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Fenix to extend McEwen Mining's El Gallo operations by 10 years

A new preliminary economic assessment on McEwen Mining Inc.'s proposed Fenix gold-silver development defined an after-tax net present value of US$60 million with a 25% internal rate of return.

After-tax cash flow is expected to average US$12 million per year of operation. The base case uses metal prices of US$1,250/oz of gold and US$16/oz of silver.

The company said May 25 that the study indicates that Fenix could extend the life of its El Gallo Complex in Mexico by 10 years.

Fenix will be developed in two phases. Phase one will involve reprocessing El Gallo heap leach material, while phase two will involve processing open pit gold and silver ore from multiple deposits including El Gallo Silver, Palmarito, El Encuentro and Carrisalejo.

The project is expected to produce an annual average 47,000 ounces of gold equivalent over 10 to 12 years, with cash costs of US$598/oz of gold equivalent for phase one and US$797/oz of gold equivalent for phase-two operations.

Initial phase-one CapEx is estimated at US$40.9 million, phase-two CapEx is pegged at US$30.4 million, and sustaining CapEx is estimated at US$9.5 million, with a four-year payback period.

The analysis includes an updated resource estimate, with measured and indicated resources containing 591,000 ounces of gold equivalent within 13 million tonnes grading 0.39 g/t of gold and 77 g/t of silver. Inferred resources are estimated to contain 214,000 ounces of gold equivalent within 5.7 million tonnes grading 0.81 g/t of gold and 27 g/t of silver.

The resource estimate uses various cutoff grades for the heap leach pad, El Gallo, Palmarito, Palmarito Dump, Carrisalejo and El Encuentro areas.

Testing and trade-off studies are expected to continue throughout 2018. McEwen Mining aims to secure approval of phase-one permit amendments by the fourth quarter, with phase-two approvals targeted for the third quarter of 2019.

McEwen Mining produced 29,733 ounces of gold equivalent in the first quarter, decreasing year over year due to lower production at El Gallo.