prices, we are undertaking a new feasibility study on the project expected to be completed later this year.    

Los Azules Exploration Project, Argentina (100%)

The Company is preparing an updated Preliminary Economic Assessment (“PEA”) for Los Azules.  We believe the recent policy shifts in Argentina such as the elimination of export taxes, the devaluation of the peso and the lifting of certain import restrictions on equipment will improve the economics of Los Azules over the previously published PEA completed in 2013.  For 2016, we have budgeted $1.0 million to advance the project, and will commence a drill program in early 2017.    

About McEwen Mining 

McEwen Mining’s goal is to qualify for inclusion in the S&P 500 Index by creating a high growth, profitable gold and silver producer focused in the Americas and Europe. McEwen Mining's principal assets consist of the San Jos? Mine in Santa Cruz, Argentina (49% interest), the El Gallo Mine and El Gallo Silver project in Sinaloa, Mexico, the Gold Bar project in Nevada, USA, and the Los Azules copper project in San Juan, Argentina.

McEwen Mining has a total of 299 million shares outstanding and 305 million fully diluted. Rob McEwen, Chairman and Chief Owner, owns 25% of the Company.