Fox PEA – Higher Production, Longer Life

TORONTO, Jan. 26, 2022 (GLOBE NEWSWIRE) — McEwen Mining Inc. (NYSE: MUX) (TSX: MUX) is pleased to provide summary results from the Fox Complex Preliminary Economic Assessment (“Fox PEA” or “PEA“), which outlines a mine life of over twelve (12) years, generating average annual production of 71,980 gold ounces, at average cash costs and all-in sustaining costs (“AISC“) per ounce under $800 and $1,225, respectively.(1)(2) Peak annual gold production of approximately 100,000 ounces occurs in Years 6 to 10 of the mine life.

“The Fox PEA is an important step forward for us. It translates our exploration success into a business case that increases mine life and production rates and lowers costs per ounce! It also provides a clearer picture of where future exploration should be focused to add value.

Our commitment and investment in exploration has provided the foundation for this study, and ongoing exploration success continues to further enhance the expansion potential at Fox. While the PEA is an encouraging first iteration, continuing exploration success, improved economics, and a shorter payback period is required before we decide to advance the project.

I am also pleased that the Froome mine was successfully brought into production in 2021, is performing as planned, and is expected to continue for at least another three years while our expansion plans and drilling progress,” commented Rob McEwen, Chairman and Chief Owner.

McEwen engaged Wood Canada Limited ( (“Wood“) to assist in evaluating and developing a business strategy to unlock the value of our Fox Complex properties (“Fox“) in Canada’s Timmins mining district. The PEA was prepared by Wood in accordance with the requirements of Canadian National Instrument 43-101 “Standards of Disclosure for Mineral Projects” (“NI 43-101“). The NI 43-101 technical report summarizing the PEA report will be published on SEDAR within 45 days from the date of this news release.

Fox is an active mining operation with gold production from the Froome mine, which was developed in 2020-2021 and started commercial production in September 2021 using the pre-existing Fox mill facility. The PEA evaluates the economics of Fox in two ways: Case A – Fox including Froome, and Case B – Fox excluding Froome. Case B is intended to show the incremental return on investment provided by the expansion of the Fox mill to 2,400 tonnes per day and the development of mines at Stock West, Grey Fox and Fuller deposits (the “Expansion Project“).

Table 1 presents a summary of results for Case A. In this case, the internal rate of return and payback period are not meaningful metrics because of Froome’s initial positive operating earnings.

Table 1: Case A – Fox Financial Results (US Dollars)(2)

Financial & Operating Metrics (After-tax):
Life of Mine (LoM) 12.3 years
LoM Gold Production 885,400 oz
Average Annual Gold Production – LoM 71,980 oz
Average Cash Costs per oz. – LoM (1) $797
Average AISC per oz. – LoM (1) $1,224
Gold Price Sensitivity: Downside Case
$1,500/oz Au
Base Case
$1,650/oz Au
Upside Case
$1,800/oz Au
Net Present Value (5% discount) (NPV5%)(3)(4) $108 million $175 million $240 million

Table 2 presents a summary of results for Case B. Table 2 is the only instance in this news release where Froome is excluded from the information presented.

Table 2: Case B – Expansion Project Financial Results(2)(5)

Financial & Operating Metrics (After-tax):
Life of Mine (LoM) 9.3 years
LoM Gold Production 751,700 oz
Average Annual Gold Production – LoM 80,800 oz
Average Cash Costs per oz. – LoM (1) $769
Average AISC per oz. – LoM (1) $1,246
Gold Price Sensitivity: Downside Case
$1,500/oz Au
Base Case
$1,650/oz Au
Upside Case
$1,800/oz Au
Net Present Value (5% discount) (NPV5%)(4)(6) $81 million $137 million $192 million
Internal Rate of Return (IRR%) 15% 21% 26%
Payback Period (years) 6.5 5.9 5.4

Most of the funding required for capital expenditures to implement the Expansion Project comes from internally generated project cash flow. Table 3 shows the total projected capital (initial and sustaining) and the amount and timing of external funding required to realize the PEA business case. While the PEA shows encouraging results for expansion at Fox, it is not McEwen Mining’s intention to finance or construct the Expansion Project based on this PEA. The execution strategy is to seek further opportunities to reduce the funding requirements and improve the payback period concurrent with additional drilling and studies.

Table 3: Fox Capital Expenditure and Potential Funding Requirements (2)(7)

Year of Project Total Capital Expenditure
Amount and Timing of Funding Required
Above Project Generated Cash Flow
Downside Case
$1,500/oz Au

Base Case
$1,650/oz Au
Upside Case
$1,800/oz Au

Year 1 (2022) $10
Year 2 (2023) $49 $70 $52 $35
Year 3 (2024) $76 $41 $37 $34
Year 4 to 13 (2025-2034) $223
Total LoM $358 $111 $89 $69

Readers are cautioned that the PEA is preliminary in nature. It includes Inferred mineral resources that are considered too speculative geologically to have applicable economic considerations that would enable them to be categorized as mineral reserves. Mineral resources that are not mineral reserves do not have demonstrated economic viability. There is no certainty that the PEA will be realized.

PEA Overview

The PEA is based on the sequential underground development and mining of the Froome, Stock West, Grey Fox, and Fuller mineral resources. Our other resources at Black Fox, Stock East, Davidson-Tisdale, Buffalo Ankerite, Paymaster, and Tamarack represent potential sources of additional production and require further exploration and study.

The PEA includes upgrading the Fox mill, located at the Stock property, to increase throughput capacity to 2,400 tonnes per day and to allow the simultaneous processing of material from multiple deposits. The impact of the increased mill throughput on annual gold production capacity can be seen in Figure 1 starting in Year 5.

The Fox project is partly funded by operating earnings from ongoing operations at Froome, some of which occur before the Expansion Project is started. In addition, exploration will continue at Stock Main and Stock West to develop additional resources that may provide opportunities for earlier revenue and a quicker payback period. Drilling is also anticipated at Grey Fox to evaluate additional opportunities for resource extensions and definition.

As shown in Figure 3, the cumulative cash flow is initially positive because of Froome operations. Subsequent capital expenditures for project expansion drive cumulative cash flow negative starting in Year 3 until becoming positive again in Year 7. Total capital for the life of mine is $358 million, of which $89 million is not addressed internally from project cash flow ($52 million in Year 2 and $37 million in Year 3)(see Table 3). The Company is evaluating possible opportunities to mitigate this funding requirement, including enhancing near-term production opportunities at the Stock property and Froome with ongoing exploration drilling in 2022.

Figure 1 summarizes the projected gold production profile for Fox. Figure 2 provides the components of the estimated annual cash flow. Figure 3 shows the modelled cumulative cash flow (undiscounted and discounted at 5%).  

Trade-Off Analysis

The mining team performed a trade-off analysis on each property to evaluate the mining method that created the highest value. Following these analyses, a set of detailed mine designs and schedules were created and used to determine the optimal mineral resources to target as part of the business strategy for the PEA.

The PEA is based on Measured, Indicated, and Inferred Mineral Resources (as defined in 2014 CIM Definition Standards), providing direction for our team to focus exploration, permitting, and development work required to advance the individual deposits to production.

Exploration and Project Development Update

The PEA provides a sound basis for identifying where best to leverage exploration and delineation spending. Management remains confident that mineral resources can be expanded in the Stock area with targeted drilling within 400 meters from the surface at Stock West and Stock Main.

Recent exploration drilling has identified the host lithology (green carbonate unit) and similar mineralization to the Stock West deposit nearer to surface, between the historical Stock mine infrastructure and the Destor-Porcupine Fault Zone. Evaluation of the extent of this unit and its mineralization is currently underway. Successfully delineating potentially economic mineralization near surface, close to the proposed decline at Stock and adjacent to the Fox Mill could significantly improve near-term project economics and payback. While aggressive drilling continues, steps to prepare for permitting a new decline at Stock are underway.

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Mineral Resource Estimates

The following Fox mineral resource models were updated to reflect the PEA’s current economic assumptions and underground mining scenarios. All mineral resources are constrained by stope shapes defining reasonable prospects for eventual economic extraction by underground mining methods.

Figures in the tables below may not sum due to rounding.

Tables 4 to 7 present mineral resource estimates for Froome (update), Stock West (initial), Grey Fox (update), and Fuller (update).

Table 4: Froome – Mineral Resource Estimate, Effective Date July 16, 2021(8)

Classification Cut-off Grade Gold
(‘000 tonnes)
Gold Grade
Contained Gold
(‘000 oz)
Measured 2.35 790 4.47 113
Indicated 2.35 641 3.92 81
Total Measured & Indicated 2.35 1,432 4.22 194
Inferred 2.35 276 3.32 29

Table 5: Grey Fox – Mineral Resource Estimate, Effective Date January 31, 2021(9)

Classification Cut-off Grade Gold
(‘000 tonnes)

Read More:Fox PEA – Higher Production, Longer Life

2022-01-26 21:30:54

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