Slowed production at Black Fox 'would be ideal', says McEwen

Production at McEwen Mining’s newest operations, Gold Bar in Nevada, and Black Fox in northern Ontario, has been a “big disappointment” concedes chief owner Rob McEwen.

Henry Lazenby in Beaver Creek, Colorado
Rob McEwen believes 2020 will bring more operational stability across the portfolio

Rob McEwen believes 2020 will bring more operational stability across the portfolio

Black Fox production has been negatively impacted by slower-than-planned underground development. "We have continued to experience production problems," he told Mining Journal at the Precious Metals Summit in Beaver Creek, Colorado.

He said Black Fox reminded him of when he was building erstwhile Goldcorp and the Red Lake mine in that it too was a project that had been capital starved for quite some time. "The miners are running just about on top of the geologists right now, resulting in not enough operating flexibility and available working areas. Ideally, I'd like to slow down the operation further to just about a breakeven," said McEwen, who owns a 22% stake and is the chief owner of the company.

"When I bought it, I was of two minds. I said, let's just shut the thing down and explore it, because when I was building Red Lake, we had the benefit of a strike that went on for 46 months that allowed us to explore the mine without the interference of the mining operators. That allowed us to build a good geological model and build a solid mine plan derived from that."

He said what had transpired at Black Fox in the recent past was "incomprehensible". "The crusher caught fire, certain areas of the mine were allowed to flood and the mining method is not particularly well suited to the coarse nature of the gold at Black Fox," he said.

In 2019, the company planned to mine both new areas and remnant stopes that make up part of the mine's reserves. These remnant stopes are in areas of the mine that have been inactive for several years.

"Prior to being able to extract the ore from these areas we must make the access safe for our workers, and this rehabilitation work is taking longer than planned. The delay has resulted in some higher-grade stopes, planned for extraction in late 2019, being pushed into 2020," McEwen said.

Operational improvements to date include sidestepping the now defunct surface crusher and shipping ore directly to the Black Fox-Stock mill, which reduces the need for ore re-handling and potential for visible gold to get lost along the way.

The Black Fox gold-equivalent production guidance dropped this year from an initial estimate of about 50,000oz to 45,000oz and now its about 36,000-40,000oz.

"Are the drops going to stop? I'd like to see output drop to 30,000GEOs to enable us to better manage exploration, development and mining."

Meanwhile, McEwen said the company had been making good exploration progress in the Timmins gold district, adding three new sources of potential production close to the Black Fox operation.

With the objectives of undertaking infill and expansion drilling in the target area, which it discovered last year, the latest drill results are confirming the continuity of the high-grade mineralisation at the 147NE zone and indicate an extension of the main mineralised shoot down plunge by about 100m.

Among the highlight intercepts were 4.79 grams per tonne over 9m, 3.64g/t over 12.42m, 6.98g/t over 15.5m and 13.66g/t over 2m. Another hole returned 10.04g/t over 13.2m and another returned 4.68g/t over 14m.

McEwen published an updated resource statement for Grey Fox in July, calculating an indicated resource of 567,000oz grading 7.1g/t and a further 135,000oz inferred.

"The economic viability of the Grey Fox and Froome deposits will benefit from their proximity to the Black Fox mine and its infrastructure. Preliminary economic results and potential development plans for Grey Fox and Froome will be published later this year," McEwen said.

Adding value

At Gold Bar commissioning delays stemming from bad weather and related teething problems have caused the company to cut 2019 guidance by two-thirds and push some production out to 2020.

The company revised the Gold Bar production range lower to 30,000-33,000oz. The mine is expected to produce between 65,000-70,000oz in 2020.

"Despite the fact that the mine is now running well, as evidenced by the tonnage on the heap leach pad that is currently 115% above the feasibility study design in terms of tonnes to the pad, ore grades reconciling with our reserve model, and gold recoveries in-line with our forecast; it was the start-up delays that have pushed some of 2019 planned production into 2020," McEwen said.

"We're confident the problems of the past year have been dealt with and we expect stable production for the next 12 months."

The company expects to add about another 100,000oz of oxide material to the mine plan by the end of the year. The company also plans to drill another deep hole at Gold Bar South to test the deep Carlin-style mineralisation potential that could constitute a "game changer" for the project and the company.

Production at the company's Argentina and Mexico operations, which represent about 60% of 2019 output, are performing to plan.

The company's global production outlook was reduced to 131,000-138,000oz gold and 3.23Moz silver, or 169,000-176,000oz gold equivalent from an initial guidance of 205,000GEOs early this year, at an 85:1 gold-to-silver ratio.

Further, McEwen Mining expects to publish a feasibility study on its Fenix expansion project at the Mexico-based El Gallo operation later this month. It is waiting for one more water permit, while all others are in-hand.

"Fenix has a very large silver component to it, and we think the gold-silver ratio is going to compress, which will make it quite a valuable property," McEwen said.

At the company's Los Azules copper asset in Argentina, the company continues to evaluate improved access. It has been looking to vend the project, which has proven easier said than done in a mostly depressed copper-price environment over the past five years.

McEwen's NYSE-listed stock (NYSE:MUX) traded 1.66% higher on Tuesday at US$1.835, which gives it a market capitalisation of $738.9 million.


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