McEwen Copper’s Los Azules eyes gain from RIGI

A feasibility study for McEwen Mining (NYSE, TSX: MUX) subsidiary McEwen Copper’s Los Azules project in Argentina outlines a mid-tier project that stands to potentially save millions of dollars in tax exemptions under the country’s large investment incentives program, known as RIGI. Shares rose.

The study, released Tuesday, gives Los Azules a 21-year life, a post-tax net present value (at an 8% discount) of $2.9 billion (C$4 billion) and an internal rate of return of 19.8%, with a payback period of 3.9 years. Initial capital costs total $3.17 billion. The project, at 3,500 metres elevation in the Andes mountains, is in the northwest province of San Juan, just east of the border with Chile and about 1,100 km northwest of Buenos Aires.

“We have delivered a plan for a long-life asset that will play a role in the world’s clean-energy transition,”, McEwen chair and chief owner Rob McEwen said in a release. “With this feasibility study, our team has transformed the geological potential of Los Azules into a clear, actionable development plan. This work gives us confidence in the project’s design, costs, and schedule, providing the foundation for the next stage of growth.”

RIGI benefits

The study’s release comes almost two weeks after the Argentine government announced Los Azules’ approval to join RIGI. Its inclusion confers on the project safeguards against regulatory changes over 30 years, a 10% corporate tax cut to 25%, a 50% cut to the dividend withholding tax and accelerated customs and foreign exchange processes. It also allows for external arbitration in disputes, in some cases.

RIGI, a creation of populist conservative President Javier Milei, is aimed at mining and energy projects with investments of more than $200 million.

McEwen shares gained 6.7% to $26.42 apiece at mid-Wednesday in Toronto, valuing the company at $993.4 million (C$1.3 billion). The stock has traded in a 12-month range of $9.13 to $26.25.

Potential NPV, IRR lift

While McEwen hasn’t given precise figures on how RIGI will improve the project’s economics, the program’s decreased value added tax and duties could lower Los Azules’ capital costs by several percentage points. Those cuts could also raise after-tax net cash flow and simultaneously lift the IRR and NPV while shortening the payback period. The 30-year planned stability of RIGI might also diminish the financing risk for the project and could help raise the NPV.

Though McEwen raised $70 million last year for the feasibility study, it’s still working to secure financing to build Los Azules.

The feasibility study estimates average annual cathode production of 148,200 tonnes at $1.71 per lb. over the mine’s 21-year life, with 204,800 tonnes annually in the first five years. All-in sustaining costs are pegged at $2.11 per pound.

The mine plan envisions an open pit with a heap leaching and solvent extraction and electrowinning (SX/EW) operation producing 99.9% copper cathodes. That marks a change from the 2023 preliminary economic assessment that planned for a flotation concentrator.

The study also plans for total renewable power at the site through wind, hydro and solar.

Proven and probable

The feasibility study converted Los Azules’ measured and indicated resources into just over 1 billion tonnes in proven and probable reserves grading 0.45% copper for 10.2 billion contained copper pounds.

McEwen estimates construction of the SX/EW could start next year and first copper by 2030.