McEwen Inc. (MUX) Earnings Call Transcript & Summary

Hello, ladies and gentlemen, and welcome to 2021's Annual Meeting of Shareholders of McEwen Mining. Please note that today's meeting is being recorded. [Operator Instructions] It is now my pleasure to turn the meeting over to Rob McEwen, Chairman and Chief Owner of McEwen Mining. Mr. McEwen, the floor is yours.

Thank you, operator. Good afternoon, and welcome to fellow shareowners and interested investors. I'm very pleased to welcome you to McEwen Mining's Annual and Special Meeting of Shareholders. All of our directors are online in attendance, as are a number of our officers. The speakers today other than myself, will be Carmen Diges, our General Counsel and Secretary; Anna Ladd-Kruger, our Chief Financial Officer; Stephen McGibbon, our Executive Vice President of Exploration; and Peter Mah, our Chief Operating Officer. So I'd just like to show you the agenda for today. And you can see, we'll start with Carmen who will be chairing the formal part of the meeting. Once Carmen concludes, I'll provide a quick overview of the progress that we've made since last year. Anna will follow me with a summary of our improving financial strength. Next, Steve will discuss our exploration plans and targets that are designed to extend the life of our mines. Then Peter will report on how much better our operations are performing this year than last. And then I will follow up with closing remarks, and then we'll move to a question-and-answer period, which Stefan Spears will oversee. So let's get started. Carmen, please assume the chair.

Thank you, Rob, and good afternoon, everyone. I wish I could say it was great to see you, but we're very glad you're all on the line and hoping you're all safe. My name is Carmen Diges, and I'm the General Counsel and Corporate Secretary of McEwen Mining. And at Rob's request, as you heard, and in accordance with our bylaws, I'll act as Chairman for the meeting and Mihaela Iancu, Investor Relations of the corporation, will act as Secretary for the meeting. We have a representative of Computershare who will be acting as the inspector of election for this meeting. And today's virtual-only meeting is a live audio webcast. We believe in engaging with our shareholders whichever way we can, and we hope that this virtual meeting will maximize the participation of our shareholders regardless of their location. This technology enables us to reach a larger audience and safely hold our meeting while battling the threat of COVID-19. Thank you very much again to everyone for taking the time to listen to us today. I call your attention to the agenda and the rules of conduct set forth in this meeting. They were made available to each shareholder in the Files section in the lower left screen. Today, we will consider the election of directors for the ensuing year, proposed amendments to our second and amended and restated Articles of Incorporation, as well as proposed amendments to our amended and restated Equity Incentive Plan and the ratification of appointment of our independent accountants. For convenience, certain persons have been asked to propose and second the resolutions. You don't need to vote if you've already voted by proxy, unless, of course, you wish to change your votes. All owners of record as at the close of business on April 26, 2021, were entitled to vote at this meeting. And those wishing to vote would have received a ballot when they registered with the scrutineers and will need to sign in using the link provided online as well as their 15-digit control number provided on the proxy card or notice of availability of proxy materials previously received. [Operator Instructions] Our Vice President of Corporate Development, Stefan Spears, will be managing messages and questions for this meeting. Any questions pertaining to the business of the meeting will be addressed today by one of our speakers. A complete list of the owners of McEwen Mining as of the record date for the meeting, April 26, 2021, as required by Colorado law has been on file at the McEwen Mining office and was open to inspection by any owner at the corporation's principal office and upon request by e-mail since April 27, 2021. The list is also available offline for inspection by any owner during this meeting. I also have an affidavit from Computershare Trust Company, our stock transfer agent, attesting that the notice of this meeting, proxy statement, annual report on Form 10-K and proxy were made available or mailed to all shareholders of record as of April 26, 2021, in the manner prescribed by law on May 6, 2021. Copies of these documents are available today to any owner who would like them. If you would like a copy of the annual report or proxy statement, links are provided online. There are a total of 459,187,391 shares outstanding and entitled to vote at this meeting, and I have received the interim inspector's report on attendance. Our articles require 1/3 of the outstanding shares entitled to vote for a quorum. And on that basis, I declare that a quorum is present for this meeting. I also declare that this meeting is duly convened. The first item of business is the appointment of the election judge. I have appointed Computershare Trust Company of Canada to act as election judge and inspector of election for the purposes of tabulating votes at this meeting. Moving on to the next item, that would be the approval of the minutes of our last meeting held on May 14, 2020. Copies are available for inspection by any interested owner. With your consent, I propose we dispense with the reading of these minutes. Is there any objection? Just a reminder, you may submit objections or questions online by clicking on the messages icon in the right corner of meeting center screen.

No objections, Carmen. Carry on.

Thank you. The polls have been open for voting since April 26, 2021 and will remain open until 5:00 p.m. Eastern time today as declared in our proxy statement regarding this meeting. We will vote on these matters by online ballot and provide an interim result of voting on each item at the end of business today. And we believe that we have sufficient proxies to carry each of the proposals. And as such, the outcome is expected in favor of management's recommendations for each resolution. If you didn't vote by proxy and would like to vote at the meeting and you have not yet been informed to the procedure for online voting, please read the online voting instructions, which are available to shareholders in the Files section in the lower left hand of the screen. Our first formal item of business is the election of directors to serve until the next annual meeting of owners or until their successors are duly elected and qualified. Mr. McEwen, McEwen Mining's Chairman and CEO will now recognize the 8 persons nominated for election to the Board.

The Board has nominated the following person to serve as directors of the corporation to hold office until the next annual meeting of McEwen Mining and until their successors are duly elected: Allen Ambrose; Michele Ashby; Richard Brissenden; Robin Dunbar; Gregory Fauquier; Dr. Donald Quick; Michael Stein; and myself, Rob McEwen.

Thank you, Rob. Is there a second to the nominations?

I second the nominations.

Thank you, Mihaela. The corporation has received no other nominations for directors in the manner prescribed by the corporation's bylaws. I therefore declare that the nominations for directors are closed. Is there any discussion regarding this matter? If so, please communicate using the messages icon on your screen.

No questions or points of discussion have been raised.

Thank you, Stefan. We'll now move on to the proposed amendments to our second amended and restated Articles of Incorporation to increase our authorized capital by 170 million shares of common stock as more fully discussed in the proxy statement. The Board of Directors has adopted the amendment subject to shareholder approval and unanimously recommends approving them. Robert McEwen will make the necessary motion to approve the amendments.

I move the following resolution be adopted: Resolve that the proposed amendment to the corporation's second amended and restated Articles of Incorporation to increase the corporation's authorized capital by 175 million shares of common stock be approved.

Thank you, Rob. Is there a second to the motion?

I second the motion.

Thank you, Mihaela. You have now heard the motion. Is there any discussion?

No questions or points of discussion have been raised.

Thank you. We'll now move on to the proposed amendments to our amended and restated Equity Incentive Plan. These are to increase the number of shares reserved for issuance under the plan by 12,500,000 shares, as well as to extend the expiration of the plan to April 15, 2031. All is more fully discussed in the proxy statement. The Board of Directors has adopted the amendment subject to shareholder approval and unanimously recommends approving them. Robert McEwen will make the necessary motion to approve the amendments.

I move the following resolution be adopted: Resolve that the proposed amendments to the corporation's amended and restated Equity Incentive Plan, to increase the number of shares reserved for issuance under the plan by 12,500,000 shares and to extend the expiration of the plan to April 15, 2031 be approved.

Thank you, Rob. Is there a second to the motion?

I second the motion.

Excellent. You've now heard the motion. Is there any discussion?

No questions or points of discussion have been raised.

Thank you. We'll now move on to the remaining items of business before this meeting, which is the ratification of the appointment of Ernst & Young LLP as auditors and independent registered public accountants of the corporation for the year ended December 31, 2021. The Audit Committee of the Board of Directors has approved the appointment of Ernst & Young LLP and recommends ratification of their appointment. Once again, Mr. McEwen will make the necessary motion.

I move the following resolution be adopted: Resolve that the appointment of Ernst & Young LLP, as the corporation's independent registered public accountants for the year ending December 31, 2021 be ratified and approved.

Thank you, Rob. Is there a second, please?

I second the motion.

You have now heard the motion. Is there any discussion?

No questions or points of discussion have been raised.

Thank you, Stefan. If you have not voted or wish to change your vote, just as a reminder, you may do so now by clicking on the link provided online. Any shareholder who has already voted and does not want to change their vote need not take any further action. And once again, a reminder that online voting will remain open until 5 p.m. Eastern Time as stated earlier. The final tally of the vote and report on ballot of the election judge will be published on the SEC website and on SEDAR within 4 business days of the meeting and in the minutes of the meeting. Based on the preliminary review of the votes cast, the election judge has informed me that all nominees for the Board of Directors have been elected. The amendments to the second amended and restated Articles of Incorporation and to the Equity Incentive Plan have been approved as well as the appointment of Ernst & Young LLP as the company's auditors. We will safeguard any ballots, proxies, affidavit of mailing, oath and certificate and report of inspector and save them with the records of this meeting. So on the basis of that election judge's report, I'm pleased to announce that Robert McEwen, Allen Ambrose, Michele Ashby, Richard Brissenden, Robin Dunbar, Gregory Fauquier, Donald Quick and Michael Stein have been elected as the corporation's directors for the ensuing year. The amendments to the second and amended restated Articles of Incorporation have been adopted to increase the number of shares of common stock authorized to be issued from 500 million to 675 million. The amendments to the corporation's amended and restated Equity Incentive Plan have been adopted to increase the number of shares authorized from 17.5 million to 30 million, as well as to extend the expiration of the plan to April 15, 2031. Further, the proposal to ratify the appointment of Ernst & Young LLP as the corporation's independent registered public accountants for the year ending December 31, 2021, is approved. Are there any other items to be considered at this owners' meeting? If not, I would entertain a motion to terminate the meeting for McEwen Mining.

I hereby move that the meeting be terminated.

I second that motion.

Thank you both. Unless anyone is opposed, the formal portion of this meeting is now terminated.

There's no opposition to the motion.

Excellent, Stefan. I declare the meeting terminated. Thank you for your attention, and we'll now continue with a company presentation by management, providing an update on operations, project development, expansion plans and following with a question-and-answer section. Without further ado, I'll turn the presentation back to Rob and to our management team. I know you're going to be really excited to hear what they have to say and what our plans are for the coming term.

Thank you, Carmen. Well done. Okay. We're going to start with the normal safe harbor statement, a tradition that is designed to remind shareholders that the future is anything but predictable. And the unexpected, unanticipated frequently occurs. I would say COVID is a vivid example of such. So I'd like to deal with something I do every morning. Each morning, I wake up to see my wife, and every day is beautiful despite the weather. Then I look at the gold price, the value of the dollar and our share price. And I can say almost every day last year, our share performance didn't make me smile, and I'm certain that all of you felt the same way. Well, I'm really delighted to say that 2021 is a very different year than 2020. Our share price has been giving me another reason to smile most days. It's happening because our operations are now delivering on guidance and a bit more. Our treasury is growing. Our debt covenants are no longer squeezing us, and our exploration is delivering good results. And I just want to -- here in this slide, you can see how we've performed since last March, March of 2020. And this is as of yesterday, last Friday closing, and we were up 148%. Silver was up 107% during that period. Copper was up 99%. The GDXJ, up 92%, and gold was up 19%. Now we're coming off of a low base, but it was very heartening to see. And I just want to talk a little bit about some history. In this slide, we have historically, since 2012 to 2020 or late 2019, we traded at a premium to the gold index with GDXJ, its small and intermediate producers. And so in this graph, going from the left over to the right, you can see the gold shading. And the GDXJ is the bottom line of that gold shading and the top line is our share price. And you can see we're trading at a considerable premium to the GDXJ. However, in late 2019 and then in '20, we started trading at a discount to the GDXJ, and it became quite severe. I look at it now and as our operations are turning around, the potential for regaining lost ground is quite attractive. And so if you were to look at the GDXJ, where it's trading and where we're trading right now, you can see there's quite a bit of room just to catch up to trading on par with the GDXJ. And that's our objective to do that. I'm going to now pass the chair over to Anna, and she's going to talk about our financial performance.

Thanks, Rob. Well, it's been a busy 12 months since I signed the company last fall, and we've seen a lot of progress. And this has translated into improved operational and financial metrics, and we do expect to see this trend continue for the remainder of the year. We ended 2020 with just under 115,000 gold equivalent ounces of production. We did book a net loss of $152 million. Of that, $27 million related to gross loss of our operations, $9 million in G&A, and we also charged $27.5 million of advanced projects and exploration to our income statement and booked a further $84 million noncash impairment charge at our Gold Bar mining operations. I would like to comment that because McEwen Mining is a U.S. company following under U.S. GAAP accounting standards, we are required to take the $27.5 million of projects and exploration investments to our income statement. Most of our peers who report under IFRS accounting standards have the choice to capitalize such costs. In addition, under U.S. GAAP, we are unfortunately unable to reverse any impairment charges, unlike under IFRS, we would have had the opportunity to reverse the impairment charge at Gold Bar, which would have approximately yielded $25 million to $30 million positive impact on our Q1 financials this year. We are pleased to have removed our growing concern note. It is a note that you don't typically see on producing companies and cash goes on the company's financial position for the next 12 months. That is no longer the case. Our debt repayment schedule was also extended from 2021 to 2023, aligning to increase cash flow from our Ontario operations, and we remain in full compliance with all of our debt covenants. In terms of our 2021 production guidance announced to the market earlier this year, I'm also pleased to say that we are on track. Q2 was a successful quarter based on our preliminary numbers and thus set us up for the rest of the year. Our first quarter highlights of this year include 30,600 gold equivalent ounces. And at our 100% owned operations, we had a cash cost of just over $1,600 and all-in sustaining cost of approximately $1,800 per ounce. We did book a minor cash gross profit of $200,000. We booked a net loss of $12.5 million versus a net loss of $99 million in the same period last year. In addition, our cash and cash equivalents more than doubled that of our December 31 balance. Looking ahead to the rest of 2021, our year-to-date production is in line with expectations, and we are on track to achieve that. Our operating costs at Black Fox and Gold Bar are trending down and we will likely be in a position to give cost guidance for the remainder of the year in conjunction with our Q2 results. Our balance sheet is much improved compared to the same period last year. Our treasury is getting stronger with continued mine dividend payments from our San Jose mine. Our 2021 programs are fully funded, and we are ahead of schedule for commercial production at our Froome development. Our U.S. and Canadian exploration programs are funded as well as investments in our business systems and processes. As I noted in the beginning of the presentation, it's been a busy 12 months. We're gaining momentum, and there are a number of achievements in the past year. Financially, we completed a financing in Q1, which funded all of our exploration operation projects. We removed our growing concern note, we extended our debt repayment terms, and we continue to receive dividends at our San Jose mine. Operationally, we have been able to attract and continue to attract talent at both corporate and site operations. Our foundational business systems and processes are making progress, and it will be delivered by the end of this year or early into next year. We delivered 2 technical ports this year, Mexico and Gold Bar and our FOX Complex PEA is in progress, and Peter will speak shortly to that. Our gold production did exceed our June expectations and all of our mining operations continue to deliver safely throughout the COVID-19 pandemic. We also struck a 10-year community agreement at our Mexican operation. Strategically, our stock price has been gaining momentum, and we actually reached a 52-week high in the past month at $1.71. We have a number of options for our silver assets, so stay tuned for news on that. And finally, our sleeping giant Los Azules project is moving forward, and we're on the brink of adding value in the time of rising copper prices. So stay tuned for news on that one as well. McEwen Mining's capital structure is a very unique one. This includes Rob's personal investment of $165 million, of which $25 million is 50% of the company's current debt. In addition, Rob maintains a $1 a year salary. He is a very unique CEO and pretty safe to say there's no other CEO of a publicly traded mining company with this kind of an alignment profile. McEwen is an actively traded stock on the New York Stock Exchange. The stock is very well represented in terms of the ownership between retail and institution, with 57% retail and 25% institutional investors. The institutional mains are well represented, as you can see. The average daily trading volume over the past 3 months was $5.6 million at a close of $1.44 on Friday. Thank you. And I will now turn the presentation over to Steve McGibbon.

Thank you, Anna, and good afternoon. While there are varying levels of activity at all McEwen Mining operations and projects, today's exploration review will focus primarily on Ontario and Nevada. Drilling activities in both areas are focused on near mine and brownfields targets where exploration success can quickly be converted into value creation, owing to the shorter cycle leading to production. In doing so, our geological teams seek detailed understanding of the geology near our operations and work to extend that knowledge to areas less explored in the region. This attention to detail is resulting in confidence and reliability in our geological models and resource estimates, which in turn support operational planning. Despite this more local focus in 2021, the big picture strategic opportunities that is the hallmark of McEwen Mining's global assets remains unchanged. McEwen Mining's land position in the Abitibi of Northern Ontario is a great example of strategic opportunity. Several of Canada's historic gold mining districts, including Red Lake, Timmins and Kirkland Lake are hosted within a broadly similar package of very old rocks called Archean greenstones. Deposits hosted in greenstones are often high grade, world-class and can remain in production for decades. One reason for this is the vertical continuity of mineralization that typifies these kinds of deposits. McEwen's Fox Complex and Lexam properties are shallowly explored by comparison. Gold deposits can remain viable well below 2,000 meters depth. That being said, we still see attractive exploration opportunities between surface and 1,000 meters depth at the Fox Complex properties. All of our exploration in 2021 at the Fox Complex is focused on delineating and expanding mineralization that could be advanced into producing assets far more quickly than the deeper target areas. Our Canadian operations at the Fox Complex properties are shown in blue and consists of the Stock Mine and Mill, shown center stage. To the right, the Froome deposit is now in production just west of the Black Fox Mine; and the Grey Fox project, which hosts high-grade mineral resources, remains an attractive foundation to our Canadian assets. On the left, the Fox Lexam properties are just south of Timmins. The upcoming expansion PEA will articulate a plan of growing future production from the district that will continue to be processed from the Stock Mill. Nearly 2.8 million ounces of measured and indicated gold resources and another 1.2 million ounces in the inferred category support the growth opportunity that targets potential production of 100,000 to 150,000 ounces per year. I draw your attention now to the resource opportunity, we see developing at Stock, which includes the recently discovered Stock West area, the past producing Stock Mine and Stock East. This land package does not have any streaming payment obligations on it, is located proximal to the Stock Mill and contains multiple large mineralized intercepts that may support lower cost bulk mining methods at a potential future mining operation. We currently have 5 drills turning here and recently committed to expanding the program to 7 drills. The image at the bottom is a simplified geological plan view that shows the regionally important Destor-Porcupine Fault zone and the Nighthawk Fault further to the south. The colored contour areas are a heat map of the mineralization created by multiplying the grade of an intercept by the estimated true width of the intercept. The creation of heat maps are a quick and useful way to gain an early understanding of the likely trends of mineralization that exist. They can guide our decision-making and are useful in communicating results to others. We have moved from a plan view to a longitudinal view, which now show the heat maps from the side rather than from above. In this view, West is to the left and East is to the right. You can see that mineralization seems to occur most often along a flat line of trend or plunge have stocked West, and along deeper or steeper trends at and below the Stock Mine, which has historic production of some 137,000 ounces of gold. Also, it's easier to see that the far majority of mineralization resides no deeper than 500 meters below surface and very limited drilling has been conducted deeper than 500 meters. These opportunities to expand mineralization to depth in 2021 is taking a backseat to delineating and expanding the known mineralization of stock left that is shallower and accessible to development far sooner. The shallower exploration potential also exists for 5 kilometers west to the property boundary. Our next slide will take a closer look at Stock West. Here, we have zoomed into Stock West to show the heat map in greater detail. Note that in addition to the contrary, we have now included the pierce points and drill holes extended through the zone of mineralization. The color of the pierce point correlates to the grade range shown in the legend to the right and gives a good indication of whether the high values and the grade thickness contouring are supported primarily by grade or by fitness. Assigning mineral resources to an area, in part, requires meeting preliminary economic and confidence thresholds. This process is now underway at Stock West, where drilling results can be variable from hole-to-hole and the distribution of drill holes can be somewhat uneven. Mineralization identified in the holes to the left may not have enough closely spaced drilling to assign a resource classification, despite the attractive intercepts that we see. This represents those areas where we still have work to do and the potential to expand the footprint of mineralization is very good. Note how the trends I was mentioning earlier can be seen in greater detail. One aspect of the work our geologists must do is understanding why these trends exist where they do. We often refer to these Archean deposits as being structurally controlled. The same stresses and pressures that created the fault as shown earlier, often have a great influence on where gold deposits will be created. Now on to Nevada. In Nevada, our Gold Bar and Tonkin projects are shown in gold, along the prolific Cortez Trend, where -- which currently hosts some of the most important 21st century discoveries being made in the world. Gold Bar's geologic characteristics include a very large mineralized footprint of 12 kilometers by 6 kilometers, the right host rock alteration and mineralization and a favorable structural setting. The properties remain underexplored and multiple targets exist near surface and at depth. As with Ontario in 2021, we are focusing our efforts on drilling near mine and brownfield targets in an effort to increase our confidence in the resource base that is the foundation of the Gold Bar mine. We are also quietly and methodically reviewing the Tonkin property with low-cost mapping and sampling, focusing on the local geology near the Tonkin Springs gold deposit can help us better understand the regional opportunity that this world-class jurisdiction may host. At the property scale, highly prospective exploration targets exist near mine and along known faults and structures. The relative locations of the ridge, pick and cabin pits are shown by pick-and-shovel symbols. The darker red shapes are deposits that were included in the 2020 feasibility update for Gold Bar, while the light red shapes are active or planned near-mine drill targets. In the bottom right corner is the Gold Bar South, deposit currently in the permitting phase and targeted to enter production later in 2022. The brown and green shapes are brownfield and greenfield exploration areas, respectively. McEwen Mining has earmarked some $5 million for drilling, mapping and modeling areas described as near mine and brownfields in 2021. Again, positive results from this type of program has a shorter path to production than greenfield areas, benefiting shareholders and all stakeholders sooner. Here, we have zoomed in still further, and are profiling some of the positive results that have been returned in recent drilling. Each of the drill intercepts shown to the left were drilled within the rectangle shown to the right. The grades and thicknesses shown and shallow depths from which they come are very exciting. Our goal with this program is to not only replace all of the ounces mined in 2021, but to also expand the footprint of known mineralization and mineral resources reported on the property. This drilling goes hand-in-hand with mine site mapping and modeling to bring greater confidence to the mining and planning being conducted on an ongoing basis. This confidence was lacking in earlier resource models and estimates. And as a result, led to production outcomes that put the operation at risk prior to 2021. These 2 images are meant to portray how that confidence has returned. McEwen Mining's homegrown solution in late 2020 to a challenging problem included detailed updates of structural, alteration and lithological domains based on mapping and other techniques used to collect the right information and utilize it in a highly effective way. I draw your attention to the magenta-colored circles in each image. On the right, the colored blocks that made up the 2018 model estimate are far more widespread than the red rings that represent production drilling in the bottom of the pit. Much more ore was expected than was actually found, leading to disappointing production results and high costs. The image on the left is a comparison of the 2020 model with the same production data. Note how closely aligned the 2 series of data are. This is an outstanding turnaround that has put the operation on a much more sound footing. In the first quarter of 2021, the difference between what was expected to be mined versus what was mined, called reconciliation, was less than 5%. In fact, more ounces were actually mined than the model predicted. Understanding the local and extending to the regional, this is a geological success story in the making. Briefly, McEwen Mining is funding its pro rata portion of a nearly $10 million exploration program at the 49%-owned San Jose mine and property in Argentina. The San Jose property surrounds Newmont's Cerro Negro mine and is host to high-grade epithermal gold and silver deposits. One important feature of epithermal deposits is that they occur in vein arrays, or clusters that can be very expensive. Basically, once you make an initial discovery, the likelihood of finding it much more becomes far greater. The planned view of the property highlights where areas of Hocschild, our 51% partner and operator of the mine, is conducting exploration in 2021. Recent infill results are shown to the left, and exploration potential on the property remains very good. This concludes the exploration review portion of the presentation. Peter Mah, McEwen Mining's Chief Operating Officer, will speak next. Thank you.

Thank you, Steve, and good afternoon, all. I will start my presentation by providing an update on our Gold Bar mine in Nevada. I'm pleased to report that mining at Gold Bar has been conducted safely with 490 days since the last lost time incident and with minimal impact from the COVID-19 pandemic as we recorded no new positive cases at site since January 2021. The company facilitated access to the COVID-19 vaccines for employees and contractors by coordinating with the local health unit. Many shareholders are aware of the resource and reserve reduction that resulted in a significant financial write-down at Gold Bar in Q1 2020, which Anna detailed earlier. The turnaround required an immense effort from our team to pull together and recover the sustainability of the mine. In February 2021, we published an updated feasibility study, defining a 302,000-ounce gold reserve and a 6-year mine life. I am pleased to report that since the new reserve and mine design became operational, the reconciliation has been very consistent with plan. Exploration planned around the Gold Bar and Tonkin properties is ongoing, as Steve spoke about in detail, and we anticipate a resource and reserve update towards the end of this year. Gold Bar is on track to reach its production guidance of 37,000 ounces to 45,000 ounces gold equivalent in 2021. Production has been trending well in May and June, exceeding our budget while setting a new monthly production record of over 6,000 gold equivalent ounces in June. Production costs in Q1 were in line with our budget but above where we are targeting performance. The key to reducing Gold Bar's per ounce cost is increasing production. Year-to-date, we are on target for gold produced. Other cost savings are expected to be realized by continued efficiencies with our mining contractor. One of the challenges faced by Gold Bar operation at this time is maintaining adequate staff of our contract mining haulage fleet. Field operators are in high demand across the U.S.A. This challenge is common to many mining companies. In response, we are augmenting and widening, however. Moving on to the Fox Complex near Timmins in Ontario. Work is also occurring safely at our Black Fox Mine, with 837 days since the last lost time incident. COVID-19 continues to be a concern in the region around the mine and strong precautions are still in effect. The last reported case at the mine was in April, during which time the company deployed rapid testing at site, that together with other protocols helped control any further spread of cases. Production mining has now started at the Froome deposit, which extends the life of the Black Fox Mine by 2.5 years. The twin underground access ramps from the Black Fox open pit bottom were completed in April this year, and the first 3 stopes have been blasted and are being hauled to the mill as we speak. It's early days, but the team is pleased with how production is performing. I will drill down on these details in subsequent slides. We will not be providing the Fox Complex expansion PEA today. We need to define additional resources to provide a robust economic project. Our 2021 exploration program is targeted to deliver this objective later this year. This diagram shows the planned mining of the Froome deposit in magenta. The ore body is amenable to bulk productive mining techniques. The brown tunneling has been completed and the green is planned. The grade reconciliation completed so far indicates that slightly more gold was being mined compared to the mine plan block model, which is positive. However, it is too early to draw any conclusions. Year-to-date, the amount of development advancement is in line with our plan. This is key to achieving productive mining. And finally, mill recovery has been on plan. And overall, we are pleased with the results so far. Fox Complex production is on track year-to-date and expected to meet our guidance of 27,500 to 32,500 gold equivalent ounces for 2021. As you can see from this graph, monthly production is expected to increase as the Froome ramps up towards commercial production on or before schedule in Q4 2021. That concludes the operations update. I will now turn the call back to Rob for closing remarks.

Thanks, Peter. We have a vastly improved silver and copper price -- vastly improved silver and copper prices, coupled with improving performance of our mines, plus our stronger financial position. And most importantly, we have attracted some very talented senior management both in head office and at our mine sites. And that is giving us the opportunity to invest in -- investigate the best ways to monetize some of our assets that have been largely overlooked, particularly last year when our operational performance was very weak, and the direction of our stock was going south. Now that the operations are running much better, people are starting to look at our other assets. And so on this Slide 37, you can see on here various silver companies and where we would rank with just our silver asset. Argentina is over on the right-hand side, 5.6 million ounces attributable silver production to us. Our El Gallo Mine and the Fenix Project, Phase I and Phase II window, it lifts silver production from 7.5 million ounces to 10.1 million ounces of silver per year. And we've seen against companies like Pan American, First Majestic, Fortuna Silver, Silver Corp even and others going down the line. So not only do we have a silver company within the McEwen Mining with potential for increasing our gold production, both in Nevada and in Timmins, but we also have a very large copper project. And I'd just like to show a couple of slides there because the -- it's quite sensitive to the copper price, the net present value -- is the net present value sensitivity chart, it's discounted at 8%. And you can see the study was done back in 2017 at a $3 copper price per pound, and it had a net present value of $2.2 billion. At current copper prices, the NPV using that same calculation is over $5 billion. So it's a large deposit. It is good grade. And again, based on the preliminary economic assessment done earlier, this chart is just showing you where it would be on the cost curve of unapproved copper project. So -- and this -- if you look at it, you can see over on the left, close to the vertical axis, you can see Los Azules in red is having first quartile cost. So not only is it large and not only is it sensitive to copper, it would be a low-cost producer. Another way of looking at it is to look at various other large-scale copper developers, Josemaria, Filo, SolGold. And in others -- and you can just see how well it compares. It's a big deposit, long life, 36 years in the PEA. It had a cost of $1.14 a pound. So what we've been looking at is what could be the best ways that we could monetize these assets. And we've spoken about it earlier, about putting the copper company into a separate company and financing it that way. It seems that a lot of investors want a pure copper company. We're a pure precious metal company. But they're not really keen to see a company of our size take on a very large copper project. So we've been looking at joint ventures or spinning it out into a company initially taking it private, and then doing a public financing within a year's time. We're also taking the same view of our silver assets. So I think there's quite a bit work still to be done. In terms of near-term catalyst exploration results. As you heard from Steve, we have fairly large exploration programs going on in Timmins, Nevada, Argentina. Some in Mexico. There's a PEA for the Fox Complex that's coming along this year. There's the Froome deposit that we just opened up, we'll get commercial production in Q4. And as I was just speaking, the monetization of our copper and silver assets. I'd just like to make a comment on the gold market. It's been lagging with silver and copper. And a lot of people have looked at it and said, Rob, maybe gold's over because the cryptocurrencies are out there. I've looked at the cryptocurrencies and been fascinated by the price movement, maybe regretting I didn't have any of it. But if you look at it, and it reminds me a lot of an American Express traveler's check. The crypto experience allows you to transfer it, but I've never seen a currency appreciate like this, if currencies really aren't investment. And I look at the cryptos as really a very expensive way of trying to transfer money now. But it's -- looking at gold and it's historic role, post-COVID, the responses of governments around the world has been just to open up the printing presses and create enormous amount of monetary stimulation. And that is expressing itself in a number of areas right now, price increases. Maybe some of the surge right now is as COVID seems to be slowing down, people getting out and wanting to expand the travel. So you're seeing those shortages. But you've seen strong moves in a lot of commodity prices. And all you have to do is project those pricing increases forward into anything we're buying. I think you're going to see a lot of inflation coming in. The expansion of money supply has been unprecedented. There hasn't been a time in history when globally governments have just gone all out and disrupted the allocation of capital. That said, I'd like to move now -- close off the presentation and move into the question-and-answer period. MUX, we're looking at -- we have motivated talent, we're united and we're aiming to be exceptional. Stefan, would you open up the question-and-answer period, please?

Thank you very much, Rob. We have several questions in the queue. [Operator Instructions] The first question is best answered by Carmen Diges. When are insiders of the company in a trading blackout? And are insiders currently in a blackout that would prevent insiders from purchasing shares?

Thank you, Stefan. So our mandated blackout period, by policy, would be every quarter from the last day of the quarter until the second trading day after the quarterly results or the annual results are press released. And we are periodically in trading blackouts that would be communicated to insiders only. Obviously, to communicate whether or not we are at a given time is not appropriate in terms of a public forum at this time.

Thank you, Carmen. The second question, I will direct to Peter Mah. What is the status of the all-season access road for Los Azules? Please be specific on permits, government approvals and updated cost estimates.

Thank you, Stefan. Segment 5 of the Los Azules new pioneer or access road is nearly permitted. We are in the process of engaging a contractor to begin that construction in July of this year.

Thank you, Peter. The next question we'll direct to Rob McEwen. What will be done with the additional share capital in McEwen Mining?

It just gives us flexibility if we see some opportunities out there. Our current authorized capital was right at its limit. There was no opportunity to issue shares should we want to do some M&A, or if there was an attractive project. There's no immediate plan.

Thank you, Rob. The next question we'll direct to Steve McGibbon. Are you getting assay results on a timely basis? And when do you expect the next drill results from Timmins and Nevada to be released?

Yes, thank you for the question. Like most of the explorers and producers across North America, turnaround time has been a challenge, as it has been just securing diamond drills. Depending on the region that you're in, turnaround times can vary quite dramatically. The good news for McEwen Mining is that we have recently secured additional capacity for our samples that will bring turnaround times much closer to a 3- to 4-week turnaround, which is half to less than half of the kind of turnaround times most people are managing their affairs with. And what was the second part of that question?

The timing of additional drill results.

Well, we are going to be getting our assay results back on a regular basis throughout the summer. And when the timing is right in terms of having a relevant amount of drill results back, we would plan to issue a press release. And I would expect that, that will be some time during the third quarter.

Thank you, Steve. The next question is for Rob McEwen. Can you comment on how MUX shareholders will be rewarded for Los Azules in the scenarios you are considering?

I would suspect we'd have a higher share price.

Thank you. Another question for Rob. How do you judge the political environment in Argentina, given trends in Chile and Peru that appear to not be business-friendly for mining companies?

Argentina's profile has improved somewhat as a result of the elections and the speculations of what's going to happen in Chile and Peru. They're giving -- and Argentina is pushing to the mines ministers and that are pushing to try to get -- attract foreign capital. I'd say they're trying harder than they have in the past. It's their opportunity to attract the capital that would normally be earmarked for Chile and Peru. So I'm feeling more comfortable there.

Thank you, Rob. That's all the questions that we've received today. Thank you for your participation. And operator, you may end the meeting.

Ladies and gentlemen, this concludes the 2021 Annual Meeting of Shareholders of McEwen Mining. Thank you for your attention. You may now disconnect.