El Gallo Phase 1, Mexico (100%)
Commercial Production Achieved. Running at Steady State.
The focus at El Gallo Phase 1 during the fourth quarter was on increasing production levels towards the designed rate of 3,000 tonnes per day. This was successfully achieved, with commercial production being declared on January 1, 2013. During the fourth quarter the mine produced 6,554 gold ounces and 4,500 silver ounces or 6,638 gold equivalent ounces. Since declaring commercial production the crushers have been operating 20% above the designed throughput rate.
The Company will begin reporting cash costs and all-in sustaining costs starting in the first quarter, 2013. Cash costs and all-in sustaining costs per gold equivalent ounce for 2013 have been estimated at $1,135 - $1,235 and $1,200 - $1,325, respectfully. Costs are estimated to be higher in 2013 versus the life of mine plan, due to higher pre-stripping required to access deeper mineralization and lower grades, early in the mine life.
A new resource estimate for Phase 1 will be released during the second quarter. This will include approximately 11,600 meters of new core drilling.
El Gallo Phase 2, Mexico (100%)
Next Mine Remains on Target for Construction
The Company remains on schedule to submit its construction and mining permits by the end of the first quarter to SEMARNAT, Mexico's Environmental and Natural Resource Ministry. Although the approval and its timing are outside of McEwen Mining's control, the Company is targeting the end of the third quarter for approval.
Long lead-time equipment purchases have commenced. Both the ball mill and filter presses for the dry stack tailings having been ordered. The ball mill and filter presses are expected to be shipped to El Gallo in approximately 32 weeks. The Company expects to purchase the crushers, leach tanks, agitators, electrical substation and the Merrill Crowe plant during the second and third quarters.
Capital expenditures to complete El Gallo Phase 2 have been estimated between $180-$190 million. In order to complete construction the Company will need to raise an estimated $120 million. McEwen Mining is looking at several financing alternatives, which include a possible sale or joint venture of its Los Azules Copper project and various forms of debt and equity.
A new resource estimate for Phase 2 will be released during the second quarter. This will include approximately 10,000 meters of new core drilling.
1) Gold Bar Project
McEwen Mining continues to advance the Gold Bar permitting process in order to begin production in 2015. Gold Bar is forecasted to produce 55,000 gold ounces per year. The project is located primarily on public lands managed by the Bureau of Land Management (BLM). The BLM and the Nevada Division of Environmental Protection (NDEP) are the primary government agencies responsible for approving the permits that would allow the Company to begin construction.
McEwen Mining will continue to advance the Gold Bar project through the permitting process during 2013. This will involve additional environmental baseline collection and data review. The Company expects to submit its Plan of Operations report in the second half of 2013.
2) Tonkin Project
The Tonkin project, which has a current resource of 1.4 million gold ounces in the measured and indicated categories (32.3 million tonnes @ 1.39 gpt gold) and 0.3 million gold ounces in the inferred (8.4 million tonnes @ 1.13 gpt gold), is undergoing a series of metallurgical tests for possible process alternatives that are common to mines in Nevada. The last test results indicated that approximately 50-55% of the gold would report to a concentrate, which would then be subsequently processed by an autoclave or roaster. McEwen Mining feels the amount of gold reporting to the concentrate needs to be higher in order to make Tonkin economically viable.
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