Photo by: Reuters
TORONTO (miningweekly.com) – Precious metals producer McEwen Mining on Thursday reported a 8% drop in consolidated output for the three months ended June 30, mainly owing to lower gold and silver grades at its two operations.
The NYSE- and TSX-listed miner reported total output of 31 200 gold equivalent ounces, comprising 18 863 oz of gold and 740 276 oz of silver, in line with the company’s guidance.
McEwen expects to produce between 135 000 oz and 140 000 oz of gold equivalent, as output is expected to increase in the fourth quarter, driven by a 50% increase in processing capacity at its El Gallo 1 mine, in Mexico, and higher grades at its 49%-owned San José mine, in Argentina.
McEwen’s attributable output from San José was 23 033 oz of gold equivalent, as output was lower year-over-year owing to lower gold and silver grades.
During the second quarter, the El Gallo 1 mine produced 8 167 oz of gold equivalent, 4% lower than the comparable period in 2013, owing to lower gold grades and temporary downtime at the process plant as part of commissioning the plant expansion.
The expansion, which would increase the processing capacity from 3 000 t/d to 4 500 t/d, was completed mid-May and commissioning was currently under way. The mine was expected to be operating at its full capacity by the start of the fourth quarter.
IMPAIRMENT TEST
Further, McEwen said it was conducting an impairment test on its Los Azules project, in Argentina, triggered by the recent acquisition of Lumina Copper by First Quantum Minerals for about C$470-million. Lumina’s only significant asset was the Taca Taca copper project located in Salta, Argentina.
While there were some notable differences between Taca Taca and Los Azules, McEwen believed the similarities in project scale and location within Argentina warranted paying close attention to the Lumina transaction.
The company’s preliminary assessment, which placed a substantial weighting on the announcement-day value of the Lumina transaction to value Los Azules, indicated a pretax asset impairment charge in the range of $90-million to $135-million. The actual amount would be disclosed in the company’s quarterly securities filing.
"With First Quantum acquiring Lumina and [its] Taca Taca project, Los Azules moves to the forefront in terms of world-class, undeveloped, high-grade copper assets not owned by a major mining company. As we have said in the past, Taca Taca serves as a good proxy for the value of Los Azules and we believe this transaction demonstrates value in projects located in Argentina," the company’s chief owner, chairperson and CEO Rob McEwen said.