McEwen Mining(MUX) - 2023 Q4 - Annual Report

PART I ITEM 1. BUSINESS McEwen Mining Inc. is a gold and silver mining, production, and exploration company focused on the Americas - McEwen Mining Inc. operates as a gold and silver mining, production, and exploration company with an advanced copper development project, primarily focused on the Americas[17] - The company holds 100% ownership of mines in Canada (Froome, Stock), the United States (Gold Bar), and Mexico (Fenix Project), alongside 47.7% interest in the Los Azules copper project and 49% interest in the San José mine in Argentina[17] 2023 Attributable Gold Equivalent Ounce Production | Production Type | Gold (ounces) | Silver (ounces) | Gold Equivalent (ounces) | | :---------------- | :------------ | :-------------- | :----------------------- | | Gold Bar Mine | 43,669 | 756 | 43,678 | | Fox Complex | 44,373 | 5,590 | 44,439 | | El Gallo Mine | 787 | 877 | 797 | | San José mine (49%) | 39,683 | 2,166,833 | 65,673 | | Total Production | 128,512 | 2,174,056 | 154,587 | 2023 Revenues from Gold and Silver Sales (in millions USD) | Mine/Complex | Revenue (USD millions) | | :------------- | :--------------------- | | Gold Bar Mine | $83.4 | | Fox Complex | $81.3 | | El Gallo Mine | $1.5 | | San José mine (49%) | $118.8 | Annual High, Low, and Average Daily London Fix Prices (2021-2024 YTD) | Year | Gold High ($/oz) | Gold Low ($/oz) | Gold Average ($/oz) | Silver High ($/oz) | Silver Low ($/oz) | Silver Average ($/oz) | | :--- | :--------------- | :-------------- | :------------------ | :----------------- | :---------------- | :-------------------- | | 2021 | 2,067 | 1,474 | 1,770 | 28.90 | 12.00 | 20.50 | | 2022 | 1,943 | 1,684 | 1,799 | 29.59 | 21.53 | 25.14 | | 2023 | 2,078 | 1,811 | 1,940 | 26.03 | 20.09 | 23.35 | | 2024 (through March 14) | 2,180 | 1,985 | 2,050 | 24.97 | 22.08 | 23.05 | - As of December 31, 2023, the company employed 575 individuals across its wholly-owned operations, with an additional 1,402 employees at the San José mine in Argentina[105] ITEM 1A. RISK FACTORS The company faces significant risks from volatile commodity prices, operational uncertainties, and political, social, and regulatory challenges - Company results are highly dependent on the volatile market prices of gold, silver, and copper[117] - The company reported pre-tax losses of $80.3 million in 2022 and $64.2 million in 2021, resulting in an accumulated deficit of $1.2 billion as of December 31, 2023[120] - An outstanding credit facility of $40.0 million existed as of December 31, 2023, with principal payments commencing in January 2025[123] - Reclamation obligations amounted to $43.0 million as of December 31, 2023, with $42.5 million secured by surety bonds in the U.S. and Canada, and an $8.0 million liability in Mexico[136] - The company's 49.0% interest in the San José mine and 47.7% interest in the Los Azules copper project limit its control over exploration, development, and production activities[148] - Operations in Argentina and Mexico are exposed to political and social risks, including foreign exchange regulations, export taxes, and violent crime[156][157][160] - A material weakness in internal control over financial reporting was identified as of December 31, 2023, stemming from insufficient human resources for non-routine transactions, affecting inventory, mineral properties, and income taxes[191][192] ITEM 1B. UNRESOLVED STAFF COMMENTS There are no unresolved staff comments to report - No unresolved staff comments to report[220] ITEM 1C. CYBERSECURITY The company integrates cybersecurity risk management with Audit Committee oversight, identifying no material incidents to date - Cybersecurity processes are integrated into the company's overall risk assessment, encompassing third-party monitoring and incident response assessment[220] - The Audit Committee oversees cybersecurity risks, with the Global IT Manager responsible for leading risk management and strategy processes[224][225] - No specific cybersecurity risks or incidents have been identified that materially affected or are reasonably likely to materially affect the company's business, operations, or financial condition[223] ITEM 2. PROPERTIES Mineral properties are categorized by segment and development stage, including production sites and advanced projects across regions - Mineral properties are categorized into reportable segments and by stage of development, including production, advanced-stage, and exploration[226] - Key operating and advanced-stage properties include the Fox Complex, Gold Bar mine, Fenix Project, Los Azules copper project, and San José mine across North and South America[226] USA Mineral Property Interest (as of Dec 31, 2023) | Property Name | Number of Claims | Square Miles | Square Kilometers | | :-------------- | :--------------- | :----------- | :---------------- | | Gold Bar | 2,376 | 97 | 251 | | Tonkin | 1,390 | 45 | 117 | | Other Properties | 994 | 32 | 83 | | Total USA Properties | 4,760 | 174 | 451 | Canada Mineral Property Interest (as of Dec 31, 2023) | Property Name | Number of PINs | Number of Claims | Square Miles | Square Kilometers | | :-------------- | :------------- | :--------------- | :----------- | :---------------- | | Black Fox Property | 32 | 53 | 10 | 26 | | Stock Property | 25 | 108 | 10 | 26 | | Davidson-Tisdale | 11 | 1 | 2 | 5 | | Fuller | 4 | — | 1 | 3 | | Paymaster | 15 | — | 1 | 3 | | Buffalo Ankerite | 7 | 1 | 3 | 8 | | Total Canada Properties | 94 | 163 | 27 | 71 | Mexico Mineral Property Interest (as of Dec 31, 2023) | Property Name | Claims | Square Miles | Square Kilometers | | :-------------- | :----- | :----------- | :---------------- | | Fenix Project (including El Gallo mine) | 20 | 178 | 461 | | Other Mexico properties | 25 | 26 | 67 | | El Gallo Gold (In Remediation) | 1 | 2 | 5 | | Total Mexico Properties | 46 | 206 | 533 | McEwen Copper Mineral Property Interest (as of Dec 31, 2023) | Property Name | Number of Claims | Square Miles | Square Kilometers | | :-------------- | :--------------- | :----------- | :---------------- | | Los Azules project | 21 | 126 | 326 | | Elder Creek exploration property (Nevada, USA) | 573 | 18 | 47 | | Other Argentina properties | 17 | 180 | 466 | | Total McEwen Copper Properties | 611 | 324 | 839 | ITEM 3. LEGAL PROCEEDINGS The company is not involved in any material legal proceedings, nor are any threatened proceedings expected to impact operations - The company is not subject to any material legal proceedings, nor are any threatened proceedings expected to materially impact its properties, operations, or financial condition[314] ITEM 4. MINE SAFETY DISCLOSURES McEwen Mining prioritizes safety through a comprehensive management system, with the Gold Bar mine regulated by MSHA - Safety is a core value, with a comprehensive health and safety management system covering training, risk management, inspections, emergency response, and accident investigation[315] - The Gold Bar mine is regulated by the Federal Mine Safety and Health Administration (MSHA), which conducts regular inspections and may issue citations[317] - The company reports mine safety violations and other regulatory matters as required by Section 1503(a) of the Dodd-Frank Act and Item 104 of Regulation S-K[318] PART II ITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES McEwen Mining's common stock trades on the NYSE and TSX, underperforming key indices over the past five years - Common stock trades on the NYSE and TSX under the symbol "MUX"[321] - As of March 15, 2024, 49,439,696 shares of common stock were outstanding, held by approximately 3,000 stockholders[321] Cumulative Total Shareholder Return (December 31, 2018 - December 31, 2023) | Index | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | | :-------------------- | :--- | :--- | :--- | :--- | :--- | :--- | | McEwen Mining (MUX) | $100 | $70 | $54 | $49 | $32 | $40 | | NYSE Arca Gold Bugs Index | $100 | $151 | $187 | $161 | $143 | $152 | | NYSE Composite Index | $100 | $122 | $128 | $151 | $133 | $148 | ITEM 6. [RESERVED] This item is reserved and contains no information ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section details financial condition and operating results, highlighting net income from deconsolidation, increased production, and key financial aspects - The company achieved its annual consolidated GEO production guidance, producing 154,588 GEOs in 2023, an increase from 133,348 GEOs in 2022[336] - Revenue from 100% owned operations increased by 51% to $166.2 million in 2023 from $110.4 million in 2022, driven by a 34% increase in GEOs sold and an 8% increase in realized gold prices[340][356] Selected Consolidated Financial and Operating Results (in thousands USD) | Metric | 2023 (in thousands) | 2022 (in thousands) | 2021 (in thousands) | | :-------------------------------- | :------------------ | :------------------ | :------------------ | | Revenue from gold and silver sales | $166,231 | $110,417 | $136,541 | | Production costs applicable to sales | $(119,230) | $(91,260) | $(119,223) | | Gross profit (loss) | $17,780 | $(544) | $(6,480) | | Net income (loss) | $55,299 | $(81,075) | $(56,712) | | Adjusted net income (loss) | $(23,047) | $(16,964) | $(43,034) | | GEOs produced (thousands) | 154.6 | 133.3 | 154.4 | | GEOs sold (thousands) | 151.1 | 132.2 | 153.4 | | Average realized price ($/GEO) | $1,927 | $1,788 | $1,803 | | Cash cost per ounce ($/GEO sold) (100% owned) | $1,356 | $1,276 | $1,453 | | AISC per ounce ($/GEO sold) (100% owned) | $1,615 | $1,688 | $1,635 | - Net income for full year 2023 was $55.3 million, or $1.16 per share, primarily due to a $222.2 million accounting gain from the deconsolidation of McEwen Copper[340][351] - Cash and cash equivalents decreased by $16.8 million to $23.0 million as of December 31, 2023, mainly due to the derecognition of cash balances from McEwen Copper's deconsolidation[368] - A material weakness in internal control over financial reporting was identified due to insufficient human resources for non-routine transactions, particularly the deconsolidation of McEwen Copper[191][192][726] ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK The company faces market risks from foreign currency, commodity price volatility, and credit risk, particularly in Argentina, without using derivatives - The company is exposed to market risks including foreign currency exchange rates, equity price risks, commodity price fluctuations, credit risk, and inflationary risk, and does not use derivative financial instruments for management[505] - The Argentine peso devalued by 73% against the U.S. dollar in 2023, significantly impacting costs and liabilities, following 41% in 2022 and 18% in 2021[508] - A 10% change in gold and silver prices would have resulted in an additional income or loss of approximately $16.6 million before taxes in 2023[517] - Credit risk is present for $0.9 million in VAT receivables from Mexican tax authorities and $42.5 million in surety bonds covering reclamation obligations in Nevada and Ontario[522][523] ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA This section presents consolidated financial statements, auditor reports, and notes, highlighting a material weakness in internal control - The consolidated financial statements are prepared in accordance with US GAAP[533][566] - Management assessed internal control over financial reporting as not effective as of December 31, 2023, due to a material weakness from insufficient human resources for non-routine transactions impacting inventory, mineral properties, and income taxes[531][545][546] Consolidated Statements of Operations and Comprehensive Income (Loss) (in thousands USD) | Metric | 2023 | 2022 | 2021 | | :-------------------------------- | :----- | :----- | :----- | | Revenue from gold and silver sales | $166,231 | $110,417 | $136,541 | | Production costs applicable to sales | $(119,230) | $(91,260) | $(119,223) | | Depreciation and depletion | $(29,221) | $(19,701) | $(23,798) | | Gross profit (loss) | $17,780 | $(544) | $(6,480) | | Operating loss | $(162,063) | $(95,437) | $(64,280) | | Total other income | $229,099 | $15,149 | $81 | | Income (loss) before income and mining taxes | $67,036 | $(80,288) | $(64,199) | | Income and mining tax (expense) recovery | $(33,859) | $(5,806) | $7,315 | | Net income (loss) after income and mining taxes | $33,177 | $(86,094) | $(56,884) | | Net income (loss) attributable to McEwen shareholders | $55,299 | $(81,075) | $(56,712) | | Net income (loss) per share (Basic and diluted) | $1.16 | $(1.71) | $(1.25) | Consolidated Balance Sheets (as of December 31, in thousands USD) | Asset/Liability | 2023 | 2022 | | :-------------------------------- | :----- | :----- | | Cash and cash equivalents | $23,020 | $39,782 | | Total current assets | $52,661 | $81,652 | | Mineral property interests and plant and equipment, net | $169,950 | $346,281 | | Investment in McEwen Copper Inc. | $326,147 | — | | Investment in Minera Santa Cruz S.A. | $93,218 | $93,451 | | Total assets | $657,239 | $528,719 | | Total current liabilities | $30,003 | $84,186 | | Long-term debt | $40,000 | $53,979 | | Total liabilities | $154,819 | $172,445 | | Total shareholders' equity | $502,420 | $356,274 | Consolidated Statements of Cash Flows (in thousands USD) | Cash Flow Activity | 2023 | 2022 | 2021 | | :-------------------------------- | :------- | :------- | :------- | | Cash used in operating activities | $(39,637) | $(56,580) | $(20,063) | | Cash used in investing activities | $(99,637) | $(23,901) | $(24,564) | | Cash provided by financing activities | $172,182 | $65,455 | $80,983 | | Effect of exchange rate change on cash and cash equivalents | $(48,977) | $(2,029) | $(160) | | (Decrease) increase in cash, cash equivalents and restricted cash | $(16,069) | $(17,055) | $36,196 | | Cash, cash equivalents and restricted cash, end of year | $27,510 | $43,579 | $60,634 | ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE There are no changes in or disagreements with accountants on accounting and financial disclosure - No changes in or disagreements with accountants on accounting and financial disclosure[719] ITEM 9A. CONTROLS AND PROCEDURES Disclosure controls were ineffective due to a material weakness in internal control over financial reporting, with a remediation plan underway - Disclosure controls and procedures were not effective as of December 31, 2023, due to a material weakness in internal control over financial reporting[719] - The material weakness resulted from an insufficient complement of human resources for non-routine transactions, specifically the deconsolidation of McEwen Copper Inc., impacting inventory, mineral properties, and income taxes[726] - Management is implementing a remediation plan to redesign control procedures, potentially add personnel, and engage third-party resources to address the material weakness[728] ITEM 9B. OTHER INFORMATION No directors or executive officers adopted, modified, or terminated Rule 10b5-1 trading arrangements during Q4 2023 - No directors or executive officers adopted, modified, or terminated any Rule 10b5-1 trading arrangements during Q4 2023[731] ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS This disclosure item is not applicable to the company - This disclosure item is not applicable[731] PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Information on directors, executive officers, and corporate governance is incorporated by reference from the 2024 Definitive Proxy Statement - Information is incorporated by reference from the Definitive Proxy Statement for the 2024 Annual Meeting of Shareholders[733] - The company maintains a code of business conduct and ethics applicable to all employees, officers, and directors[734] ITEM 11. EXECUTIVE COMPENSATION Information on executive compensation is incorporated by reference from the 2024 Definitive Proxy Statement - Information is incorporated by reference from the Definitive Proxy Statement for the 2024 Annual Meeting of Shareholders[735] ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS Information on security ownership and related stockholder matters is incorporated by reference from the 2024 Definitive Proxy Statement - Information is incorporated by reference from the Definitive Proxy Statement for the 2024 Annual Meeting of Shareholders[736] ITEM 13. CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE Information on certain relationships, related transactions, and director independence is incorporated by reference from the 2024 Definitive Proxy Statement - Information is incorporated by reference from the Definitive Proxy Statement for the 2024 Annual Meeting of Shareholders[737] ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES Information on principal accounting fees and services is incorporated by reference from the 2024 Definitive Proxy Statement - Information is incorporated by reference from the Definitive Proxy Statement for the 2024 Annual Meeting of Shareholders[738] PART IV ITEM 15. EXHIBITS, AND FINANCIAL STATEMENT SCHEDULES This section lists all exhibits and financial statement schedules, including various agreements, corporate documents, and consents - This section lists all exhibits and financial statement schedules filed or furnished with the report[740] - Exhibits encompass various agreements, corporate documents, warrants, and equity incentive plans[742][743][744][745][746] - Consents from Ernst & Young LLP and various mining consultants and qualified persons are also included[746] ITEM 16. FORM 10-K SUMMARY No Form 10-K summary is provided - No Form 10-K summary is provided[747] SIGNATURES This section contains the required signatures for the Form 10-K report, certifying its submission - The report is duly signed by Robert R. McEwen (Chairman and CEO) and Perry Ing (Interim CFO and Principal Accounting Officer) on behalf of McEwen Mining Inc[749][750] - The signing date for the report is March 15, 2024[750]