McEwen Mining(MUX) - 2024 Q3 - Quarterly Report

PART I Financial Statements Revenue and gross profit increased, net loss narrowed, and operating cash flow turned positive for the nine months ended September 30, 2024 Consolidated Statements of Operations Highlights (in thousands USD, except per share) | Metric | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Revenue from gold and silver sales | $52,250 | $38,404 | $140,954 | $107,551 | | Gross profit | $13,803 | $3,755 | $30,572 | $4,138 | | Operating loss | $(97) | $(28,840) | $(36,026) | $(114,683) | | Net loss attributable to McEwen shareholders | $(2,081) | $(18,451) | $(35,459) | $(83,154) | | Basic and diluted net loss per share | $(0.04) | $(0.39) | $(0.70) | $(1.75) | Consolidated Balance Sheet Highlights (in thousands USD) | Metric | September 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $29,226 | $23,020 | | Total current assets | $59,572 | $52,661 | | Total assets | $667,792 | $657,239 | | Total current liabilities | $50,936 | $30,003 | | Long-term debt | $31,000 | $40,000 | | Total liabilities | $165,688 | $154,819 | | Total shareholders' equity | $502,104 | $502,420 | Consolidated Cash Flow Highlights (Nine Months Ended, in thousands USD) | Metric | September 30, 2024 | September 30, 2023 | | :--- | :--- | :--- | | Cash provided by (used in) operating activities | $30,666 | $(55,747) | | Cash used in investing activities | $(45,143) | $(52,184) | | Cash provided by financing activities | $19,536 | $158,880 | Note 2: Operating Segment Reporting The company operates five segments, with USA leading in revenue and profit, while McEwen Copper recorded the largest segment loss Segment Performance (Nine Months Ended September 30, 2024, in thousands USD) | Segment | Revenue | Gross Profit/(Loss) | Segment Profit/(Loss) | Capital Expenditures | | :--- | :--- | :--- | :--- | :--- | | USA | $88,215 | $27,995 | $20,893 | $12,756 | | Canada | $51,539 | $1,377 | $(5,705) | $15,547 | | Mexico | $1,200 | $1,200 | $(6,712) | $2,043 | | MSC | N/A | N/A | $4,751 | $0 | | McEwen Copper | N/A | N/A | $(36,680) | $0 | - The Chief Operating Decision Maker (CODM) evaluates segments based on segment income or loss, defined as sales less production costs, depreciation, advanced projects, and exploration costs, with MSC and McEwen Copper evaluated based on attributable equity income or loss[19] Note 9: Equity Method Investments The company holds equity method investments in McEwen Copper and MSC, reporting a $36.7 million loss from McEwen Copper and $4.8 million income from MSC Equity Method Investment Performance (Nine Months Ended Sep 30, 2024, in thousands USD) | Investment | Attributable Income/(Loss) | Carrying Value (as of Sep 30, 2024) | | :--- | :--- | :--- | | McEwen Copper (48.3%) | $(36,680) | $303,467 | | Minera Santa Cruz (49.0%) | $4,751 | $97,586 | - The company's investment in McEwen Copper exceeded its proportionate share of underlying net assets by $207.5 million, attributable to equity-method goodwill, while the investment in MSC exceeded its share of net assets by $69.3 million, primarily attributable to mineral property interests[35][40] Note 12: Shareholders' Equity In 2024, the company issued flow-through common shares for $21.8 million and common shares valued at $18.3 million for the Timberline acquisition - On June 14, 2024, the company issued 1,533,000 flow-through common shares for gross proceeds of $21.8 million, with net proceeds of $20.4 million allocated to tax benefits ($6.0 million) and common shares ($14.4 million)[46] - On August 19, 2024, the company acquired Timberline by issuing 1,839,306 common shares with a fair value of $18.3 million and 205,349 warrants valued at $0.9 million[48] Note 17: Timberline Acquisition On August 19, 2024, the company acquired Timberline Resource Corporation for $21.7 million, primarily acquiring mineral property interests valued at $22.4 million Timberline Acquisition Purchase Price Allocation (in thousands USD) | Component | Fair Value | | :--- | :--- | | Purchase Price: | | | Common shares | $18,301 | | Warrants | $913 | | Notes receivable | $1,897 | | Other | $615 | | Total Purchase Price | $21,726 | | Assets Acquired: | | | Mineral property interests | $22,369 | | Cash and other assets | $1,196 | | Liabilities Assumed: | | | Deferred tax & other liabilities | $(1,839) | | Net Assets Acquired | $21,726 | Management's Discussion and Analysis (MD&A) Q3 2024 financial performance improved with increased revenue and narrowed net loss, supported by strong Gold Bar mine production and strategic acquisitions - Q3 2024 revenue increased to $52.3 million from $38.4 million in Q3 2023, driven by a higher average realized price of $2,499 per GEO[99][113] - Net loss for Q3 2024 was $2.1 million ($0.04 per share), a significant improvement from a net loss of $18.5 million ($0.39 per share) in Q3 2023[101] - The company successfully completed its acquisition of Timberline Resources Corporation on August 19, 2024, expanding its exploration portfolio in Nevada[89] - Consolidated production for Q3 2024 was 35,180 GEOs, with the company reiterating its full-year 2024 production guidance of 130,000 to 145,000 GEOs, supported by strong performance at the Gold Bar mine[90] Liquidity and Capital Resources Cash and equivalents increased to $32.3 million driven by operating and financing activities, with management confident in sufficient liquidity for the next 12 months Cash and Working Capital (in millions USD) | Metric | September 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Cash, cash equivalents & restricted cash | $32.3 | $27.5 | | Working capital | $8.6 | $22.7 | - Cash from operating activities was $30.7 million for the first nine months of 2024, a significant turnaround from the $56.0 million used in the same period of 2023[127][109] - Management believes that current liquidity, along with funds from operations, is sufficient to fund cash requirements for operations and capital expenditures for the next 12 months[131] Operations Review Gold Bar mine production increased significantly, while Fox Complex and San José production decreased, with the Los Azules copper project advancing towards a feasibility study Q3 2024 Production by Mine (GEOs) | Mine | Q3 2024 Production | Q3 2023 Production | % Change | | :--- | :--- | :--- | :--- | | Gold Bar (100%) | 13,640 | 9,507 | +43% | | Fox Complex (100%) | 7,855 | 11,174 | -30% | | San José (49% attributable) | 13,684 | 17,932 | -24% | - Gold Bar mine is expected to meet or exceed its annual production guidance of 40,000 to 43,000 GEOs[93] - Fox Complex full-year production is expected to be 15% to 20% below its annual guidance of 40,000 to 42,000 GEOs[92] - The Los Azules project feasibility study is on track for delivery in the first half of 2025, with over 70,000 meters drilled in the 2023-24 season[95][164] Non-GAAP Financial Performance Measures The company uses non-GAAP measures, reporting Q3 2024 AISC of $1,871/GEO for 100% owned operations and Adjusted EBITDA of $10.5 million Q3 2024 All-In Sustaining Costs (AISC) per GEO Sold | Operation | AISC per GEO ($) | | :--- | :--- | | Gold Bar | $1,822 | | Fox Complex | $1,953 | | 100% Owned Operations Total | $1,871 | | San José Mine (49% attributable) | $2,675 | Adjusted EBITDA Reconciliation (in thousands USD) | Metric | Q3 2024 | Q3 2023 | | :--- | :--- | :--- | | Net loss before income and mining taxes | $(1,267) | $(28,617) | | Adjustments (Depreciation, McEwen Copper results, etc.) | $11,756 | $30,145 | | Adjusted EBITDA | $10,489 | $1,528 | Quantitative and Qualitative Disclosure about Market Risk The company faces market risks from foreign currency, commodity prices, equity investments, and credit exposure, with a 10% change in gold/silver prices impacting Q3 2024 revenues by $5.2 million - The company is exposed to foreign currency risk from the Canadian dollar, Mexican peso, and indirectly, the Argentine peso[199] - A 10% change in the price of gold and silver would have impacted revenues for Q3 2024 by approximately $5.2 million[206] - The company has $44.8 million in surety bonds in place for reclamation costs, exposing it to credit risk if the surety defaults[209] Controls and Procedures Management is actively remediating a material weakness in internal control over financial reporting, leading to a conclusion that disclosure controls were not effective as of September 30, 2024 - The company is actively remediating a material weakness in internal control over financial reporting identified in its 2023 Annual Report[212] - Due to the material weakness, the CEO and CFO concluded that disclosure controls and procedures were not effective as of September 30, 2024[213] PART II OTHER INFORMATION Legal Proceedings The company reported no legal proceedings during the period - None[217] Risk Factors No material changes were reported to the risk factors previously disclosed in the 2023 Annual Report on Form 10-K - No material changes from the risk factors set forth in the Annual Report on Form 10-K for the fiscal year ended December 31, 2023[218] Mine Safety Disclosures The company maintains a comprehensive health and safety management system, with Gold Bar mine regulated by MSHA, and required disclosures included as an exhibit - The operation of the Gold Bar mine is subject to regulation by MSHA under the Mine Act[222] - Mine safety disclosures required by Section 1503(a) of the Dodd-Frank Act are included in Exhibit 95 filed with the report[223]