TORONTO (miningweekly.com) – Mexican authorities have given McEwen Mining the all clear to proceed with construction of the El Gallo 2 precious metals mine.

The NYSE- and TSX-listed miner on Tuesday said that the Secretariat of Environment and Natural Resources for the state of Sinaloa, had approved the company’s change-of-land-use application for El Gallo 2.

This final environmental permit would allow the company to build and operate the proposed 95 000 gold-equivalent-ounce- (GEO-) a-year mine.

Phase 2 of the mine is expected to produce about 5.2-million ounces a year of silver and 6 100 oz/y of gold at a cash cost of about $750/GEO (including all pre-strip and Mexican royalties).

All-in sustaining costs have been estimated at about $800/GEO, including $5-million a year on exploration. The company calculated GEOs by converting silver into gold using a 60:1 exchange ratio.

McEwen and its engineering contractors were currently conducting studies in order to reduce the estimated capital expenditures associated with El Gallo 2. The company said it believed that about $20-million in capital costs could be saved from previous estimates with minimal impact on production by reducing the number of leach tanks; building a smaller Merrill Crowe process plant/refinery; using modular crushers; and by reducing the number of transformers.

To date, $10-million of the estimated $150-million final construction cost had been spent.

The miner cautioned that it had not yet made a final decision to proceed with the project, noting that it first planned to complete its cost savings studies and review financing alternatives.

Despite believing that this is an ideal environment to build El Gallo 2, owing to the abundance of skilled labour and supplies, any decision to proceed would be based on securing financing on more attractive terms than those currently available. The company believes receiving the final permit for El Gallo 2 would help to facilitate the process.

At December 31, McEwen had cash and gold/silver bullion totalling $26-million and was debt free.

The company would submit two more permits associated with El Gallo 2 during this current quarter, which included seeking permission for mining a satellite deposit, Palmarito, in 2016. The second permit is for a right-of-way for electrical power to connect to the process plant. Construction of the mine could begin with power provided by generators, with the option of later connecting to the electrical grid.