McEwen Mining has received the final environmental permit required for construction and operation of its proposed El Gallo 2 gold project in Sinaloa, Mexico. El Gallo 2 is located about 5 km from McEwen’s El Gallo 1 mine, which poured its first gold in September 2012 and achieved commercial production on January 1, 2013.
El Gallo 2 is projected to produce an average of 95,000 gold equivalent oz/y (5.2 million oz of silver and 6,100 oz of gold) at an approximate cash cost of $750/gold equivalent oz, including all pre-strip and Mexican royalties. All-in sustaining costs have been estimated at approximately $800/gold equivalent oz, including an estimated $5 million per year for exploration.
McEwen and its engineering contractors are conducting ongoing studies to reduce the estimated capital expenditures associated with El Gallo 2. The company believes that previous estimates can be reduced by about $20 million with minimal impact on production by reducing the number of leach tanks, building a smaller Merrill Crowe process plant/refinery, using modular crushers, and reducing the number of transformers. To date, $10 million of the estimated final construction cost has been spent. An estimated $150 million will be required to complete the project.
McEwen has not made a final decision to proceed with construction of El Gallo 2. The company will complete its cost-savings studies and review financing alternatives. Any decision to proceed will be based on securing financing on more attractive terms than those currently available. The company believes receiving the final permit for El Gallo 2 will help facilitate this process.
McEwen’s El Gallo 1 mine had a successful first full-year of commercial production in 2013, producing 31,129 gold equivalent oz. In 2014, the mine is forecast to produce 37,500 gold equivalent oz.
Plant throughput at El Gallo 1 is being expanded from 3,000 to 4,500 mt/d. The expansion is scheduled to be completed by the end of the first quarter of 2014. The increased capacity, combined with higher grades as mining moves deeper in the pit, is expected to increase annual production to 75,000 gold equivalent oz by 2015.