El Gallo 2, Mexico (100%)
The Company is evaluating various alternatives to lower both capital and operating costs to make the project financially viable at a lower silver price environment.
In Q3 2014, the Company submitted the last permit for the right-of-way that will connect the El Gallo 2 operation to the Mexican power grid. Approval is expected in the second quarter of 2015. Construction of the mine could begin with power provided by generators with the option of later connecting to the grid.
Based on on-going cost savings studies, the Company believes approximately ,,,$150 MILLION IN FINANCING !!!!! would be required in order to complete the mine. The El Gallo 2 feasibility study HAS NOTBEEN updated to reflect these possible changes
On January 21, 2014, the Company announced that the Secretariat of Environment and Natural Resources (SEMARNAT) for the State of Sinaloa, Mexico had approved McEwen Mining’sEnvironmental Impact Statement (EIS) and Change of Land Use permit for El Gallo 2. These are the major permits required before construction can proceed.
The Company has made a temporary decision to defer the construction of El Gallo 2 due to low silver prices. The Company believes silver prices would have to equal $23-25 per ounce before the rate of return would be high enough to move forward with construction. In order to prepare for a possible construction decision later this year, the Company has been evaluating possible debt financing alternatives while advancing the construction of the ball mill, which is the longest lead time item associated with the project. The ball mill is 75% complete and expected to be delivered in Q4 2014.
Studies have now been completed in order to reduce the estimated capital expenditures associated with El Gallo 2. Approximately $20 million in savings is expected in the following areas: 1) reduction in leach tanks, 2) smaller process plant / refinery, 3) modular crushers, and 4) reduction in transformers. These changes are expected to have minimal impact on annual production. To date$10 million of the final construction cost has been spent. Provided the Company realizes on these projected savings and factoring in the funds that have been spent to date, approximately $150 million would be required in order to complete the mine.
Current resources for the complex total 893,271 ounces of gold in the measured and indicated categories and 78,480 ounces of gold in the inferred. Silver resources total 63.9 million ounces in the measured and indicated categories and 14.5 million ounces in the inferred.