McEwen to proceed with Los Azules permitting and prefeasibility study

Reforms introduced by the Argentine government to encourage mining investment by eliminating taxes on exported mineral concentrates prompted McEwen Mining (TSX: MUX; NYSE: MUX) to revise a 2013 preliminary economic assessment of the Los Azules project.

The PEA includes an updated resource estimate that incorporates results from the company’s 2016-2017 drill program for the 100%-owned project in the Cordilleran region of Argentina’s San Juan province near the border with Chile.

Los Azules – described by McEwen Mining as one of the world’s largest undeveloped high-grade open-pit copper projects — contains 10.2 billion pounds of copper in the indicated resource category (962 million tonnes grading 0.48% copper, 0.06 gram gold per tonne, 0.003% molybdenum and 1.8 grams silver) and another 19.3 billion pounds of inferred copper (2.67 billion tonnes grading 0.33% copper, 0.04 gram gold, 0.003% moly and 1.6 grams silver).

The revised PEA outlines a 36-year mine life and initial capex of $2.4 billion.

Using metal prices of US$3.00 per lb. copper, US$1,300 per oz. gold and US$17 per oz. silver, payback of the initial capex would take under four years.

Starting in year five, additional capex of US$278 million will be paid from operating cash flow.

The project’s after-tax net present value at an 8% discount rate is estimated to be US$2.2 billion with an after-tax internal rate of return of 20.1%.

The PEA envisaged an initial processing rate of 80,000 tonnes per day, increasing by 50% to 120,000 tonnes per day by year five.

Average annual production in the first ten years would be 415 million pounds of copper, at average production costs of US$1.11 per lb.

For the entire life of mine, the operation will produce 338 million pounds of copper a year, at average cash costs of US$1.28 per lb. copper.

The cash costs include at-mine cash operating costs, treatment and refining charges, mine reclamation and closure costs and copper concentrate transportation.

Rob McEwen, the company’s chief owner and chairman, said in prepared remarks that the project “offers tremendous potential to generate wealth for McEwen Mining shareholders and other stakeholders.”

The study outlined an owner-operated mine and conventional concentrator (flotation circuit) producing a copper concentrate for export. The process design was modeled on the flowsheet and implementation of Glencore’s (LON: GLEN) Antapaccay copper concentrator in the Andes of Peru. The company said Antapaccay shares many characteristics with Los Azules, such as similar ore properties and process plant altitude, “making it an obvious choice upon which to model the proposed infrastructure.”

The PEA envisions two years of permitting, drilling and feasibility studies followed by a three-year project implementation phase.

Results of the PEA lifted McEwen Mining’s share price in Toronto by 4.6%, or 15¢, to $3.43. Over the last year, the company’s shares have ranged between $2.73 (August 2017) and $5.83 (February 2017).