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Shares of McEwen Mining (NYSE: MUX) (TSX: MUX) have been given a big jolt after its majority-owned copper subsidiary reported encouraging results from earlier drilling performed on its project in Argentina.
McEwen Copper, which is 52% owned by the company, said Wednesday it has received additional copper values over wide intercepts from drilling at the Los Azules project. The most significant intercept was 398 metres grading 0.75% copper (true thickness), and it included a sub-interval of 124 metres grading 1.43% copper.
The latest drilling program, which began in October 2022 and ended June 2023, consisted of 15 rigs for some 39,900 metres of drilling in 138 holes. These included infill holes to test the resource model used in the recently updated preliminary economic assessment (PEA), with actual grades turning out 9% higher than the model prediction.
According to the PEA dated June 20, 2023, the Los Azules has an after-tax net present value (at a discount of 8%) of $2.66 billion, with an internal rate of return of 21.2% and a payback period of 3.2 years. This is assuming a copper price of $3.75 per lb.
Average annual copper cathode production is estimated at 401 million lb. during the first five years of operation, and 322 million lb. over the 27-year life of the mine. Its initial capital expenditure is calculated at $2.46 billion, with a project capital intensity of $7.66 per lb.
The PEA contains 26% inferred mineral resources in the conceptual mine plan, totalling 4.51 billion tonnes grading 0.31% total copper, for 26.7 billion lb. of contained copper. The indicated portion has 1.23 billion tonnes grading 0.40% total copper for 10.94 billion lb. of contained metal. The resource estimation cut-off was year-end 2022.
Preparations are underway for the next phase of drilling at Los Azules, anticipated to begin in early October. This phase, McEwen says, will continue to increase geologic certainty with drilling needed to delineate a measured resource estimate on the material expected to be mined in the first five years of operation, covering more than the payback period and other technical evaluations.
Located in San Juan province, Los Azules is considered one of the world’s largest undeveloped high-grade open pit copper projects. McEwen anticipates this to be a world top 25 copper producer, in the lowest cost quartile, comparable to some of the best deposits in South America.
McEwen Copper was initially formed in 2021 to hold the company’s 100% interest in the Los Azules project in Argentina, along with the Elder Creek exploration property in Nevada. McEwen’s effective interest in the project subsequently diluted to 52% following a series of investments into the copper entity, beginning with its chief owner and chairman Rob McEwen.
Other notable investors include Nuton, a Rio Tinto venture that has developed a propriety copper heap leaching technology, and Netherlands-based automaker Stellantis. Each of Stellantis and Nuton holds 14.2% of McEwen Copper, while Rob McEwen owns 13.8%.
By market close Wednesday, McEwen’s stock jumped 10.8% to trade at C$10.65 a share, its highest in a month. The company’s market capitalization stood at $382.3 million in New York.
