| | | UNITED STATES |
| | SECURITIES AND EXCHANGE COMMISSION |
| Washington, D.C. 20549 |
| FORM 10-K/A |
| (Amendment No.1) |
| | | | | | | | | | | | | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT |
| | | | ☒ |
| | | OF 1934 |
| For the fiscal year ended December 31, 2021 |
| | | | ☐ | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the transition period from to |
| |
| Commission file number 001-33190 |
| | | | | MCEWEN MINING INC. |
| | | | | (Name of registrant as specified in its charter) |
| | | | | | | Colorado | 84-0796160 |
| | | | (State or other jurisdiction of incorporation or organization) | | | | | (I.R.S. Employer Identification No.) |
| | | | 150 King Street West, Suite 2800, Toronto, Ontario Canada | | | | M5H 1J9 |
| | | (Address of principal executive offices) | | | | | | | | (Zip Code) | | |
| | | | | | | | | | | (866) 441-0690 |
| | | | | (Registrant’s telephone number, including area code) |
| | | | Securities registered pursuant to Section 12(b) of the Act: |
| | | Title of each class | | | | | | | | Trading Symbol(s) | | Name of each exchange on which registered | | | | |
| | | | Common Stock, no par value | | MUX | | New York Stock Exchange (“NYSE”) |
| | | | Securities registered pursuant to Section 12(g) of the Act: | | | | | | | None |
| | | | Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes | | | | | | | | | ☐ No ☒ |
| | | | Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes | | | | | | | | | ☐ No ☒ |
| | | | Indicate by check mark whether the registrant (1) has filed al reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act |
| of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such |
| filing requirements for the past 90 days. Yes | | | | | | | ☒ No ☐ |
| | | | Indicate by check mark whether the registrant has submit ed electronical y every Interactive Data File required to be submitted pursuant to |
| Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to |
| submit such files). Yes | | | ☒ No ☐ |
| | | | Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smal er reporting |
| company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smal er reporting company” and “emerging |
| growth company” in Rule 12b-2 of the Exchange Act. |
| | | | | | | Large accelerated filer | ☐ | | | | Accelerated filer | | | ☒ |
| | | | Non-accelerated filer | ☐ | | | | Smal er reporting company | | ☐ |
| | | | | | Emerging growth company | | ☐ |
| | | | If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying |
| with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. | | | | | | | | | | ☐ |
| | | | Indicate by check mark whether the registrant has filed a report on and at estation to its management’s assessment of the effectiveness of its |
| internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C 7262 (b)) by the registered public accounting firm that |
| prepared or issued its audit report. | | ☒ |
| | | | Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes | | | | | | | | | ☐ No ☒ |
| | | | As of June 30, 2021 (the last business day of the registrant’s second fiscal quarter), the aggregate market value of the registrant’s voting |
| and non-voting common equity held by non-affiliates of the registrant was $633,678,600 based on the closing price of $1.38 per share as reported |
| on the NYSE. There were 473,687,391 shares of common stock outstanding on March 4, 2022. |
| | | | DOCUMENTS INCORPORATED BY REFERENCE: Portions of the registrant’s Proxy Statement for the 2022 Annual Meeting of |
| Shareholders are incorporated into Part III, Items 10 through 14 of this report. |
| |
| |
| Explanatory Note |
| | McEwen Mining Inc. (the “Company”) is filing this Amendment No. 1 on Form 10-K/A (this “Amendment”) to its Annual |
| | Report on Form 10-K for the year ended December 31, 2021 filed with the U.S. Securities and Exchange Commission |
| | (“SEC”) on March 7, 2022 (the “Original Filing”) to correct a scrivener’s error in the Gold and Silver Reserves and |
| | Resources tables presented in Item 1 of the Original Filing. Specifical y, many of the total gold and silver grades in the |
| | tables were incorrectly disclosed in the Original Filing. The Company has also corrected some clerical errors in the exhibit |
| | list included in Item 15. |
| | The Gold and Silver Reserves and Resources tables included in Item 1 of the Amendment, as well as the exhibit list, have |
| | been restated to correct the errors. The remainder of the Original Filing, in addition to the tables referenced in the preceding |
| | sentence, is included for the convenience of the reader. |
| | No attempt has been made in this Amendment to modify or update the disclosures in the Original Filing except as required |
| | to reflect the effect of the revisions discussed herein. Except as otherwise noted herein, this Amendment continues to |
| | describe conditions as of the date of the Original Filing and the disclosures contained herein have not been updated to |
| | reflect events, results or developments that occurred after the date of the Original Filing, or to modify or update those |
| | disclosures affected by subsequent events. Among other things, forward-looking statements made in the Original Filing |
| | have not been revised to reflect events, results or developments that occurred or facts that became known to us after the |
| | date of the Original Filing, and such forward-looking statements should be read in conjunction with our filings with the |
| | SEC subsequent to the filing of the Original Filing. Accordingly, this Amendment should be read in conjunction with the |
| | Company’s other filings with the SEC subsequent to March 7, 2022. | |
| | | | |
| 1 |
| SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS |
| Please see the note under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of |
| Operations,” for a description of special factors potentially affecting forward-looking statements included in this report. |
| CAUTIONARY NOTE REGARDING DISCLOSURE OF MINERAL PROPERTIES |
| |
| Mineral Reserves and Resources |
| |
| We are subject to the reporting requirements of the Securities and Exchange Act of 1934, as amended (the “Exchange |
| Act”) and applicable Canadian securities laws, and as a result, we have reported our mineral reserves and mineral resources |
| according to two different standards. U.S. reporting requirements are governed by Item 1300 of Regulation S-K (“S-K |
| 1300”), as issued by the U.S. Securities and Exchange Commission (“SEC”). Canadian reporting requirements for |
| disclosure of mineral properties are governed by National Instrument 43-101 Standards of Disclosure for Mineral Projects |
| (“NI 43-101”), as adopted from the definitions provided by the Canadian Institute of Mining, Metallurgy and Petroleum. |
| Both sets of reporting standards have similar goals in terms of conveying an appropriate level of confidence in the |
| disclosures being reported, but the standards embody slightly different approaches and definitions. All disclosure of |
| mineral resources and mineral reserves in this report are reported in accordance with S-K 1300. |
| |
| Investors should be aware that the estimation of measured resources and indicated resources involve greater uncertainty |
| as to their existence and economic feasibility than the estimation of proven and probable reserves, and therefore investors |
| are cautioned not to assume that all or any part of measured or indicated resources wil ever be converted into S-K 1300- |
| compliant reserves. The estimation of inferred resources involves far greater uncertainty as to their existence and economic |
| viability than the estimation of other categories of resources, and therefore it cannot be assumed that all or any part of |
| inferred resources will ever be upgraded to a higher category. Therefore, investors are cautioned not to assume that al or |
| any part of inferred resources exist, or that they can be mined legally or economically. |
| |
| Technical Report Summaries and Qualified Persons |
| |
| The technical information concerning our mineral projects in this Form 10-K have been reviewed and approved by Peter |
| Mah, P.Eng., Chief Operating Officer, and Luke Willis, Director, Resource Modeling, each a “qualified person” under S- |
| K 1300. For a description of the key assumptions, parameters and methods used to estimate mineral reserves and mineral |
| resources included in this Form 10-K, as well as data verification procedures and a general discussion of the extent to |
| which the estimates may be affected by any known environmental, permit ing, legal, title, taxation, sociopolitical, |
| marketing or other relevant factors, please review the Technical Report Summaries for each of our material properties |
| | |
| which are included as exhibits to this Report. |
| |
| RELIABILITY OF INFORMATION |
| Minera Santa Cruz S.A. (“MSC”), the owner of the San José mine, is responsible for and has supplied to us all reported |
| results from the San José mine. The technical information contained herein with regard to the San José mine is, with few |
| exceptions as noted, based entirely on information provided to us by MSC. Our joint venture partner, a subsidiary of |
| Hochschild Mining plc, and its affiliates other than MSC do not accept responsibility for the use of project data or the |
| adequacy or accuracy of this information. | |
| |
| 3 |
| PART I |
| ITEM 1. BUSINESS |
| History and Organization |
| We are a mining and minerals production and exploration company focused on precious and base metals in the United |
| States, Canada, Mexico and Argentina. We were incorporated under the laws of the state of Colorado in 1979. We own |
| 100% of the Black Fox mine and Stock mil in Ontario, Canada, a 100% interest in the Gold Bar mine in Nevada, 100% |
| of the formerly-producing El Gallo Project in Sinaloa, Mexico, 81.4% of McEwen Copper, the owner of the Los Azules |
| copper deposit in San Juan, Argentina, and a 49% interest in MSC, the owner and operator of the San José mine in Santa |
| Cruz, Argentina. MSC is controlled by the majority owner of the joint venture, Hochschild Mining plc (“Hochschild”). |
| Since we own less than a 50% interest in MSC, we account for our interest as an unconsolidated subsidiary using the |
| equity method of accounting. In addition to our operating properties, we hold interests in advanced-stage and exploration- |
| stage properties and projects in the United States, Canada, Mexico and Argentina, including the Los Azules copper project |
| (“Los Azules”) in Argentina. |
| Our commencement of Canadian operations in 2017 was facilitated by the acquisition of Lexam VG Gold Inc. (“Lexam”) |
| in April 2017 and the acquisition of the Black Fox mine and Stock mil in October 2017. These two acquisitions provided |
| us with an operating mine, mill and significant land interests in the historic Timmins mining district of Ontario. On |
| September 19, 2021, the Froome deposit at the Black Fox mine achieved commercial production. |
| Our 100% owned Gold Bar mine in Nevada poured its first gold ingot on February 16, 2019 and achieved commercial |
| production on May 23, 2019. Construction activities started in late 2017 following the receipt of the final permit on |
| November 8, 2017. At the El Gallo Project, mining and crushing activities ceased during the second quarter of 2018, with |
| production activities since that time limited to residual leaching. |
| During 2021, we re-organized our subsidiary, McEwen Copper Inc. (“McEwen Copper”), through which we historically |
| held an indirect 100% interest in the Los Azules copper project in the province of San Juan, Argentina and Nevada Creek |
| property. During the year ended December 31, 2021, we closed the first tranche of a private placement, a $40 mil ion |
| investment by an affiliate of our Chairman and CEO, Rob McEwen, in exchange for a 18.6% interest in McEwen Copper. |
| McEwen Copper is included for the period August 19 to December 31, 2021, which is reported at 81.4% non-controlling |
| interest. For further information, see Item 8. Financial Statements and Supplementary Data, Note 20 Non-Controlling |
| Interests. |
| Our objective is to increase shareholder value through the exploration for and economic extraction of gold, silver and other |
| valuable minerals. Other than the San José mine in Argentina, we generally conduct our activities as the sole operator, but |
| we may enter into arrangements with other companies through joint venture or similar agreements in an effort to achieve |
| our strategic objectives. We hold our mineral property interests and operate our business through various subsidiary |
| companies, each of which is owned directly, or indirectly, by us. |
| Our principal executive office is located at 150 King Street West, Suite 2800, Toronto, Ontario, Canada M5H 1J9 and our |
| telephone number is (866) 441-0690. We also maintain offices in Elko, Nevada (U.S.), Matheson, Canada, Guamuchil, |
| Mexico, and San Juan, Argentina. Our website is www.mcewenmining.com. We make available at no cost our periodic |
| reports including Forms 10-K, 10-Q and 8-K, and news releases and certain of our corporate governance documents, |
| including our Code of Ethics, on our website. Our common stock is listed on the New York Stock Exchange (“NYSE”) |
| and on the Toronto Stock Exchange (“TSX”) under the symbol “MUX.” |
| In this report, unless otherwise noted, “Au” represents gold; “Ag” represents silver; “Cu” represents copper, “oz” |
| represents troy ounce; “gpt” represents grams per metric tonne; “ft.” represents feet; “m” represents meter; “sq.” represents |
| square, and C$ refers to Canadian dollars. Al our financial information is reported in United States (U.S.) dollars, unless |
| otherwise noted. |
| 4 |
| Segment Information |
| Our operating segments include USA, Canada, Mexico, MSC and Los Azules. Financial information for each of our |
| reportable segments can be found under Item 7. Management’s Discussion and Analysis of Financial Condition and Results |
| of Operations and Item 8 | . Financial Statements and Supplementary Data, Note 3, Operating Segment Reporting. |
| Products |
| The end product at our gold and silver operations is either in the form of doré or concentrate. Doré is an alloy consisting |
| primarily of gold and silver but also containing other impurity metals. Doré is sent to third party refiners to produce bullion |
| that meets the required market standard of 99.95% gold and 99.9% silver. Ore concentrate, or simply concentrate, is raw |
| mineralized material that has been ground finely to a powdery product from which gangue (waste) is removed, thus |
| concentrating the metal component. Concentrate, as well as slag and fine carbons (by-products of the gold production |
| process), are sent to third party smelters for further recovery of gold and silver. |
| |
| During 2021, production consisted of 100% doré from the Gold Bar mine, 99% doré and 1% slag and fine carbon from |
| the Black Fox mine was and approximately 92% doré and 8% slag and fine carbon from the El Gallo Project. Production |
| from the San José mine consisted of approximately 40% doré and 60% concentrate. |
| |
| During 2021, we reported the following consolidated production at ributable to us: |
| |
| | | | | | | | | | | | | | | | | Gold | | | | Silver | Gold equivalent |
| Consolidated Production | | | | ounces | | | | ounces | | | | ounces(1) |
| Gold Bar mine | | | | | | | 43,881 | 1,142 | 43,894 |
| Black Fox mine | | | | | | | 30,016 | — | | | 30,016 |
| El Gal o Project | | | | | | | 3,543 | 7,045 | | 3,643 |
| San José mine (on 49% basis) | | | | | | | 40,971 | 2,572,286 | 76,839 |
| Total Production | | | | | | | 118,411 | 2,580,473 | 154,392 |
| | | | | | | | | | |
| (1) Calculated using an average silver to gold ratio of 72:1 at the 100% owned operations and at the San José mine. |
| Gold and silver bullion obtained from the doré produced in USA, Canada, Mexico and the San José mine are sold at the |
| prevailing spot market price. Concentrates produced by the San José mine are provisionally priced, whereby the sel ing |
| price is subject to final adjustments at the end of a period ranging from 30 to 90 days after delivery to the customer. The |
| final price is based on the market price at the relevant quotation period stipulated in the contract. Due to the time elapsed |
| between shipment and the final settlement with the buyer, MSC estimates the prices at which sales of metals will be settled. |
| At the end of each financial reporting period, previously recorded provisional sales are adjusted to estimated set lement |
| metals prices based on relevant forward market prices until final set lement with the buyer. |
| During 2021, revenues from gold and silver sales were $79.2 mil ion from the Gold Bar mine, $50.7 mil ion from the |
| Black Fox mine, $6.6 million from the El Gallo Project, and $133.2 million from the San José mine on a 49% basis. |
| Revenue from the San José mine is not included in our Consolidated Statements of Operations and Comprehensive (Loss) |
| as we use the equity method of accounting for MSC. See Item 7. | | Management’s Discussion and Analysis of Financial |
| Condition and Results of Operations for additional information regarding production and operating results for our |
| properties, and Item 8 | . Financial Statements and Supplementary Data, Note 2, Summary of Significant Accounting |
| Policies—Investments and Note 9, Investment in Minera Santa Cruz S.A. (“MSC”) – San José Mine for additional |
| information regarding the equity method of accounting. |
| 5 |
| Like all metal producers, our operations are affected by fluctuations in metal prices. The following table presents the |
| annual high, low and average daily London P.M. Fix prices per ounce for gold and London Fix prices per ounce for silver |
| over the past three years and 2022 to the most recent practical date on the London Bullion Market: |
| |
| | | | | | | | | | | | | | | | | | | | | | | Gold | | | | | | | | | Silver | |
| Year | | High | Low | | | | | | | | | | Average | High | Low | | | | Average |
| | | | | | | | | | (in dollars per ounce) | |
| 2019 | 1,546 1,270 | | | | | | | | 1,393 19.31 14.38 16.21 |
| 2020 | 2,067 1,474 1,770 28.90 12.00 20.50 |
| 2021 | 1,943 1,684 1,799 29.59 21.53 25.14 |
| 2022 (through March 4, 2022) | 1,945 1,788 1,845 25.32 22.24 23.46 |
| |
| On March 4, 2022, the London P.M. Fix for gold was $1,945 per ounce and the London Fix for silver was $25.15 per |
| ounce. |
| Mineralized Material Processing Methods |
| Gold and silver are extracted from mineralized material by either milling or heap leaching depending on, among other |
| things, the amount of gold and silver contained in the material, whether the material is naturally oxidized or not, and the |
| amenability of the material to treatment. |
| At the Gold Bar mine and the El Gal o Project, both open pit operations, the mineralized material is processed using heap |
| leaching methods. Heap leaching consists of stacking crushed, oxidized material on impermeable pads, where a weak |
| cyanide solution is applied to the surface of the heap to dissolve and leach the gold and silver. The gold and silver-bearing |
| solution is then col ected and processed into doré bars. |
| At Black Fox, mineralized material from the underground mine is transported to the mil site and fed to the mill’s crushing |
| circuit. Following additional processing and refining, the operation produces doré bars. |
| At San José, mineralized material from the underground mine is processed at a mill site, producing a concentrate and doré |
| product. |
| Hedging Activities |
| Our strategy is to provide shareholders with exposure to gold and silver prices by selling our gold and silver ounces at spot |
| market prices and consequently, we do not hedge our gold or silver sales. We may, however, from time to time, manage |
| certain risks associated with fluctuations in foreign currencies using the derivatives market. |
| Gold and Silver Reserves |
| We have established gold and/or silver reserves at two of our properties: Gold Bar and San José. In 2020, through |
| consultations with field experts, we completed work around the Gold Bar mineral reserve to revise the previous estimate. |
| The work included drilling and metallurgical testing, geological and structural model ing and a 110,500 feet (33,700 m) |
| dril program. On January 7, 2021, we announced the updated Indicated Resource and Probable Reserve Estimates of the |
| Gold Bar mine and subsequently filed the 43-101 Technical Report on February 22, 2021. |
| | |
| 6 |
| Mexico |
| |
| Mineral resources, exclusive of reserves, as at December 31, 2021: |
| |
| | | | | | | | | | | | | | | | | | | | | | Gold | Measured | | | Indicated | Measured & Indicated | | | | Inferred | | | |
| | | Au | | | | | Au | | | Au |
| | Tonnes | | Contained | Tonnes | Au Grade | Contained | | | | | | | Tonnes | | Contained | Tonnes | | Contained | | Met |
| | | | | | | | | | | | | | | | Grade | | | | | Grade | | | Grade | | COG |
| | (Mt) | | Au (koz) | (Mt) | (g/t) | Au (koz) | | | | | | | (Mt) | | Au (koz) | (Mt) | | Au (koz) | | Rec % |
| | | (g/t) | | | | | (g/t) | | | (g/t) |
| Fenix | 9.8 | 0.46 | 146 | 5 | 0.23 | 35 | | | | | | | 14.5 0.39 | | 182 | 0.2 | 0.31 | 2 | var** | var** |
| Total | 9.8 | 0.46 | 146 | 5 | 0.23 | 35 | | | | | | | 14.5 0.39 | | 182 | 0.2 | 0.31 | 2 | | |
| |
| | | | | | | | | | | | | | | | | | | | | | Ag | | | | | Ag | | | Ag |
| | Tonnes | | Contained | Tonnes | Ag Grade | Contained | | | | | | | Tonnes | | Contained | Tonnes | | Contained | | Met |
| | | | | | | | | | | | | | | Silver | Grade | | | | | Grade | | | Grade | | COG |
| | (Mt) | | Ag (koz) | (Mt) | (g/t) | Ag (koz) | | | | | | | (Mt) | | Ag (koz) | (Mt) | | Ag (koz) | | Rec % |
| | | (g/t) | | | | | (g/t) | | | (g/t) |
| Fenix | 9.8 | 17 | 5,236 | 5 | 95 14,294 | 14.5 | 42 | 19,530 | 0.2 | 46 | 293 | var* | var** |
| Total | 9.8 | 17 | 5,236 | 5 | 95 | 14294 | | | | | | | 14.5 | 42 | 19,530 | 0.2 | 46 | 293 | | |
| * Heap Leach has no COG as the entire heap is processed with zero selectivity; El Gallo Silver COG 58gpt Ag; |
| ** Recoveries HLP 85% Au, 60% Ag; EGS 86% Au, 75% Ag |
| |
| Mineral resources, exclusive of reserves, as at December 31, 2020: |
| |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Gold | Measured | Indicated | | | | | | | | | Measured & Indicated | | | | Inferred |
| | | | Au | | | | | | Au | | | Au |
| | Tonnes | | Contained | Au Grade | Contained | | | | | | | | Tonnes | | Contained Au | | Tonnes | Contained |
| | | | | | | | | | | | | | | | Grade | | | | | | Grade | | | | Grade |
| | (Mt) | | | Au (koz) Tonnes (Mt) | (g/t) | Au (koz) | | | | | | | | (Mt) | | (koz) | | (Mt) | | Au (koz) |
| | | (g/t) | | | | | | (g/t) | | | | (g/t) |
| Fenix | 9.8 | 0.48 | | 150 | 5 | 0.23 | | | | | | | 35 | 14.5 | 0.39 | 186 | | 0.2 | 0.31 | 2 |
| Total | 9.8 | 0.48 | | 150 | 5 | 0.23 | | | | | | | 35 | 14.5 | 0.39 | 186 | | 0.2 | 0.31 | 2 |
| |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Ag | | | | | | Ag | | | Ag |
| | Tonnes | | Contained | Ag Grade | Contained Ag | | | | | | | | Tonnes | | Contained Ag | | Tonnes | Contained |
| | | | | | | | | | | | | | | Silver | Grade | | | | | | Grade | | | | Grade |
| | (Mt) | | | Ag (koz) Tonnes (Mt) | (g/t) | | | | | | | (koz) | (Mt) | | (koz) | | (Mt) | | Ag (koz) |
| | | (g/t) | | | | | | (g/t) | | | | (g/t) |
| Fenix | 9.8 | | 17 | 5,242 | 5 | 95.00 | | | | | | | 14,295 | 14.5 | | 41 | 19,537 | | 0.2 | 46 | 293 |
| Total | 9.8 | | 17 | 5,242 | 5 | 95.00 | | | | | | | 14295 | 14.5 | | 41 | 19,537 | | 0.2 | 46 | 293 |
| |
| The following table is a variance of the mineral resources from December 31, 2020 and December 31, 2021: |
| |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Property | Measured | Indicated | | | | | | | | | Measured & Indicated | | | | Inferred |
| | | | | | | | | | | | | | | | Mass % Grade | | | Metal % | Mass % Grade % Metal % Mass % Grade | | | | Metal % Mass % Grade | | | | Metal % |
| | | | % | | | | | | % | | | % |
| Froome | 100 | | 100 | 100 | -42 | -23 | | | | | | | -55 | 30 | | -17 | 7 | 431 | -20 | 314 |
| Grey Fox | | - | - | - | 93 | -32 | | | | | | | 32 | 93 | | -32 | 32 | | 106 | -34 | 36 |
| Stock West | | - | - | - | - | - | | | | | | | - | | - | - | - | - | - | - |
| Stock East | | - | - | - | -49 | 55 | | | | | | | -21 | -49 | | 55 | -21 | | -92 | 155 | -75 |
| Fuller | | - | - | - | -80 | 121 | | | | | | | -55 | -80 | | 121 | -55 | | -80 | 58 | -69 |
| Gold Bar | | - | - | - | 16 | -2 | | | | | | | 14 | 16 | | -2 | 14 | | -12 | -6 | -17 |
| Los Azules | | - | - | - | -18 | - | | | | | | | -18 | -18 | | - | -18 | | -18 | - | -18 |
| Mexico | | - | -4 | -3 | - | - | | | | | | | - | | - | - | -2 | | - | - | - |
| *Mexico, no change in Resources exclusive of Reserves; San Jose, calculation not made. |
| |
| Technical Report Summaries and Qualified Persons |
| |
| The technical information concerning our mineral projects in this Form 10-K have been reviewed and approved by Peter |
| Mah, P.Eng., Chief Operating Officer, and Luke Willis, Director, Resource Modeling, each a “qualified person” under S- |
| K 1300. For a description of the key assumptions, parameters and methods used to estimate mineral reserves and mineral |
| resources included in this Form 10-K, as well as data verification procedures and a general discussion of the extent to |
| which the estimates may be affected by any known environmental, permit ing, legal, title, taxation, sociopolitical, |
| marketing or other relevant factors, please review the Technical Report Summaries for each of our material properties |
| which are included as exhibits to this Report. |
| |
| 9 |
| The following table summarizes the estimated portion of proven and probable gold and silver reserves at ributable to us |
| for the Gold Bar mine and San José mine as of December 31, 2021. |
| |
| | | | | | | | | | | | | | | | | | |
| | | | | Gold Reserves at December 31, 2021 |
| | | Proven | | | | | | | Probable | | Proven and Probable |
| | Tonnes | Gold | Gold | | Tonnes | | | | | | | | | | Gold | Gold | | | | | Tonnes | Gold | Gold |
| | (kt) | (gpt) | (koz) | | (kt) | | | | | | | | | | (gpt) | (koz) | | | | | (kt) | (gpt) | (koz) |
| Gold Bar mine (1) | | - | - | - | 14,053 | | | | | | | | | | 0.82 | | 370 | 14,053 | | 0.82 | 370 |
| | | 381 | | | | | | | | | | | | 5.69 | 70 | 351 | | | | | | | | | | 5.68 | 64 | | | | 733 | | 5.69 | 134 |
| San José mine (2) |
| |
| | | | | | | | | | | | | | | | | | Silver Reserves at December 31, 2021 |
| | | Proven | | | | | | | Probable | | Proven and Probable |
| | Tonnes | Silver | Silver | | Tonnes | | | | | | | | | | Silver | Silver | | | | | Tonnes | Silver | Silver |
| | (kt) | (gpt) | (moz) | | (kt) | | | | | | | | | | (gpt) | (moz) | | | | | (kt) | (gpt) | (moz) |
| San José mine (2) | | 381 | 368 | 4.5 | 351 | | | | | | 314 | 3.5 | 733 | 342 | | | | | 8.1 |
| | | | | | | | | | | | | | | | |
| (1) The reserve estimate for the Gold Bar mine as at December 31, 2021 was prepared by Joseph McNaughton, P.E., Senior Mining |
| Engineers, Partner, Independent Mining Consultants |
| (2) The reserve estimate for the San José mine as at December 31, 2021, presented on a 49% basis, was prepared by Hochschild and |
| audited by P&E Mining Consultants Inc. (“P&E”). |
| The following table summarizes the estimated portion of proven and probable gold and silver reserves at ributable to us |
| for the Gold Bar mine San José mine as of December 31, 2020. |
| |
| | | | | | | | | | | | | | | | | | |
| | | | | Gold Reserves at December 31, 2020 |
| | | Proven | | | | | | | Probable | | Proven and Probable |
| | Tonnes | Gold | Gold | | Tonnes | | | | | | | | | | Gold | Gold | | | | | Tonnes | Gold | Gold |
| | (kt) | (gpt) | (koz) | | (kt) | | | | | | | | | | (gpt) | (koz) | | | | | (kt) | (gpt) | (koz) |
| Gold Bar mine | | - | - | - | 15,570 | | | | | | | | | | 0.84 | | 420 | 15,570 | | 0.84 | 420 |
| San José mine | | 399 | | | | | | | | | | | | 6.73 | 86 | 92 | | | | | | | | | | 5.46 | 16 | | | | 491 | | 6.49 | 102 |
| |
| | | | | | | | | | | | | | | | | | | | | | Silver Reserves at December 31, 2020 |
| | | Proven | | | | | | | Probable | | Proven and Probable |
| | Tonnes | Silver | Silver | | Tonnes | | | | | | | | | | Silver | Silver | | | | | Tonnes | Silver | Silver |
| | (kt) | (gpt) | (moz) | | (kt) | | | | | | | | | | (gpt) | (moz) | | | | | (kt) | (gpt) | (moz) |
| San José mine | | | | | | | | | | | | | | | | 399 | 409 | 5.3 | 92 | | | | | | | | | | 354 | 1.0 | | | | 491 | | 399 | 6.3 |
| |
| Footnotes to 2021 Mineral Resource and Mineral Reserves |
| Mineral Resources are not Mineral Reserves and do not have demonstrated economic viability. There is no certainty that |
| any part of the Mineral Resources estimated wil be converted into a Mineral Reserves estimate. The numbers in the tables |
| have been rounded to reflect the accuracy of the estimates and may not sum due to rounding. The Inferred Mineral |
| Resource in these estimates has a lower level of confidence than that applied to an Indicated Mineral Resource and must |
| not be converted to a Mineral Reserve. It is reasonably expected that the majority of the Inferred Mineral Resource could |
| be upgraded to an Indicated Mineral Resource with continued exploration; Quantity and grade of reported Inferred |
| resources are uncertain in nature and there has been insufficient exploration to classify these Inferred resources as |
| Measured or Indicated. UG Mineral Resources include the ‘must take’ minor material below cut-off grade within the mineable shape optimizer |
| stopes that are generated by above-cut-off grade blocks. The Mineral Resources in this report were estimated and reporting using the regulation S-K 1300 of the United States |
| Securities and Exchange Commission (“SEC”). |
| | | | |
| 10 |
| Fox Complex Mineral Resources for Froome are reported above an economic cut-off grade of 2.35 g/t gold assuming underground |
| extraction methods and based on a mining cost of C$80/t, process cost of C$24.34/t, G&A cost of C$10.50/t, haulage cost |
| of C$4.70/t, refining cost of C$1.82/oz, metallurgical recovery of 87%, royalty buyout of C$1.21/t, dilution of 15%, and |
| realized gold price of US$1,632/oz (after Sandstorm Stream). Mineral Resources for Grey Fox are reported above an economic cut-off grade of 2.30 g/t gold assuming underground |
| extraction methods and based on a mining cost of C$80/t, process cost of C$24.34/t, G&A cost of C$10.50/t, haulage cost |
| of C$5.64/t, refining cost of C$1.82/oz, metal urgical recovery of 85%, royalty NSR of 2.65%, dilution of 15%, and gold |
| price of US$1,725/oz. Mineral Resources for Stock West are reported above an economic cut-off grade of 1.95 g/t gold assuming underground |
| extraction methods and based on a mining cost of C$80/t, process cost of C$24.34/t, G&A cost of C$10.50/t, refining cost |
| of C$1.82/oz, metal urgical recovery of 94%, dilution of 15%, and gold price of US$1,725/oz. Mineral Resources for Fuller are reported above an economic cut-off grade of 2.30 g/t gold assuming underground |
| extraction methods and based on a mining cost of C$90/t, process cost of C$24.55/t, G&A cost of C$10.50/t, haulage cost |
| of C$6.64/t, metal urgical recovery of 88%, 10% Net Profits Interest (NPI) royalty, dilution of 10% and gold price of |
| US$1,725/oz. | |
| Mineral Resources for Stock East are reported above an economic cut-off grade of 1.67 g/t gold assuming underground |
| extraction methods and based on a mining cost of $60.61/t, process cost of $18.60/t, G&A cost of $7.95/t, metallurgical |
| recovery of 94%, and gold price of US$1,725/oz. Resources were calculated using a gold price of U$1725 based on industry consensus on long-term metal prices in late |
| 2020. Resources are stated as in-situ. There are no Mineral Reserves stated in 2021 - Black Fox Mine reserves were |
| depleted in 2021 when mining ceased in May. For al properties, a change in commodity price led to a change (general y |
| lower) in the COG used to calculate resources. In addition, the use of UG constraining shapes to bet er define reasonable |
| prospects for economic extraction were used. Some of the deposits used improvements to modelling and estimation |
| methodology and updates based on drilling results. Black Fox Mine and Froome included changes due to mining depletion. |
| Gold Bar Mineral reserves equal the total ore planned for processing from the mine plan based on a $1,650/oz gold price. Mineral |
| reserves are based on the following economic input parameters: $3.80/ avg. ore ton mining cost, $2.88/ avg. waste ton |
| mining cost, $4.91/ore ton crushed process cost, $3.77/ore ton ROM process cost, $3.22/ore ton G&A cost, $0.475/oz gold |
| refining charge, $1.538/oz transport & sales cost, 99.95% payable gold, 1% royalty at GBS only. The stated Reserves are based on a variable cut-off grade based on rock type, mining area, carbon content, clay content |
| and process response. The grades reported from Pick and Ridge include a mining dilution based on the surrounding block |
| grades. Reserves are contained within an engineered pit design between the $1,250/oz and $1,400 gold sales price Lerchs- |
| Grossman pit shel s, based on end of December 2021 topography. Mineral resources are based on the following economic input parameters: $3.19/ore ton mining cost, $1.99/waste ton |
| mining cost, $4.91/ore ton crushed process cost, $3.77/ore ton ROM process cost, $3.16/ore ton G&A cost, $0.475/oz gold |
| refining charge, $1.538/oz transport & sales cost, 99.95% payable gold, 1% royalty at Gold Bar South (GBS) only. |
| Resources stated are contained within a $1,725/oz Gold sales price Lerchs-Grossmann (LG) pits based on end of December |
| 2021 topography The Metal price used (U$1725) for resources is based on the consensus pricing forecasts based on Q4 2020 data. Resources |
| are reported as in-situ. Recoveries are variable and as follows: 78% crushed oxide recovery at Pick & Ridge, 50% mid- |
| carbon recovery at Pick & Ridge, 72% ROM oxide recovery at Pick & Ridge, 61% ROM oxide recovery at GBS, 0% |
| ROM mid-carbon recovery. Cut-off grades are variable and based on the presence or not of clay content, carbon content |
| and recoveries. |
| 11 |
| The metal price used (U$1650) for reserves reflects a conservative combination of a recent trailing average sourced from |
| Kitco’s Historic Price data and a consensus forecast via Bloomberg. Recoveries are variable and as fol ows: 78% crushed |
| oxide recovery at Pick & Ridge, 50% mid-carbon recovery at Pick & Ridge, 72% ROM oxide recovery at Pick & Ridge, |
| 61% ROM oxide recovery at GBS, 0% ROM mid-carbon recovery. Cut-off grades are variable and based on the presence |
| or not of clay content, carbon content and recoveries and range from 0.0065opt to 0.0121opt. The reference point for the |
| Mineral Reserves is at the primary crusher. |
| |
| Changes in Mineral Resources are due to mining depletion during 2021. The following changes have impacted the project |
| Reserves: Mining depletion at Pick; the Gold Price has increased from $1500/toz to $1650/toz; the operating costs |
| increased largely driven by an increase in mining costs; project costs were re-estimated based on current mining activity |
| and new contractor quotes; the schedule has been updated based on the revised metal prices and costs. |
| San Jose Reported resources and reserves are McEwen’s 49% attributable interest. Hochschild has a 51% interest in San José. Metal equivalent used AgEq = (Au x 72) + Ag Resources reporting Cut-off: 240 g/t AgEq; For Reserves AgEq Cut-offs: cut & fill 269 g/t AgEq., long hole 191 g/t AgEq. Resources are in situ. Reserves as presented are in place and include average internal dilution of 5%, average mining and |
| geotechnical dilution of 46%, and mine extraction of 37%, but do not include allowances for mil or smelter recoveries. |
| For the 2021 Mineral Reserve Estimate, inaccessible Mineral Resources that contained insufficient tonnages to permit the |
| development of local infrastructure, Mineral Resources in mined out/ isolated areas, Mineral Resources located in sill and |
| rib pil ars and operationally lost Mineral Resources were not included in the Mineral Reserve Estimate. Metal prices of U$1800/oz Au and U$26/oz Ag were used for Resources based on a long-term consensus forecast for |
| reserve prices with ~15% increase for resource prices. Metal prices of U$1600/oz Au and U$23/oz Ag were used based |
| on long term consensus forecast for reserve prices. Ongoing definition, delineation and mine exploration drilling leads to |
| bet er definition of existing resources or extensions of known veins that wil be reflected on the year-on-year comparison |
| of both mineral resources and reserves. Mine depletion, commodity price changes and equivalents leading to COG changes |
| will also have an effect on the comparative data. It should be noted that the San José Mine has a history of increasing Mineral Reserves over time, both from upgrading |
| Inferred Mineral Resources to Indicated Mineral Resources, and from exploration success. Changes to internal and external |
| dilution and ore loss rates wil affect the Reserve balance |
| Los Azules Mineral Resource is reported inside of a pitshell, the parameters assumed are a copper price of $2.75/lb, operating costs |
| of $1.70/t mining, $5.00/t for processing and $1.00/t for G&A, and Copper metal urgical recovery of 90%. Mineral |
| Resource is reported with a cut-off grade of 0.20% Cu. |
| Mexico Gold and Silver Resources were calculated using metal prices of U$1300/oz and U$16/oz respectively. These prices |
| were based off the 3-year trailing average of the London Closing Fix for 2017-2019 ($1306 and $16.32) sourced from |
| Kitco’s Historical Data charts. |
| |
| Resources are stated as in situ for El Gal o Silver and as crushed and stacked ready for hauling and processing at the El |
| Gallo Gold HLP. |
| El Gallo Silver: Milling recovery assumptions of 86% (sulfide) and 75% (oxide) for silver and 86% gold. Mining costs |
| of $1.95/t, processing and G&A costs of $26.15/t mil ed were used. Resources are stated within an optimized pitshel |
| indicating prospects for eventual economic extraction. |
| 12 |
| |
| Heap Leach Pad: Because of the unconsolidated nature of the heap leach material, the mine schedule plans to mine the |
| entire heap without the benefit of selectivity. Sub-cut-off leach pad material will inherently have potential acid |
| generating sulfide liabilities if placed in our waste dumps and so it wil be prudent to process the entire leach pad and |
| place tailings in a previously mined pit at an overal environmental and economic benefit. |
| |
| Recovery assumptions of 85% Au and 60% Ag. |
| |
| The differences in annual Resources at El Gal o Gold are at ributed to the Heap Leach operation. Residual leaching |
| continued in 2021 and continues into 2022. There was a minor amount of metal recovered (c.3.6koz Au and 7.0koz Ag) |
| at the operation in 2021. |
| |
| Competitive Business Conditions |
| We compete with many companies in the mining and mineral exploration and production industry, including large, |
| established mining companies with substantial capabilities, personnel, and financial resources. There is a limited supply |
| of desirable mineral lands available for claim-staking, lease, or acquisition in the United States, Canada, Mexico, |
| Argentina, and other areas where we may conduct our mining or exploration activities. We may be at a competitive |
| disadvantage in acquiring mineral properties, since we compete with these individuals and companies, many of which |
| have significantly greater financial resources and larger technical staffs than we do. From time to time, specific properties |
| or areas that would otherwise be attractive to us for exploration or acquisition may be unavailable due to their previous |
| acquisition by other companies or our lack of financial resources. |
| Competition in the industry is not limited to the acquisition of mineral properties, but also extends to the technical expertise |
| to find, advance, and operate such properties; the labor to operate the properties; and the capital for the purpose of funding |
| such exploration and development. Many competitors not only explore for and mine precious and base metals but conduct |
| refining and marketing operations on a world-wide basis. Such competition may result in our company not only being |
| unable to acquire desired properties, but to recruit or retain qualified employees or to acquire the capital necessary to fund |
| our operation and advance our properties. Our inability to compete with other companies for these resources would have |
| a material adverse effect on our results of operation, financial condition and cash flows. |
| General Government Regulations |
| In the United States, Canada, Mexico and Argentina, we are subject to various governmental laws and regulations, |
| including environmental regulations. Other than operating licenses for our mining and processing facilities and concessions |
| granted under contracts with the host government, there are no third-party patents, licenses or franchises material to our |
| business. The applicable laws and regulations applicable to us include but are not limited to: |
| | • | mineral concession rights. |
| | • | surface rights. |
| | • | water rights. |
| | • | mining royalties. |
| | • | environmental laws. |
| | • | mining permits. |
| | • | mining and income taxes. |
| | • | health and safety laws and regulations. |
| | • | labor laws and regulations. |
| | • | export regulations. |
| We believe that al of our properties are operated in compliance with al applicable governmental laws and regulations. | | |
| 13 |
| Reclamation Obligations |
| Under applicable laws in the jurisdictions where our properties are located, we are required to reclaim disturbances caused |
| by our mining activities. Accordingly, we have recorded estimates in our financial statements for our reclamation |
| obligations, in accordance with United States General y Accepted Accounting Principles (“US GAAP” or “GAAP”) the |
| most significant of which are related to our properties in the U.S., Canada and Mexico. |
| Estimated future reclamation costs are based primarily on legal and regulatory requirements. At December 31, 2021, we |
| accrued $35.5 mil ion for reclamation costs relating to currently developed and producing properties. These amounts are |
| included in Asset Retirement Obligation on the Consolidated Balance Sheets. |
| U.S. Environmental Laws |
| We are subject to extensive environmental regulation under the laws of the U.S. and the state of Nevada, where our U.S. |
| operations are conducted. For example, certain mining wastes resulting from the extraction and processing of ores would |
| be considered hazardous waste under the Resource Conservation and Recovery Act (“RCRA”) and state law equivalents, |
| but we are currently exempt from the extensive set of Environmental Protection Agency (“EPA”) regulations governing |
| hazardous waste. If our mine wastes were treated as hazardous waste under RCRA or such wastes resulted in operations |
| being designated as “Superfund” sites under the Comprehensive Environmental Response, Compensation, and Liability |
| Act (“CERCLA”) or state law equivalents for cleanup, significant expenditures could be required for the construction of |
| additional waste disposal facilities, for other remediation expenditures, or for natural resource damages. Under CERCLA, |
| any present or past owners or operators of a Superfund site general y may be held liable and may be forced to undertake |
| remedial cleanup action or to pay for the government’s cleanup efforts. Such owners or operators may also be liable to |
| governmental entities for the cost of damages to natural resources, which may be substantial. Additional regulations or |
| requirements may also be imposed upon our operations, tailings, and waste disposal areas, as wel as upon mine closure |
| under federal and state environmental laws and regulations, including, without limitation, CERCLA, the Clean Water Act, |
| Clean Air Act, the Endangered Species Act and state law equivalents. See Note 12 to our consolidation financial |
| statements, Reclamation and Remediation Liabilities, for information on reclamation obligations under governmental |
| environmental laws. |
| We have reviewed and considered current federal legislation relating to climate change and do not believe it to have a |
| material effect on our operations. Future changes in U.S. federal or state laws or regulations could have a material adverse |
| effect upon us and our results of operations. |
| Foreign Government Regulations |
| Canada, where the Black Fox mine, Stock mill and other exploration and development projects are located, and Mexico, |
| where the El Gallo Project and Fenix Project are located, have both adopted laws and guidelines for environmental |
| permitting that are similar to those in effect in the U.S. The permit ing process requires a thorough study to determine the |
| baseline condition of the mining site and surrounding area, an environmental impact analysis, and proposed mitigation |
| measures to minimize and offset the environmental impact of exploration and mining operation activities. We have |
| received all permits required to operate our current activities in Canada and Mexico and have received al permits necessary |
| for the exploration activities being conducted at our non-U.S. properties. |
| Customers |
| Production from Gold Bar, Black Fox, and the El Gallo Project is sold as refined metal on the spot market or doré under |
| the terms set out in doré purchase agreements. |
| We have doré purchase agreements with Canadian financial institutions, Asahi Refining (“Asahi”), our refiner, and with |
| metals trading companies. Under the terms of our doré purchase agreements, we have the option to sel approximately |
| 90% of the gold and silver contained in doré bars produced at Gold Bar, Black Fox and the El Gallo Project prior to the |
| completion of refining. During the year ended December 31, 2021, 97% of our consolidated sales were made to Asahi, |
| with 38% of the sales made through the doré purchase agreement. |
| 14 |
| During the year ended December 31, 2021, 92% of the total sales from the San José mine were made to three companies: |
| Aurubis AG, a German company, accounted for 15% of the total sales, LS Nikko, a Korean Company, accounted for 35% |
| of the total sales and Argo-Heraeus, a Swiss company, accounted for 42% of the total sales. MSC has sales agreements |
| with each of these purchasers. |
| In the event that our customer relationships or MSC’s customer relationships were interrupted for any reason, we believe |
| that we or MSC could locate other purchasers for our products. However, any interruption may temporarily disrupt the |
| sale of our products and may affect our operating results. |
| Human Capital Resources |
| As of December 31, 2021, we had 430 employees, including 83 in the United States, 27 in Toronto, Ontario, Canada, 189 |
| in Timmins, Ontario, Canada, 96 in Mexico, and 35 in Argentina. All our employees based in Toronto work in an executive, |
| technical or administrative position, while our employees in the United States, Timmins, Mexico, and Argentina include |
| management, laborers, craftsmen, mining, geologist environmental specialists, information technologists, and various |
| other support roles. As of December 31, 2021, MSC had 1,462 employees in Argentina. We also frequently engage |
| independent contractors in connection with certain administrative matters and the exploration of our properties, such as |
| dril ers, geophysicists, geologists, and other specialty technical disciplines. For Canada and United States, we also engage |
| independent contractors for technical and professional expertise as wel as extractive and exploration activities such as |
| dril ing, geophysics, hauling and crushing. Of our employees in Mexico, 48 are covered by union labor contracts and we |
| believe we have good relations with them. |
| As part of our fundamental need to attract and retain talent, we regularly evaluate our compensation, benefits and employee |
| wellness offerings. We have determined that our compensation arrangements are competitive in the industry. Over 93% |
| of U.S. employees are enrolled in our medical benefit plan, and over 90% of U.S. employees contribute to our 401(k) plan |
| and 94% of employees in Canada contribute to our Deferred Profit Share Plan. Supplemental healthcare is provided above |
| government requirements in both Canada and Mexico. |
| |
| ITEM 1A. RISK FACTORS |
| Our operations and financial condition are subject to significant risks, including those described below. You should |
| carefully consider these risks. If any of these risks actually occurs, our business, financial condition, and/or results of |
| operation could be adversely affected. This report, including Management’s Discussion and Analysis of Financial |
| Condition and Results of Operations, contains forward looking statements that may be affected by several risk factors, |
| including those set forth below. The following information summarizes all material risks known to us as of the date of |
| filing this report: |
| Risks Relating to Our Financial Condition, Results of Operation and Cash Flows |
| Our results of operations, cash flows and the value of our properties are highly dependent on the market prices of gold, |
| silver, and copper and these prices can be volatile. |
| The profitability of our gold and silver mining operations and the value of our mining properties are directly related to the |
| market price of gold, silver and copper. The price of gold, silver and copper may also have a significant influence on the |
| market price of our common stock. Historical y, the market price of gold and silver has fluctuated significantly and is |
| affected by numerous factors beyond our control. These factors include supply and demand fundamentals, global or |
| national political or economic conditions, expectations with respect to the rate of inflation, the relative strength of the U.S. |
| dollar and other currencies, interest rates, gold and silver sales and loans by central banks, forward sales by metal |
| producers, accumulation and divestiture by exchange traded funds, and a number of other factors such as industrial and |
| commercial demand. The volatility of mineral prices represents a substantial risk which no amount of planning or technical |
| expertise can fully eliminate. This is especial y true since we do not hedge any of our sales. |
| We derive al of our revenue from the sale of gold and silver and our results of operations wil fluctuate as the prices of |
| these metals change. A period of significant and sustained lower gold and silver prices would materially and adversely |
| 15 |
| affect our results of operations and cash flows. In the event metal prices decline or remain low for prolonged periods of |
| time, our existing producing properties may become uneconomic, and we might be unable to develop our undeveloped |
| properties, which may further adversely affect our results of operations, financial performance and cash flows. An asset |
| impairment charge may also result from the occurrence of unexpected adverse events that impact our estimates of expected |
| cash flows generated from our producing properties or the market value of our non-producing properties, including a |
| material diminution in the price of gold and/or silver. |
| Our results of operations have been and could in the future be material y and adversely affected by the impairment of |
| assets. |
| During 2021, the price of gold, as measured by the London PM fix, fluctuated between $1,684 and $1,943 per ounce, while |
| the price of silver fluctuated between $21.53 and $29.59 per ounce. As at March 4, 2022, gold, silver and copper prices |
| were $1,945 per ounce, $25.15 per ounce, and $4.82 per pound, respectively. |
| We have incurred substantial losses in recent years and may never return to profitability. |
| During the three years ended December 31, 2021, we have incurred pre-tax losses on an annual basis of $64.2 million |
| $153.7 mil ion and $63.6 million. As of December 31, 2021, our accumulated deficit, which includes noncash impairment |
| charges, was $1.2 bil ion. In the future, our ability to become profitable wil depend on the profitability of the Gold Bar, |
| Black Fox, including the Froome mine, and San José mines, our ability to generate revenue sufficient to cover our costs |
| and expenses, and our ability to advance, sell or otherwise monetize our other properties and our interest in the Los Azules |
| copper project. In pursuit of profitability, we will seek to identify additional mineralization that can be extracted |
| economically at operating and exploration properties. For our non-operating properties that we believe demonstrate |
| economic potential, we need to either develop our properties, locate and enter into agreements with third party operators, |
| or sel the properties. We may suffer significant additional losses in the future and may not be profitable again. Even if we |
| do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. |
| Our business requires substantial capital investment from outside sources, and we may be unable to raise additional |
| funding on favorable terms to develop additional mining operations. In addition, our ongoing reliance on equity |
| funding will result in continued dilution to our existing shareholders. |
| We have in the past and will likely in the future require significant capital to develop our exploration projects. A significant |
| portion of that funding in the past has come in the form of sales of our common stock. We continue to evaluate capital |
| and development expenditure requirements as well as other options to monetize certain assets in the Company’s portfolio |
| including Los Azules, Grey Fox, Stock and the Fenix Project. If we make a positive decision to develop one or more of |
| these initiatives, the expenditures incurred may significantly exceed our working capital. Our ability to obtain necessary |
| funding, in turn, depends upon a number of factors, including the state of the economy, our operating results and applicable |
| commodity prices. We may not be successful in obtaining the required financing to advance our projects or for other |
| purposes, on terms that are favorable to us or at al , in which case, our ability to replace reserves and continue operating |
| would be adversely affected. Failure to obtain such additional financing could result in delay or indefinite postponement |
| of further exploration or potential development and in the possible partial or total loss of our interest in certain properties. |
| Even if we are successful in obtaining additional equity capital, it wil result in dilution to existing shareholders. | |
| Our indebtedness adversely affects our cash flow and may adversely affect our ability to operate our business. |
| As of December 31, 2021, we had an outstanding long term, secured debt with a principal amount of $50.0 mil ion. |
| Repayment of the loan is secured by a lien on certain of our and our subsidiaries’ assets. This debt requires us to make |
| monthly interest payments, to begin making monthly principal payments of $2 million August 2022 for 12 months and a |
| final $26 mil ion payment on August 31, 2023. During 2021, the Company entered into negotiations with the lenders to |
| defer the repayment of the debt and also change the terms that will be favorable to the Company. As of March 4, 2022, |
| discussions are ongoing to extend debt repayments and more favorable terms. |
| We cannot be certain that our cash flow from operations wil be sufficient to allow us to pay the principal and interest on |
| our debt and meet our other obligations. Even if we have sufficient cash flow to retire the debt, those payments will affect |
| 16 |
| the amount of cash we have available for capital investment, exploration, ongoing operations and other purposes. Payments |
| on our debt may also inhibit our ability to react to changing business conditions. |
| Any failure to meet our debt obligations could harm our business and financial condition and may require us to sel |
| assets or take other steps to satisfy the debt. |
| Our ability to make payments on and/or to refinance our indebtedness and to fund planned capital expenditures wil depend |
| on our ability to generate sufficient cash flow from operations in the future. We cannot assure you that our business will |
| generate sufficient cash flow from operations or that future borrowings, or other financing will be available to us in an |
| amount sufficient to enable us to pay principal and interest on our indebtedness or to fund our other liquidity needs. |
| Decreases in precious metal prices, in addition to our ability to execute our mine plans at existing operations, may adversely |
| affect our ability to generate cash flow from operations. If our cash flow and existing capital resources are insufficient to |
| fund our debt obligations, we may be forced to reduce our planned capital expenditures, sell assets, seek additional equity |
| or debt capital, or restructure our debt, and any of these actions, if completed, could adversely affect our business and/or |
| the holders of our securities. We cannot assure you that any of these remedies could, if necessary, be completed on |
| commercial y reasonable terms, in a timely manner or at all. In addition, any failure to make scheduled payments of interest |
| and principal on our outstanding indebtedness could result in the immediate acceleration of the debt and foreclosure of our |
| assets. |
| Restrictive debt covenants could limit our growth and our ability to finance our operations, fund our capital needs, |
| respond to changing conditions, and engage in other business activities that may be in our best interests. |
| Our credit facility contains covenants that restrict or limit our ability to: |
| | • | Pay dividends or distributions on our capital stock; |
| | • | Borrow additional funds; |
| | • | Repurchase, redeem, or retire our capital stock; |
| | • | Make certain loans and investments; |
| | • | Sell assets; |
| | • | Enter into certain transactions with affiliates; |
| | • | Create or assume certain liens on our assets; |
| | • | Make certain acquisitions; or |
| | • | Engage in certain other corporate activities. |
| As part of our facility, the debt can be cal ed in certain circumstances, including on demand in the event of a material |
| adverse change in our business or our inability to satisfy certain financial tests on an ongoing basis. Our ability to comply |
| with these requirements may be affected by events beyond our control, and we cannot assure you that we wil satisfy them |
| in the future. In addition, these requirements could limit our ability to obtain future financings, make needed capital |
| expenditures, withstand a future downturn in our business or the economy in general, or otherwise conduct necessary |
| corporate activities. We may also be prevented from taking advantage of potential business opportunities that arise because |
| of the restrictive covenants under our debt agreement. A breach of any of the covenants in our debt agreements could result |
| in a default under the agreement. |
| Increased operating and capital costs could adversely affect our results of operations. |
| Costs at any particular mining location are subject to variation due to a number of factors, such as variable ore grade, |
| changing metallurgy and revisions to mine plans in response to the physical shape and location of the ore body, as well as |
| the age and utilization rates for the mining and processing- related facilities and equipment. In addition, costs are affected |
| by the price and availability of input commodities, such as fuel, electricity, labor, chemical reagents, explosives, steel, |
| concrete and mining and processing related equipment and facilities. Commodity costs are, at times, subject to volatile |
| price movements, including increases that could make production at certain operations less profitable. Further, changes in |
| laws and regulations can affect commodity prices, uses and transport. Reported costs may also be affected by changes in |
| 17 |
| accounting standards. A material increase in costs at any significant location could have a significant adverse effect on our |
| results of operation and operating cash flow. |
| We could have significant increases in capital and operating costs over the next several years in connection with the |
| development of new projects in challenging jurisdictions and in the sustaining and/or expansion of existing mining and |
| processing operations. Costs associated with capital expenditures may increase in the future as a result of factors beyond |
| our control. Increased capital expenditures may have an adverse effect on the results of operation and cash flow generated |
| from existing operations, as well as the economic returns anticipated from new projects. |
| If we do not hedge our exposure to reductions in gold and silver prices, we may be subject to significant reductions in |
| price. |
| We do not use hedging transactions with respect to any of our gold and silver production and we do not expect to do so in |
| the future. Accordingly, we may be exposed to more significant price fluctuations if gold and/or silver prices decline. |
| While the use of hedging transactions limits the downside risk of price declines, their use also may limit future revenues |
| from price increases. Hedging transactions also involve the risk that the counterparty may be unable to satisfy its |
| obligations. |
| Estimates relating to new development projects and mine plans of existing operations are uncertain and we may incur |
| higher costs and lower economic returns than estimated. |
| Our decision to develop a project is typically based on the results of feasibility studies, which estimate the anticipated |
| economic returns of a project. However, the actual project profitability or economic feasibility may differ from such |
| estimates as a result of any of the following factors, among others: |
| | • | Changes in tonnage, grades and metallurgical characteristics of mineralized material to be mined and |
| | processed; |
| | • | Changes in input commodity and labor costs; |
| | • | The quality of the data on which engineering assumptions were made; |
| | • | Adverse geotechnical conditions; |
| | • | Availability of an adequate and skilled labor force; |
| | • | Availability, supply and cost of utilities such as water and power; |
| | • | Fluctuations in inflation and currency exchange rates; |
| | • | Changes in metals prices; or |
| | • | Changes in tax laws, the laws and/or regulations around royalties and other taxes due to the regional and |
| | national governments and royalty agreements. |
| Our recent development activities, including Gold Bar and Black Fox, may not result in the expansion or replacement of |
| past production with new production, or one or more of these new production sites or facilities may be less profitable than |
| currently anticipated or may not be profitable at all, any of which could have a material adverse effect on our results of |
| operations and financial position. |
| For our existing operations, we base our mine plans on geological, metal urgical and engineering assumptions, financial |
| projections and commodity price estimates. These estimates are periodical y updated to reflect changes in our operations, |
| including modifications to our proven and probable reserves and mineralized material, revisions to environmental |
| obligations, changes in legislation and/or our political or economic environment, and other significant events associated |
| with mining operations. There are numerous uncertainties inherent in estimating quantities and qualities of gold, silver and |
| copper and costs to mine recoverable reserves, including many factors beyond our control, that could cause actual results |
| to differ materially from expected financial and operating results or result in future impairment charges. |
| 18 |
| We are subject to foreign currency risks which may increase our costs and affect our results of operation. |
| While we transact most of our business in U.S. dollars, certain expenses, such as labor, operating supplies, and property |
| and equipment, may be denominated in Canadian dollars, Mexican pesos or Argentine pesos. As a result, currency |
| exchange fluctuations and foreign exchange regulations may impact our operating costs. The appreciation of non-U.S. |
| dollar currencies against the U.S. dollar increases costs and the cost of purchasing property and equipment in U.S. dollar |
| terms in Canada, Mexico and Argentina, which can adversely impact our operating results and cash flows. |
| The value of cash and cash equivalents denominated in foreign currencies also fluctuates with changes in currency |
| exchange rates. Appreciation of non-U.S. dollar currencies results in a foreign currency gain on such investments and a |
| depreciation in non-U.S. dollar currencies results in a loss. We have not utilized market risk sensitive instruments to |
| manage our exposure to foreign currency exchange rates but may do so in the future. We also hold portions of our cash |
| reserves in Canadian, Mexican and Argentine currency. |
| Our continuing reclamation obligations at Tonkin, Gold Bar, Black Fox and other Timmins properties, El Gallo, and |
| other properties could require significant additional expenditures. |
| We are responsible for the reclamation obligations related to disturbances on al our properties. In Canada and the United |
| States, we are required to post bonds to ensure performance of our reclamation obligations. As of December 31, 2021, we |
| have accrued $29.7 million in estimated reclamation costs for our properties, including $37.7 million covered by surety |
| bonds for projects in the United States and Canada. We have not posted a bond in Mexico as none is required by the current |
| legislation; however, we have recorded a liability based on the estimated amount of our reclamation obligations in that |
| jurisdiction. |
| There is a risk that any surety bond or recorded liability, even if increased based on the analysis and work performed to |
| update the reclamation obligations, could be inadequate to cover the actual costs of reclamation when actually carried out. |
| The satisfaction of bonding requirements and continuing reclamation obligations wil require a significant amount of |
| capital. Further, it is possible that the United States Bureau of Land Management (“BLM”) may request that we provide |
| additional long-term financing supported by a long-term trust for an amount that cannot be determined at present. There |
| is a risk that we wil be unable to fund any additional bonding requirements or that the surety bonds may no longer be |
| accepted by the governmental agencies as satisfactory reclamation coverage, in which case we would be required to replace |
| the surety bonding with cash, and further, that the regulatory authorities may increase reclamation and bonding |
| requirements to such a degree that it would not be commercially reasonable to continue exploration activities, which may |
| adversely affect our results of operations, financial performance and cash flows. |
| There is no guarantee that we will declare distributions to shareholders. |
| From June 2015 to September 2018, we paid a distribution to holders of our common stock on a semi-annual basis. Those |
| distributions were suspended in March 2019. Any determination to reinstate this distribution on our common stock will be |
| based primarily upon covenants in outstanding debt instruments, our financial condition, results of operations and capital |
| requirements, including for capital expenditures and acquisitions, and our Board of Directors’ determination that the |
| distribution to shareholders is in the best interest of our shareholders and in compliance with all laws and agreements |
| applicable to the Company. |
| Risks Relating to Our Operations as a Mining Company |
| Our estimates of proven and probable reserves and mineralized material are based on interpretation and assumptions |
| and, under actual conditions, may yield less mineral production than is currently estimated or may result in additional |
| impairment charges to our operations. |
| Unless otherwise disclosed, proven and probable reserves and mineralization figures presented in our filings with securities |
| regulatory authorities, including the SEC, in our news releases and other public statements that may be made from time to |
| time, are based upon estimates made by both independent and our own internal professionals. Estimates of proven and |
| probable reserves and mineralized material are subject to considerable uncertainty and are based, to a large extent, on the |
| 19 |
| prices of gold and silver and interpretations of geologic data obtained from dril holes and other exploration techniques. |
| These prices and interpretations are subject to change. If we determine that certain of our estimated reserves or mineralized |
| material have become uneconomic, we may be forced to reduce our estimates. Actual production may be significantly less |
| than we expect and such reductions may result in impairment charges such as we experienced in 2020. |
| When making determinations about whether to advance any of our projects to development, we rely upon such estimated |
| calculations as to the mineralized material and grades of mineralization on our properties. Until ore is mined and processed, |
| mineralized material and grades of mineralization must be considered as estimates only. We cannot ensure that these |
| estimates wil be accurate, or this mineralization can be mined or processed profitably. |
| Any material changes in mineral estimates and grades of mineralization may affect the economic viability of placing a |
| property into production and such property’s return on capital. There can be no assurance that minerals recovered in small |
| scale tests wil be recovered in large-scale tests under on-site conditions or in production scale. Extended declines in market |
| prices for gold and/or silver may render portions of our mineralization estimates uneconomic and result in reduced reported |
| mineralization or adversely affect the commercial viability of one or more of our properties. Any material reductions in |
| estimates of mineralization, or of our ability to extract this mineralization, could have a material adverse effect on our |
| results of operations or financial condition. |
| Investors should also be aware that calculations of “reserves” differ under SEC reporting standards and those under other |
| international standards, such as Canada. Investors should also be aware that mineralized material may not be converted |
| into reserves. Please also see, CAUTIONARY NOTE TO UNITED STATES INVESTORS-INFORMATION |
| CONCERNING PREPARATION OF RESOURCE AND RESERVE ESTIMATES. |
| We may be unable to replace gold and silver reserves as they become depleted. |
| Like all metal producers, we must continually replace reserves depleted by production to maintain production levels over |
| the long term and provide a return on invested capital. Depleted reserves can be replaced in several ways, including |
| expanding known ore bodies, locating new deposits or acquiring interests in reserves from third parties. Exploration is |
| highly speculative in nature, involves many risks and uncertainties and is frequently unsuccessful in discovering significant |
| mineralization. Accordingly, our current or future exploration programs may not result in new mineral producing |
| operations. Even if significant mineralization is discovered, it will likely take many years from the initial phases of |
| exploration to commencement of production, during which time the economic feasibility of production may change. |
| From time to time, we may acquire ore reserves from other parties, as we did in 2017. Such acquisitions are based on an |
| analysis of a variety of factors including historical operating results, estimates and assumptions on the extent of ore |
| reserves, the timing of production from such reserves, cash and other operating costs. In addition, we may rely on data and |
| reports prepared by third parties (including in relation to the ability to permit and comply with existing regulations), which |
| may contain information or data that we are unable to independently verify or confirm in advance. Other than historical |
| operating results, these factors are uncertain, they may contribute to the uncertainties related to the process used to estimate |
| ore reserves and have an impact on our revenue, our cash flow and other operating issues. |
| As a result of these uncertainties, our exploration programs and acquisitions may not result in the expansion or replacement |
| of our current production with new ore reserves or operations, which could have a material adverse effect on our business, |
| prospects, results of operations and financial position. |
| Our acquisitions may not achieve their intended results. |
| Our acquisitions subject us to many risks. The Fox Complex acquired in 2017 was a distressed asset which has struggled |
| to produce positive cash flows during its years of operation. We are working to improve the operations but with a smal |
| reserve base, the success of this operation is dependent upon finding additional mineralization through exploration and |
| there is no guarantee that we will be able to convert this mineralization into mineable reserves. We may discover title |
| defects, adverse environmental or other conditions relating to the properties acquired of which we are currently unaware. |
| Environmental, title, and other problems could reduce the value of the properties to us, and depending on the |
| 20 |
| circumstances, we could have limited or no recourse to the sellers with respect to those problems. We have assumed |
| substantially all of the liabilities associated with acquired properties, and such liabilities could be significant. |
| We own our 49% interest in the San José mine under the terms of an option and joint venture agreement (“OJVA”), |
| and therefore we are unable to control all aspects of the exploration and development of, and production from, this |
| property. |
| Our interest in the San José mine is subject to the risks normally associated with the conduct of joint ventures. A |
| disagreement between joint venture partners on strategic decisions or how to conduct business efficiently, the inability of |
| joint venture partners to meet their obligations to the joint venture or third parties, or litigation arising between joint venture |
| partners regarding joint venture mat ers could have a material adverse effect on the viability of our interests held through |
| the joint venture. Since all day-to-day decisions are made by the majority owner of the venture, we are unable to participate |
| in those decisions, including whether and when to pay dividends to the venture partners. |
| Even if we are successful in achieving one or more of our strategic initiatives at the Los Azules project, its development |
| presents challenges that may negatively affect, if not completely negate, the feasibility for development of the property. |
| The Los Azules property is located in a remote location that is currently accessed by 75 miles of dirt road with eight river |
| crossings and two mountain passes above 13,450 feet. Even assuming that technical difficulties associated with this remote |
| location can be overcome, the significant capital costs required to develop the project may make the project uneconomical. |
| If it were for the long term price of copper to decrease significantly below the current price or for capital cost estimates to |
| increase significantly, Los Azules may not be feasible for development, and we may have to write-off the remaining |
| carrying value of the asset. Furthermore, the project’s economic feasibility has not yet been demonstrated through a full |
| feasibility study. The Preliminary Economic Assessment (“PEA”) is preliminary in nature, includes NI 43-101 mineral |
| resources that are considered too speculative geologically to have economic considerations applied to them that would |
| allow them to be categorized as mineral reserves either under S-K 1300 or NI 43-101, and there is no certainty that the |
| PEA will be realized. |
| We may acquire additional exploration-stage properties on which reserves may never be discovered. |
| We have acquired in the past and may acquire in the future additional exploration-stage properties. There can be no |
| assurance that we have completed or will be able to complete the acquisition of such properties at reasonable prices or on |
| favorable terms and that reserves wil be identified on any properties that we acquire. We may also experience negative |
| reactions from the financial markets if we are unable to successfully complete acquisitions of additional properties or if |
| reserves are not located on acquired properties. These factors may adversely affect the trading price of our common stock |
| or our financial condition or results of operations. |
| The nature of mineral exploration and production activities involves a high degree of risk and the possibility of |
| uninsured losses that could adversely and materially affect our operations. |
| Exploration for and production of minerals is highly speculative and involves greater risk than many other businesses. |
| Many exploration programs do not result in the discovery of mineralization, and any mineralization discovered may not |
| be of sufficient quantity or quality to be profitably mined. Few properties that are explored are ultimately advanced to |
| production. Our current exploration efforts, and future development and mining operations are subject to all of the |
| operating hazards and risks normally incident to exploring for and developing mineral properties, such as, but not limited |
| to: |
| | • | economically insufficient mineralized material; |
| | • | fluctuations in production costs that may render mining uneconomical; |
| | • | availability of labor, contractors, engineers, power, transportation and infrastructure; |
| | • | labor disputes; |
| | • | potential delays related to social, public health, and community issues; |
| | • | negotiations with aboriginal groups or local populations affecting our efforts to explore, develop or produce |
| | gold and silver deposits; |
| 21 |
| • | unanticipated variations in grade and other geological problems; |
| • | environmental hazards; |
| • | water conditions; |
| • | difficult surface or underground conditions; |
| • | metal urgical and other processing problems; |
| • | mechanical and equipment performance problems; |
| • | industrial accidents, personal injury, fire, flooding, cave-ins, landslides and other natural disasters; and |
| • | decrease in reserves or mineralized material due to a lower price of silver, gold or copper. |
| | Any of these risks can adversely and materially affect, among other things, the development of properties, production |
| | quantities and rates, costs and expenditures, potential revenues and production dates. We currently have no insurance to |
| | guard against any of these risks, except in very limited circumstances. If we determine that capitalized costs associated |
| | with any of our mineral interests are not likely to be recovered, we would incur a write-down of our investment in these |
| | interests. Al of these factors may result in losses in relation to amounts spent and those amounts that would then not be |
| | recoverable. |
| | Our operations are subject to permitting requirements which could require us to delay, suspend or terminate our |
| | operations on our mining properties. |
| | Our mining operations, including ongoing exploration drilling programs and development efforts, require permits from |
| | various state and federal governments, including permits for the use of water and for drilling water wells. We may be |
| | unable to obtain these permits in a timely manner, on reasonable terms or on terms that provide us sufficient resources to |
| | develop our properties in any way. Even if we are able to obtain such permits, the time required by the permit ing process |
| | can be significant. If we cannot obtain or maintain the necessary permits, or if there is a delay in receiving these permits, |
| | our timetable and business plan for exploration of our properties will be adversely affected, which may in turn adversely |
| | affect our results of operations, financial condition, cash flows and market price of our securities. |
| | Due to increased activity levels of non-governmental, aboriginal and local groups targeting the mining industry, the |
| | potential for the government or process instituted by non-governmental, aboriginal and local groups, to delay the issuance |
| | of permits or impose new requirements or conditions upon mining operations may be increased. Any changes in |
| | government policies may be costly to comply with and may delay mining operations. Future changes in such laws and |
| | regulations, if any, may adversely affect our operations, make them prohibitively expensive, or prohibit them altogether. |
| | If our interests are material y adversely affected as a result of a violation of applicable laws, regulations, permitting |
| | requirements or a change in applicable law or regulations, it would have a significant negative impact on the value of our |
| | company and could have a significant impact on our stock price. |
| | Our operations in Argentina and Mexico are subject to political and social risks. |
| | With respect to our affiliated company, Minera Santa Cruz S.A (“MSC”) which owns the San José mine, there are risks |
| | relating to an uncertain or unpredictable political and economic environment in Argentina, illustrated by the following: |
| • | Argentina defaulted on foreign debt repayments and on the repayment on a number of official loans to |
| multinational organizations in 2002 and 2003, and defaulted again on its bonds in 2014. |
| • | In 2012, Argentina’s President announced the nationalization of the majority stake of Yacimientos |
| Petrolíferos Fiscales (YPF), Argentina’s largest oil company. |
| • | In December 2017,Argentina enacted comprehensive tax reform (Law No. 27,430 (the “Law”)). Specifical y, |
| the Law introduces amendments to tax and other various laws, including a special regime comprising an |
| optional revaluation of assets for income tax purposes. |
| • | In 2018, Argentina’s federal government introduced a decree imposing a temporary tax on al exports from |
| Argentina. The tax was introduced as an emergency measure due to the significant peso devaluation during |
| the year. The estimated impact to MSC is a tax of approximately 7.5% of revenue. |
| • | In September 2019, Argentine authorities implemented new foreign exchange regulations that impact the |
| results of MSC. The main restrictions include, but are not limited to, full repatriation of proceeds of exports |
| 22 |
| in cash bank savings to be denominated only in Argentine pesos and authorization from Argentina Central |
| Bank being required for dividend distributions abroad and intercompany loan payments. |
| • | In October 2019, Alberto Fernández and former president Cristina Fernández de Kirchner were elected to |
| office. The prior president, Mr. Mauricio Macri, who assumed office in December 2015, implemented several |
| significant economic and policy reforms, including reforms related to foreign exchange and trade, fiscal |
| policy, labor laws and tax rules. The fiscal, monetary and currency adjustments undertaken by the Macri |
| administration subdued growth in the short-term, and some measures, including the export tax, have |
| negatively impacted Argentina sourced revenues. There remains uncertainty about changes that may be |
| adopted by the new administration and their impact on the Argentina economy and our business. |
| • | In December 2019, the Argentina federal government approved a decree delaying the corporate tax rate to |
| change from 30% to 25% to the end of 2021 and extending the temporary export tax introduced in September |
| 2018 to the end of 2021. Furthermore, the decree suspended the increase in the dividend withholding tax |
| from 7% to 13% until January 2021. |
| • | In 2020, the Alberto Fernández administration marked its first year in office, a year in which it faced |
| numerous challenges including renegotiating Argentina’s foreign debt, managing currency crises, and, most |
| difficult, designing Argentina’s response to the COVID-19 pandemic. |
| • | In June 16, 2021, Law 27,630, which introduced amendments to the corporate income tax law, entered into |
| force. Under prior law, the corporate income tax rate was 25%. As per the new law applicable to fiscal years |
| starting on or after January 1, 2021, corporate income will be subject to tax at progressive rates ranging from |
| 25% to 35%. Starting in January 2022, these brackets wil be annual y adjusted to account for inflation, as |
| per the consumer price index published by relevant governmental agency. |
| • | Under prior law, distribution of earnings attributable to fiscal year 2021 were subject to withholding tax at a |
| 13% rate. The rate was tied to the prior income tax rate of 25%. The enacted Law 27,630 reduced the |
| withholding tax rate on dividend distributions to non-residents from earnings obtained from the beginning of |
| 2021 to 7%. |
| | With respect to the El Gallo Project in Mexico, there has been an ongoing level of violence and crime relating to drug |
| | cartels and gangs in Sinaloa State where we operate, and in other regions of Mexico. Our facility at the El Gallo Project |
| | was robbed in 2015. On December 17, 2019, the US State Department issued a Level 2 (“increased caution”) warning |
| | with respect to five Mexican states, including Sinaloa State, due to violent crime. On September 8, 2020, the US State |
| | Department issued a Level 3 (“Reconsider travel”) revaluating travel to Mexico with respect to COVID-19 and warning |
| | travel to five Mexican states, including Sinaloa State, due to violent crime. These events may disrupt our ability to carry |
| | out exploration and mining activities and may affect the safety and security of our employees and contractors. |
| | Our operations and properties in Canada expose us to additional political risks. |
| | Our properties in Canada may be of particular interest or sensitivity to one or more interest groups, including aboriginal |
| | groups (which are generally referred to as "First Nations" and “Metis” groups). We have mineral projects in Ontario that |
| | are in areas with an aboriginal presence. It is our practice to work closely with and consult with First Nations in areas in |
| | which our projects are located or which could be impacted by our activities. However, there is no assurance that |
| | relationships with such groups will be positive. Accordingly, it is possible that our production, exploration or development |
| | activities on these properties could be interrupted or otherwise adversely affected in the future by political uncertainty, |
| | native land claims entitlements, expropriations of property, changes in applicable law, governmental policies and policies |
| | of relevant interest groups, including those of First Nations. Any changes in law or relations or shifts in political conditions |
| | may be beyond our control, or we may enter into agreements with First Nations, al of which may adversely affect our |
| | business and operations and if significant, may result in the impairment or loss of mineral concessions or other mineral |
| | rights, or may make it impossible to continue our mineral production, exploration or development activities in the |
| | applicable area, any of which could have an adverse effect on our financial conditions and results of operations. |
| | Our operations face substantial regulation of health and safety. |
| | Our operations are subject to extensive and complex laws and regulations governing worker health and safety across our |
| | projects and our failure to comply with applicable legal requirements can result in substantial penalties. Future changes in |
| | applicable laws, regulations, permits and approvals or changes in their enforcement or regulatory interpretation could |
| 23 |
| substantially increase costs to achieve compliance, lead to the revocation of existing or future exploration or mining rights |
| or otherwise have an adverse impact on our results of operations and financial position. |
| Our mines are inspected on a regular basis by government regulators who may issue citations and orders when they believe |
| a violation has occurred under local mining regulations. If inspections result in an al eged violation, we may be subject to |
| fines, penalties or sanctions and our mining operations could be subject to temporary or extended closures. |
| In addition to potential government restrictions and regulatory fines, penalties or sanctions, our ability to operate (including |
| the effect of any impact on our workforce) and thus, our results of operations and our financial position, could be adversely |
| affected by accidents, injuries, fatalities or events detrimental (or perceived to be detrimental) to the health and safety of |
| our employees, the environment or the communities in which we operate. |
| Reform of the General Mining Law in the United States could adversely affect our results of operations. |
| Periodical y, members of the U.S. Congress have introduced bills which would supplant or alter the provisions of the |
| General Mining Law of 1872, which governs the unpatented claims that we control with respect to our U.S. properties. |
| One such amendment has become law and has imposed a moratorium on the patenting of mining claims, which reduced |
| the security of title provided by unpatented claims such as those on our U.S. properties. If additional legislation is enacted, |
| it could substantially increase the cost of holding unpatented mining claims by requiring payment of royalties, and could |
| significantly impair our ability to develop mineral estimates on unpatented mining claims. Such bills have proposed, |
| among other things, to make permanent the patent moratorium, to impose a federal royalty on production from unpatented |
| mining claims and to declare certain lands as unsuitable for mining. Although it is impossible to predict at this time what |
| royalties may be imposed in the future, the imposition of such royalties could adversely affect the potential for development |
| of such mining claims, and the economics of existing operating mines on federal unpatented mining claims. Passage of |
| such legislation could adversely affect our business. |
| Title to mineral properties can be uncertain, and we may be at risk of loss of ownership of one or more of our properties. |
| Our ability to explore and operate our properties depends on the validity of our title to those properties. Our U.S. mineral |
| properties include leases of unpatented mining claims, as well as unpatented mining and mill site claims, which we control |
| directly. Unpatented mining claims provide only possessory title and their validity is often subject to contest by third |
| parties or the federal government, which makes the validity of unpatented mining claims uncertain and generally riskier. |
| Similarly, Canadian mineral properties consist of patented and unpatented claims which each have their respective risks |
| and uncertainties. Further, there may be title defects or additional rights that are not recorded on the title. Our concessions |
| in Mexico are subject to continuing government regulation and failure to adhere to such regulations will result in |
| termination of the concession. Similarly, under Argentine Law, failure to comply with applicable conditions may result in |
| the termination of the concession. Uncertainties inherent in mineral properties relate to such things as the sufficiency of |
| mineral discovery, proper posting and marking of boundaries, assessment work and possible conflicts with other claims |
| not determinable from public record. We have not obtained title opinions covering our entire property, with the attendant |
| risk that title to some claims, particularly title to undeveloped property, may be defective. There may be valid challenges |
| to the title to our property which, if successful, could impair development and/or operations. |
| We cannot ensure that we will have an adequate supply of water to complete desired exploration or development of our |
| mining properties. |
| Our mining operations require significant quantities of water for mining, ore processing and related support facilities. Our |
| operations in the United States, Mexico and Argentina are in areas where water is scarce and competition among users for |
| continuing access to water is significant. Continuous production at our mines is dependent on our ability to maintain our |
| water rights and claims and to defeat claims adverse to our current water uses in legal proceedings. Although each of our |
| operations currently has sufficient water rights and claims to cover its operational demands, we cannot predict the potential |
| outcome of pending or future legal proceedings relating to our water rights, claims and uses. Water shortages may also |
| result from weather or environmental and climate impacts out of the Company’s control. |
| 24 |
| Our ongoing operations and past mining activities are subject to environmental risks, which could expose us to |
| significant liability and delay, suspension or termination of our operations. |
| All aspects of our operations are subject to United States, Canada, Mexico and Argentina federal, state and local |
| environmental regulation. These regulations mandate, among other things, the maintenance of air and water quality |
| standards and land reclamation. They also set forth limitations on the generation, transportation, storage and disposal of |
| solid and hazardous waste, including cyanide. Environmental legislation is evolving in a manner which wil require stricter |
| standards and enforcement, increased fines and penalties for non-compliance, more stringent environmental assessments |
| of proposed projects, and a heightened degree of responsibility for us and our officers, directors and employees. Future |
| changes in environmental regulation, if any, may adversely affect our operations, make our operations prohibitively |
| expensive, or prohibit them altogether. Environmental hazards may exist on our properties that are unknown to us at the |
| present and that have been caused by us, previous owners or operators, or that may have occurred naturally. We utilize |
| explosives in our business, which could cause injury to our personnel, and damage to our equipment or assets. Mining |
| properties from the companies we have acquired may cause us to be liable for remediating any damage that those |
| companies may have caused. The liability could include response costs for removing or remediating the release and |
| damage to natural resources, including ground water, as wel as the payment of fines and penalties. Failure to comply with |
| applicable environmental laws, regulations and permitting requirements may also result in enforcement actions thereunder, |
| including orders issued by regulatory or judicial authorities, causing operations to cease or be curtailed, and may include |
| corrective measures requiring capital expenditures, instal ation of additional equipment, or remedial actions. |
| Our industry is highly competitive, attractive mineral lands are scarce, and we may not be able to obtain quality |
| properties. |
| We compete with many companies in the mining industry, including large, established mining companies with substantial |
| capabilities, personnel and financial resources. There is a limited supply of desirable mineral lands available for claim |
| staking, lease or acquisition in the United States, Canada, Mexico and Argentina, and other areas where we may conduct |
| exploration activities. We may be at a competitive disadvantage in acquiring mineral properties, since we compete with |
| these individuals and companies, many of which have greater financial resources and larger technical staffs than we do. |
| From time to time, specific properties or areas which would otherwise be at ractive to us for exploration or acquisition |
| may be unavailable to us due to their previous acquisition by other companies or our lack of financial resources. |
| Competition in the industry is not limited to the acquisition of mineral properties but also extends to the technical expertise |
| to find, advance, and operate such properties; the labor to operate the properties; and the capital for the purpose of funding |
| such properties. Many competitors not only explore for and mine precious metals, but conduct refining and marketing |
| operations on a world-wide basis. Such competition may result in our Company being unable not only to acquire desired |
| properties, but to recruit or retain qualified employees or to acquire the capital necessary to fund our operation and advance |
| our properties. Our inability to compete with other companies for these resources would have a material adverse effect on |
| our results of operation, financial condition and cash flows. |
| We rely on contractors to conduct a significant portion of our operations and construction projects. |
| A portion of our operations and construction projects are currently conducted in whole or in part by contractors, including |
| our operations at the Gold Bar and Black Fox mines. As a result, our operations are subject to a number of risks, some of |
| which are outside our control, including: |
| | • | Negotiating agreements with contractors on acceptable terms; |
| | • | The inability to replace a contractor and its operating equipment in the event that either party terminates the |
| | agreement; |
| | • | Reduced control and oversight over those aspects of operations which are the responsibility of the contractor; |
| | • | Failure of a contractor to perform under its agreement; |
| | • | Interruption of operations or increased costs in the event that a contractor ceases its business due to |
| | insolvency or other unforeseen events; |
| | • | Failure of a contractor to comply with our standards and policies, as well as with applicable legal and |
| | regulatory requirements, to the extent it is responsible for such compliance; and |
| | • | Problems of a contractor with managing its workforce, labor unrest or other related employment issues. |
| 25 |
| In addition, we may incur liability to third parties as a result of the actions of our contractors. The occurrence of one or |
| more of these risks could potentially adversely affect our results of operations and financial position. |
| If our employees or contractors engage in a strike, work stoppage or other slowdown, we could experience business |
| disruptions and/or increased costs. |
| As of December 31, 2021, a number of our employees were represented by different trade unions and work councils which |
| subject us to employment arrangements very similar to collective bargaining agreements. Further, most of our employees |
| are based in foreign locations. The laws of certain foreign countries may place restrictions on our ability to take certain |
| employee-related actions or may require that we conduct additional negotiations with trade unions, works councils or other |
| governmental authorities before we can take such actions. |
| If the employees or contractors at the Gold Bar, Mexico, or San José mines were to engage in a strike, work stoppage, or |
| other slowdown in the future, we could experience a significant disruption of our operations. Such disruption could |
| interfere with our business operations and could lead to decreased productivity, increased labor costs, and lost revenue. |
| We may not be successful in negotiating new collective bargaining agreements or other employment arrangements when |
| the current ones expire. Furthermore, future labor negotiations could result in significant increases in our labor costs. The |
| occurrence of any of the foregoing could have a material adverse effect on our business, financial condition, and results of |
| operations. |
| Our business is sensitive to nature and climate conditions |
| A number of governments have introduced or are moving to introduce climate change legislation and treaties at the |
| international, national, state/provincial and local levels. Regulations relating to emission levels (such as carbon taxes) |
| and energy efficiency are becoming more stringent. If the current regulatory trend continues, this may result in |
| increased costs at some or all of our project locations. In addition, the physical risks of climate change may also have |
| an adverse effect on our operations and properties. Extreme weather events have the potential to disrupt our power |
| supply, surface operations and exploration at our mines and may require us to make additional expenditures to |
| mitigate the impact of such events. |
| Some of the countries in which we operate have implemented, and are developing, laws and regulations related to climate |
| change and greenhouse gas emissions. In December 2009, the United States Environmental Protection Agency (“EPA”) |
| issued an endangerment finding under the U.S. Clean Air Act that current and projected concentrations of certain mixed |
| greenhouse gases, including carbon dioxide, in the atmosphere threaten the public health and welfare. Additional y, the |
| United States and China signed a bilateral agreement in November 2014 that commit ed the United States to reduce |
| greenhouse gas emissions by an additional 26% to 28% below 2005 levels by the year 2025. The EPA in August 2015 |
| issued final rules for the Clean Power Plan under Section 111 (d) of the Clean Air Act designed to reduce greenhouse gas |
| emissions at electric utilities in line with reductions planned for the compliance with the Paris Agreement. As part of a |
| regulatory review, on June 19, 2019, the EPA repealed the Clean Power Plan and replaced it with the Affordable Clean |
| Energy rule which eliminates most of the emission reduction standards included in the Clean Power Plan. That rule is now |
| the subject of challenges in the courts. |
| Legislation and increased regulation and requirements regarding climate change could impose increased costs on us, our |
| venture partners and our suppliers, including increased energy, capital equipment, environmental monitoring and reporting |
| and other costs to comply with such regulations. |
| Risks Relating to Our Common Stock |
| A small number of existing shareholders own a significant portion of McEwen Mining common stock, which could |
| limit your ability to influence the outcome of any shareholder vote. |
| As of March 4, 2022, Mr. McEwen beneficial y owned approximately 17% of the 473.7 million shares of McEwen Mining |
| common stock outstanding. Under our Articles of Incorporation and the laws of the State of Colorado, the vote of the |
| 26 |
| holders of a majority of the shares voting at a meeting at which a quorum is present is generally required to approve most |
| shareholder action. As a result, Mr. McEwen will be able to significantly influence the outcome of shareholder votes for |
| the foreseeable future, including votes concerning the election of directors, amendments to our Articles of Incorporation |
| or proposed mergers, acquisitions or other significant corporate transactions. |
| Our stock price may be volatile, and as a result you could lose all or part of your investment. |
| In addition to other risk factors identified herein and to volatility associated with equity securities in general, the value of |
| your investment could decline due to the impact of any of the following factors upon the market price of our common |
| stock: |
| | • | Changes in the worldwide price for gold, silver and/or copper; |
| | • | Disappointing results from our exploration or production efforts; |
| | • | Producing at rates lower than t targeted; |
| | • | Political and regulatory risks; |
| | • | Weather conditions, including unusually heavy rains, unusually light rains or drought; |
| | • | Failure to meet our revenue ,profit goals or operating budget; |
| | • | Decline in demand for our common stock; |
| | • | Downward revisions in securities analysts’ estimates or changes in general market conditions; |
| | • | Technological innovations by competitors or in competing technologies; |
| | • | Investor perception of our industry or our prospects; |
| | • | Disruption of supply and demand and other economic factors due to virus and other disease; |
| | • | Actions by government central banks; and |
| | • | General economic trends. |
| Stock markets in general have in the past and may in the future experience extreme price and volume fluctuations. These |
| fluctuations are often unrelated to operating performance and may adversely affect the market price of our common stock. |
| Adverse price fluctuations may lead to threatened or actual delisting of our common stock from the NYSE. As a result, |
| you may be unable to resel your shares at a desired price. |
| Failure of the Company to regain compliance with the NYSE listing requirements could result in delisting of its |
| common stock, which in turn could adversely affect its future financial condition and the market for its common stock. |
| |
| If the common stock ultimately were to be delisted for any reason, it could negatively impact the Company by (i) reducing |
| the liquidity and market price of the Company’s common stock; (ii) reducing the number of investors willing to hold or |
| acquire the Company’s common stock, which could negatively impact the Company’s ability to raise equity financing; |
| (iii) limiting the Company’s ability to use a registration statement to offer and sell freely tradable securities, adversely |
| affecting the Company’s ability to access the public capital markets; and (iv) impairing the Company’s ability to provide |
| equity incentives to its employees. |
| The future issuances of our common stock will dilute current shareholders and may reduce the market price of our |
| common stock. |
| Under certain circumstances, our board of directors has the authority to authorize the offer and sale of additional securities |
| without the vote of or notice to existing shareholders. We may issue equity in the future in connection with capital |
| formation, acquisitions, strategic transactions or for other purposes. Based on the need for additional capital to fund |
| expected growth, it is likely that we will issue additional securities to provide such capital and that such additional |
| issuances may involve a significant number of shares of our common stock. Issuance of additional securities in the future |
| will dilute the percentage interest of existing shareholders and may reduce the market price of our common stock and any |
| other outstanding securities. Furthermore, the sale of a significant amount of our common stock by any selling security |
| holders, including Mr. McEwen, may depress the price of our common stock. As a result, you may lose all or a portion of |
| your investment. |
| 27 |
| General Risks |
| The Coronavirus pandemic could result in adverse operating results due to workforce reductions, supply and/or demand |
| interruptions and travel restrictions. |
| On March 11, 2020, the World Health Organization (“WHO”) declared the COVID-19 virus a global pandemic. During |
| late March and early April, our operations were disrupted by temporary shutdowns to protect our workforce from the |
| spread of the virus. During the shutdown periods, rigorous policies and procedures were implemented at each site to |
| minimize potential health and safety risks to our workforce. We continue to experience periodic disruption in our |
| operations both due to government policies around COVID-19 and due to incidents of illness due to the virus at our |
| operations. This continues to adversely impact cash flows and liquidity and is expected to continue to have adverse |
| consequences to us beyond 2021. Due to slowed ramp up in production and sales, our liquidity and financial condition |
| have been adversely affected and we are at an increased risk of not having sufficient cash flow to fund our operations as |
| well as an increased risk of default under our debt agreement. Achieving and maintaining normal operating capacity is |
| also dependent on the continued availability and logistical delivery of supplies, which remains out of our control. The |
| long-term impact of the COVID-19 outbreak on our results of operations, financial position and cash flows wil depend |
| on future developments, including the endemic characteristics, duration and spread of the outbreak and related advisories |
| and restrictions, and the viability and success of the ongoing treatment development and worldwide vaccination roll-out. |
| Management continues to actively monitor the global situation on our financial condition, liquidity, operations, suppliers, |
| industry and workforce. |
| We do not insure against all risks to which we may be subject in our operations. |
| While we currently maintain insurance policies to insure against general commercial liability claims and physical assets |
| at our properties in the United States, Canada, Mexico and Argentina, we do not maintain insurance to cover al of the |
| potential risks associated with our operations. We may also be unable to obtain insurance to cover other risks at |
| economically feasible premiums or at al . Insurance coverage may not continue to be available, or may not be adequate to |
| cover liabilities. We might also become subject to liability for environmental, pollution or other hazards associated with |
| mineral exploration and production including bankruptcy of our refiners or other third party contractors which may not be |
| insured against, which may exceed the limits of our insurance coverage or which we may elect not to insure against because |
| of premium costs or other reasons. Losses from these events may cause us to incur significant costs that could material y |
| adversely affect our financial condition and our ability to fund activities on our property. A significant loss could force us |
| to reduce, temporarily suspend or, in the worst case, terminate our operations. |
| Our business is subject to the U.S. Foreign Corrupt Practices Act and similar worldwide anti-bribery laws, a breach or |
| violation of which could lead to civil and criminal fines and penalties, loss of licenses or permits and reputational harm. |
| We operate in certain jurisdictions that have experienced governmental and private sector corruption to some degree. The |
| U.S. Foreign Corrupt Practices Act and anti-bribery laws in other jurisdictions general y prohibit companies and their |
| intermediaries from making improper payments for the purpose of obtaining or retaining business or other commercial |
| advantage. Violations of these laws, or allegations of such violations, could lead to civil and criminal fines and penalties, |
| litigation, and loss of operating licenses or permits, and may damage our reputation, which could have a material adverse |
| effect on our business, financial position and results of operations. There can be no assurance that our internal control |
| policies and procedures will always protect us from recklessness, fraudulent behavior, dishonesty or other inappropriate |
| acts committed by our affiliates, employees or agents. As such, our corporate policies and processes may not prevent all |
| potential breaches of law or other governance practices. |
| We depend on certain key personnel, and our success wil depend on our continued ability to retain and at ract such |
| qualified personnel. |
| Our success is dependent on the efforts, abilities and continued service of certain senior officers and key employees and |
| consultants. A number of our key senior officers, employees and consultants have significant experience in the precious |
| metals industry. A loss of service from any one of these individuals may adversely affect our operations, and we may have |
| difficulty or may not be able to locate and hire a suitable replacement. |
| 28 |
| We conduct operations in a number of foreign countries and are exposed to legal, political and social risks associated |
| with those operations. |
| A significant portion of our revenue in 2021 was generated by operations outside the United States. Exploration, |
| development, production and closure activities in many countries are potential y subject to heightened political and social |
| risks that are beyond our control and could result in increased costs, capacity constraints and potential disruptions to our |
| business. These risks include the possible unilateral cancellation or forced renegotiation of contracts in which we may, |
| directly or indirectly, have an interest, unfavorable changes in foreign laws and regulations, royalty and tax increases |
| (including taxes associated with the import or export of goods), risks associated with consumption taxes in Mexico, |
| Argentina, and Canada, income tax refund recovery and collection processes in Mexico and Argentina, changes in US |
| legislation as applicable to foreign operations, claims by governmental entities or indigenous communities, expropriation |
| or nationalization of property and other risks arising out of foreign sovereignty over areas in which we conduct our |
| operations. The right to import and export gold and silver may depend on obtaining certain licenses and quotas, which |
| could be delayed or denied at the discretion of the relevant regulatory authorities, or could become subject to new taxes or |
| duties imposed by U.S. or foreign jurisdictions, which could have a material adverse effect on our business, financial |
| condition, or future prospects. In addition, our rights under local law may be less secure in countries where the rule of law |
| is less robust and judicial systems may be susceptible to manipulation or influence from government agencies, non- |
| governmental organizations or civic groups. |
| Any of these developments could require us to curtail or terminate operations at our mines, incur significant costs in |
| renegotiating contracts and meeting newly-imposed environmental or other standards, pay greater royalties or higher prices |
| for labor or services and recognize higher taxes, or experience significant delays or obstacles in the recovery of |
| consumption taxes or income tax refunds owed, which could materially and adversely affect our financial condition, results |
| of operations and cash flows. |
| Our ongoing and future success depends on developing and maintaining productive relationships with the communities, |
| including indigenous peoples, and other stakeholders in our operating locations. Notwithstanding our ongoing efforts, local |
| communities and stakeholders can become dissatisfied with our activities or the level of benefits provided, which may |
| result in civil unrest, protests, direct action or campaigns against us. Any such occurrences could materially and adversely |
| affect our financial condition, results of operations and cash flows. |
| Our business could be negatively impacted by security threats, including cybersecurity threats, and other disruptions. |
| We face various security threats, including attempts by third parties to gain unauthorized access to sensitive information |
| or to render data or systems unusable; threats to the safety of our employees; threats to the security of our infrastructure; |
| and threats from terrorist acts. There can be no assurance that the procedures and controls we use to monitor and mitigate |
| our exposure to these threats will be sufficient in preventing them from materializing. If any of these events were to |
| materialize, they could lead to losses of sensitive information, critical infrastructure, personnel or capabilities essential to |
| our operations and could have a material adverse effect on our reputation, financial condition, results of operations, or |
| cash flows. |
| Our business partners’ technologies, systems and networks may become the target of cyber-at acks or information security |
| breaches that could result in the unauthorized release, gathering, monitoring, misuse, loss or destruction of proprietary and |
| other information, theft of property or other disruption of our business operations. In addition, certain cyber incidents, such |
| as surveil ance, may remain undetected for an extended period. A cyber incident involving our business partners’ |
| information systems and related infrastructure could disrupt our business plans and negatively impact our operations. |
| Although to date we have not experienced any significant cyber-attacks, there can be no assurance that we will not be the |
| target of such at acks in the future. As cyber threats continue to evolve, we may be required to expend significant additional |
| resources to continue to modify or enhance our protective measures or to investigate and remediate any security |
| vulnerabilities. | |
| 29 |
| Several of our directors and officers are residents outside of the United States, and it may be difficult for shareholders |
| to enforce within the United States any judgments obtained against such directors or officers. |
| Several of our directors and officers are nationals and/or residents of countries other than the United States, and all or a |
| substantial portion of such persons’ assets are located outside of the United States. As a result, it may be difficult for |
| investors to effect service of process on such directors and officers, or enforce within the United States any judgments |
| obtained against such directors and officers, including judgments predicated upon the civil liability provisions of the |
| securities laws of the United States or any state thereof. Consequently, shareholders may be effectively prevented from |
| pursuing remedies against such directors and officers under United States federal securities laws. In addition, shareholders |
| may not be able to commence an action in a Canadian court predicated upon the civil liability provisions under United |
| States federal securities laws. The foregoing risks also apply to those experts identified in this report that are not residents |
| of the United States. |
| The laws of the State of Colorado, our Articles of Incorporation and agreements with certain officers and directors may |
| protect our directors from certain types of lawsuits. |
| The laws of the State of Colorado provide that our directors will not be liable to us or our shareholders for monetary |
| damages for al but certain types of conduct as directors of the Company. Our Articles of Incorporation permit us to |
| indemnify our directors and officers against al damages incurred in connection with our business to the fullest extent |
| provided or al owed by law, including through stand-alone indemnity agreements. We have also entered into |
| indemnification agreements with our executive officers and directors which require that we indemnify them against certain |
| liabilities incurred by them in their capacity as such. The exculpation provisions may have the effect of preventing |
| shareholders from recovering damages against our directors caused by their negligence, poor judgment or other |
| circumstances. The indemnification provisions may require us to use our limited assets to defend our directors and officers |
| against claims, including claims arising out of their negligence, poor judgment, or other circumstances. |
| We may be required to write down certain long-lived assets, due to metal prices, operational challenges or other factors. |
| | |
| Such write- downs may adversely affect our results of operations and financial condition. |
| We review our long-lived assets for recoverability pursuant to the Financial Accounting Standard Board’s Accounting |
| Standards Codification Section 360. Under that standard, we review the recoverability of our long-lived assets, such as |
| our mining properties, quarterly or upon a triggering event. Such review involves estimating the future undiscounted cash |
| flows expected to result from the use and eventual disposition of the asset. Impairment, measured by comparing an asset’s |
| carrying value to its fair value, must be recognized when the carrying value of the asset exceeds these cash flows. We |
| conduct a review of the financial performance of our mines in connection with the preparation of our financial statements |
| for each reported period and determine whether any triggering events are indicated. |
| For example, during the first quarter of 2020, we performed a comprehensive analysis of the Gold Bar mine and the related |
| long-lived assets and determined that indicators of impairment existed, and we ultimately concluded that the carrying value |
| of the long-lived assets for the Gold Bar property was impaired, and a non-cash impairment charge of $83.8 million was |
| recorded during the first quarter of 2020. If there are further significant and sustained declines in relevant metal prices, or |
| if we fail to control production and operating costs or realize the mineable ore reserves at our mining properties, we may |
| terminate or suspend mining operations at one or more of our properties. These events could require a further write-down |
| of the carrying value of our assets. Any such actions would adversely affect our results of operations and financial |
| condition. |
| We may record other types of charges in the future if we sell a property or asset for a price less than its carrying value or |
| have to increase reclamation liabilities in connection with the closure and reclamation of a property. Any additional write- |
| downs of mining properties or other assets could adversely affect our results of operations and financial condition. |
| 30 |
| A significant delay or disruption in sales of concentrates or doré as a result of the unexpected disruption in services |
| provided by smelters or refiners or other third parties could have a material adverse effect on our results of operations. |
| |
| We rely on refiners and smelters to refine and process and, in some cases, purchase, the gold and silver doré and concentrate |
| produced by our mines or the mines in which we have an interest. Access to refiners and smelters on economical terms is |
| critical to our ability to sell our products to buyers and generate revenues. We have existing agreements with refiners and |
| smelters, some of which operate their refining or smelting facilities outside the United States. We believe we currently |
| have contractual arrangements with a sufficient number of refiners and smelters so that the loss of any one refiner or |
| smelter would not significantly or materially impact our operations or our ability to generate revenues. Nevertheless, |
| services provided by a refiner or smelter may be disrupted by new or increased tariffs, duties or other cross-border trade |
| barriers, shipping delays, the bankruptcy or insolvency of one or more refiners or smelters or the inability to agree on |
| acceptable commercial or legal terms with a refiner or smelter. Such an event or events may disrupt an existing relationship |
| with a refiner or smelter or result in the inability to create (or the necessity to terminate) a contractual relationship with a |
| refiner or smelter, which may leave us with limited, uneconomical or no access to refining or smelting services for short |
| or long periods of time. Epidemics, pandemics or natural disasters may also impact refiners, smelters or other third parties |
| with which we have contractual arrangements or have an indirect effect on our ability to obtain refining, smelting or other |
| third-party services. |
| Any delay or loss of access to refiners or smelters may significantly impact our ability to sel doré and concentrate products |
| and generate revenue. A default by a refiner or smelter on its contractual obligations to us or an insolvency event or |
| bankruptcy filing by a refiner or smelter may result in the loss of all or part of our doré or concentrate in the possession of |
| the refiner or smelter, and such a loss likely would not be insured by our insurance policies. We cannot ensure that |
| alternative refiners or smelters would be available or offer comparable terms if the need for them were to arise or that it |
| would not experience delays or disruptions in sales that would material y and adversely affect results of operations. |
| Our operations may be further disrupted, and our financial results may be adversely affected, by the COVID-19 |
| pandemic. |
| COVID-19 and other unforeseen pandemics pose or may in the future pose a material risk to our business and operations. |
| If a significant portion of our workforce becomes unable to work or travel to our operations due to illness or state or federal |
| government restrictions (including travel restrictions and “shelter-in-place” and similar orders restricting certain activities |
| that may be issued or extended by authorities), we may be forced to reduce or suspend operations at one or more of our |
| mines, which could reduce production, limit exploration activities and development projects and impact liquidity and |
| financial results. In addition, we have implemented several initiatives to protect the health and safety of our employees, |
| contractors and communities during this pandemic, including COVID-19 testing, site access symptom checks, contact |
| tracing technology and procuring additional disinfectant and sanitation products and personal protective equipment for our |
| employees, among others, some of which have and may result in additional costs to us. |
| Illnesses or government restrictions, including the closure of national borders, related to COVID-19 also may disrupt the |
| supply of raw goods, equipment, supplies and services upon which our operations rely. We also continue to monitor |
| legislative initiatives in the U.S., Mexico, Canada and Argentina related to COVID-19 to determine their potential impacts |
| or benefits (if any) to our business. |
| Third parties with whom we conduct business, including the refiners and smelters that process and, in some cases, purchase |
| the gold and silver doré and concentrate produced by our mines, are also subject to these risks and may be required to |
| reduce or suspend operations, which could impact our ability to conduct our operations, advance exploration, development |
| and expansion projects, sel our products and generate revenue. |
| The jurisdictions in which we operate have and may in the future continue to encounter financial difficulties resulting from |
| one or both of lower tax revenue and new and increased costs related to COVID-19. As a result, national, state or local |
| governments may seek to raise existing taxes or introduce new taxes that affect our business, which may adversely affect |
| our business and financial results. For example, in Nevada, where the Gold Bar mine is located, in response to a significant |
| loss of tourism and gaming revenue during 2020, in June 2021 the Governor signed into law a new excise tax on gross |
| proceeds derived from mining gold and silver. |
| 31 |
| ITEM 1B. UNRESOLVED STAFF COMMENTS |
| | None. |
| |
| ITEM 2. PROPERTIES |
| We classify our mineral properties into reportable segments consistent with the manner in which they are grouped in |
| Item 8 | . Financial Statements and Supplementary Data, Note 3, Operating Segment Reporting and subdivide them within |
| each segment by their respective stage of development: “production properties”, “advanced-stage properties” and |
| “exploration properties.” Advanced-stage properties consist of properties for which advanced studies and reports have |
| been completed indicating the presence of economically mineable mineralized material or in some cases, proven and |
| probable reserves, and for which we have obtained or are in the process of obtaining the required permit ing. Our |
| designation of certain properties as “production properties” or “advanced-stage properties” should not suggest that we |
| have proven or probable reserves at those properties as defined by S-K 1300. Our current operating or advanced stage |
| properties are the following: Fox Complex in Ontario, Canada; the Gold Bar Mine in Nevada, US; the Los Azules copper |
| project in Argentina; the San Jose Mine in Santa Cruz, Argentina and the Fenix Project in Sinaloa, Mexico. |
| The following table summarizes our other properties in the United States: |
| | | | | | | | Project | County | Type of Interest | Acres Hectares Claimant or Owner | | | | Agreement Status |
| Name |
| Tonkin | Eureka | 1390 Unpatented Claims | 27708 11213 Held By Tonkin | | | Not currently under agreement. |
| Springs | County | | | | Springs LLC |
| Cornersto | Eureka | 50 Unpatented Claims | 1015 | 411 Held by Nevada Pacific | | Not currently under agreement. |
| ne | County | | | | Gold LLC |
| Patty JV Eureka | | Total of 616 claims | 12644 5117 McEwen Mining | | | Joint Venture with Nevada Gold Mines (60% as Manager) |
| | County | 311 claims contributed by | | | Nevada Inc. | Serabi Gold (10%) and McEwen Mining Nevada Inc. |
| | | McEwen Mining Nevada | | | Nevada Gold Mines | (30%) |
| | | Inc. | | | Etchegaray, Smith, |
| | | 257 claims contributed by | | | Damele et al |
| | | NGM | | | |
| | | 48 Leased Claims |
| New Pass Churchill | | 107 Unpatented Claims | 2211 | 895 Held by McEwen | | Under a 50/50 JV with Bonaventure (Iconic) |
| | County | | | | Mining Nevada Inc. |
| South | Elko | 151 Unpatented Claims | 3096 1253 Held by McEwen | | | Under a 50/50 JV with Bonaventure (Iconic) |
| Midas | County | | | | Mining Nevada Inc. |
| (Squaw |
| Creek) |
| Elder | Humbold | 573 Unpatented Claims | 11831 4788 Held by NPGUS LLC Not currently under agreement. |
| Creek | t County |
| | Lander |
| | County |
| Slaven | Lander | 68 Unpatented Claims | 1382 | 559 Held by WKGUS LLC Currently in an Exploration Agreement with Option to |
| Canyon | County | | | | | Lease with Baker Hughes Oilfield Operations LLC, set to |
| | | | | | | expire 5/7/2022 |
| Keystone | Eureka | 2 Patented Claims | 16.52 | 6.7 Owned by: | | Not currently under agreement. |
| and O'Dair | County | | | | 50% Nevada Pacific |
| | | | | | Gold (US), Inc. |
| | | | | | 50% Robert C. Withnell |
| | | | | | and Ralph S.Withnell |
| |
| The following table summarizes our other properties in Canada: |
| | | | | | | | | | | | | | | | | Property name | | Municipality | Type of Interest Acres / Hectares | | | Stage | Conditions | | | | Ownership |
| Buffalo Ankerite Timmins | | | | | | | | 11 Patented claims | 432 / 175 | | | | | | | Exploration NPI agreement with | | | | | Held by McEwen |
| | | | | | | | | | | Summit | Mining via Lexam |
| | | | | | | | | | | | VG |
| Paymaster | | Timmins | | | | | | 15 Patented claims | 1730 / 700 | | | | | | | Exploration None | | | | | 60% JV interest with |
| | | | | | | | | | | | Newmont (40%) |
| Black Fox North | | Black River-Matheson 50 Unpatented claims | 1608 / 651 | | | | | | | Exploration | | | | | 100% McEwen |
| | | | | | | | | | | | Mining |
| 32 |
| Production Properties |
| Gold Bar mine, Nevada (100% owned) |
| For detailed information on the Gold Bar mine production statistics and financial results, refer to Item 7. Management’s |
| Discussion and Analysis of Financial Condition and Results of Operations. |
| Overview and History |
| The Gold Bar mine is an open pit oxide gold mine with a processing facility, heap leach pad and gold recovery plant. The |
| mine is located primarily on public lands managed by the Nevada Bureau of Land Management (“BLM”). We commenced |
| construction in November 2017 following receipt of the signed Record of Decision from the U.S. Environmental Protection |
| Agency. The Gold Bar mine achieved commercial production on May 23, 2019. |
| The property is located within the Battle Mountain-Eureka-Cortez gold trend in Eureka County, Nevada. The property was |
| previously mined from 1987 to 1994 by Atlas Precious Metals Inc. |
| Location and Access |
| The Gold Bar mine is located in the Southern Roberts Creek Mountains, in Eureka County, Nevada, approximately 30 |
| miles northwest of the town of Eureka, Nevada, primarily in Township 22 North, Range 50 East (N39°48’16.5”; |
| W116°21’09.65”). The mine site is accessed from US Highway 50 by travel ing north on Robert’s Creek Road, an |
| unimproved dirt road maintained by the Company. The mine area is approximately 15 miles from U.S. Highway 50. |
| Geology and Mineralization |
| The mine is located in the Battle Mountain-Eureka mineral belt in a large window of lower-plate carbonate rocks |
| surrounded by upper-plate rocks. The lower-plate carbonates consist of an east-dipping section of Silurian Lone Mountain |
| Dolomite, Devonian McColley Canyon Formation, Devonian Denay Formation, and Devonian Devils Gate Limestone |
| (from oldest to youngest). Gold mineralization is hosted primarily in the Bartine Member of the McColley Canyon |
| Formation, which consists of carbonate wackestones and packstones approximately 250 to 380 feet thick. Minor amounts |
| of mineralization are found in the underlying dolomitic limestone Kobeh Member of the McColley Canyon Formation |
| where it is adjacent to apparent feeder structures. The project is in an area with “Carlin-Type” sediment-hosted gold |
| mineralization characteristics with typical associated alteration (decalcification, silicification). |
| At Gold Ridge, extensive alteration (silicification) and gold mineralization occurs at surface and at depth proximal to three |
| historical open pits. Drilling is ongoing to extend mineralization beyond the currently defined resource. |
| Facilities and Infrastructure |
| Gold Bar mine construction began in November 2017 with key site facilities and infrastructure completed by the end of |
| 2018 and commercial production declared in May 23, 2019. The Gold Bar mine has well developed infrastructure including |
| on-site power generation and transmission lines, water, natural gas and related supply utilities as well as buildings which |
| support the operations and administration. The water supply for the Gold Bar mine and processing facilities comes from |
| production wells located approximately two miles southeast from the site and powered by a diesel generator. The mining |
| of the open pits, carried out by a contractor, progressed during 2021. Ore from the mine is transported to the crusher and |
| conveyor system with the crushed and agglomerated material transported to the heap leach pad via an overland conveyor. |
| The ore is stacked onto the heap using a radial stacker and then leached with a weak cyanide solution to extract the precious |
| metal values. The gold is then recovered from the pregnant solution in the carbon plant by adsorbing the dissolved gold |
| onto activated carbon followed by desorption, electrowinning, retorting and smelting to recover the gold as a final doré |
| product. |
| 35 |
| Exploration Activities |
| Exploration activities in 2021 included drilling 27,624 feet of core and reverse circulation drilling focused on targets |
| around the Gold Bar mine. This included drilling at Ridge to test certain near-surface and deep targets and shallow targets |
| at Cabin North. More distant dril ing from Gold Bar included several RC holes at the Atlas Mine to the west and at the |
| Rooster deposit on the Tonkin Property to the north. See Item 7. Management’s Discussion and Analysis of Financial |
| Condition and Results of Operations for more details. With multiple near-surface targets identified, we expect to continue |
| similar drilling at the Gold Bar property in 2022 |
| Exploration Properties |
| Tonkin property (100% owned) |
| The Tonkin property represents our second largest holding within the Bat le Mountain-Eureka Trend in Eureka County, |
| Nevada with approximately 45 sq. miles of claims. The Tonkin property consists of the Tonkin deposit and the previously |
| operating Tonkin mine. |
| From 1985 through 1989, the Tonkin mine produced approximately 30,000 ounces of gold utilizing an oxide heap leach |
| and a separate ball mill involving bio-oxidation to treat refractory sulfide mineralized material. Due to cost escalation and |
| recovery issues, the operation was shut down. The mine site is currently on care-and-maintenance and we continue to |
| advance the reclamation program. We also continue evaluation work with respect to the Tonkin deposit. |
| Other exploration properties |
| We hold other exploration stage properties throughout Nevada which are not considered material at this time. |
| SEGMENT: CANADA |
| The following map depicts the location of our major properties forming the Canada segment of our operations. The |
| properties within the Canada segment are located in the well-established Timmins Gold Mining district in Northern |
| Ontario, Canada. The segment consists of the Black Fox and Stock properties and various exploration and advanced stage |
| properties (the “Fox Complex”), comprising 5,100 hectares of land packages intersecting 9 miles of the Destor-Porcupine |
| Fault, which is known as the ‘Golden Highway’. The Destor-Porcupine Fault has a total strike length of approximately |
| 124 miles and hosts many of Ontario and Quebec’s prolific gold mines. |
| The Black Fox property includes the Black Fox mine and surrounding properties, including the advanced-stage Grey Fox |
| property and Froome property, the latter of which declared commercial production during the third quarter of 2021. The |
| Stock property, the site of former Stock mine, is located approximately 17 miles from the Black Fox mine. The Stock |
| property includes the Stock mill where mineralized material from the Froome mine is transported to and processed, and |
| the Stock exploration project. In addition, the Canada segment includes other exploration properties such as Fuller, |
| Davidson-Tisdale, Buffalo Ankerite and Paymaster. |
| 36 |
| Overview and History |
| We acquired the Fox Complex in October 2017. It is located in the well-established Timmins Gold Mining district in |
| Northern Ontario, Canada. Its main properties, Stock and Black Fox, are positioned along the Provincial Highway 101, |
| with the Stock property 22 miles east of the city of Timmins and the Black Fox property 6 miles east of the town of |
| Matheson. Given the proximity to communities in a region with primary industries of mining and forestry, local supplies |
| and services are easily available and can be delivered in a timely manner to our operations. |
| The Black Fox property includes the Froome, Grey Fox deposit, and an area where production has ceased. The Black Fox |
| mine initially produced from 1997 to 2001, operated by Exall Resources Limited. Re-commissioned by Brigus Gold |
| Corporation, the mine restarted in early 2009. Primero Mining Corp. (“Primero”) acquired Brigus on March 5, 2014 and |
| continued to operate the mine. We acquired the property on October 3, 2017 and continued the commercial operations. |
| Also, part of the Fox Complex, the Stock property hosts the Stock mill and is the site of the former Stock mine. Exploration |
| initiated by us in 2018 and continuing in 2021 has defined two new mineralized zones at Stock East and Stock West, within |
| a 2-mile mineralized trend along the Destor-Porcupine Fault. |
| The Black Fox mine contains 32 mining rights parcels and 52 unpatented claims totaling 10 sq. miles in mining rights. |
| The complex also includes 6 sq. miles in surface rights. Al land parcels are located within the Beat y and Hislop townships |
| in the municipality of Black-River Matheson. |
| Location and Access |
| The Black Fox mine is located 6 miles east of Matheson, Ontario, and accessed directly from Highway 101 East. Matheson, |
| in turn, is located approximately 45 miles from Timmins, which has a commercial airport. Timmins is approximately 342 |
| miles north of Toronto by air. |
| The Stock mill is located approximately 17 miles from the Froome mine and the ceased operations of the Black Fox mine. |
| Mineralized material is shipped to the mill from the Froome mine and prior to the cessation of the Black Fox mine by |
| truck. |
| Geology and Mineralization |
| All of our properties in the Timmins-Matheson region are located within the Archean aged, Abitibi greenstone belt. Gold |
| mineralization at the Black Fox and Froome mines occurs in different, geological environments within a complex system |
| of structurally-prepared pathways (conduits) that host economic quantities of gold mineralization as: (1) free gold grains |
| associated with shallow dipping quartz veins (aka ‘flats’) and stockworks within green carbonate and ankerite-altered |
| ultramafic rocks; (2) gold associated with the development and distribution of pyrite, and (3) free gold carried within |
| steeply dipping sigmoidal/sheared quartz veins. |
| Facilities and Infrastructure |
| The Black Fox mine property has well developed infrastructure including electricity, roads, water supply and high-speed |
| internet access. There are seven fully serviced modular buildings supporting various functions of the underground mine, |
| including a maintenance shop, warehouse, compressed air plant, backfill plant and water management facilities. |
| Mineralized material from the Black Fox and Froome mine is transported to, and processed at, the Stock mil , which has |
| a nominal processing capacity of 2,000 tpd. |
| The primary water supply for the Black Fox mine comes from an on-site fresh water wel and water produced from |
| dewatering activities. Current water supplies are adequate to sustain current and planned future operations. |
| 38 |
| The Stock property, the site of our Stock mill, also has wel developed infrastructure including electricity, roads, water |
| supply and high-speed internet access. Two buildings support security and administration of the mil . There is an assay |
| lab and several other buildings to support operations and milling, including a hoist house, warehouse and maintenance |
| shop, mine dry building, crusher and conveyor systems and the mill building itself. The site also houses various support |
| structures including storage and generator buildings. |
| Underground Mine Development |
| Froome, Canada (100% Owned) |
| The Froome deposit, which is part of the overall Fox Complex, is accessed from two declines from the bottom of the Black |
| Fox pit and is situated approximately one-half mile west of the Black Fox mine. The mineralized material from Froome is |
| hauled approximately 20 miles to the Stock Mine mill, where it is processed. Based on the PEA announced on January 26, |
| 2022, the life of mine production from the Froome deposit is 4 years. Low cost, bulk mining is to bridge gold production |
| and provide cash flow while we continue to dril and assess potential additional resources at the Black Fox, Grey Fox, |
| Stock and Lexam projects for future development towards expanded production. |
| Development of the underground access to the Froome deposit was completed during the year and commercial production |
| from Froome was achieved in Q3 2021. Froome offers several benefits compared to Black Fox such as a straighter, more |
| efficient haulage route and wider, more consistent mineralization that is amenable to lower cost bulk mining methods. We |
| are targeting an average annualized production rate of 40,000 - 45,000 gold equivalent ounces (“GEO”) from Froome over |
| a period of 4 years. |
| Advanced-Stage Properties |
| Grey Fox, Canada (100% owned) |
| The Grey Fox project is located 2.2 miles southeast of Black Fox mine, and is adjacent to Kirkland Lake Gold’s former |
| Hislop mine. Access is either by paved or wel maintained, two-way, dirt roads. |
| An internal feasibility-level study completed on the Grey Fox project in early 2015 by Primero, recommended further |
| development of the deposit. Further advanced project work continued until 2016, when Primero ceased all non-essential |
| expenditures. |
| In 2021, we undertook a substantial surface exploration program of 185 holes and nearly 255,000 feet of core drilling that |
| focused on the Stock and Grey Fox properties in support of a planned preliminary economic assessment. |
| Exploration Properties |
| The Stock property is the site of the former Stock mine, which produced 137,000 ounces of gold from an underground |
| operation between 1989 and 2005. |
| Exploration activities (chiefly diamond drilling and geophysical surveys) were initiated at the Stock property in early 2018, |
| and continued at a steady pace throughout 2019. These efforts led to growth of mineralized material at Stock East, and the |
| discovery of a new source of potential y economic bulk mineralization known as Stock West sitting approximately 0.5 |
| miles west of the existing mine workings. We resumed exploration at Stock West in late August 2020 and continued into |
| 2021. |
| Other exploration properties acquired in connection with our acquisition of Lexam VG Gold Inc. in 2017 include |
| Davidson-Tisdale, Fuller, Paymaster, and Buffalo Ankerite. No exploration work was performed at these properties in |
| 2021. |
| 39 |
| Overview and History |
| We own 100% of the El Gallo Project. Originally known as the Magistral mine, the El Gallo Project was an open-pit gold |
| mine and heap leach operation that we operated from September 2012 to June 2018, when we ceased active mining. Present |
| activities are limited to residual leaching production that is expected to continue into 2022, as wel as closure and |
| reclamation activities. |
| The El Gallo Project consists of 8 sq. miles of concessions. Concession titles are granted under Mexican mining law. |
| Mining concessions are subject to annual work requirements and payment of annual surface taxes that are assessed and |
| levied on a semi-annual basis in accordance with Mexican law. An annual lease agreement for surface access to the El |
| Gallo Project is currently in place. |
| Location and Access |
| The El Gallo Project and the surrounding properties are in northwestern Mexico in the western foothills of the Sierra Madre |
| Occidental mountain range, within the State of Sinaloa in the Mocorito Municipality, approximately 60 miles by air |
| northwest of Culiacan, the capital city of Sinaloa State. The concessions are located approximately 2.5 miles by road from |
| the town of Mocorito. Access is by paved and well maintained, two-way dirt roads. |
| Facilities and Infrastructure |
| The El Gallo Project property has well-developed infrastructure including electricity, roads, water supply and high-speed |
| internet access. There is a truck shop, a warehouse, a fuel depot, core logging facilities, an explosives magazine, heap |
| leach pads, process ponds, an assay laboratory, a three-stage crushing plant, an ADR process plant with a sulfidation- |
| acidification recovery (“SAR”) circuit added in the first quarter of 2018 and an administrative office. The laboratory is |
| equipped to process al assay samples from the mine, core, chips and soil. The metallurgical lab is capable of determining |
| cyanide leaching amenability and gold and silver recoveries of mineralized material amenable to cyanide leaching. |
| Advanced-Stage Properties |
| Fenix Project, Mexico (100% owned) |
| Overview and History |
| Two areas of mineralized material located inside of our property are currently considered for the Fenix Project and are the |
| basis of the resource estimate included in the feasibility study released on February 16, 2021. |
| The Fenix Project, which is currently under consideration but has not been approved for development, contemplates a two- |
| phase development process. Phase 1 includes the reprocessing of material from the gold heap leach pad at the existing El |
| Gallo Project. Phase 2 includes the processing of open pit silver mineralization from El Gallo Silver at the existing process |
| plant. |
| The process plant is expected to use conventional and proven mineral processing and precious metals recovery |
| technologies. Phase 1 is envisioned to have a throughput rate of 5,000 tonnes per day. During Phase 2, mineralized material |
| from the El Gallo Silver would be processed at a maximum of 3,250 tons per day. |
| Tailings produced during the operation would be stored in the mined-out Samaniego open pit at the El Gal o Project. As |
| part of this process, tailings deposition would include a delivery system designed to maximize tailings consolidation and |
| water recovery. Utilizing the in pit tailings storage technology is expected to be cost effective and environmentally friendly |
| as it would reduce the disturbance footprint and construction material, eliminate the construction of a tailings dam, recycle |
| process water, and reduce closure obligations by removing the leach pad. |
| 41 |
| The following table summarizes the land position related to Los Azules segment as of December 31, 2021: |
| |
| | | | | | | Number of | | Square |
| Argentina Mineral Property Interest | | | | Claims | | Miles |
| Los Azules project | | 21 | 123 |
| Other Argentina properties | | 18 | 184 |
| Total Argentina Properties | | 39 | 307 |
| |
| Los Azules Copper Project, Argentina (100% owned by McEwen Copper) |
| Overview and History |
| The Los Azules copper project is an advanced-stage porphyry copper exploration project located in the cordilleran region |
| in the province of San Juan, Argentina near the border with Chile. In 1994, Minera Andes acquired lands in the southern |
| portion of the Los Azules area. Over the years there was additional exploration done by Minera Andes and other companies |
| who owned adjacent properties around Los Azules. We acquired Minera Andes in January 2012. |
| The environmental baseline monitoring work continued as well as other works, which were identified as necessary to |
| develop a conforming Environmental Impact Assessment (“EIA”) submission. The environmental work included the |
| geological mapping of the tailings dam design. |
| Location and Access |
| The project is located at approximately 31o 13’30” South latitude and 70o 13’50” West longitude and abuts the |
| Chile-Argentina border. It is accessible by unimproved dirt roads with seasonal closures in winter. The elevation at the |
| site ranges between 11,500 feet to 14,750 feet above sea level. |
| Geology and Mineralization |
| The deposit is located within a copper porphyry belt that is host to some of the world’s largest copper mines. The upper |
| part of the system consists of a barren leached cap, which is underlain by a high-grade secondary enrichment blanket. |
| Primary mineralization below the secondary enrichment zone has been intersected in drilling up to a depth of more than |
| 3,280 feet below surface. |
| Exploration Activities |
| Work has progressed rapidly following the closing of the first tranche of the private placement. Drill crews were mobilized |
| to site in Q4/21 to begin a 174,000 ft (53,000m) phase one drill program that is expected to run through the end of Q2/22. |
| In the future, the Company anticipates completing a road that will allow for year round access to the project for drilling |
| and other activity. The program’s focus will be to confirm the existing indicated mineral resource and upgrade areas |
| currently classified as inferred to indicated. Dril ing necessary to complete geo-metallurgical and geotechnical evaluations |
| is also included in the program that will be conducted by an established and well-recognized dril ing contractor employing |
| the local workforce. |
| Facilities and Infrastructure |
| Construction has begun on the new access road that wil provide year-round access to the project. To date, construction |
| has advanced 11 miles from the east (72-mile planned length). As part of our ongoing involvement with local communities |
| and entrepreneurs, local contractors are being sourced for the construction. |
| 43 |
| The mine is part of a larger property which covers a total area of approximately 1,004 sq. miles and consists of 141 mining |
| concessions. |
| MSC has purchased the land and the corresponding occupation rights necessary to conduct its operations. |
| Location and Access |
| The San José property is in the province of Santa Cruz, Argentina, lying approximately between latitude 46°41’S and |
| 46°47’S and longitude 70°17’W and 70°00’W. The mine is 1,087 miles south-southwest of the city of Buenos Aires and |
| 217 miles southwest of the Atlantic port city of Comodoro Rivadavia. The principal access route to the San José property |
| is a paved highway from Comodoro Rivadavia followed by a 20 mile two-lane dirt road to the mine. Comodoro Rivadavia |
| has regularly scheduled air services to Buenos Aires. The nearest town is Perito Moreno, which is approximately 19 miles |
| west of the San José property. |
| Geology and Mineralization |
| The San José property is in the Deseado Massif, which consists of Paleozoic metamorphic basement rocks unconformably |
| overlain by Middle to Upper Jurassic bimodal andesitic and rhyolitic volcanics and volcaniclastics. Cretaceous sediments |
| and Tertiary to Quaternary basalts overlie the Jurassic volcanics. The Jurassic Bajo Pobre Formation is the main host of |
| gold and silver vein mineralization at the mine. The formation is comprised of a lower andesite volcaniclastic unit and an |
| upper andesite lava flow and has a maximum thickness of 394 ft. Mineralization in the San José area occurs as low |
| sulfidation epithermal quartz veins, breccias and stockwork systems accompanying normal sinistral faults. |
| Facilities and Infrastructure |
| Infrastructure at the property consists of camp facilities that can accommodate up to approximately 1,100 personnel, a |
| medical clinic, a security building, a maintenance shop, a laboratory, processing facilities, a mine and process facility |
| warehouse, a surface tailings impoundment, support buildings and mine portals, a change house, a core warehouse, an |
| administration building and offices. The laboratory is equipped to process all assays (core, chips and soil). MSC has |
| installed a satellite-based telephone/data/internet communication system. |
| Electricity is provided by an 81-mile 132 kV electric transmission line, which connects the San José mine processing |
| facility to the national power grid. |
| The San José mine is a ramp access underground mining operation. |
| |
| ITEM 3. LEGAL PROCEEDINGS |
| We are not currently subject to any material legal proceedings. To the best of our knowledge, no such proceeding is |
| threatened, the results of which would have a material impact on our properties, results of operations, or financial condition. |
| Nor, to the best of our knowledge, are any of our officers or directors involved in any legal proceedings in which we are |
| an adverse party. |
| |
| ITEM 4. MINE SAFETY DISCLOSURES |
| At McEwen Mining, safety is a core value, and we strive for superior performance. Our health and safety management |
| system, which includes detailed standards and procedures for safe operations, addresses topics such as employee training, |
| risk management, workplace inspection, emergency response, accident investigation and program auditing. Based on |
| strong leadership and involvement from all levels of the organization, these programs and procedures form the cornerstone |
| of safety at McEwen Mining, ensuring that employees are provided a safe and healthy environment and are intended to |
| reduce workplace accidents, incidents and losses, comply with al mining-related regulations and provide support for both |
| regulators and the industry to improve mine safety. |
| 45 |
| PART II |
| ITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER |
| | PURCHASES OF EQUITY SECURITIES |
| Market Information On January 24, 2012, our common stock commenced trading on the NYSE and TSX under the symbol “MUX”, subsequent |
| to the completion of the acquisition of Minera Andes. As of March 4, 2022, there were 473,687,391 shares of our common |
| stock outstanding, which were held by approximately 2,987 stockholders of record. Transfer Agent Computershare Trust Company, N.A. is the transfer agent for our common stock. The principal office of Computershare |
| is 250 Royal Street, Canton, Massachuset s, 02021 and its telephone number is (303) 262-0600. The transfer agent in |
| Canada is Computershare Trust Company of Canada at 100 University Ave., 8th Floor, Toronto ON, M5J 2Y1 and its |
| telephone number is 1-800-564-6253. NYSE Notice On January 5, 2022, McEwen Mining was notified by the NYSE that the average closing price of the Company’s common |
| stock had fal en below $1.00 per share over a period of 30 consecutive trading days, which is the minimum average share |
| price required under NYSE rules. |
| McEwen Mining intends to take steps to regain compliance with the NYSE continued listing requirements. |
| Under NYSE rules, the Company has a period of six months to bring its share price and 30-day average closing share price |
| back above $1.00. During this period, the Company’s common stock will continue to trade on the NYSE, subject to all |
| other continued listing requirements. At the end of the six-month remedy period, if the share price has not recovered, the |
| Company's stock will be subject to NYSE suspension and delisting procedures. The Company's listing on the TSX is |
| unaffected by any actions of the NYSE. | | |
| Performance Graph |
| |
| | | | |
| |
| The following graph compares our cumulative total shareholder return for the five years ended December 31, 2021, with |
| (i) the NYSE Arca Gold Bugs Index, which is an index of companies involved in the gold industry and (ii) the NYSE |
| Composite Index, which is a performance indicator of the overall stock market. The graph assumes a $100 investment on |
| 47 |
| December 31, 2016, in our common stock and the two other stock market indices, and assumes the reinvestment of |
| dividends, if any. |
| | | | | | | | | | | | | | | | | | | | | | | | | December 31, | | | | |
| | | 2016 2017 2018 2019 2020 2021 |
| McEwen Mining (MUX) | $ 100 $ 79 $ 63 $ 44 $ 34 $ 30 |
| NYSE Arca Gold Bugs Index | 100 105 88 133 164 142 |
| NYSE Composite Index | 100 116 103 126 131 155 |
| |
| ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS |
| | | | | | | | | OF OPERATIONS |
| Introduction |
| This section of this Annual Report on Form 10-K generally discusses fiscal 2021 and 2020 items including our results of |
| operations and financial condition, and year-to-year comparisons between 2021 and 2020 with a particular emphasis on |
| 2021. In each case, we discuss factors that we believe have affected our operating results and financial condition and may |
| do so in the future. For a discussion of our financial condition and results of operations for 2020 compared to 2019, please |
| refer to Item 7 of Part II, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in |
| our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on March 10, 2021. |
| Regarding properties and projects that are not in production, we provide some details of our plan of operation. This section |
| provides information up to the date of filing this report. |
| The discussion contains financial performance measures that are not prepared in accordance with United States Generally |
| Accepted Accounting Principles (“US GAAP” or “GAAP”). Each of the following is a non-GAAP measure: cash gross |
| profit, cash costs, cash cost per ounce, all-in sustaining costs (“AISC”), all-in sustaining cost per ounce, average realized |
| price per ounce, and liquid assets. These non-GAAP measures are used by management in running the business and we |
| believe they provide useful information that can be used by investors to evaluate our performance and our ability to |
| generate cash flows. These measures do not have standardized definitions and should not be relied upon in isolation or as |
| a substitute for measures prepared in accordance with GAAP. Cash Costs equals Production Costs Applicable to Sales and |
| is used interchangeably throughout the document. For a reconciliation of these non-GAAP measures to the amounts |
| included in our Statements of Operations for the three months ended December 31, 2021, and 2020 and the years ended |
| December 31, 2021, 2020 and 2019 and to our Balance Sheets as of December 31, 2021 and 2020 and certain limitations |
| inherent in such measures, please see the discussion under “Non-GAAP Financial Performance Measures”, on page 63. |
| This discussion also includes references to “advanced-stage properties”, which are defined as properties for which |
| advanced studies and reports have been completed indicating the presence of mineralized material or proven or probable |
| reserves, or that have obtained or are in the process of obtaining the required permit ing. Our designation of certain |
| properties as “advanced-stage properties” should not suggest that we have or will have proven or probable reserves at |
| those properties as defined by S-K 1300. This section provides information up to the date of the filing of this report. |
| The information in this section should be read in conjunction with our consolidated financial statements and the notes |
| thereto included in this Annual Report on Form 10-K. | | | | | | | | | |
| Throughout this Management’s Discussion and Analysis (“MDA”), the reporting periods for the three months ended |
| March 31, 2021, June 30, 2021, September 30, 2021, December 31, 2021, and December 31, 2020 are abbreviated as |
| Q1/21, Q2/21, Q3/21, Q4/21 and Q4/20, respectively, the reporting periods for the six months ended June 30, 2021 and |
| December 31, 2021 are abbreviated as H1/21 and H2/21, respectively, and the reporting for the years ended December 31, |
| 2021 and 2020 are abbreviated as the full year 2021 and the full year 2020 respectively. All financial quarterly and other |
| interim results are unaudited. |
| In addition, in this report, gold equivalent ounces (“Au Eq. oz”) includes gold and silver ounces calculated based on a |
| silver to gold ratio of 68:1 for the Q1/21, 68:1 for the Q2/21, 73:1 for the Q3/21, and 77:1 for the Q4/21. Beginning with |
| 48 |
| the Q2/19, we adopted a variable silver to gold ratio for reporting that approximates the average price during each fiscal |
| quarter. |
| Note: We ceased active mining and processing at the El Gallo mine in the second quarter of 2018. Where comparative |
| results for mining operations are presented for prior periods, we continue to use the term “El Gal o Mine.” We use the |
| term “El Gallo Project” to refer to the ongoing reclamation and residual heap-leaching that is taking place at the formerly |
| producing mine. |
| COVID-19 Pandemic |
| The Company continues to closely monitor and respond, as possible, to the ongoing COVID-19 pandemic. As the global |
| situation continues to change rapidly, ensuring the health and safety of the Company’s employees and contractors is one |
| of the Company’s top priorities. Many jurisdictions including the United States, Canada, Mexico, and Argentina have |
| varied but continued restrictions to travel, public gatherings, and certain business operations. Unlike the year 2020, during |
| 2021 there were no mandated suspensions for the Company’s operations. In addition, vaccination rates in countries where |
| the Company operates continue to increase. |
| The Company has implemented policies at its mines sites and office in Toronto and elsewhere designed to ensure the |
| safety and well-being of al employees and the people associated with them. In that regard, to reduce risk, our employees |
| have been encouraged to get fully vaccinated against COVID-19, have been asked to work remotely, avoid all non-essential |
| business travel, adhere to good hygiene practices, and engage in physical distancing. |
| The Company’s results of operations, financial position, and cash flows were adversely affected in both 2020 and 2021 |
| due to COVID-19. The continuing impact of the COVID-19 pandemic on the Company’s results of operations, financial |
| position and cash flows will depend on future developments, including the duration and spread of the outbreak, variants |
| of the COVID-19 virus, the availability, ongoing effectiveness, development and distribution of vaccinations and |
| treatments and on government advisories, restrictions, and financial assistance offered. To ensure a safe working |
| environment for the Company’s employees and contractors and to prevent the spread of COVID-19, the Company |
| continues to reinforce safety measures at all sites and offices including contact tracing, restricting non-essential travel, and |
| complying with public health orders. The impact of COVID-19 on the global financial markets, the overall economy and |
| the Company are highly uncertain and cannot be predicted. Maintaining normal operating capacity is also dependent on |
| the continued availability of supplies and contractors, which are out of the Company’s control. If the financial markets |
| and/or the overal economy continue to be impacted, the Company’s results of operations, financial position and cash |
| flows may be further affected. As the situation continues to evolve, the Company wil continue to monitor market |
| conditions closely and respond accordingly. |
| During 2021, the Company raised $12.7 million and $31.5 mil ion through a Canadian Development Expenses (“CDE”) |
| flow-through common share issuance and an equity financing, and a subsidiary of the Company secured an additional |
| $40.0 million for its Los Azules project in Argentina. See Item 8 | . Financial Statements and Supplementary Data, Note 13 |
| Shareholders’ Equity. |
| Continuation of COVID-19 in 2022 and beyond could impact employee health, workforce productivity, insurance |
| premiums, ability to travel, the availability of industry experts, personnel and equipment, restrictions or delays to field |
| work, studies, and assay results, impeding access to capital markets when needed on acceptable term and other factors that |
| will depend on future developments that may be beyond our control. The Company has completed various scenario |
| planning analyses to consider the potential impacts of COVID-19 on its business, including volatility in commodity prices, |
| temporary disruptions and/or curtailments of operating activities (voluntary or involuntary). However, there is no |
| assurance that these measures wil prevent adverse effects from COVID-19 in the future. |
| | |
| 49 |
| 2021 AND Q4/21 OPERATING AND FINANCIAL HIGHLIGHTS Highlights for the year and quarter ended December 31, 2021, are summarized below and discussed further in the |
| Consolidated Financial Performance: Corporate Developments |
| • | We re-organized McEwen Copper Inc. (“McEwen Copper”), originally a wholly-owned subsidiary, which holds |
| | 100% interest in the Los Azules copper project in the province of San Juan, Argentina and the Elder Creek project |
| | in Nevada. |
| • | William (Bill) Shaver, P. Eng., was appointed to the Board of Directors on September 29, 2021. Mr. Shaver |
| | replaces Gregory Fauquier, who has resigned from the Board of Directors after seven years of distinguished |
| | service to the Company. |
| Cash Flow and Results of Operations |
| • | Production within the full year 2021 guidance ranges. Gold equivalent ounces produced in Q4/21 remained |
| | strong at 40,153, including 20,190 attributable gold equivalent ounces from the San José mine(1) bringing the full |
| | year 2021 production total to 154,391 gold equivalent ounces, including 76,839 gold equivalent ounces from the |
| | San José mine(1). |
| • | 33% increase in gold equivalent ounces sold in 2021 over 2020. We sold 40,184 gold equivalent ounces in |
| | Q4/21, with 20,327 attributable ounces from the San José mine (1), bringing the total gold equivalent ounces sold |
| | in 2021 to 153,415, including 76,112 attributable gold equivalent ounces from the San José mine (1). |
| • | The Froome Mine attained commercial production on September 19, 2021, two months ahead of schedule. The |
| | Froome mine produced 24,289 gold equivalent ounces in 2021. |
| • | We reported cash, cash equivalents and restricted cash of $60.6 mil ion as at December 31, 2021, of which $39.8 |
| | million is to be used toward McEwen Copper for the advancement of the Los Azules Copper project. |
| • | In 2021 the Company raised additional gross proceeds of $12.7 mil ion and $31.5 million through a Canadian |
| | development expenditures (“CDE”) flow-through and an equity financing, respectively. |
| • | On March 2, 2022, the Company closed the private placement offering of 14,500,000 flow-through common |
| | shares priced at $1.04 for gross proceeds of $15.1 million. |
| • | Second half drove improved full year 2021 financial results. Revenue was $136.5 million representing a 30% |
| | increase over 2020, from the sale of 77,304 gold equivalent ounces during 2021 from our 100% owned properties; |
| | at an average realized price(2) of $1,803 per gold equivalent ounce. |
| • | We reported cash gross profit(2) of $17.3 million and gross loss of $6.5 mil ion in 2021 compared with cash gross |
| | loss(2) of $4.0 million and gross loss of $26.9 million in 2020. |
| • | We reported net loss of $56.7 million, or $0.12 per diluted share for the year 2021. |
| Exploration and Mineral Resources and Reserves |
| • | In H2/20, the Company completed two flow-through financings for combined net proceeds of $19.6 million. |
| | These proceeds were used to incur eligible exploration expenditures in the Timmins region in 2021 and will be |
| | used in 2022, with the primary focus around the Stock West, Grey Fox and Whiskey Jack targets (Fox Complex) | . |
| • | We continued our exploration programs during 2021 including a total $20.9 million spend and dril ing 77,670 |
| | and 5,259 meters (254,757 and 17,250 feet) at our Fox Complex and Nevada respectively. |
| • | On January 26, 2022, we announced the results of our Preliminary Economic Assessment (“PEA”) of the Fox |
| | Complex. The PEA estimates positive economics for our expansion project at Fox, where after depletion of |
| | Froome, production could continue for another 9 years, at average 80,800 oz gold per year. Overall, estimated |
| | economics predict an IRR of 21% at a gold price of $1,650/oz, at average cash costs and AISC $769/oz and |
| | $1,246/oz respectively. |
| 51 |
| • | In early 2021, the Company announced an updated Probable Reserve Estimate of 302,000 recoverable gold |
| ounces for the Gold Bar Mine in Nevada. |
| • | Approval of the mining permit is pending for Gold Bar South as of the date of filing this report. |
| | |
| (1) | At our 49% attributable interest. |
| (2) | As used here and elsewhere in this report, this is a Non-GAAP financial performance measure. See “Non-GAAP Financial |
| Performance Measures” beginning on page 63. | | |
| SELECTED CONSOLIDATED FINANCIAL AND OPERATING RESULTS |
| |
| The following tables present selected financial and operating results of our company for the three months ended December |
| 31, 2021 and 2020 and for the years ended December 31, 2021, 2020, and 2019: |
| |
| | | | | | | | | | | | | | | | | | | | Three months ended December 31, | | | | | Year ended December 31, |
| | | | 2021 | | | | | | | | | 2020 | 2021 | | 2020 | 2019 |
| | | | (in thousands, except per share) |
| Revenue from gold and silver sales(1) | | | $ | 34,966 $ | | | | | | | | | 27,703 | $ 136,541 $ 104,789 $ 117,019 |
| Production costs applicable to sales | | | $ | (33,742) $ | | | | | | | | | (34,560) | $ (119,223) $ (108,827) $ (83,280) |
| Loss before income and mining taxes | | | $ | (24,465) $ | | | | | | | | | (23,656) | $ (64,199) $ (153,715) $ (63,591) |
| Net loss(2) | | | $ | (21,028) $ | | | | | | | | | (23,542) | $ (56,884) $ (152,325) $ (59,747) |
| Net loss per share(2) | | | $ | (0.05) $ | | | | | | | | | (0.06) | $ (0.12) $ (0.38) $ (0.17) |
| Cash used in operating activities | | | $ | (1,147) $ | | | | | | | | | (2,600) | $ (20,223) $ (27,873) $ (39,527) |
| Cash additions to mineral property interests and |
| plant and equipment | | | $ | 6,405 $ | | | | | | | | | 4,069 | $ 34,888 $ 13,373 $ 29,707 |
| | |
| (1) | Excludes revenue from the San José mine, which is accounted for under the equity method. |
| (2) | Results for the year ended December 31, 2020 include an impairment charge of $83.8 million. |
| |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Three months ended December 31, Year ended December 31, |
| | | | 2021 | 2020 | 2021 | 2020 2019 |
| | | | | | | | | | | | (in thousands, except per ounce) |
| Produced - gold equivalent ounces(1) | | | 40.2 | 30.2 | 154.4 114.8 174.4 |
| 100% owned operations | | | 20.0 | 15.4 77.6 | | 60.3 82.7 |
| San José mine (49% at ributable) | | | 20.2 | 14.8 76.8 | | 54.5 91.7 |
| Sold - gold equivalent ounces(1) | | | 40.2 | 30.3 | 153.4 115.6 175.4 |
| 100% owned operations | | | 19.9 | 15.2 77.3 | | 60.7 85.1 |
| San José mine (49% at ributable) | | | 20.3 | 15.1 76.1 | | 54.9 90.3 |
| Average realized price ($/Au Eq. oz)(2)(3) | | | $ | 1,806 $ | | | | | 1,888 | | | $ 1,803 $ 1,771 $ 1,403 |
| P.M. Fix Gold ($/oz)(4) | | | $ | 1,795 $ | | | | | 1,874 | | | $ 1,799 $ 1,735 $ 1,393 |
| Cash cost per ounce ($/Au Eq. oz sold):(2) | | | | | | | | | | | | | | |
| 100% owned operations | | | $ | 1,601 $ | | | | | 2,197 | | | $ 1,453 $ 1,772 $ 949 |
| San José mine (49% at ributable) | | | $ | 1,708 $ | | | | | 1,234 | | | $ 1,262 $ 1,233 $ 867 |
| AISC per ounce ($/Au Eq. oz sold):(2) | | | | | | | | | | | | | | |
| 100% owned operations | | | $ | 1,940 $ | | | | | 2,393 | | | $ 1,635 $ 2,077 $ 1,251 |
| San José mine (49% at ributable) | | | $ | 2,043 $ | | | | | 1,455 | | | $ 1,603 $ 1,514 $ 1,140 |
| Cash gross profit (loss) (2) | | | $ | 1,224 $ | | | | | (6,857) | | | $ 17,318 $ (4,038) 33,739 |
| Gross profit (loss) | | | $ | (5,898) $ | | | | | (13,686) | | | $ (6,481) $ (26,948) | — |
| Silver : Gold ratio(1) | | | | 77 : 1 | | | | | 77 : 1 | | | 72 : 1 86 : 1 | 84:1 |
| | |
| (1) | Silver production is presented as a gold equivalent; silver:gold ratio of 72:1 for 2021 and 86:1 for 2020; 77:1 for Q4/21 and |
| 77:1 for Q4/20. |
| (2) | As used here and elsewhere in this report, this is a Non-GAAP financial performance measure. See “Non-GAAP Financial |
| Performance Measures” beginning on page 63. |
| (3) | On sales from 100% owned operations only, excluding streaming arrangement. | | | | | | | | |
| (4) | Average for the quarter or year as presented. | | |
| |
| 52 |
| CONSOLIDATED PERFORMANCE |
| For the year ended December 31, 2021, we reported a net loss of $56.7 mil ion (or $0.12 per share) compared to a net loss |
| of $152.3 million (or $0.38 per share) for the year ended December 31, 2020. The year over year improvement in net loss |
| was primarily due to no impairment in 2021, unlike 2020 where a non-cash impairment charge of $83.8 million at Gold |
| Bar was recorded. In addition, the improvement was a result of an increase in revenue of $31.8 million resulting from a |
| 30% increase in gold equivalent ounces sold and average realized price of $1,803 that was $32 per gold equivalent ounce |
| higher than 2020, partially offset by a $10.4 mil ion increase in cost of sales due to higher mining costs, $6.7 mil ion |
| increase in exploration spending, $6.0 million increased loss from MSC, and higher corporate costs related to insurance |
| premiums and other employee costs. MSC’s results declined in 2021 due to higher production costs attributable to COVID- |
| 19 and an overall increase in ounces sold. |
| Cash gross profit of $17.3 million for 2021 increased by $21.3 million compared to a gross cash loss of $4.0 million in |
| 2020, mainly as the result of an increase in production and revenue partial y offset by the increased operating costs |
| stemming from higher production levels. Improved operations at Gold Bar and the quicker than planned ramp up of |
| production from Froome at the Fox Complex, contributed to the improved Cash gross profit. See “Non-GAAP Financial |
| Performance Measures” for a reconciliation to gross (loss) profit, the nearest GAAP measure. |
| Production from our 100% owned mines of 77,553 gold equivalent ounces in 2021 increased by 17,210 gold equivalent |
| ounces compared to 2020. The increase is at ributed to a full year of normal operations, operational improvements at Gold |
| Bar, the ramp up ahead of schedule to commercial production at Froome, offset by lower than planned residual leach |
| production from the El Gallo Project, which produced approximately 4,500 fewer gold equivalent ounces in 2021 than |
| 2020 | . |
| Our share of the San José mine production of 76,839 gold equivalent ounces in 2021 was 22,339 ounces higher than in |
| 2020. This increase is attributable to operating at normal capacity in 2021 due to the government lifting restrictions |
| from COVID-19. |
| CONSOLIDATED FINANCIAL REVIEW |
| Year ended December 31, 2021 compared to 2020 |
| Revenue from gold and silver sales in 2021 of $136.5 million increased by 30% compared to 2020. The increase reflects |
| 16,661 more gold equivalent ounces sold from our 100% owned mines in 2021 compared to 2020, and a higher average |
| realized price of $1,803 per gold equivalent ounce or $32 per gold equivalent ounce increase year over year. | |
| The increase in gold equivalent ounces sold for the full year 2021 includes 4,958 more gold equivalent ounces sold from |
| the Black Fox mine, 16,098 more gold equivalent ounces sold from the Gold Bar mine, all partial y offset by 4,395 fewer |
| gold equivalent ounces sold from the El Gal o Project as these operations continue to wind down. |
| Production costs applicable to sales in 2021 increased by 9.6% to $119.2 mil ion compared to 2020. The increase was |
| primarily due to an increase in gold equivalent ounces sold during the year. |
| Advanced projects of $12.4 mil ion for 2021 increased by $0.7 mil ion compared to 2020. Advanced projects in 2021 |
| included continued spending for the Preliminary Economic Assessment of the Fox Complex expansion, the engineering |
| and permit ing work at the Gold Bar South property in Nevada, the Fenix project in Mexico, and the Los Azules project |
| in Argentina. |
| Exploration costs of $22.6 mil ion for 2021 increased by $6.7 million compared to 2020. Exploration activities ramped up |
| during 2021 following the funding received from our flow-through share sales completed in September and December |
| 2020. The funds are being used to expand high potential target areas in the Timmins region of Ontario. |
| General and administrative expenses of $11.4 million for 2021 increased by $2.2 mil ion, compared to 2020, due to higher |
| insurance premiums, corporate fees and other employee costs during the period ending December 31, 2021. |
| 53 |
| Loss from investment in MSC of $7.5 million in 2021, increased by $6.0 million compared to 2020. MSC’s results declined |
| in 2021 due to higher production costs applicable to sales due to COVID-19 and an overal increase in production arising |
| from increased production and higher taxes for the year. |
| Revision of estimates and accretion of reclamation and remediation obligations of $3.5 million in 2021, increased by $1.7 |
| mil ion from 2020. This year over year increase was due to reclamation adjustments reflecting updates to existing |
| estimates. | |
| Other income was $6.3 mil ion for 2021 compared to $6.9 mil ion for 2020. Other income in 2021 and 2020 includes |
| proceeds received from COVID-19 relief funds and 2021 also includes the sale of property in Nevada to a third party. | | |
| Income and mining tax recovery of $7.3 million for 2021 increased by $5.9 million from 2020. The increase in the tax |
| recovery is primarily due to the flow-through share premium amortization and by a change in the valuation allowance |
| mainly caused by the fluctuating Argentine and Mexican pesos against the U.S. dollar, causing fluctuations to the |
| Company’s deferred tax liabilities denominated in the respective foreign currency. |
| LIQUIDITY AND CAPITAL RESOURCES |
| Our cash and cash equivalents balance on December 31, 2021 of $54.3 mil ion increased by $33.5 million from the balance |
| at December 31, 2020. The increase in cash and cash equivalents for the year ended December 31, 2021, was primarily |
| driven by the cash received from financing activities of $81.0 million during 2021, of which $42.6 mil ion related to funds |
| raised for McEwen Copper. This was offset by additions to our mineral property, plant, and equipment of $34.9 mil ion. |
| Cash used in operations of $20.2 mil ion in 2021 decreased from $27.9 million in 2020. The $7.7 million variance is |
| primarily driven by the $11.6 mil ion reduction in net loss compared to 2020 after adjusting for the 2020 impairment |
| charge. |
| Cash used in investing activities of $24.6 mil ion in 2021 increased from $11.8 mil ion from 2020. The change is attributed |
| to the increased capital development costs incurred as commercial production was reached for the Froome mine deposit at |
| the Fox Complex during 2021. This was partially offset by $9.8 million in dividends received from MSC during 2021 |
| compared to $0.3M in 2020. |
| During 2021, we spent $34.9 mil ion on mineral property interests and plant and equipment representing an increase of |
| $21.5 million from the year 2020. The additions were primarily, related to capital development costs at the Froome Project |
| as we reached commercial production during 2021. |
| Cash from financing activities provided $81.0 million in 2021 compared to $17.6 mil ion in 2020. The significant increase |
| arose from $12.0 million from the CDE flow-through share raise completed in January 2021, $29.9 mil ion from the |
| registered direct common stock offering in February 2021, and $42.6 million from proceeds received from the selling of |
| 18.6% interest in McEwen Copper. |
| Cash from financing activities included net proceeds of $12.0 mil ion (gross proceeds of $12.7 million) from the issuance |
| of Canadian Development Expenditures (“CDE”) flow-through shares on January 29, 2021, and gross proceeds of $31.5 |
| mil ion (net proceeds of $29.9 million) from a registered direct equity offering on February 9, 2021. We are required to |
| spend the flow-through share proceeds on CDE flow-through eligible expenditures as defined by subsection 66.2(5) of the |
| Income Tax Act (Canada). For more details on our flow-through share financing, refer to Note 13 to the Consolidated |
| Financial Statements, Shareholders’ Equity. |
| In addition, we received proceeds in the amount of $40.0 mil ion relating to the first tranche of the series B private |
| placement for McEwen Copper and $2.6 mil ion received in advance from the ongoing second tranche financing. As of |
| December 31, 2021, McEwen Mining controls 81.4% of the common shares outstanding of McEwen Copper. For more |
| details refer to Note 20 to the Consolidated Financial Statements, Non-Controlling Interests. The proceeds received from |
| 54 |
| the financing activities for McEwen Copper wil be used to conduct economic studies on the Los Azules project in |
| Argentina. |
| Working capital as at December 31, 2021 of $32.6 mil ion increased by $24.7 million from December 31, 2020. The |
| change is attributed to the increase in cash and cash equivalents arising from the financing activities related to flow-through |
| shares and sale of shares of McEwen Copper discussed above. |
| The Company have sufficient liquidity along with funds generated from ongoing operations to fund anticipated cash |
| requirements for operations, capital expenditures and working capital purposes for the next 12 months. |
| OPERATIONS REVIEW |
| U.S.A. Segment |
| The U.S.A. segment is comprised of the Gold Bar mine and certain exploration properties. |
| Gold Bar mine |
| The following table sets out operating results for the Gold Bar mine for the three months and year ended December 31, |
| 2021, compared to 2020 and 2019: |
| |
| | | | | | | | | | | | | | | | | | | | | Three months ended December 31, | | | | Year ended December 31, | | |
| | | | 2021 | 2020 | 2021 | 2020 | 2019 |
| Operating Results | | | | | | | | (in thousands, unless otherwise indicated) | | |
| Mined mineralized material (t) | | | 511 | | 357 | 2,227 1,072 1,918 |
| Average grade (gpt Au) | | | | | | | | 0.39 | 0.77 | 0.63 0.72 0.82 |
| Processed mineralized material (t) | | | 529 | | 352 | 2,296 1,164 2,412 |
| Average grade (gpt Au) | | | | | | | | 0.41 | 0.74 | 0.64 0.69 0.81 |
| Gold ounces: | | | | | | | | |
| Produced | | | | | | | | 10.0 | | 5.9 | | | | | | 43.9 27.9 30.7 |
| Sold | | | | | | | | 10.1 | | 5.7 | | | | | | 43.9 27.8 30.5 |
| Silver ounces: | | | | | | | | |
| Produced | | | 0.1 | | 0.2 | 1.1 | 0.7 | 0.6 |
| Sold | | | — | | — | — | 0.6 | 0.3 |
| Gold equivalent ounces: | | | | | | | | |
| Produced | | | | | | | | 10.0 | | 5.9 | | | | | | 43.9 27.9 30.7 |
| Sold | | | | | | | | 10.1 | | 5.7 | | | | | | 43.9 27.8 30.5 |
| Revenue from gold and silver sales | | $ | | | | | | | 18,286 $ | 10,755 | $ 79,205 $ 48,884 $ 43,847 |
| Cash costs(1) | | $ | | | | | | | 20,615 $ | 19,602 | $ 73,991 $ 58,465 $ 33,614 |
| Cash cost per ounce ($/Au Eq. oz sold)(1) | | $ | | | | | | | 2,038 $ | 3,439 | $ 1,687 $ 2,106 $ 1,101 |
| All‑in sustaining costs(1) | | $ | | | | | | | 21,286 $ | 21,241 | $ 76,870 $ 68,272 $ 39,139 |
| AISC per ounce ($/Au Eq. oz sold)(1) | | $ | | | | | | | 2,104 $ | 3,726 | $ 1,753 $ 2,459 $ 1,282 |
| Silver : gold ratio | | | | | | | | 77 : 1 | 77 : 1 | 72 : 1 86 : 1 84 : 1 |
| | | | | | |
| (1) | As used here and elsewhere in this report, this is a Non-GAAP financial performance measure. Cash costs for the Company’s |
| 100% owned operations equal Production costs applicable to sales. See “Non-GAAP Financial Performance Measures” beginning |
| on page 63 for additional information. |
| 2021 compared to 2020 |
| Gold Bar produced 9,965 and 43,894 gold equivalent ounces in Q4/21 and the full year 2021. This represents a 69% and |
| 57% increase from the 5,900 and 27,923 gold equivalent ounces produced in Q4/20 and the full year 2020, respectively. |
| The increase was largely due to improvements in contractor mining efficiencies, processing, and ore control realized in |
| the full year 2021. The full year 2020 production results were negatively impacted by COVID-19 related suspensions and |
| a decrease in the grade of ore mined and processed. |
| 55 |
| Revenue from gold and silver sales was $18.3 million in Q4/21 compared to $10.8 mil ion in Q4/20. The increase in |
| revenues in was due to an increase in ounces sold during Q4/21 bolstered by higher average realized gold prices relative |
| to Q4/20 ($1,910 per GEO in Q4/21; $1,888 per GEO in Q4/20). Revenue from gold and silver sales was $79.2 million |
| for the full year 2021 compared to $48.9 mil ion for the full year 2020, the increase was primarily due to improved heap |
| leach operating efficiencies realized in 2021. During the year 2021, there was no material adverse COVID-19 impact on |
| the operations of Gold Bar compared to suspension of operations related to COVID-19 in 2020. |
| Production costs applicable to sales were $20.6 million in Q4/21 compared to $19.6 mil ion in Q4/20. The increase is |
| primarily due to higher cost of precious metal inventories sold during the Q4/21 that were historically carried at higher |
| costs at Gold Bar. Production costs applicable to sales were $74.0 million for the full year 2021, compared to $58.5 mil ion |
| for the full year 2020, attributable to primarily a 26% year over year increase in gold equivalent ounces sold that were |
| historically carried at higher costs. |
| Cash cost and AISC per gold equivalent ounce sold were $2,038 and $2,104 in Q4/21 respectively compared to $3,439 |
| and $3,726 in Q4/20 respectively. The decrease was primarily due to lower mining cost as a result of mined waste materials |
| decreased by 47% compared to Q4/20. |
| Cash cost and AISC per gold equivalent ounce sold were $1,687 and $1,753 for the full year 2021 respectively compared |
| to $2,106 and $2,459 for the full year 2020 respectively. The year-over-year decrease was primarily due higher gold |
| equivalent ounces produced and sold from the stacked heap leach pad. |
| Exploration Activities – Nevada |
| In Q4/21 and full year 20/21, we incurred $1.5 mil ion and $4.2 million, respectively compared to $1.0 million and $5.1 |
| mil ion in Q4/20 and full year 2020, respectively in exploration expenditures in the Gold Bar mine area. In Q4/21, core |
| dril ing resumed in the North Ridge, SW Pick, and Cabin North areas. The permitting process to access ore at Gold Bar |
| South is ongoing and we are anticipating receiving the permit in Q1/22. The initiation of gold production of Gold Bar |
| South is planned in H2/22. |
| The exploration activities in 2021 included metallurgical, geotechnical and dril ing programs for a cumulative 8,620 feet |
| (2,627m) at Ridge and Tonkin Rooster. Delineation drilling programs were conducted at Atlas Pit, SW Pick Extension, |
| and Cabin North with cumulative 8,629 feet (2,632m) completed. Delineation dril ing at Cabin North and Pick SW |
| Extension is ongoing | . |
| Canada Segment |
| The Canada segment is comprised of the Fox Complex, which includes the Black Fox gold mine, the Froome mine, the |
| Stock mill, the Grey Fox and Stock West advanced-stage projects, and other gold exploration properties located in |
| Timmins, Ontario, Canada | | . |
| Fox Complex, Black Fox mine and Froome mine development |
| Black Fox mine production wound down during 2021 as production shifted to the Froome Mine. We realized a milestone |
| on September 19, 2021 when commercial production was reached at the Froome mine, three months ahead of schedule. |
| On January 26, 2022, we announced the results of our PEA of the Fox Complex. The PEA presents estimates for a positive |
| business case for the Fox Complex expansion project, with potential average gold production of 80,800 oz per year over |
| nine years, after the depletion of Froome. Economic analysis estimate an IRR of 21% at a gold price of $1,650/oz, and |
| average cash costs and AISC of $769/oz and $1,246/oz, respectively. Additional exploration work on the Fox Complex |
| properties wil be conducted through 2022 to support ongoing studies necessary for approval of the expansion project. No |
| decision has been made to pursue development of any of these additional projects. |
| 56 |
| The following table sets out operating results for the Black Fox and Froome mine for the three months ended December |
| 31, 2021, and 2020, and the years ended December 31, 2021, 2020, and 2019: |
| |
| | | | | | | | | | | | | | | | | | | | | Three months ended December 31, | | | | Year ended December 31, | | |
| | | | 2021 | 2020 | 2021 | 2020 | 2019 |
| |
| Operating Results | | | | | | | | (in thousands, unless otherwise indicated) | | |
| Mined mineralized material (t) | | | 122 | | 62 | 307 | 200 214 |
| Average grade (gpt Au) | | | | | | | | 3.05 | 4.00 | 3.38 3.51 | 5.04 |
| Processed mineralized material (t) | | | 92 | | 68 | 303 | 235 244 |
| Average grade (gpt Au) | | | | | | | | 3.41 | 3.77 | 3.24 3.19 | 4.83 |
| Gold equivalent ounces: | | | | | | | | |
| Produced | | | 9.5 | | 8.0 | | | | | | 30.0 24.4 35.7 |
| Sold | | | 9.2 | | 8.0 | | | | | | 29.7 24.8 37.7 |
| Revenue from gold and silver sales | | $ | | | | | | | 15,738 $ | 14,195 | $ 50,704 $ 41,452 $ 50,058 |
| Cash costs(1) | | $ | | | | | | | 10,339 $ | 10,408 | $ 32,961 $ 34,639 $ 31,121 |
| Cash cost per ounce ($/Au Eq. oz sold)(1) | $ | | | | | | | 1,122 $ | 1,307 | $ 1,108 $ 1,397 $ 825 |
| All‑in sustaining costs(1) | $ | | | | | | | 16,221 $ | 11,454 | $ 43,457 $ 40,904 $ 46,192 |
| AISC per ounce ($/Au Eq. oz sold)(1) | $ | | | | | | | 1,760 $ | 1,439 | $ 1,461 $ 1,650 | | $ 1,225 |
| Silver : gold ratio | | | | | | | | 77 : 1 | 77 : 1 | 72 : 1 86 : 1 84 : 1 |
| | | | | | |
| (1) | As used here and elsewhere in this report, this is a Non-GAAP financial performance measure. Cash costs for the Company’s |
| 100% owned operations equal Production costs applicable to sales. See “Non-GAAP Financial Performance Measures” beginning |
| on page 63 for additional information. |
| 2021 compared to 2020 |
| Production in Q4/21 and for the full year 2021 from the Black Fox and Froome mines was 9,458 and 30,016 gold equivalent |
| ounces, respectively compared to 8,049 and 24,353 gold equivalent ounces in Q4/20 and the full year 2020, respectively. |
| The increase in production is at ributable to the better than expected production from Froome mine. The Froome mine |
| produced 9,458 and 24,289 gold equivalent ounces in Q4/21 and the full year 2021, respectively. The increase in gold |
| equivalent ounces produced was primarily due to higher ore mined and milled. During the Q4/2021, Black Fox and Froome |
| mined 122,195 tonnes of ore compared with 61,604 tonnes of ore mined at the Black Fox mine during Q4/20. |
| Revenue from gold and silver sales increased in Q4/21 and the full year 2021 by $1.5 million, or 11% and $9.3 million or |
| 22%, respectively, compared to Q4/20 and the full year 2020. Increase was primarily due to higher gold equivalent ounces |
| produced and sold and average realized gold price per ounce that increased from $1,888 and $1,771 in Q4/20 and the full |
| year 2020, respectively to $1,806 and $1,803 in Q4/21 and the full year 2021, respectively. |
| Production costs applicable to sales were $10.3 mil ion and $33.0 million in Q4/21 and the full year ended December 31, |
| 2021, respectively compared to $10.4 mil ion and $34.6 million in Q4/20 and the full year ended December 31, 2020, |
| respectively. The decrease in production costs are primarily due to higher ounces produced and lower costs of consumables |
| supplies as production ramped up at the Froome mine. |
| Cash cost and AISC per gold equivalent ounce sold were $1,122 and $1,760 in Q4/21, respectively, compared to $1,307 |
| and $1,439 in Q4/20, respectively. The decrease in cash costs per gold equivalent ounce sold for Q4/21 was driven by the |
| decrease in the mining costs. Mining costs per tonne decreased from $90 per tonne in Q4/20 to $71 per tonne in Q4/21. |
| The increase in AISC per gold equivalent ounce sold over Q4/20 was primarily due to higher gold equivalent ounce sold |
| and $5.3 mil ion in sustaining capital costs incurred relating to the Froome mine development coming into commercial |
| production three months ahead schedule. |
| For the full year 2021, Cash cost and AISC per gold equivalent ounce sold were $1,108 and $1,461 , respectively compared |
| to $1,397 and $1,650 for the full year 2020. The decrease in cash cost per gold equivalent ounces was primarily due to |
| lower mining costs and higher ounces. During the full year 2021, mining costs were $77 per tonne compared to $102 per |
| tonne in the full year 2020. The decrease in costs per tonne was primarily due to 54% greater tonnes mined with Froome |
| mine coming into commercial production and lower maintenance costs. The decrease in AISC per gold equivalent ounce |
| 57 |
| sold was primarily due to higher ounces sold and less sustaining capital spending during 2021 due to winding down of the |
| Black Fox mine. |
| Froome Underground Mine Development |
| The Froome mine, which is part of the overall Fox Complex, is accessed from two declines at the bottom of the Black Fox |
| pit and situated approximately one-half mile west of the ceased Black Fox mine. As was the case with the Black Fox |
| deposit, the mineralized material from Froome is hauled approximately 20 miles to the Stock mil for processing. |
| On September 19, 2021, we successfully reached commercial production Froome, three months ahead of schedule. To |
| date, ore extracted from the Froome mine produced grades that are consistent with the resources model and mine plan. |
| Encouraging dril results from near-mine exploration activities were also obtained. Exploration initiatives near the Froome |
| mine are designed to extend the mine life and resource. |
| We are targeting higher production and lower cost profiles at the Fox Complex. The intention is to leverage the potential |
| for operational synergies through shared resources and infrastructure, longer life of mine and expanded production scale |
| for the combined project | s. |
| Exploration Activities and Expansion Study – Timmins |
| We remain focused on our principal exploration goal of cost-effectively discovering and extending gold deposits adjacent |
| to our existing operations to contribute to near-term gold production. For exploration initiatives at the Fox Complex, we |
| incurred $2.5 million and $15.0 million in Q4/21 and the ful year 2021 respectively, compared to $2.0 mil ion and $6.5 |
| mil ion in Q4/20 and the full year 2020. |
| Exploration activities ramped up as a result of proceeds received from the flow-through share programs in 2020. We |
| focused the proceeds on exploration work around the Grey Fox, Stock West, and Stock Main (historical mine) targets. |
| Specifical y, we conducted surface gold exploration activities throughout Q4 2021, and dril ing shallow targets close to |
| the Stock Mill. | | |
| Black Fox mine |
| Before Black Fox ceased operations in September 2021, it continued to deliver high grade assay results from underground |
| dril ing completed between Q1 and Q3 of 2021. The focus of 2021 underground drilling was to add resources in areas that |
| could extend the life of mine. There is potential to extend mineralization to greater depths as wel as towards the western |
| margin of the ore body. |
| Froome mine |
| Diamond drilling from underground at Froome continued in Q4/21. Three drilling rigs combined to generate 13,051 meters |
| of core over the 3-month period. Our total underground definition, delineation, and exploration dril ing generated 65,310 |
| meters of core for the year. |
| Stock & Grey Fox property |
| The Stock exploration area sits adjacent to our Stock mil , which currently processes ore from our Black Fox and Froome |
| mines. This facility processed ore from the historical underground Stock mine, which operated intermittently by a third |
| party from the early 1980s until 2004, generating a total of 137,000 ounces of gold. |
| The Company focused its surface gold exploration activities throughout Q4/2021 on drilling shal ow targets situated close |
| to the Stock Mill, old stock mine workings and proximal to the new Stock decline proposed in the Fox Complex PEA. |
| Three contracted drilling rigs combined to generate 9,239 meters of core over the 3-month period with assays pending. |
| 58 |
| This brought our annual total to 77,670 meters from the 185 surface holes drilled within the Fox Complex exploration |
| properties. |
| Initial gold resources that will contribute to our growth plans have been outlined. |
| Additional highlights include: |
| • | Encouraging assay results show the potential of the Stock West mineralized zones to extend eastward to depth |
| | and 200 meters along a prominent shal ow eastern plunge-vector. |
| • | Drilling is planned for 2022 to investigate an intercept in hole S21-202 | , which encountered 21 meters of |
| | mineralization at an average gold grade of 4.29 g/t. If drilling shows this intercept connects to mineralization at |
| | Stock West, it could material y enlarge the boundaries of the Stock West system. |
| • | The host lithology of the Stock West mineralization was also recently intersected in the footwall of the historic |
| | Stock mine. These observations support our confidence that the property is early in its discovery phase of |
| | exploration. |
| Mexico Segment |
| The Mexico segment includes the El Gallo Project (formerly “El Gal o 1” or “El Gallo Mine”) and the advanced-stage |
| Fenix Project, located in Sinaloa. |
| El Gallo Project |
| Current activities at the El Gal o Project are limited to residual leaching as part of closure and reclamation plans. |
| The following table summarizes certain operating results at the El Gallo Project for the three months ended December 31, |
| 2021, and 2020, and for the years ended December 31, 2021, 2020, and 2019: |
| |
| | | | | | | | | | | | | | | | | | | | | | | | Three months ended December 31, | | | | | Year ended December 31, | | | |
| | | | | | 2021 | 2020 | | 2021 | | 2020 | 2019 |
| Operating Results | | | | | (in thousands, unless otherwise indicated) | | | | |
| Gold ounces: | | | | | | | | | | | | |
| Produced | | | | | 0.5 | | 1.5 | | 3.5 | | 8.0 16.2 |
| Sold | | | | | 0.5 | | 1.5 | | 3.6 | | 8.1 16.8 |
| Silver ounces: | | | | | | | | | | | | |
| Produced | | | | | 2.0 | | 0.2 | | 7.0 | | 4.9 | 8.4 |
| Sold | | | | | 1.9 | | — | | 7.8 | | 5.0 | 8.5 |
| Gold equivalent ounces: | | | | | | | | | | | | |
| Produced | | | | | 0.5 | | 1.5 | | 3.6 | | 8.1 16.3 |
| Sold | | | | | 0.5 | | 1.4 | | 3.7 | | 8.1 16.9 |
| Revenue from gold and silver sales | | $ | | | | 942 $ | 2,752 | | $ 6,632 $ 14,453 $ 23,114 |
| Silver : gold ratio | | | | | | | | | | 77 : 1 | 77 : 1 | | 72 : 1 86 : 1 84 : 1 |
| |
| Cash costs and Al -in-sustaining costs and Cash costs and AISC per gold equivalent ounce |
| As the El Gal o Project’s gold and silver production and sales result from residual leaching activities, we have ceased |
| relying on, and disclosing, cash cost and AISC per gold equivalent ounce as key metrics for the operation. |
| Incremental residual leaching costs, that included production costs less inventory movements, for Q4/21 and the full year |
| 2021 were $0.8 mil ion and $3.5 mil ion or $2,557 and $1,738 per gold equivalent ounce, respectively. This resulted in a |
| $3.3 mil ion write-down of the heap leach and in-circuit inventory balances during the full year 2021. |
| 59 |
| 2021 compared to 2020 |
| Production and revenue decreased, as expected, in Q4/21 and for the full year 2021 compared to Q4/20 and the full year |
| 2020, as the heap leach operation continues to wind down. This was partially offset by higher average realized gold prices |
| during Q4/21 and the full year 2021 compared to Q4/20 and the full year 2020. |
| Advanced-Stage Properties – Fenix Project |
| In December 2020, we announced the positive results of a feasibility study for the development of our 100%-owned Fenix |
| Project, which includes the El Gallo Gold and El Gal o Silver deposits. |
| The study envisions a 9.5-year mine life with an attractive after-tax IRR of 28% using $1,500/oz gold and $17/oz silver, |
| with an estimated initial capital expenditure of $42.0 mil ion for Phase 1 and $24.0 million for Phase 2. The project |
| implementation is envisioned in two distinct phases: Phase 1 (years 1 to 6) - gold production from heap leach reprocessing, |
| and Phase 2 (years 7 to 10) - silver production from open pit mining. No development decision has been made with regard |
| to this project. |
| The Fenix Project feasibility study was published on February 16, 2021 and is available for review on our website and |
| SEDAR (www.sedar.com). |
| The key environmental permits for Phase 1 were received in 2019, including the approval for an in-pit tailings storage |
| facility and process plant construction. |
| We incurred $0.2 million and $1.8 million in Q4/21 and the full year 2021, respectively, ($0.9 million and $2.5 million in |
| Q4/20 and full year 2020, respectively) on activities required to advance the Fenix Project. Multiple strategic alternatives |
| are being evaluated, including assessing lower capital cost alternatives for Fenix, developing a plan to define the base |
| metal potential for the district, and possible divestiture of our Mexican business unit. |
| 60 |
| MSC Segment, Argentina |
| The MSC segment is comprised of a 49% interest in the San José mine, located in Santa Cruz, Argentina. | |
| MSC – Operating Results |
| The following table sets out operating results for the San José mine for the three months ended December 31, 2021 and |
| 2020, and for the years ended December 31, 2021, 2020, and 2019. |
| |
| | | | | | | | | | | | | | | | | | | | | | | Three months ended December 31, | | | | | Year ended December 31, |
| | | | | 2021 | 2020 | 2021 | 2020 | | | | | 2019 |
| Operating Results | | (in thousands, except otherwise indicated) |
| |
| San José Mine—100% basis | | | | | | | |
| Mined mineralized material (t) | | | | 144 | | 95 | 532 | 400 | | | | | 554 |
| Average grade mined (gpt) | | | | | | | | | |
| Gold | | | | 5.7 | | 5.3 | 5.4 | 5.7 | | | | | 6.9 |
| Silver | | | | 358 | | 339 | 353 | 389 | | | | | 472 |
| Processed mineralized material (t) | | | | 143 | | 110 | 539 | 401 | | | | | 544 |
| Average grade processed (gpt) | | | | | | | | | |
| Gold | | | | 5.8 | | 5.6 | 5.5 | 5.6 | | | | | 6.8 |
| Silver | | | | 346 | | 345 | 344 | 357 | | | | | 443 |
| Average recovery (%): | | | | | | | | | |
| Gold | | | | | | | | | 86.9 | | | | | | | 89.2 | 88.1 89.4 88.6 |
| Silver | | | | | | | | | 87.3 | | | | | | | 88.9 | 88.0 89.1 88.3 |
| Gold ounces: | | | | | | | | | |
| Produced | | | | | | | | | 23.1 | | | | | | | 17.7 | 83.6 65.0 105.5 |
| Sold | | | | | | | | | 22.7 | | | | | | | 18.0 | 81.8 65.3 102.8 |
| Silver ounces: | | | | | | | |
| Produced | | | | | | | | | 1,393 | | | | | | | 1,085 | 5,250 4,108 6,846 |
| Sold | | | | | | | | | 1,392 | | | | | | | 1,112 | 5,229 4,172 6,846 |
| Gold equivalent ounces: | | | | | | | | | |
| Produced | | | | | | | | | 41.2 | | | | | | | 30.2 | 156.8 111.2 187.0 |
| Sold | | | | | | | | | 41.5 | | | | | | | 30.8 | 155.3 112.1 184.3 |
| Revenue from gold and silver sales | | $ | 76,065 $ | | | | | | | | | 64,354 | $ 271,863 $ 219,020 $ 263,887 |
| Average realized price: | | | | | | | | | |
| Gold ($/Au oz) | | $ | | | | | | | | 1,869 $ | 1,762 | $ 1,760 $ 1,842 $ 1,448 |
| Silver ($/Ag oz) | | $ | | | | | | | | 24.12 $ | 29.40 | $ 24.45 $ 23.67 $ 16.80 |
| Cash costs(1) | | $ | 70,866 $ | | | | | | | | | 37,950 | $ 196,032 $ 138,182 $ 159,915 |
| Cash cost per ounce ($/Au Eq. oz sold)(1) | | $ | | | | | | | | 1,708 $ | 1,234 | $ 1,262 $ 1,233 $ | | | 867 |
| All‑in sustaining costs(1) | | $ | 84,761 $ | | | | | | | | | 44,744 | $ 249,018 $ 169,715 $ 210,186 |
| AISC per ounce ($/Au Eq. oz sold)(1) | | $ | | | | | | | | 2,043 $ | 1,455 | $ 1,603 $ 1,514 $ 1,140 |
| Silver : gold ratio | | | | | | | | | 77 : 1 | 77 : 1 | 72 : 1 | 89 : 1 | | | | 84 : 1 |
| | | | | | | |
| (1) | As used here and elsewhere in this report, this is a Non-GAAP financial performance measure. Cash costs for the Company’s |
| 100% owned operations equal Production costs applicable to sales. See “Non-GAAP Financial Performance Measures” beginning |
| on page 63 for additional information. |
| The comparative analysis below compares the operating and financial results of MSC on a 100% basis. |
| 2021 compared to 2020 |
| Gold and silver production increased in Q4/21 by 30% and 28% respectively, compared to Q4/20. The increase arose from |
| an increase in mined and processed mineralized material in addition to higher processed grades. Operations in Q4/20 were |
| limited due to a decrease in available staff and restrictions in travel mandated by provincial and federal authorities to limit |
| the spread of COVID-19. As of Q4/21, some of these restrictions have been lifted, al owing staff to mobilize to and from |
| the site. |
| 61 |
| Gold and silver production increased for the full year 2021 by 29% and 28%, respectively, compared to the full year 2020 |
| as a result of a 34% increase in processed mineralized material, offset by a 4% decrease in silver grade and a 2% decrease |
| in gold grade of the mineralized material processed in 2021. As previously discussed, mining and mill throughput was |
| limited for the full year 2020 due to COVID-19 restrictions. |
| Revenue from gold and silver sales increased by 18% and 24% in Q4/21 and for the full year 2021 compared to Q4/20 and |
| the full year 2020. This increase arose primarily from an increase in gold equivalent ounces sold for the full year 2021. |
| Revenues on concentrate sales include provisional sales adjustments which contributed to the decreased per ounce average |
| realized price per GEO Q4/21. |
| Cash costs in Q4/21 and the full year 2021 increased by $32.9 mil ion and $57.9 million, or 87% and 42% respectively |
| compared to Q4/20 and the full year 2020. The change is attributable to the increase in mineralized material processed |
| arising from increased production and sales during 2021. In addition, MSC expended a significant amount in extra costs |
| for COVID-19 risk mitigation activities during Q4/21 including alternative housing, testing, and travel arrangements. |
| All-in sustaining cost per gold equivalent ounce increased in Q4/21 compared to Q4/20 as a result of the above discussion |
| and remained consistent for the full year 2021 compared to the full year 2020. |
| Investment in MSC | |
| We recognized losses of $2.5 million and $7.5 million during Q4/21 and for the full year 2021 respectively attributable to |
| our 49% share of operations from our investment in MSC. A loss of $0.4 mil ion was recognized in Q4/20 while a loss of |
| $1.5 million was recognized for the full year 2020. The change in Q4/21 compared to Q4/20 arose from a $15.1 million |
| decrease in gross profits largely attributed to the COVID-19 expenditures during Q4/21. |
| Exploration activities were focused on the Telken Norte and Saavedra near-mine targets. Drilling is expected to continue |
| through 2022. |
| MSC Dividend Distribution (49%) |
| We received $2.3 million and $9.8 million in dividends from MSC during Q4/21 and the full year 2021 respectively, |
| compared to $0.3 million received during the comparative periods in 2020. |
| McEwen Copper Inc. |
| In 2021 we established McEwen Copper Inc. (“McEwen Copper”), originally a wholly-owned subsidiary of Minera Andes |
| Inc. (“MAI”), a wholly-owned subsidiary of the Company. McEwen Copper holds a 100% interest in the Los Azules |
| copper project in the province of San Juan, Argentina, and the Elder Creek exploration property in Nevada. On August 23, |
| 2021, we successfully closed the first tranche of the private placement, a $40 million investment from an affiliate of our |
| Chairman and CEO, Rob McEwen. MAI now owns 81.4% of McEwen Copper following the completion of the private |
| placement. |
| McEwen Copper intends to pursue an initial public listing within 12 months of the completion of the private placement |
| transaction. | | |
| Los Azules Project |
| The Los Azules project is one of the world’s largest undeveloped open-pit copper porphyry deposits and is located in San |
| Juan, Argentina. The total indicated and inferred mineral resources are estimated at 10.2 and 19.3 billion lbs. of copper |
| respectively. A PEA was completed on the Los Azules project in 2017. |
| Work has progressed rapidly following the closing of the first tranche of the private placement. Drill crews were mobilized |
| to site in Q4/21 to begin a 174,000 ft (53,000m) phase one drill program that is expected to run through the end of Q2/22. |
| In the future, the Company anticipates completing a road that will al ow for year-round access to the project for drilling |
| 62 |
| and other activity. The program’s focus will be to confirm the existing indicated mineral resource and upgrade areas |
| currently classified as inferred to indicated. Dril ing necessary to complete geo-metal urgical and geotechnical evaluations |
| is also included in the program that will be conducted by an established and well-recognized dril ing contractor employing |
| the local workforce. |
| Historically, drilling has been conducted at Los Azules with vertical dril holes. Given there is structural and lithologic |
| features (faults, contacts, hydrothermal breccia) that are sub-vertical to vertical in orientation, the phase one and subsequent |
| dril programs will focus on dril ing inclined holes typically dipping between -70 and -80 degrees. This will ensure many |
| more of these features wil be intersected, observed and captured in databases. This information wil be useful in further |
| fixing the location of geological and other domains necessary to strengthen the geologic and resource models. |
| In addition to the planned drill program, technical teams will also utilize borehole televiewer technologies to supplement |
| the capture of geotechnical information. Two hyperspectral scanning units are also being deployed to capture data from |
| the existing suite of core stored at Calingasta and new core dril ed in the current program. In all, 100,000 meters of core |
| will be analyzed to ensure greater consistency of core logging and to help resolve areas of lithologic or alteration-related |
| uncertainty. Together, this work wil support the creation of a significantly improved multi-element litho-structural model. |
| Construction has begun on the new access road that wil provide year-round access to the project. To date, construction |
| has advanced 11 miles from the east (72-mile planned length). As part of our ongoing involvement with local communities |
| and entrepreneurs, local contractors are being sourced for the construction. |
| During the year ended December 31, 2021, we spent $5.0 mil ion, mainly on advancing on the project. In the comparative |
| period of 2020, the Company spent $2.1 million on activities to progress access and site preparation and detailed |
| engineering plans. |
| Please refer to our website at www.mcewenmining.com for further details. |
| COMMITMENTS AND CONTINGENCIES |
| As of December 31, 2021, we have the following consolidated contractual obligations: |
| |
| | | | | | | | | | | | | | | | | | | | | | Payments due by period |
| | | 2022 | 2023 | | | | | 2024 | 2025 Thereafter | | Total |
| Mining and surface rights | | $ | 492 | $ | 488 | | | | $ | 470 | $ | 443 | $ | — | $ | 1,893 |
| Exploration | | | | | | | | | 8,116 | | 15,080 | | | | | — | | — | | — | | 23,196 |
| Reclamation costs(1) | | | | | | | | 6,358 | 5,873 | | | | | 525 | | | | | 1,186 | 29,215 | 43,158 |
| Long-term debt | | | | | | | | 4,875 | 14,712 | | | | | | | | | | | | 32,710 | 10,027 | — | 62,324 |
| Lease obligations | | | | | | | | 2,949 | 1,058 | | | | | 441 | — | — | 4,448 |
| Total | $ | | | | | | | 22,791 $ | 37,211 $ | | | | | | | | | | | | 34,146 $ | 11,656 $ | 29,215 $ 135,019 |
| | | | | | | | | | | | | |
| (1) Amounts presented represent the undiscounted uninflated future payments. |
| Operating lease obligations include long term leases covering office space, exploration expenditures, option payments and |
| option payments on properties. |
| We have surety bonds outstanding to provide bonding for our environmental reclamation obligations in the United States |
| and Canada. These surety bonds are available for draw down in the event we do not perform our reclamation obligations. |
| If the bond is drawn, we would be obligated to reimburse the surety. When the specific reclamation requirements are met, |
| the beneficiary of the surety bonds will cancel and/or return the instrument to the issuing entity. As of December 31, 2021, |
| no additional liability has been recognized for our surety bonds of $37.7 million. |
| | |
| 63 |
| NON-GAAP FINANCIAL PERFORMANCE MEASURES |
| We have included in this report certain non-GAAP performance measures as detailed below. In the gold mining industry, |
| these are common performance measures but do not have any standardized meaning and are considered non-GAAP |
| measures. We believe that, in addition to conventional measures prepared in accordance with GAAP, certain investors use |
| such non-GAAP measures to evaluate our performance and ability to generate cash flow. We also report these measures |
| to provide investors and analysts with useful information about our underlying costs of operations and clarity over our |
| ability to finance operations. Accordingly, they are intended to provide additional information and should not be |
| considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. There are |
| limitations associated with the use of such non-GAAP measures. We compensate for these limitations by relying primarily |
| on our U.S. GAAP results and using the non-GAAP measures supplemental y. |
| The non-GAAP measures are presented for our wholly owned mines and our interest in the San José mine. The GAAP |
| information used for the reconciliation to the non-GAAP measures for our minority interest in the San José mine may be |
| found in Item 8. Financial Statements and Supplementary Data, Note 10, Investment in Minera Santa Cruz S.A. (“MSC”) |
| – San José Mine. The amounts in the tables labeled “49% basis” were derived by applying to each financial statement line |
| item the ownership percentage interest used to arrive at our share of net income or loss during the period when applying |
| the equity method of accounting. We do not control the interest in or operations of MSC and the presentations of assets |
| and liabilities and revenues and expenses of MSC do not represent our legal claim to such items. The amount of cash we |
| receive is based upon specific provisions of the Option and Joint Venture Agreement (“OJVA”) and varies depending on |
| factors including the profitability of the operations. |
| The presentation of these measures including the minority interest in the San José, has limitations as an analytical tool. |
| Some of these limitations include: |
| • | The amounts shown on the individual line items were derived by applying our overall economic ownership |
| | interest percentage determined when applying the equity method of accounting and do not represent our legal |
| | claim to the assets and liabilities, or the revenues and expenses; and |
| • | Other companies in our industry may calculate their cash gross profit, cash costs, cash cost per ounce, all-in |
| | sustaining costs, all-in sustaining cost per ounce, average realized price per ounce, and liquid assets differently |
| | than we do, limiting the usefulness as a comparative measure. |
| Cash Gross Profit |
| Cash gross profit is a non-GAAP financial measure and does not have any standardized meaning. We use cash gross profit |
| to evaluate our operating performance and ability to generate cash flow from mining operations; we disclose cash gross |
| profit or loss as we believe this measure provides valuable assistance to investors and analysts in evaluating our ability to |
| finance our ongoing business and capital activities. The most directly comparable measure prepared in accordance with |
| GAAP is gross profit or loss. Cash gross profit or loss is calculated by adding depletion and depreciation to gross profit or |
| loss. |
| 64 |
| The following tables present a reconciliation of cash gross profit or loss to the most directly comparable GAAP measure, |
| gross profit or loss: |
| |
| | | | | | | | | | | | | | | | | | | | | | | Year ended December 31, 2021 | |
| | | | | | | | | | Total (100% |
| | | | | | | | Gold Bar | Fox Complex | | | | | | El Gallo | owned) |
| | | | (in thousands) | | |
| Gross profit (loss) | $ | (3,288) $ | | | | | | | 2,448 $ | | (5,640) $ | (6,480) |
| Add: Depreciation and depletion | | 8,502 | | | | | | | 15,296 | — | | | | | 23,798 |
| Cash gross profit (loss) | $ | 5,214 $ | | | | | | | 17,744 $ | | (5,640) $ | 17,318 |
| | | | | | | | | |
| |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | Three months ended December 31, | | | | | | | Year ended December 31, |
| | | 2021 | | | | | | | 2020 | | 2021 | 2020 | 2019 |
| | | | (in thousands) |
| San José mine cash gross profit (100% basis) | | | | | | | | | | | |
| Gross (loss) profit | | $ | | | | | | (6,327) $ | 18,679 $ | 35,882 $ | 51,029 $ | 33,977 |
| Add: Depreciation and depletion | | | | | | | | 11,527 | 7,725 | 39,948 | 29,809 | 69,995 |
| Cash gross (loss) profit | | $ | 5,200 $ | | | | | | | 26,404 $ | 75,830 $ | 80,838 $ | | | | | | 103,972 |
| |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year ended December 31, 2020 |
| | | | | | | | | | Total (100% owned) |
| | | | | | | | | Gold Bar | | | | | | | Fox Complex | El Gallo |
| | | | | | | | | (in thousands) |
| Gross (loss) profit | | | | | | | $ | (21,366) $ | | | | (4,070) $ | (1,512) $ | | | | | | (26,948) |
| Add: Depreciation and depletion | | | | | | | | 11,785 | | | | 10,883 | 242 | 22,910 |
| Cash gross (loss) profit | | | | | | | $ | (9,581) $ | | | | 6,813 $ | (1,270) $ | (4,038) |
| |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year ended December 31, 2019 |
| | | | | | | | | Gold Bar | | | | | | | Fox Complex | El Gallo Total (100% owned) |
| | | | | | | | | (in thousands) |
| Gross (loss) profit | | | | | | | $ | (701) $ | | | | 5,666 $ | 4,021 $ | 8,986 |
| Add: Depreciation and depletion | | | | | | | | 10,934 | | | | 13,271 | 548 | 24,753 |
| Cash gross (loss) profit | | | | | | | $ | 10,233 $ | | | | 18,937 $ | 4,569 $ | 33,739 |
| |
| Cash Costs and All-In Sustaining Costs |
| The terms cash costs, cash cost per ounce, all-in sustaining costs (“AISC”), and all-in sustaining cost per ounce used in |
| this report are non-GAAP financial measures. We report these measures to provide additional information regarding |
| operational efficiencies on an individual mine basis, and believe these measures provide investors and analysts with useful |
| information about our underlying costs of operations. |
| Cash costs consist of mining, processing, on-site general and administrative expenses, community and permit ing costs |
| related to current operations, royalty costs, refining and treatment charges (for both doré and concentrate products), sales |
| costs, export taxes and operational stripping costs, but exclude depreciation and amortization (non-cash items). The sum |
| of these costs is divided by the corresponding gold equivalent ounces sold to determine a per ounce amount. |
| All-in sustaining costs consist of cash costs (as described above), plus accretion of retirement obligations and amortization |
| of the asset retirement costs related to operating sites, environmental rehabilitation costs for mines with no reserves, |
| sustaining exploration and development costs, sustaining capital expenditures and sustaining lease payments. Our al -in |
| sustaining costs exclude the al ocation of corporate general and administrative costs. The following is additional |
| information regarding our all-in sustaining costs: |
| • | | | | | | | | | | | Sustaining operating costs represent expenditures incurred at current operations that are considered necessary to |
| | | | | | | | | | | | maintain current annual production at the mine site and include mine development costs and ongoing replacement |
| | | | | | | | | | | | of mine equipment and other capital facilities. Sustaining capital costs do not include costs of expanding the |
| 65 |
| project that would result in improved productivity of the existing asset, increased existing capacity or extended |
| useful life. |
| • | Sustaining exploration and development costs include expenditures incurred to sustain current operations and to |
| replace reserves and/or resources extracted as part of the ongoing production. Exploration activity performed |
| near-mine (brownfield) or new exploration projects (greenfield) are classified as non-sustaining. |
| | The sum of al -in sustaining costs is divided by the corresponding gold equivalent ounces sold to determine a per ounce |
| | amount. |
| | Costs excluded from cash costs and all-in sustaining costs, in addition to depreciation and depletion, are income and mining |
| | tax expense, al corporate financing charges, costs related to business combinations, asset acquisitions and asset disposal, |
| | and any items that are deducted for the purpose of normalizing items. |
| | The following tables reconcile these non-GAAP measures to the most directly comparable GAAP measure, production |
| | costs applicable to sales; the El Gallo Project results are excluded from this reconciliation for 2021 and 2020 as the |
| | economics of residual leaching operations are measured by incremental revenue exceeding incremental costs. Cash costs |
| | and AISC include, in addition to current period residual leaching costs, prior-year leach pad inventory costs expensed in |
| | the current period, with the lat er not relevant on the evaluation of the residual leaching operations. Residual leaching costs |
| | for the year ended December 31, 2021 were $9.3 million or $2,543 per gold equivalent ounce. For this reason, we have |
| | ceased relying on, and disclosing, cash cost and al -in sustaining cost per gold equivalent ounce as key metrics for the El |
| | Gallo Project: |
| | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | Three months ended December 31, 2021 | | | | Year ended December 31, 2021 |
| | | | Gold Bar Fox Complex | | | | | | Total Gold Bar Fox Complex | Total |
| | | | | | | | | | | (in thousands, except per ounce) | | | | | | | (in thousands, except per ounce) |
| | Production costs applicable to sales - Cash |
| | costs (100% owned) | $ 20,615 $ 10,339 $ | | | | | | 30,954 $ 73,991 $ 32,961 $ 106,952 |
| | Mine site reclamation, accretion and |
| | amortization | | 167 | 152 | | | | | | 320 | 651 | 906 | | | 1,557 |
| | In‑mine exploration | | 40 | 436 | | | | | | 476 | 921 | | | | | | 2,248 | | | 3,168 |
| | Capitalized underground mine |
| | development (sustaining) | | — | 4,969 | | | | | | | | | 4,969 | — | | | | | | 5,771 | | | 5,771 |
| | Capital expenditures on plant and |
| | equipment (sustaining) | | 29 | 110 | | | | | | 139 | 29 | 836 | | | 865 |
| | Sustaining leases | | 435 | 215 | | | | | | 650 | | | | | | 1,279 | 735 | | | 2,014 |
| | All‑in sustaining costs | $ 21,286 $ 16,221 $ 37,507 $ 76,870 $ 43,456 $ 120,326 |
| | Ounces sold, including stream (Au Eq. oz)(1) | | | | | | | | | 10.1 | 9.2 | | | | | | | | | 19.3 | | | 43.9 | 29.7 | | | 73.6 |
| | Cash cost per ounce ($/Au Eq. oz sold) | $ 2,038 $ | 1,122 $ | | | | | | | | | 1,601 $ 1,687 $ | | | | 1,108 | $ 1,453 |
| | AISC per ounce ($/Au Eq. oz sold) | $ 2,104 $ | 1,760 $ | | | | | | | | | 1,940 $ 1,753 $ | | | | 1,461 | $ 1,635 |
| | | | | | | | | | | | | | |
| | (1) | Total gold equivalent ounces sold for Q4/21 and 2021 is 40,184 and 153,415 respectively and includes gold equivalent ounces sold |
| from 49% interest in MSC and 100% owned operating mines of 19,962 and 77,553, as disclosed above, and 525 and 3,696 gold |
| equivalent ounces sold from the El Gallo Project for Q4/21 and 2021, respectively. |
| | |
| 66 |
| | | | | | | | | | | | | | | | | | | | | | | Three months ended December 31, 2020 | | | | | Year ended December 31, 2020 |
| | Gold Bar Fox Complex | | | | | | Total Gold Bar Fox Complex | Total |
| | | | | | | | | | (in thousands, except per ounce) | | | | (in thousands, except per ounce) |
| Production costs applicable to sales - Cash |
| costs (100% owned) | $ 19,602 $ | 10,408 $ 30,010 $ 58,465 $ | | | | | | | | | | | 34,639 $ 93,104 |
| Mine site reclamation, accretion and |
| amortization | | | | | | | | | 485 | | | | 119 | 604 1,223 | | 414 1,637 |
| In‑mine exploration | | | | | | | | | 608 | | | | 573 1,181 1,923 | | | | | | | | 1,280 3,203 |
| Capitalized underground mine |
| development (sustaining) | | | | | | | | | — | | | | — | — | — | | | | | | | 3,646 3,646 |
| Capital expenditures on plant and |
| equipment (sustaining) | | | | | | | | | 76 | 279 | 355 4,739 | | 601 5,340 |
| Sustaining leases | | | | | | | | | 470 | | | | 75 | 545 1,922 | | 324 2,246 |
| All‑in sustaining costs | $ 21,241 $ | 11,454 $ 32,695 $ 68,272 $ | | | | | | | | | | | 40,904 $ 109,176 |
| Ounces sold, including stream (Au Eq. oz)(1) | | | | | | | | | 5.7 | 8.0 | | | | | 13.7 | 27.8 | | | | 24.8 | 52.6 |
| Cash cost per ounce ($/Au Eq. oz sold) | $ 3,439 $ | 1,307 $ 2,197 $ 2,106 $ | | | | | | | | | | | 1,397 $ 1,772 |
| AISC per ounce ($/Au Eq. oz sold) | $ 3,726 $ | 1,439 $ 2,393 $ 2,459 $ | | | | | | | | | | | 1,650 $ 2,077 |
| |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year ended December 31, 2019 |
| | | | | | | | | | | | | | Gold Bar Fox Complex El Gal o | Total |
| | | | | (in thousands, except ounces and per ounce) |
| Production costs applicable to sales - Cash costs (100% |
| owned) | $ | | | 33,614 $ | 31,121 $ 18,545 $ | | 83,280 |
| Mine site reclamation, accretion and amortization | | | | | 1,205 | | | | | | 583 | | | | | | | 326 | | 2,114 |
| In‑mine exploration | | | | | — | | | | | | 3,726 | | | | | | | — | | 3,726 |
| Capitalized underground mine development (sustaining) | | | | — | | | | | | 8,554 | | | | | | | — | | 8,554 |
| Capital expenditures on plant and equipment (sustaining) | | 2,416 | 1,856 | | | | | | | 17 | 4,289 |
| Sustaining leases | | | | | 1,904 | | | | | | 352 | | | | | | | — | | 2,256 |
| All‑in sustaining costs | $ | | | 39,139 $ | 46,192 $ 18,888 $ | | 104,219 |
| Ounces sold, including stream (Au Eq. oz) | | | | 30.5 | 37.7 | 16.9 | | | | 85.1 |
| Cash cost per ounce ($/Au Eq. oz sold) | $ | | | 1,101 $ | 825 $ | 1,097 $ | | | | 978 |
| AISC per ounce ($/Au Eq. oz sold) | $ | | | 1,282 $ | 1,225 $ | 1,117 $ | 1,224 |
| |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Three months ended December 31, | | | | | Year ended December 31, |
| | | 2021 | | | 2020 | 2021 | | 2020 | | | | 2019 |
| San José mine cash costs (100% basis) | | (in thousands, except per ounce) | | | | | | | | | |
| Production costs applicable to sales - Cash |
| costs | | $ | | | | | | | | 70,866 $ | 37,950 | $ | 196,032 $ | 138,182 $ 159,915 |
| Mine site reclamation, accretion and |
| amortization | | | 118 | | | 276 | | 451 | | | | | | | 635 | 1,181 |
| Site exploration expenses | | | | | | | | | | 2,715 | 2,580 | | 11,207 | | | | | | | 9,183 10,635 |
| Capitalized underground mine development |
| (sustaining) | | | | | | | | | | 9,509 | 3,370 | | 27,548 | | | | | | | 16,782 27,237 |
| Less: Depreciation | | | | | | | | | | | | | (647) | (268) | | (1,971) | | | | | | | (1,184) | (2,355) |
| Capital expenditures (sustaining) | | | | | | | | | | 2,199 | 836 | | 15,751 | | | | | | | 6,117 13,573 |
| All‑in sustaining costs | $ | | | | | | | | 84,761 $ | 44,744 | $ | 249,018 $ | 169,715 $ 210,185 |
| Ounces sold (Au Eq. oz) | | 41.5 | | | 30.8 | | 155.3 | | | | | | | 112.1 | 184.3 |
| Cash cost per ounce ($/Au Eq. oz sold) | $ | | | | | | | | 1,708 $ | 1,234 | | | | | $ | 1,262 $ | | | | | | | 1,233 | 867 |
| AISC per ounce ($/Au Eq. oz sold) | $ | | | | | | | | 2,043 $ | 1,455 | $ | 1,603 $ | | | | | | | 1,514 | 1,140 |
| |
| Average realized prices |
| The term average realized price per ounce used in this report is also a non-GAAP financial measure. We prepare this |
| measure to evaluate our performance against market (London P.M. Fix). Average realized price is calculated as gross sales |
| of gold and silver, less streaming revenue, divided by the number of net ounces sold in the period, less ounces sold under |
| the streaming agreement. |
| 67 |
| The following table reconciles this non-GAAP measure to the most directly comparable U.S. GAAP measure, revenue |
| from gold and silver sales. Ounces of gold and silver sold for the San José mine are provided to us by MSC. |
| |
| | | | | | | | | | | | | | | | | | | | Three months ended December 31, | | | Year ended December 31, |
| | | 2021 | | | | 2020 | | 2021 | 2020 | | 2019 |
| Average realized price - 100% owned | | (in thousands, except per ounce) |
| Revenue from gold and silver sales | | $ | 34,966 $ | | | | | | | | 27,703 | $ 136,541 $ 104,789 $ 117,019 |
| Less: revenue from gold sales, stream | | | 413 | | | | 311 | | | | | | 1,309 | 1,194 | 1,540 |
| Revenue from gold and silver sales, excluding |
| stream | | $ | 34,553 $ | | | | | | | | 27,392 | $ 135,232 $ 103,595 $ 115,479 |
| Gold equivalent ounces sold | | | 19.9 | | | | | | | | 15.1 | | | | | | 77.3 | 60.6 | 85.1 |
| Less: gold ounces sold, stream | | | 0.7 | | | | 0.6 | | 2.3 | 2.1 | 2.8 |
| Gold equivalent ounces sold, excluding stream | | | 19.1 | | | | | | | | 14.5 | | | | | | 75.0 | 58.5 | 82.3 |
| Average realized price per Au Eq. oz sold, |
| excluding stream | | $ | 1,806 $ | | | | | | | | 1,888 | $ | | | | | 1,803 $ | 1,771 $ 1,403 |
| |
| | | | | | | | | | | | | | | | | | | | | Three months ended December 31, | | | Year ended December 31, |
| | | 2021 | | | | 2020 | | 2021 | 2020 | | 2019 |
| Average realized price - San José mine (100% |
| basis) | | (in thousands, except per ounce) |
| Gold sales | | $ | 42,484 $ | | | | | | | | 31,656 | $ 144,024 $ 120,258 $ 148,890 |
| Silver sales | | | 33,581 | | | | | | | | 32,698 | | | | | | 127,839 | 98,762 114,997 |
| Gold and silver sales | | $ | 76,065 $ | | | | | | | | 64,354 | $ 271,863 $ 219,020 $ 263,887 |
| Gold ounces sold | | | 22.7 | | | | | | | | 18.0 | | | | | | 81.8 | 65.3 | 102.8 |
| Silver ounces sold | | | 1,392 | | | | | | | | 1,112 | | | | | | 5,229 | 4,172 | 6,846 |
| Gold equivalent ounces sold | | | 41.5 | | | | | | | | 30.8 | | | | | | 155.3 | 112.1 | 184.3 |
| Average realized price per gold ounce sold | | $ | 1,869 $ | | | | | | | | 1,762 | $ | | | | | 1,760 $ | 1,842 $ 1,448 |
| Average realized price per silver ounce sold | | $ | 24.12 $ | | | | | | | | 29.40 | $ | | | | | 24.45 $ | 23.67 $ | 16.8 |
| Average realized price per gold equivalent ounce |
| sold | | $ | 1,834 $ | | | | | | | | 2,092 | $ | | | | | 1,750 $ | 1,954 $ 1,431 |
| |
| Liquid assets |
| The term liquid assets used in this report is also a non-GAAP financial measure. We report this measure to better |
| understand our liquidity in each reporting period. |
| Liquid assets are calculated as the sum of the Balance Sheet line items of cash and cash equivalents, restricted cash and |
| investments, plus ounces of doré held in precious metals inventories valued at the London PM Fix spot price at the |
| corresponding period. The following table summarizes the calculation of liquid assets as of December 31, 2021 and 2020: |
| |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, |
| | | | | | | | | | 2021 | | 2020 |
| | | | | | | | | | (in thousands) |
| Cash and cash equivalents | | | | | | | | | $ | 54,287 $ | 20,843 |
| Restricted cash | | | | | | | | | | 6,347 | | 3,595 |
| Investments | | | | | | | | | | 1,806 | | — |
| Precious Metals valued at market value (1)(2) | | | | | | | | | | 1,018 | | 1,412 |
| Total liquid assets | | | | | | | | | $ | 63,458 $ | 25,850 |
| | | | | | | |
| (1) | As of December 31, 2021 and 2020 we held 560 and 798 gold equivalent ounces in inventory, valued at $1,799 and $1,770 per |
| ounce, respectively, net of our streaming agreement. |
| (2) | Precious metals valued at cost on December 31, 2021 and 2020 equals $1,819 and $1,344, respectively. | | | | |
| 68 |
| CRITICAL ACCOUNTING ESTIMATES AND ACCOUNTING DEVELOPMENTS |
| Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses our consolidated |
| financial statements, which have been prepared in conformity with U.S. GAAP. The preparation of these statements |
| requires that we make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and |
| expenses. We base these estimates on historical experience and on assumptions that we consider reasonable under the |
| circumstances; however, reported results could differ from those based on the current estimates under different |
| assumptions or conditions. The summary of our significant accounting policies is detailed in Note 2 of the Consolidated |
| Financial Statements. |
| We believe that significant areas requiring the use of management estimates and assumptions relate to environmental |
| reclamation and closure obligations; asset useful lives utilized for depletion, depreciation, amortization and accretion |
| calculations; the fair value of equity investments and asset groups used in impairment testing; recoverable gold in leach |
| pad inventory; current and long-term inventory and mine development capitalization costs; the collectability of value |
| added taxes receivable; fair values of assets and liabilities acquired in business combinations; reserves; valuation |
| allowances for deferred tax assets; income and mining tax provisions and reserves for contingencies and litigation. There |
| are other items within our financial statements that require estimation but are not deemed to be critical. However, changes |
| in estimates used in these and other items could have a material impact on our financial statements. In the section below |
| we identify estimates critical to the understanding of our financial condition and results of operations and that require the |
| application of significant management judgment. |
| Asset Retirement Obligation, Reclamation and Remediation Costs: The Company records the fair value of a liability |
| for an asset retirement obligation (“ARO”) in the period that it is incurred if a reasonable estimate of fair value can be |
| made. The Company prepares estimates of the timing and amounts of expected cash flows when an ARO is incurred, |
| which are updated to reflect changes in facts and circumstances. Estimation of the fair value of AROs requires significant |
| judgment, including amount of cash flows, timing of reclamation, inflation rate and credit risk. Accrued reclamation and |
| closure costs can represent a significant and variable liability on our balance sheet. The company has estimated its liabilities |
| under appropriate accounting guidance, and review its liabilities on at least an annual basis. However, the ranges of liability |
| could exceed the liabilities recognized. If substantial damages were awarded, claims were settled, or remediation costs |
| were incurred in excess of our accruals, our financial results or condition could be materially adversely affected. |
| Mineral Property Interests, Plant and Equipment and Mine Development Costs: The Company amortizes its mineral |
| property interests, plant and equipment, and mine development costs using the most appropriate method, which includes |
| the units-of-production method over the estimated life of the mine or ore body based on recoverable ounces to be mined |
| from proven and probable reserves, or the straight-line method over the useful life. The accounting estimates related to |
| amortization are critical accounting estimates because (1) the determination of reserves involves uncertainties with respect |
| to the ultimate geology of its reserves and the assumptions used in determining the economic feasibility of mining those |
| reserves and (2) changes in estimated proven and probable reserves and asset useful lives can have a material impact on |
| net (loss) income. | |
| Estimates regarding mine development capitalization costs involve the determination of proven and probable reserves. |
| Impairment of Long-lived Assets: The Company reviews and evaluates its long-lived assets for impairment when events |
| or changes in circumstances indicate that the related carrying amounts may not be recoverable. Once it is determined that |
| impairment exists, an impairment loss is measured as the amount by which the asset carrying value exceeds its fair value. |
| For asset groups where an impairment loss is determined using the discounted future net cash flows method or discounted |
| future net cash flows method, future cash flows are estimated based on quantities of recoverable mineralized material, |
| expected gold and silver prices (considering current and historical prices, trends and related factors), production levels, |
| operating costs, capital requirements and reclamation costs, all based on life-of-mine plans. The term “recoverable |
| mineralized material” refers to the estimated amount of gold or other commodities that will be obtained after considering |
| losses during processing and treatment. The Company’s estimates of future cash flows are based on numerous assumptions |
| and uncertainties. It is possible that actual future cash flows will be significantly different than the estimates, as actual |
| 69 |
| future quantities of recoverable minerals, gold, silver and other commodity prices, production levels and costs of capital |
| are each subject to significant risks and uncertainties. |
| Stockpiles, Material on Leach Pads, In-process Inventory, Precious Metals Inventory and Materials and Supplies: |
| Stockpiles are measured by estimating the number of tonnes added and removed from the stockpile, an estimate of the |
| contained metals (based on assay data) and the estimated metallurgical recovery rates. Costs are allocated to stockpiles |
| based on current mining costs incurred including applicable overhead relating to mining operations. |
| Costs are attributed to the mineralized material on leach pads based on current mining costs incurred up to the point of |
| placing the ore on the pad. Costs are removed from the leach pad inventory based on the average cost per estimated |
| recoverable ounce of gold on the leach pad as the gold is recovered. The estimates of recoverable gold on the leach pads |
| are calculated from the quantities of mineralized material placed on the leach pads (measured tonnes added to the leach |
| pads), the grade of mineralized material placed on the leach pads (based on assay data) and a recovery percentage. |
| Although the quantities of recoverable gold placed on the leach pads are reconciled by comparing the grades of ore placed |
| on the pads to the quantities of gold recovered (metallurgical balancing), the nature of the leaching process inherently |
| limits the ability to precisely monitor inventory levels. As a result, the metallurgical balancing process is constantly |
| monitored, and the engineering estimates are refined based on actual results over time. |
| In-process material is measured based on assays of the material from the various stages of processing. Costs are al ocated |
| to in-process inventories based on the costs of the material fed into the process attributable to the source material coming |
| from the mines, stockpiles and/or leach pads plus the in-process conversion costs incurred to that point in the process. |
| Costs are allocated to precious metal inventories based on costs of the respective in-process inventories incurred prior to |
| the refining process plus applicable refining costs. |
| The assumptions used by the Company to measure metal content during each stage of the inventory conversion process |
| includes estimated recovery rates based on laboratory testing and assaying. The Company periodically reviews its |
| estimates compared to actual experience and revises its estimates when appropriate. The ultimate recovery will not be |
| known until leaching operations cease. |
| Proven and Probable Reserves: Critical estimates are inherent in the process of determining the Company’s reserves. |
| The Company’s reserves are affected largely by our assessment of future metals prices, as well as by engineering and |
| geological estimates of ore grade, accessibility and production cost. The Company’s assessment of reserves occurs at least |
| annually, and periodically utilizes external audits. |
| Reserve estimates are used in determining appropriate rates of units-of-production depreciation, with net book value of |
| many assets depreciated over remaining estimated reserves. Reserves are also a key component in forecasts, with which |
| the Company compares future cash flows to current asset values to ensure that carrying values are reported appropriately. |
| The Company’s forecasts are also used in determining the level of valuation al owances on the Company’s deferred tax |
| assets. Reserves also play a key role in the valuation of certain assets in the determination of the purchase price allocations |
| for acquisitions. Reserves involve many estimates and are not guarantees that the Company will recover the indicated |
| quantities of metals. Changes in reserve estimates could result in material adjustments to the Company’s reserve estimates. |
| Income and Mining Taxes: The Company accounts for income and mining taxes under ASC 740 using the liability |
| method, recognizing certain temporary differences between the financial reporting basis of liabilities and assets and the |
| related tax basis for such liabilities and assets. This method generates either a net deferred income and mining tax liability |
| or asset for the Company, as measured by the statutory tax rates in effect. The Company derives the deferred income and |
| mining tax charge or benefit by recording the change in either the net deferred income and mining tax liability or asset |
| balance for the year. The Company records a valuation allowance against any portion of those deferred income and mining |
| tax assets when it believes, based on the weight of available evidence, it is more likely than not that some portion or all |
| the deferred income and mining tax asset will not be realized. |
| 70 |
| FORWARD-LOOKING STATEMENTS |
| This report contains or incorporates by reference “forward-looking statements”, as that term is used in federal securities |
| laws, about our financial condition, results of operations and business. These statements include, among others: |
| | • | statements about our anticipated exploration results, cost and feasibility of production, production estimates, |
| | receipt of permits or other regulatory or government approvals and plans for the development of our |
| | properties. |
| | • | statements concerning the benefits or outcomes that we expect wil result from our business activities and |
| | certain transactions that we contemplate or have completed, such as receipt of proceeds, increased revenues, |
| | decreased expenses and avoided expenses and expenditures. |
| | • | statements of our expectations, beliefs, future plans and strategies, anticipated developments and other |
| | matters that are not historical facts. |
| These statements may be made expressly in this document or may be incorporated by reference to other documents that |
| we will file with the SEC. Many of these statements can be found by looking for words such as “believes”, “expects”, |
| “anticipates”, “estimates” or similar expressions used in this report or incorporated by reference in this report. |
| Forward-looking statements and information are based upon several estimates and assumptions that, while considered |
| reasonable by management, they are inherently subject to significant business, economic and competitive uncertainties, |
| risks and contingencies, and there can be no assurance that such statements and information will prove to be accurate. |
| Therefore, actual results and future events could differ materially from those anticipated in such statements and |
| information. |
| Included among the forward-looking statements and information that we may provide is production guidance. From time |
| to time the Company provides guidance on operations, based on stand-alone budgets for each operating mine. In |
| developing the mine production portion of the budget, we evaluate several factors and assumptions, which include, but are |
| not limited to: |
| | • | gold and silver price forecasts. |
| | • | average gold and silver grade mined, using a resource model. |
| | • | average grade processed by the crushing facility (Gold Bar) or mil ing facility (San José mine and Black Fox |
| | mine). |
| | • | expected tonnes moved and strip ratios. |
| | • | available stockpile material (grades, tonnes, and accessibility). |
| | • | estimates of in process inventory (either on the leach pad or plant for the El Gallo Project and Gold Bar, or |
| | in the mil facility for the San José mine and the Black Fox mine). |
| | • | estimated leach recovery rates and leach cycle times (the El Gallo Project and Gold Bar). |
| | • | estimated mil recovery rates (San José mine and Black Fox mine). |
| | • | dilution of material processed. |
| | • | internal and contractor equipment and labor availability. |
| 71 |
| • | seasonal weather pat erns. |
| | Actual production results are sensitive to variances in any of the key factors and assumptions noted above. As a result, we |
| | frequently evaluate and reconcile actual results to budgeted results to determine if key assumptions and estimates require |
| | modification. Any changes will, in turn, influence production guidance. |
| | We caution you not to put undue reliance on these forward-looking statements, which speak only as of the date of this |
| | report. Further, the information contained in this document or incorporated herein by reference is a statement of our present |
| | intention and is based on present facts and assumptions, and may change at any time and without notice, based on changes |
| | in such facts or assumptions. Readers should not place undue reliance on forward-looking statements. |
| | RISK FACTORS IMPACTING FORWARD-LOOKING STATEMENTS |
| | The important factors that could prevent us from achieving our stated goals and objectives include, but are not limited to, |
| | those set forth in other “Risk Factors” section in this report and the following: |
| • | our ability to raise funds required for the execution of our business strategy. |
| • | the effects of pandemics such as COVID-19 on health in our operating jurisdictions and the world-wide, the |
| national, state and local responses to such pandemics. |
| • | our ability to secure permits or other regulatory and government approvals needed to operate, develop or |
| explore our mineral properties and projects. |
| • | decisions of foreign countries, banks and courts within those countries. |
| • | unexpected changes in business, economic, and political conditions. |
| • | operating results of MSC. |
| • | fluctuations in interest rates, inflation rates, currency exchange rates, or commodity prices. |
| • | timing and amount of mine production. |
| • | our ability to retain and at ract key personnel. |
| • | technological changes in the mining industry. |
| • | changes in operating, exploration or overhead costs. |
| • | access and availability of materials, equipment, supplies, labor and supervision, power and water. |
| • | results of current and future exploration activities. |
| • | results of pending and future feasibility studies or the expansion or commencement of mining operations |
| without feasibility studies having been completed. |
| • | changes in our business strategy. |
| • | interpretation of dril hole results and the geology, grade and continuity of mineralization. |
| • | the uncertainty of reserve estimates and timing of development expenditures. |
| 72 |
| • | litigation or regulatory investigations and procedures affecting us. |
| • | local and community impacts and issues including criminal activity and violent crimes. |
| • | accidents, public health issues, and labor disputes. |
| • | our continued listing on a public exchange. |
| • | uncertainty relating to title to mineral properties. |
| • | changes in relationships with the local communities in the areas in which we operate. |
| • | changes in environmental laws and requirements in the jurisdictions in which we operate |
| | We undertake no responsibility or obligation to update publicly these forward-looking statements, except as required by |
| | law and we may update these statements in the future in written or oral statements. Investors should take note of any |
| | future statements made by or on our behalf. |
| | |
| | ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK |
| | Our exposure to market risks includes, but is not limited to, the following risks: changes in foreign currency exchange |
| | rates, equity price risks, commodity price fluctuations, credit risk and inflationary risk. We do not use derivative financial |
| | instruments as part of an overall strategy to manage market risk. |
| | Further, our participation in the joint venture with Hochschild for the 49% interest held at MSC creates additional risks |
| | because, among other things, we do not exercise decision-making power over the day-to-day activities at MSC; however, |
| | implications from our partner’s decisions may result in us having to provide additional funding to MSC or in a decrease |
| | in our percentage of ownership. |
| | Foreign Currency Risk |
| | In general, the devaluation of non-U.S. dollar currencies with respect to the U.S. dollar has a positive effect on our costs |
| | and liabilities which are incurred outside the U.S. while it has a negative effect on our assets denominated in non-U.S. |
| | dollar currency. Although we transact most of our business in U.S. dollars, some expenses, labor, operating supplies and |
| | property and equipment are denominated in Canadian dollars, Mexican pesos or Argentine pesos. |
| | Since 2008, the Argentine peso has been steadily devaluing against the U.S. dollar by 10% to 53% on an annual basis. As |
| | noted in the graph below, during 2021 the Argentine peso devalued 18% compared to devaluations of 29% and 37% in |
| | 2020 and 2019 respectively. During 2021, the Mexican peso devalued 3% against the US dol ar, compared to a devaluation |
| | of 5% in 2020 and an increase in value of 5% in 2019. |
| | During 2021, the Canadian dollar increased in value by 0.4% against the U.S. dollar, compared to the increase in value of |
| | 2% in 2020 and 2019. |
| 73 |
| The following table illustrates changes in the value of these currencies compared to the U.S. dollar in the twelve months |
| ended December 31, 2021: |
| |
| | | | Currency Exchange Rate Performance Against U.S. Dollar |
| 110% |
| 100% |
| 90% |
| 80% |
| | | Dec-20 Jan-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21 Jul-21 Aug-21 Sep-21 Oct-21 Nov-21 Dec-21 |
| | | | | Canadian Dollar | Mexican Peso | | | | | | Argentine Peso |
| | |
| |
| The value of cash and cash equivalents denominated in foreign currencies also fluctuates with changes in currency |
| exchange rates. Appreciation of non-U.S. dollar currencies results in a foreign currency gain on such investments and a |
| depreciation in non-U.S. dollar currencies results in a loss. We have not utilized material market risk-sensitive instruments |
| to manage our exposure to foreign currency exchange rates but may do so in the future. We hold minor portions of our |
| cash reserves in non-U.S. dollar currencies. |
| Based on our Canadian cash balance of $1.05 million (C$1.34 million) at December 31, 2021, a 1% change in the Canadian |
| dollar would result in a gain/loss of $0.01 mil ion in the Consolidated Statements of Operations and Comprehensive (Loss) |
| Income. We also hold negligible portions of our cash reserves in Mexican and Argentine pesos, with effect of a 1% change |
| in these respective currencies resulting in gains/losses immaterial for disclosure purposes. |
| Further, we are also subject to foreign currency risk on the fluctuation of the Mexican peso on our VAT receivable balance. |
| As of December 31, 2021, our VAT receivable balance was 19,949,674 Mexican pesos, equivalent to approximately $0.9 |
| mil ion, for which a 1% change in the Mexican peso would have resulted in a gain/loss of less than $0.01 million in the |
| Consolidated Statements of Operations and Comprehensive (Loss) Income. |
| MSC holds a portion of its local cash balances in Argentine pesos and is therefore exposed to the effects of this continued |
| devaluation and also the risk that there may be a sudden severe devaluation of the Argentine peso. A severe devaluation |
| could result in material foreign exchange losses as reported in U.S. dollars. |
| Equity Price Risk |
| We have in the past sought and will likely in the future seek to acquire additional funding by sale of common stock or |
| other equity securities. Movements in the price of our common stock have been volatile in the past and may also be volatile |
| in the future. As a result, there is a risk that we may not be able to sell equity securities at an acceptable price to meet |
| future funding requirements. |
| 74 |
| We have invested and may continue to invest in shares of common stock of other entities in the mining sector. Some of |
| our investments may be highly volatile and lack liquidity caused by lower trading volumes. As a result, we are inherently |
| exposed to fluctuations in the fair value of our investments, which may result in gains or losses upon their valuation. |
| Commodity Price Risk |
| We produce and sel gold and silver, therefore changes in the market price of gold and silver could significantly affect our |
| results of operations and cash flows in the future. Change in the price of gold and silver could materially affect our |
| revenues. Based on our revenues from gold and silver sales of $136.5 mil ion for the year ended December 31, 2021, with |
| all other variables held constant, a 10% change in the price of gold and silver would have had resulted in an additional |
| income or loss before income and mining taxes of approximately $13.7 million. Changes in the price of gold and silver |
| can also affect the provisionally-priced sales that we make under agreements with refiners and other purchasers of our |
| products. At December 31, 2021, we had no gold or silver sales subject to final pricing. Decreases in the market price of |
| gold or silver can also significantly affect the value of our product inventory, stockpiles and leach pads, and it may be |
| necessary to record a write-down to net realizable value. |
| We have in the past and may in the future hold a portion of our treasury in gold and silver bullion, where the value is |
| recorded at the lower of cost or market. Gold and silver prices may affect the value of any bullion that we hold in treasury. |
| We do not hedge any of our sales and are therefore subject to all changes in commodity prices. |
| Credit Risk |
| We may be exposed to credit loss through our precious metals and doré sales agreements with Canadian financial |
| institutions and refineries if these customers are unable to make payment in accordance with the terms of the agreements. |
| However, based on the history and financial condition of our counterparties, we do not anticipate any of the financial |
| institutions or refineries to default on their obligation. As of December 31, 2021, we do not believe we have any significant |
| credit exposure associated with precious metals and our doré sales agreements. |
| In Mexico, we are exposed to credit loss regarding our VAT taxes receivable if the Mexican tax authorities are unable or |
| unwilling to make payments in accordance with our monthly filings. Timing of collection on VAT receivables is uncertain |
| as VAT refund procedures require a significant amount of information and follow-up. The risk is mitigated to the extent |
| that the VAT receivable balance can be applied against future income taxes payable. However, at this time we are uncertain |
| when, if ever, our Mexican operations will generate sufficient taxable operating profits to offset this receivable against |
| taxes payable. We continue to face risk on the collection of our VAT receivables, which amount to $0.9 million as at |
| December 31, 2021. |
| In Nevada and Ontario, Canada we are required to provide security to cover our projected reclamation costs. As at |
| December 31, 2021, we have surety bonds of $37.7 million in place to satisfy bonding requirements for this purpose. The |
| bonds have an annual fee of 2.3% of their value. Although we do not believe we have any significant credit exposure |
| associated with these bonds, we are exposed to the risk that the surety bonds may no longer be accepted by the |
| governmental agencies as satisfactory reclamation coverage, in which case we would be required to replace the surety |
| bonding with cash. |
| Interest rate risk |
| Our outstanding debt consists of various equipment leases and the senior secured credit facility. As the debt is at fixed |
| rates, we consider our interest rate risk exposure to be insignificant at this time. |
| 75 |
| MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING |
| | Management of the Company is responsible for establishing and maintaining adequate internal control over financial |
| | reporting. The Securities Exchange Act of 1934 defines internal control over financial reporting in Rule 13a-15(f) and |
| | 15d-15(f) as a process designed by, or under the supervision of, the Company’s principal executive and principal financial |
| | officers and effected by the Company’s board of directors, management and other personnel, to provide reasonable |
| | assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes |
| | in accordance with general y accepted accounting principles and includes those policies and procedures that: |
| • | Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions |
| and dispositions of the assets of the Company; |
| • | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial |
| statements in accordance with generally accepted accounting principles, and that receipts and expenditures |
| of the Company are being made only in accordance with authorizations of management and the board of |
| directors of the Company; and |
| • | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or |
| disposition of the Company’s assets that could have a material effect on the consolidated financial statements. |
| | Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, |
| | projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate |
| | because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. |
| | The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of |
| | December 31, 2021. In making this assessment, the Company’s management used the criteria set forth by the Committee |
| | of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework (2013). |
| | Based upon its assessment, management concluded that, as of December 31, 2021, the Company’s internal control over |
| | financial reporting was effective based upon those criteria. |
| | Ernst & Young LLP, an independent registered public accounting firm, has audited the effectiveness of the Company’s |
| | internal control over financial reporting as of December 31, 2021. |
| | |
| | | |
| 78 |
| REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
| | To the Shareholders and the Board of Directors of McEwen Mining Inc. |
| | |
| | Opinion on the consolidated financial statements |
| | |
| | We have audited the accompanying consolidated balance sheets of McEwen Mining Inc. [the "Company"] as of |
| | December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive (loss), changes in |
| | shareholders' equity and cash flows for each of the three years in the period ended December 31, 2021, and the related |
| | notes [collectively referred to as the "consolidated financial statements"]. In our opinion, the consolidated financial |
| | statements present fairly, in al material respects, the financial position of the Company as of December 31, 2021 and |
| | 2020, and the results of its operations and its consolidated cash flows for each of the three years in the period ended |
| | December 31, 2021, in conformity with U.S. generally accepted accounting principles. |
| | |
| | Report on internal control over financial reporting |
| | |
| | We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United |
| | States) [the "PCAOB"], the Company's internal control over financial reporting as of December 31, 2021, based on the |
| | criteria established in Internal Control - Integrated Framework issued by the Commit ee of Sponsoring Organizations of |
| | the Treadway Commission (2013 framework), and our report dated March 4, 2022 expressed an unqualified opinion |
| | thereon. |
| | |
| | Basis for opinion |
| | |
| | These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to |
| | express an opinion on the Company's consolidated financial statements based on our audits. We are a public accounting |
| | firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the |
| | U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the |
| | PCAOB. |
| | |
| | We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and |
| | perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material |
| | misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material |
| | misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that |
| | respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and |
| | disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used |
| | and significant estimates made by management, as wel as evaluating the overall presentation of the consolidated |
| | financial statements. We believe that our audits provide a reasonable basis for our opinion. |
| | |
| | Critical audit matters |
| | |
| | The critical audit matter communicated below is a matter arising from the current period audit of the financial statements |
| | that was communicated or required to be communicated to the audit committee and that: 1) relates to accounts or |
| | disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or |
| | complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the |
| 79 |
| consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, |
| providing a separate opinion on the critical audit mat er or on the accounts or disclosures to which it relates. |
| | | | | Valuation of Inventory at the Gold Bar mine |
| Description of the | On December 31, 2021, the carrying value of the Company's inventory was $18.3 million, of which |
| Matter | $2.0 mil ion was for the leach pad inventory at the Gold Bar mine in Nevada, USA. Inventory is |
| | recorded at the lower of cost and net realizable value. The net realizable value of the inventory is |
| | calculated based on the estimated amount of recoverable gold on the leach pads. The significant |
| | assumption used by management in the valuation of the leach pad inventory is the life of mine |
| | recovery rate. The Company discloses the significant assumption in respect of this estimate in Note |
| | 2 of the consolidated financial statements. |
| | Auditing management's estimate of the expected amount of gold to be recovered was complex due |
| | to the subjective nature of the assumption used in the calculation . The estimates of recoverable gold |
| | on the leach pads are calculated from the quantities of mineralized material placed on the leach pads, |
| | the grade of mineralized material placed on the leach pads and a recovery percentage. This |
| | significant assumption is subjected to high estimation uncertainty and required a high degree of |
| | auditor judgment given it could be affected by future economic and market conditions. |
| How We | We obtained an understanding, evaluated the design and tested the operating effectiveness of |
| Addressed the | controls over the quantities of material placed on the pad, the grade determination, the recovery |
| Matter in Our | percentage, and the calibration process to assess whether the recovery rate is appropriate. |
| Audit |
| | Our substantive audit procedures included, among others, evaluating the reasonableness of the above |
| | noted significant assumption used in the recoverable gold calculation. As each of the key inputs |
| | were determined by a specialist, we also assessed the competence and objectivity of management's |
| | specialist by evaluating their professional qualifications, experience, and their use of accepted |
| | industry practices. In addition, we evaluated the methodologies used by management's specialist by |
| | understanding the life of mine plan for ore to be placed on the pad, timing of the leaching cycle and |
| | the grade determination. We also involved our internal mining specialist to assess the |
| | appropriateness of the Gold Bar gold recovery model. We reperformed management's calculation of |
| | the leach pad inventory value to verify mathematical accuracy. |
| | We assessed the adequacy of the Company's disclosure in Note 2 to the consolidated financial |
| | statements. |
| |
| |
| We have served as the Company's auditor since 2016. |
| | | Toronto, Canada | /s/ Ernst & Young LLP |
| March 4, 2022 | Chartered Professional Accountants |
| | | | Licensed Public Accountants |
| |
| | | | |
| 80 |
| REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
| | To the Shareholders and the Board of Directors of McEwen Mining Inc. |
| | |
| | To the Shareholders and the Board of Directors of McEwen Mining Inc. |
| | |
| | Opinion on internal control over financial reporting |
| | |
| | We have audited McEwen Mining lnc.'s internal control over financial reporting as of December 31, 2021, based on criteria |
| | established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway |
| | Commission (2013 framework) [the "COSO criteria"]. In our opinion, McEwen Mining Inc. [the "Company"] maintained, in |
| | all material respects, effective internal control over financial reporting as of December 31, 2021, based on the COSO criteria. |
| | |
| | We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) |
| | [the "PCAOB"], the consolidated balance sheets of the Company as of December 31, 2021 and 2020, and the related |
| | consolidated statements of operations and comprehensive (loss) , changes in shareholders' equity and cash flows for each of the |
| | three years in the period ended December 31, 2021, and the related notes and our report dated March 4, | 2022 expressed an |
| | unqualified opinion thereon. |
| | |
| | Basis for opinion |
| | |
| | The Company's management is responsible for maintaining effective internal control over financial reporting and for its |
| | assessment of the effectiveness of internal control over financial reporting included in the accompanying Management's Report |
| | on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control |
| | over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be |
| | independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and |
| | regulations of the Securities and Exchange Commission and the PCAOB. |
| | |
| | We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the |
| | audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all |
| | material respects. |
| | |
| | Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material |
| | weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, |
| | and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a |
| | reasonable basis for our opinion. |
| | |
| | Definition and limitations of internal control over financial reporting |
| | |
| | A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the |
| | reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally |
| | accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures |
| | that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and |
| | dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to |
| | permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and |
| | expenditures of the company are being made only in accordance with authorizations of management and directors of the |
| | company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition , use, or |
| | disposition of the company's assets that could have a material effect on the financial statements. |
| | |
| | Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, |
| | projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate |
| | because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. |
| | |
| | | | | Toronto, Canada | /s/ Ernst & Young LLP |
| | March 4, 2022 | Chartered Professional Accountants |
| | | Licensed Public Accountants |
| | |
| | |
| | |
| 81 |
| MCEWEN MINING INC. |
| | CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) |
| | | FOR THE YEARS ENDED DECEMBER 31, |
| | | | (in thousands of U.S. dollars, except per share amounts) |
| |
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | 2021 | 2020 | 2019 |
| | | | | Revenue from gold and silver sales | | $ 136,541 $ 104,789 $ 117,019 |
| | | | | Production costs applicable to sales | | | (119,223) (108,827) (83,280) |
| | | | | Depreciation and depletion | | | (23,798) (22,910) (24,753) |
| | | | | Gross profit (loss) | | | (6,480) (26,948) | | | 8,986 |
| | | | | | | | | | | |
| | | | | OTHER OPERATING EXPENSES: | | | | | | |
| | | | | Advanced projects | | | (12,439) (11,681) (9,520) |
| | | | | Exploration | | | (22,604) (15,861) (37,744) |
| | | | | General and administrative | | | (11,435) | | | | (9,201) (12,785) |
| | | | | Loss from investment in Minera Santa Cruz S.A. (Note 9) | | | (7,533) | | | | (1,517) (8,754) |
| | | | | Depreciation | | | (339) | | | | (405) | (566) |
| | | | | Reclamation and remediation (Note 12) | | | (3,450) | | | | (1,788) (3,531) |
| | | | | Impairment loss on mineral property interests and plant and equipment (Note 8) | | | | — (83,805) | | — |
| | | | | Other operating | | | | — | | | (1,968) | — |
| | | | | | | | (57,800) (126,226) (72,900) |
| | | | | Operating loss | | | (64,280) (153,174) (63,914) |
| | | | | | | | | | | |
| | | | | OTHER INCOME (EXPENSE): | | | | | | |
| | | | | Interest and other finance expenses, net | | | (6,200) | | | | (7,434) (6,817) |
| | | | | Other income (Note 4) | | | 6,281 | | | | 6,893 | 7,140 |
| | | | | Total other income (expense) | | | | 81 | | | (541) | 323 |
| | | | | Loss before income and mining taxes | | | (64,199) (153,715) (63,591) |
| | | | | Income and mining tax recovery | | | 7,315 | | | | 1,390 | 3,844 |
| | | | | Net loss after income and mining taxes | | | (56,884) (152,325) (59,747) |
| | | | | Net loss attributable to non-controlling interests (Note 20) | | | | 172 | — | — |
| | | | | Net loss and comprehensive loss at ributable to McEwen shareholders | | | $ (56,712) $ (152,325) $ (59,747) |
| | | | | | | | | | | |
| | | | | Net loss per share (Note 14): | | | | | |
| | | | | Basic and Diluted | | | $ | (0.12) $ | | | | (0.38) $ (0.17) |
| | | | | Weighted average common shares outstanding (thousands) (Note 13): | | | | | |
| | | | | Basic and Diluted | | 454,899 403,457 361,845 |
| | | | | | | | | | |
| | The accompanying notes are an integral part of these consolidated financial statements. |
| | | | | |
| 82 |
| MCEWEN MINING INC. |
| | CONSOLIDATED BALANCE SHEETS |
| AS AT DECEMBER 31, |
| (in thousands of U.S. dollars) |
| |
| | | | | | | | | | | | | | | December 31, | | December 31, |
| | | | | | | 2021 | | | | 2020 | |
| | | | | | | | | | | | | | |
| | | ASSETS | | | | |
| | | Current assets: | | | | |
| | | Cash and cash equivalents (Note 18) | | $ | | | | | 54,287 $ | 20,843 |
| | | Restricted cash (Note 18) | | | | | | | | 2,550 | — |
| | | Investments (Note 5) | | | | | | | | 1,806 | — |
| | | Receivables, prepaids and other assets (Note 6) | | | | | | | 10,591 | 5,690 |
| | | Inventories (Note 7) | | | | | | | 15,792 | 26,964 |
| | | Total current assets | | | | | | | 85,026 | 53,497 |
| | | Mineral property interests and plant and equipment, net (Note 8) | | | | | | | 342,303 | 329,112 |
| | | Investment in Minera Santa Cruz S.A. (Note 9) | | | | | | | 90,961 | 108,326 |
| | | Inventories (Note 7) | | | | | | | | 2,543 | 4,785 |
| | | Restricted cash (Note 18) | | | | | | | | 3,797 | 3,595 |
| | | Other assets | | | 711 | 621 |
| | | TOTAL ASSETS | | $ | | | | | 525,341 $ | 499,936 |
| | | | | | | |
| | | LIABILITIES & SHAREHOLDERS’ EQUITY | | | | |
| | | Current liabilities: | | | | |
| | | Accounts payable and accrued liabilities | | $ | | | | | 39,615 $ | 36,055 |
| | | Flow-through share premium (Note 13) | | | | | | | | 1,572 | 3,827 |
| | | Lease liabilities | | | | | | | | 2,901 | 2,440 |
| | | Reclamation and remediation liabilities (Note 12) | | | | | | | | 5,761 | 3,232 |
| | | Other liabilities | | | | | | | | 2,550 | — |
| | | Total current liabilities | | | | | | | 52,399 | 45,554 |
| | | Lease liabilities | | | | | | | | 1,515 | 3,056 |
| | | Debt (Note 11 and 15) | | | | | | | 48,866 | 48,160 |
| | | Reclamation and remediation liabilities (Note 12) | | | | | | | 29,691 | 30,768 |
| | | Other liabilities | | | | | | | | 2,929 | 3,257 |
| | | Deferred income and mining tax liability | | | — | | | 3,813 |
| | | Total liabilities | | $ | | | | | 135,400 $ | 134,608 |
| | | | | | | |
| | | Shareholders’ equity: | | | | |
| | | Common shares: 459,188 | | | | | | | | as of December 31, 2021 and 416,587 as of |
| | | December 31, 2020 issued and outstanding (in thousands) (Note 13) | | $ | | | | | 1,615,596 $ | 1,548,876 |
| | | Non-controlling interests (Note 20) | | | | | | | 14,777 | — |
| | | Accumulated deficit | | | | | | | (1,240,432) | (1,183,548) |
| | | Total shareholders’ equity | | | | | | | 389,941 | 365,328 |
| | | TOTAL LIABILITIES & SHAREHOLDERS’ EQUITY | | $ | | | | | 525,341 $ | 499,936 |
| | | | | | | | | | | | The accompanying notes are an integral part of these consolidated financial statements. |
| | | Commitments and contingencies: Note 17 |
| | | Subsequent event: Note 23 |
| | | |
| | | | |
| 83 |
| MCEWEN MINING INC. |
| | CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY |
| | | FOR THE YEARS ENDED DECEMBER 31, |
| | | (in thousands of U.S. dollars and shares) |
| |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | Common Shares | | | | | | | | | | | | | | | | |
| | | | | | and Additional | | | | | | | | | | | | | | | | |
| | | | | | Paid-in Capital | | | | | Accumulated Non-controlling | | | | | | |
| | | | | | Shares | | | | | Amount | | | | | | | | | | Deficit | | | | | | Interests | | | | Total | |
| | | | Balance, December 31, 2018 | | 344,560 $ 1,457,422 $ | | | | | | | | | (971,476) | — $ | | | 485,946 | |
| | | | Stock-based compensation | | — | | | | | 694 | — | — | 694 | |
| | | | Units issued for cash, net of share issue |
| | | | costs | | 53,880 | 69,467 | | | | | | | — | — | | | 69,467 | |
| | | | Exercise of stock options | | 535 | | | | | 544 | — | — | 544 | |
| | | | Sale of common shares for cash | | 1,010 | 1,851 | | | | | | | — | — | | | 1,851 | |
| | | | Common shares issued for acquisition of |
| | | | mineral property interests | | 354 | | | | | 724 | — | — | 724 | |
| | | | Net loss | | — | | | | | — | | | | (59,747) | — | | | (59,747) |
| | | | Balance, December 31, 2019 | | 400,339 $ 1,530,702 $ (1,031,223) $ | | | | | | | — $ | | | 499,479 |
| | | | Stock-based compensation | | — | | | | | 613 | — | — | 613 |
| | | | Sale of flow-through common shares | | 13,968 | 15,478 | | | | | | | — | — | | | 15,478 |
| | | | Exercise of stock options | | 135 | | | | | 138 | — | — | 138 |
| | | | Shares issued for debt refinancing | | 2,092 | 1,875 | | | | | | | — | — | | | 1,875 |
| | | | Shares issued for acquisition of mineral |
| | | | property interests | | 53 | | | | | 70 | — | — | 70 |
| | | | Net loss | | — | | | | | — | | | | (152,325) | — | | | (152,325) |
| | | | Balance, December 31, 2020 | | 416,587 $ 1,548,876 $ (1,183,548) $ | | | | | | | — $ | | | 365,328 |
| | | | | | | | | | | |
| | | | Balance, December 31, 2020 | | 416,587 $ 1,548,876 $ (1,183,548) $ | | | | | | | — $ | | | 365,328 |
| | | | Stock-based compensation | | — | | | | | 837 | — | — | 837 |
| | | | Sale of flow-through common shares | | 12,601 | 10,785 | | | | | | | — | — | | | 10,785 |
| | | | Sale of shares for cash | | 30,000 | 29,875 | | | | | | | — | — | | | 29,875 |
| | | | Issuance of equity by subsidiary (Note 20) | | — | 25,223 | | | | | | | — | | | | | 14,605 | 39,828 |
| | | | Net loss | | — | | | | | — | | | | (56,884) | 172 | | | (56,712) |
| | | | Balance, December 31, 2021 | | 459,188 $ 1,615,596 $ (1,240,432) $ | | | | | | | | | | | 14,777 $ | 389,941 |
| | The accompanying notes are an integral part of these consolidated financial statements. |
| | | | | |
| 84 |
| MCEWEN MINING INC. |
| | CONSOLIDATED STATEMENTS OF CASH FLOWS |
| | | FOR THE YEARS ENDED DECEMBER 31, |
| (in thousands of U.S. dollars) |
| |
| | | | | | | | | | | | | | | Year ended December 31, |
| | | | | | | | | 2021 | | 2020 | | | 2019 |
| | | | Cash flows from operating activities: | | | | | | |
| | | | Net loss | $ | | | | (56,884) $ | | (152,325) $ | (59,747) |
| | | | Adjustments to reconcile net loss from operating activities: | | | | | |
| | | | Impairment loss on mineral property interests and plant and equipment |
| | | | (Note 8) | | — | | | | | 83,805 | — |
| | | | Loss from investment in Minera Santa Cruz S.A., net of amortization |
| | | | (Note 9) | | | | | 7,533 | | 1,517 | 8,754 |
| | | | (Gain) loss on sale of mineral property interests (Note 4) | | | | | (2,270) | — | | | | 96 |
| | | | Depreciation and amortization | | | | | 25,549 | | 23,090 | 25,543 |
| | | | (Gain) loss on investments (Note 4) | | (28) | | 619 | | (5,259) |
| | | | Unrealized foreign exchange loss and adjustment to estimate (Note 12) | | 15 | | 278 | | | | 919 |
| | | | Income and mining tax (recovery) | | | | | (7,315) | | (1,390) | (3,844) |
| | | | Stock-based compensation | | 837 | | 612 | | | | 694 |
| | | | Reclamation and remediation (Note 12) | | | | | 3,450 | | 1,788 | 3,531 |
| | | | Change in non-cash working capital items: | | | | |
| | | | Decrease (increase) in other assets related to operations | | | | | 7,887 | | 12,696 | (17,484) |
| | | | (Decrease) increase in liabilities related to operations | | | | | 1,003 | | 1,437 | 7,270 |
| | | | Cash used in operating activities | $ | | | | (20,223) $ | | (27,873) $ | (39,527) |
| | | | | | | | | | | | |
| | | | Cash flows from investing activities: | | | | | |
| | | | Additions to mineral property interests and plant and equipment | $ | | | | (34,888) $ | | (13,373) $ | (29,707) |
| | | | Proceeds from disposal of property and equipment (Note 4) | | 492 | | — | | | | — |
| | | | Proceeds from sale of investments, net of investments | | — | | | | | 1,266 | 6,769 |
| | | | Dividends received from Minera Santa Cruz S.A. (Note 9) | | | | | 9,832 | 340 | | 8,877 |
| | | | Cash used in investing activities | $ | | | | (24,564) $ | | (11,767) $ | (14,061) |
| | | | | | | | | | | | |
| | | | Cash flows from financing activities: | | | | | |
| | | | Proceeds from sale of shares, net of issuance costs (Note 13) | $ | | | | 29,875 $ | — $ | | 69,467 |
| | | | Sale of flow-through common shares, net of issuance costs (Note 13) | | | | | 11,966 | | 19,644 | — |
| | | | Proceeds from sale of shares in subsidiary (Note 20) | | | | | 40,000 | — | | | | — |
| | | | Subscription proceeds received in advance (Note 18) | | | | | 2,550 | — | | | | — |
| | | | Proceeds of at-the-market share sale (Note 13) | | — | | — | | 1,851 |
| | | | Proceeds of exercise of stock options | | — | | 138 | | | | 544 |
| | | | Payment of finance lease obligations | | | | | (3,408) | | (2,204) | (1,855) |
| | | | Cash provided by financing activities | $ | | | | 80,983 $ | | 17,578 $ | 70,007 |
| | | | Effect of exchange rate change on cash and cash equivalents | | — | | — | | | | (408) |
| | | | Increase (decrease) in cash, cash equivalents and restricted cash | | | | | 36,196 | | (22,062) | 16,011 |
| | | | Cash, cash equivalents and restricted cash, beginning of period | | | | | 24,438 | | 46,500 | 30,489 |
| | | | Cash, cash equivalents and restricted cash, end of period (Note 18) | $ | | | | 60,634 $ | | 24,438 $ | 46,500 |
| | | | | | | | | | | | | The accompanying notes are an integral part of these consolidated financial statements. |
| | | | | |
| 85 |
| MCEWEN MINING INC. |
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| December 31, 2021 |
| | (tabular amounts are in thousands of U.S. dollars, unless otherwise noted) |
| | | |
| | | | NOTE 1 NATURE OF OPERATIONS |
| | | | McEwen Mining Inc. (the “Company”) was organized under the laws of the State of Colorado on July 24, 1979. The |
| | | | Company is engaged in the exploration, development, production and sale of gold and silver and exploration for copper. |
| | | | The Company operates in the United States, Canada, Mexico and Argentina. The Company owns a 100% interest in the |
| | | | Gold Bar gold mine in Nevada, the Fox Complex in Ontario, Canada, the El Gallo gold project and the Fenix silver-gold |
| | | | project in Sinaloa, Mexico, and a portfolio of exploration properties in Nevada, Canada, Mexico, and Argentina. As of |
| | | | December 31, 2021, Minera Andes Inc., a wholly owned subsidiary of the Company, owns an 81.4% of McEwen Copper |
| | | | which holds a 100% interest in the Los Azules copper deposit in San Juan, Argentina, and the Elder Creek exploration |
| | | | property in Nevada. It also owns a 49% interest in Minera Santa Cruz S.A. (“MSC”), owner of the producing San José |
| | | | silver-gold mine in Santa Cruz, Argentina, which is operated by the joint venture majority owner Hochschild Mining plc. |
| | | | |
| | | | NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
| | | | Basis of Presentation and Use of Estimates: |
| | | | |
| | | | The Company’s consolidated financial statements have been prepared in accordance with accounting principles generally |
| | | | accepted in the United States of America (“U.S. GAAP”). The preparation of the Company’s consolidated financial |
| | | | statements requires the Company to make estimates and assumptions that affect the reported amounts of assets and |
| | | | liabilities and the related disclosure of contingent assets and liabilities at the date of the consolidated financial statements |
| | | | and the reported amounts of expenses during the reporting period. The more significant areas requiring the use of |
| | | | management estimates and assumptions relate to environmental reclamation and closure obligations; asset useful lives |
| | | | utilized for depletion, depreciation, amortization and accretion calculations; fair value of equity investment and the |
| | | | impairment test; recoverable gold in leach pad inventory; current and long-term inventory; mine development |
| | | | capitalization costs; the col ectability of value added taxes receivable; reserves; valuation al owances for deferred tax |
| | | | assets; income and mining tax provisions; reserves for contingencies and litigation and costs related to COVID-19. The |
| | | | Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable |
| | | | under the circumstances. Actual results may differ significantly from these estimates. |
| | | | References to “C$” refer to Canadian currency. |
| | | | COVID-19: |
| | | | The Company continues to closely monitor and respond, as possible, to the ongoing COVID-19 pandemic. As the global |
| | | | situation continues to change rapidly, ensuring the health and safety of the Company’s employees and contractors is one |
| | | | of the Company’s top priorities. Many jurisdictions including the United States, Canada, Mexico, and Argentina have |
| | | | varied but continued restrictions to travel, public gatherings, and certain business operations. Unlike the year 2020, during |
| | | | 2021 there were no mandated suspensions for the Company’s operations. In addition, vaccination rates in countries where |
| | | | the Company operates continue to increase. |
| | | | The Company’s results of operations, financial position, and cash flows were adversely affected in both 2020 and 2021 |
| | | | due to COVID-19. The continuing impact of the COVID-19 pandemic on the Company’s results of operations, financial |
| | | | position and cash flows wil depend on future developments, including the duration and spread of the outbreak, variants |
| | | | of the COVID-19 virus, the availability, ongoing effectiveness, development and distribution of vaccinations and |
| | | | treatments and on government advisories, restrictions, and financial assistance offered. To ensure a safe working |
| | | | environment for the Company’s employees and contractors and to prevent the spread of COVID-19, the Company |
| | | | continues to reinforce safety measures at al sites and offices including contact tracing, restricting non-essential travel, and |
| | | | complying with public health orders. The impact of COVID-19 on the global financial markets, the overal economy and |
| | | 86 |
| MCEWEN MINING INC. |
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| December 31, 2021 |
| | (tabular amounts are in thousands of U.S. dollars, unless otherwise noted) (Continued) |
| | | |
| | | | the Company are highly uncertain and cannot be predicted. Maintaining normal operating capacity is also dependent on |
| | | | the continued availability of supplies and contractors, which are out of the Company’s control. If the financial markets |
| | | | and/or the overall economy continue to be impacted, the Company’s results of operations, financial position and cash flows |
| | | | may be further affected. As the situation continues to evolve, the Company will continue to monitor market conditions |
| | | | closely and respond accordingly. |
| | | | During 2021, the Company raised $12.7 million and $31.5 mil ion through a Canadian Development Expenses (“CDE”) |
| | | | flow-through common share issuance and an equity financing and a subsidiary of the Company secured an additional $40.0 |
| | | | mil ion for its Los Azules project in Argentina. See Item 8 | . Financial Statements and Supplementary Data, Note 13 |
| | | | Shareholders’ Equity. |
| | | | Continuation of COVID-19 in 2022 and beyond could impact employee health, workforce productivity, insurance |
| | | | premiums, ability to travel, the availability of industry experts, personnel and equipment, restrictions or delays to field |
| | | | work, studies, and assay results, impeding access to capital markets when needed on acceptable term and other factors that |
| | | | will depend on future developments that may be beyond our control. The Company has completed various scenario |
| | | | planning analyses to consider the potential impacts of COVID-19 on its business, including volatility in commodity prices, |
| | | | temporary disruptions and/or curtailments of operating activities (voluntary or involuntary). However, there is no assurance |
| | | | that these measures wil prevent adverse effects from COVID-19 in the future. |
| | | | Basis of Consolidation: |
| | | | The consolidated financial statements include the accounts of the Company and its wholly-owned and majority-owned |
| | | | subsidiaries. Intercompany accounts and transactions have been eliminated. Investments over which the Company exerts |
| | | | significant influence but does not control through majority ownership are accounted for using the equity method, as |
| | | | described in Investments, below. |
| | | | Cash and Cash Equivalents and Restricted Cash: |
| | | | The Company considers cash in banks, deposits in transit, and highly liquid term deposits with remaining maturities of |
| | | | three months or less at the date of acquisition to be cash and cash equivalents. Because of the short maturity of these |
| | | | instruments, the carrying amounts approximate their fair value. The Company classifies Restricted cash between short |
| | | | term and long term based on the restrictions. |
| | | | Investments: |
| | | | The Company accounts for investments over which the Company exerts significant influence but does not control through |
| | | | majority ownership using the equity method of accounting pursuant to ASC Topic 323, Investments – Equity Method and |
| | | | Joint Ventures. Under the equity method, the Company’s investment is initially recognized at cost in the Consolidated |
| | | | Balance Sheet and subsequently increased or decreased to recognize the Company's share of income and losses of the |
| | | | investee, dividends received from the investee and for impairment losses after the initial recognition date. The Company's |
| | | | share of income and losses of the investee and impairment losses are recognized in the Consolidated Statements of |
| | | | Operations and Comprehensive (Loss) (“Statement of Operations”) during the period. Refer to Impairment of Long-lived |
| | | | Assets for the Company’s policy on impairment. |
| | | | The Company’s investments in marketable equity securities and warrants are measured at fair value at each period end |
| | | | with changes in fair value recognized in net (loss) income in the Statement of Operations in accordance with ASU 2016- |
| | | | 01 with reference to further updates in ASU 2018-03, ASU 2019-04, and ASU 2020-01. |
| | | 87 |
| MCEWEN MINING INC. |
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| December 31, 2021 |
| | (tabular amounts are in thousands of U.S. dollars, unless otherwise noted) (Continued) |
| | | |
| | | | Value Added Taxes Receivable: |
| | | | In Mexico, Argentina, and Canada, value added taxes (“VAT” and “HST”, respectively) are assessed on purchases of |
| | | | materials and services and sales of products. Businesses are general y entitled to recover the taxes they have paid related |
| | | | to purchases of materials and services, either as a refund or as a credit against future taxes payable. |
| | | | Stockpiles, Material on Leach Pads, In-process Inventory, Precious Metals Inventory and Materials and Supplies: |
| | | | Stockpiles, material on leach pads, in-process inventory, precious metals inventory and materials and supplies |
| | | | (collectively, “Inventories”) are accounted for using the weighted average cost method and are carried at the lower of |
| | | | average cost or net realizable value. Net realizable value represents the estimated future sales price of the product based |
| | | | on current and long-term metals prices, less the estimated costs to complete production and bring the product to a saleable |
| | | | form. Write-downs of Inventories resulting from net realizable value impairments are reported as a component of |
| | | | production costs applicable to sales. The current portion of Inventories is determined based on the expected amounts to be |
| | | | processed and/or recovered within the next twelve months of the balance sheet date, with the remaining portion, if any, |
| | | | classified as long-term. |
| | | | Stockpiles represent mineralized material extracted from the mine and available for processing. Stockpiles are measured |
| | | | by estimating the number of tonnes added and removed from the stockpile, an estimate of the contained metals (based on |
| | | | assay data) and the estimated metal urgical recovery rates. Costs are al ocated to stockpiles based on current mining costs |
| | | | incurred including applicable overhead relating to mining operations. Material is removed from the stockpile at an average |
| | | | cost per tonne. |
| | | | Mineralized material on leach pads is the material that is placed on pads where it is treated with a chemical solution that |
| | | | dissolves the gold contained in the mineralized material over a period of time. Costs are attributed to the mineralized |
| | | | material on leach pads based on current mining costs and processing costs incurred related to the ore on the pad. Costs are |
| | | | removed from the leach pad inventory based on the average cost per estimated recoverable ounce of gold on the leach pad |
| | | | as the gold is recovered. The estimates of recoverable gold on the leach pads are calculated from the quantities of |
| | | | mineralized material placed on the leach pads (measured tonnes added to the leach pads), the grade of mineralized material |
| | | | placed on the leach pads (based on assay data) and a recovery percentage. |
| | | | While the quantities of recoverable gold placed on the leach pads are periodically reconciled by comparing the grades of |
| | | | ore placed on the pads to the quantities of gold actual y recovered (metallurgical balancing), the nature of the leaching |
| | | | process inherently limits the ability to precisely monitor inventory levels. As a result, the metallurgical balancing process |
| | | | is constantly monitored, and the engineering estimates are refined based on actual results over time. |
| | | | In-process inventories represent materials that are currently in the process of being converted to a saleable product. In- |
| | | | process material is measured based on assays of the material from the various stages of processing. Costs are allocated to |
| | | | in-process inventories based on the costs of the material fed into the process at ributable to the source material coming |
| | | | from the mines, stockpiles and/or leach pads plus the in-process conversion costs incurred to that point in the process. |
| | | | Precious metal inventories include gold and silver doré and bullion that is unsold and held at the Company’s or the |
| | | | refinery’s facilities. Costs are al ocated to precious metal inventories based on costs of the respective in-process inventories |
| | | | incurred prior to the refining process plus applicable refining costs. |
| | | | Materials and supplies inventories are comprised of chemicals, reagents, spare parts and consumable parts used in operating |
| | | | and other activities. Cost includes applicable taxes and freight. |
| | | 88 |
| MCEWEN MINING INC. |
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| December 31, 2021 |
| | (tabular amounts are in thousands of U.S. dollars, unless otherwise noted) (Continued) |
| | | |
| | | | Proven and Probable Reserves: |
| | | | The definition of proven and probable reserves is set forth in S-K 1300. Proven mineral reserves are the economically |
| | | | mineable part of a measured mineral resource. For a proven mineral reserve, the qualified person has a high degree of |
| | | | confidence in the results obtained from the application of modifying factors and in the estimates of tonnage and grade or |
| | | | quality. A proven mineral reserve can only result from the conversion of a mineral resource. Probable mineral reserves are |
| | | | the economically mineable part of an indicated and, in some cases, measured mineral resource. For a probable mineral |
| | | | reserve, the qualified person’s confidence in the results obtained from the application of the modifying factors and in the |
| | | | estimates of tonnage and grade or quality is lower than what is sufficient for a classification as a proven mineral reserve, |
| | | | but is stil sufficient to demonstrate that, at the time of reporting, extraction of the mineral reserve is economical y viable |
| | | | under reasonable investment and market assumptions. The lower level of confidence is due to higher geologic uncertainty |
| | | | when the qualified person converts an indicated mineral resource to a probable reserve or higher risk in the results of the |
| | | | application of modifying factors at the time when the qualified person converts a measured mineral resource to a probable |
| | | | mineral reserve. A qualified person must classify a measured mineral resource as a probable mineral reserve when his or |
| | | | her confidence in the results obtained from the application of the modifying factors to the measured mineral resource is |
| | | | lower than what is sufficient for a proven mineral reserve. |
| | | | Mineral Property Interests and Plant and Equipment: |
| | | | Mineral property interests: Mineral property interests represent capitalized expenditures related to the development of |
| | | | mineral properties and expenditures arising from property acquisitions. The amount capitalized for an acquired mineral |
| | | | property represents its fair value at the time of acquisition, either as an individual asset purchase or as a part of a business |
| | | | combination. |
| | | | Development costs include engineering and metallurgical studies, drilling and other related costs to delineate an ore body, |
| | | | and the removal of overburden to initially expose an ore body at open pit surface mines (“pre-stripping”) and building of |
| | | | access paths and other infrastructure to gain access to the ore body at underground mines. Development costs are charged |
| | | | to operations in the year incurred as Advanced Projects until proven and probable reserves as defined by S-K 1300 have |
| | | | been met, after which they are capitalized. Where multiple open pits exist at a mine, pre-stripping costs are capitalized |
| | | | separately to each pit. Production commences when saleable minerals, beyond a de minimis amount, are produced. |
| | | | During the production phase of a mine, costs incurred to provide access to reserves and resources that wil be produced in |
| | | | future periods that would not have otherwise been accessible are capitalized and included in the carrying amount of the |
| | | | related mineral property interest. |
| | | | Drilling and related costs are capitalized for an ore body where proven and probable reserves exist and the activities are |
| | | | directed at obtaining additional information, providing greater definition of the ore body or converting non-reserve |
| | | | mineralization to proven and probable reserves and the benefit is expected to be realized over a period beyond one year. |
| | | | All other drilling and related costs are expensed as incurred as Exploration or Advanced Projects. Exploration costs include |
| | | | costs incurred to identify new mineral resources, evaluate potential resources, and convert mineral resources into proven |
| | | | and probable reserves. However, drilling costs specifical y incurred for the purpose of operational ore control during the |
| | | | production stage rather than obtaining additional information on the ore body are expensed and allocated to inventory costs |
| | | | and then included as a component of production costs applicable to sales as the revenue from the sale of inventory occurs. |
| | | | Mineral property interests are amortized upon commencement of production on a unit-of-production basis over proven and |
| | | | probable reserves, as defined by S-K 1300. When a property does not contain mineralized material that satisfies the |
| | | | definition of proven and probable reserves, the amortization of the capitalized costs is charged to expense based on the |
| | | | most appropriate method, which includes straight-line method and units-of-production method over the estimated useful |
| | | | life of the mine, as determined by internal mine plans. |
| | | 89 |
| MCEWEN MINING INC. |
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| December 31, 2021 |
| | (tabular amounts are in thousands of U.S. dollars, unless otherwise noted) (Continued) |
| | | |
| | | | Plant and Equipment: For properties where the Company has established proven and probable reserves as defined by S-K |
| | | | 1300, expenditures for plant and equipment and expenditures that extend the useful lives of existing plant and equipment |
| | | | are capitalized and recorded at cost. The cost capitalized for plant and equipment includes borrowing costs incurred that |
| | | | are attributable to qualifying plant and equipment. Plant and equipment are depreciated using the straight-line method |
| | | | over the estimated productive life of the asset. |
| | | | For properties where the Company did not establish proven and probable reserves as defined by S-K 1300, substantially |
| | | | all costs, including design, engineering, construction, and instal ation of equipment are expensed as incurred, unless the |
| | | | equipment has alternative uses or significant salvage value, in which case the equipment is capitalized at cost. |
| | | | Construction-in-progress (“CIP”) costs: Assets under construction are capitalized as construction-in-progress until the |
| | | | asset is available for its intended use, at which point costs are transferred to the appropriate category of plant and equipment |
| | | | or mineral property interest and amortized. The cost of construction-in-progress comprises the purchase price of the asset |
| | | | and any costs directly at ributable to bringing it into working condition for its intended use. |
| | | | Impairment of Long-Lived Assets: |
| | | | The Company reviews and evaluates its long-lived assets for impairment on a quarterly basis or when events or changes |
| | | | in circumstances indicate that the related carrying amounts may not be recoverable. Once it is determined that impairment |
| | | | exists, an impairment loss is measured as the amount by which the asset carrying value exceeds its estimated fair value. |
| | | | For the purpose of recognition and measurement of impairment, the Company groups its long-lived assets by specific mine |
| | | | or project, as this represents the lowest level for which identifiable cash flows exist. |
| | | | For asset groups where an impairment indicator is identified, an impairment loss is determined if the carrying amount of |
| | | | the asset group exceeds the recoverable amount as determined using the undiscounted future net cash flows. An impairment |
| | | | loss, if any, is the amount by which the carrying amount exceeds the discounted future net cash flows. It is possible that |
| | | | actual future cash flows will be significantly different than the estimates, as actual future quantities of recoverable minerals, |
| | | | gold, silver and other commodity prices, production levels and costs of capital are each subject to significant risks and |
| | | | uncertainties. |
| | | | For asset groups where the Company is unable to determine a reliable estimate of future net cash flows, the Company |
| | | | adopts a market approach to estimate fair value by using a combination of observed market value per square mile and |
| | | | observed market value per ounce or pound of estimated mineralized material based on comparable transactions. |
| | | | Reclamation and Remediation Liabilities: |
| | | | Provisions for environmental rehabilitation are made in respect of the estimated future costs of closure and restoration and |
| | | | rehabilitation costs (which include the dismantling and demolition of infrastructure, removal of residual materials and |
| | | | remediation of disturbed areas) in the accounting period when the related environmental disturbance occurs. The associated |
| | | | asset retirement costs, including periodic adjustments, if any, are capitalized as part of the carrying amount of the long- |
| | | | lived asset when proven or probable reserves exist or if they relate to an acquired mineral property interest; otherwise, the |
| | | | costs are charged to the operations. Periodic accretion is recorded to reclamation and remediation liabilities and charged |
| | | | to operations. |
| | | | The fair value of reclamation and remediation liabilities is measured by discounting the expected cash flows adjusted for |
| | | | inflation, using a credit-adjusted risk free rate of interest. The Company prepares estimates of the timing and amounts of |
| | | | expected cash flows when an reclamation and remediation liabilities is incurred, which are updated to reflect changes in |
| | | | facts and circumstances. Estimation of the fair value of reclamation and remediation liabilities requires significant |
| | | | judgment, including amount of cash flows, timing of reclamation, inflation rate and credit risk. |
| | | 90 |
| MCEWEN MINING INC. |
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| December 31, 2021 |
| | (tabular amounts are in thousands of U.S. dollars, unless otherwise noted) (Continued) |
| | | |
| | | | Lease Accounting: |
| | | | Contracts are analyzed to identify whether the contract contains an operating or financing lease according to ASC 842. If |
| | | | a contract is determined to contain a lease, the Company wil include lease payments (the lease liability) and the right-of- |
| | | | use asset (“ROU”) representing the right to the underlying asset for the lease term within the Consolidated Balance Sheets. |
| | | | Lease liabilities are disclosed as a distinct line item within the Consolidated Balance Sheets, whereas, the ROU asset is |
| | | | included in mineral property interests and plant and equipment. Related depreciation and amortization expense and interest |
| | | | expense for finance leases, and rent expense for operating leases is recorded within the Statement of Operations. For leases |
| | | | with a term of twelve months or less, an accounting policy election is made to not recognize lease assets and lease liabilities. |
| | | | The Company has elected to account for non-lease components as part of the lease component to which they relate. |
| | | | ROU asset balances and lease liabilities are recognized at the commencement date of the lease based on the present value |
| | | | of the future lease payments over the lease term. The Company utilizes the incremental borrowing rate (“IBR”) in |
| | | | determining the present value of the future lease payments. IBR represents the rate of interest that a lessee would have to |
| | | | pay to borrow an amount equal to the lease payments on a collateralized basis over a similar term in a similar economic |
| | | | environment. Each lease’s IBR is determined by using the average bond yield ratings for comparable companies. |
| | | | Revenue Recognition: |
| | | | Revenue consists of proceeds received and expected to be received for the Company’s principal products, gold and silver. |
| | | | Revenue is recognized when title to gold and silver passes to the buyer and when collectability is reasonably assured. Title |
| | | | passes to the buyer based on terms of the sales contract, usually upon delivery of the product. Product pricing is determined |
| | | | under the sales agreements which are referenced against active and freely traded commodity markets, for example, the |
| | | | London Bullion Market for both gold and silver, in an identical form to the product sold. Gold and silver doré produced |
| | | | from the San José mine is sold at the prevailing spot market price based on the London A.M. fix, while concentrates are |
| | | | sold at the prevailing spot market price based on either the London P.M. fix or average of the London A.M. and London |
| | | | P.M. fix depending on the sales contract. Concentrates are provisional y priced, whereby the selling price is subject to final |
| | | | adjustments at the end of a period ranging from 30 to 90 days after delivery to the customer. The final price is based on |
| | | | the market price of the precious metal content at the relevant quotation point stipulated in the contract. Due to the time |
| | | | elapsed between shipment and the final settlement with the buyer, MSC must estimate the prices at which sales of metals |
| | | | will be settled. At the end of each financial reporting period, previously recorded provisional sales are adjusted to estimated |
| | | | settlement metals prices based on relevant forward market prices until final settlement with the buyer. |
| | | | In addition to selling refined bullion at spot, the Company has doré purchase agreements in place with financial institutions |
| | | | and refineries. Under the agreements, the Company has the option to sell approximately 90% of the gold and silver |
| | | | contained in doré bars prior to the completion of refining by the third party refiner. Revenue is recognized when the |
| | | | Company has provided irrevocable instructions to the refiner to transfer to the purchaser the refined ounces sold upon final |
| | | | processing outturn, and when payment of the purchase price for the purchased doré or bullion has been made in full by the |
| | | | purchaser. There is no judgement involved in revenue recognition as revenue is recognized when payment has been made |
| | | | by the purchaser and the product has been delivered. |
| | | | Foreign Currency: |
| | | | The functional currency for the Company’s operations is the U.S. dollar. All monetary assets and liabilities denominated |
| | | | in a currency which is not the U.S. dollar are translated at current exchange rates at each balance sheet date and the resulting |
| | | | adjustments are included in a separate line item under other income (expense). Revenues and expenses in foreign currencies |
| | | | are translated at the average monthly exchange rates for the corresponding period. |
| | | 91 |
| MCEWEN MINING INC. |
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| December 31, 2021 |
| | (tabular amounts are in thousands of U.S. dollars, unless otherwise noted) (Continued) |
| | | |
| | | | Stock-Based Compensation: |
| | | | The Company accounts for stock options at fair value as prescribed in ASC 718. The Company estimates the fair value of |
| | | | each stock option at the grant date by using the Black-Scholes option-pricing model and provides for expense recognition |
| | | | over the service period, if any, of the stock option. The Company’s estimates may be impacted by certain variables |
| | | | including, but not limited to, stock price volatility, employee stock option exercise behavior and estimates of forfeitures. |
| | | | Flow-Through Common Shares: |
| | | | Current Canadian tax legislation permits mining entities to issue flow-through common shares to investors by which the |
| | | | deductions for tax purposes related to resource exploration and evaluation expenditures may be claimed by investors |
| | | | instead of the entity, subject to a renouncement process. Under ASC 740, proceeds from the issuance of flow-through |
| | | | common shares are allocated first to the common stock based on the underlying quoted price of shares and the residual |
| | | | amount is allocated to the sale of tax benefits, which is classified as a liability. In the future, as the Company incurs |
| | | | qualifying exploration and evaluation expenditures to fulfill its obligation, the liability is drawn down and the sale of tax |
| | | | benefits is recognized in the Statement of Operations as a reduction of deferred tax expense. |
| | | | Income and Mining Taxes: |
| | | | The Company accounts for income and mining taxes under ASC 740 using the liability method, recognizing certain |
| | | | temporary differences between the financial reporting basis of liabilities and assets and the related tax basis for such |
| | | | liabilities and assets. This method generates either a net deferred income and mining tax liability or asset for the Company, |
| | | | as measured by the statutory tax rates in effect. The Company derives the deferred income and mining tax charge or benefit |
| | | | by recording the change in either the net deferred income and mining tax liability or asset balance for the year. The |
| | | | Company records a valuation allowance against any portion of those deferred income and mining tax assets when it |
| | | | believes, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred |
| | | | income and mining tax asset will not be realized. |
| | | | Comprehensive (Loss) Income: |
| | | | In addition to net income or loss, comprehensive income or loss is included in changes in equity during a period. Per Share Amounts: |
| | | | Basic income or loss per share is computed by dividing income or loss available to common shareholders by the weighted |
| | | | average number of common shares outstanding during the period. Diluted income per share reflects the potential dilution |
| | | | of securities that could share in the earnings of the Company and is computed in accordance with the treasury stock method |
| | | | based on the average number of common shares and dilutive common share equivalents outstanding. Only those |
| | | | instruments that result in a reduction in income per share are included in the calculation of diluted (loss) income per share. Loans and Borrowings: |
| | | | Borrowings are recognized initial y at fair value, net of financing costs incurred, and subsequently measured at amortized |
| | | | cost. Any difference between the amounts originally received and the redemption value of the debt is recognized in the |
| | | | Statements of Operations over the period to maturity using the effective interest method. Borrowing costs directly |
| | | | attributable to the acquisition, construction or production of a qualifying asset (i.e. an asset that necessarily takes a |
| | | | substantial period of time to get ready for its intended use or sale) are capitalized as part of the cost of the asset. All other |
| | | | borrowing costs are expensed in the period they occur. |
| | | 92 |
| MCEWEN MINING INC. |
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| December 31, 2021 |
| | (tabular amounts are in thousands of U.S. dollars, unless otherwise noted) (Continued) |
| | | |
| | | | Fair Value of Financial Instruments: |
| | | | Fair value accounting establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure |
| | | | fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets and |
| | | | liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels |
| | | | of the fair value hierarchy are described below: |
| | | | |
| | | | | | | | Level 1 | Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, |
| | | unrestricted assets or liabilities; |
| | | | Level 2 | Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for |
| | | substantially the full term of the asset or liability; and |
| | | | | | Level 3 | Prices or valuation techniques that require inputs that are both significant to the fair value measurement |
| | | | | | and unobservable (supported by little or no market activity). |
| | | | | | |
| | | | | | NOTE 3 OPERATING SEGMENT REPORTING |
| | |
| | | | | | McEwen Mining is a mining and minerals production and exploration company focused on precious metals in the United |
| | | | States, Canada, Mexico, and Argentina. The Company’s chief operating decision maker (“CODM”) reviews the operating |
| | | | | results, assesses performance and makes decisions about al ocation of resources to these segments at the geographic region |
| | | | | | level or major mine/project where the economic characteristics of the individual mines or projects within a geographic |
| | | | | | region are not alike. As a result, these operating segments also represent the Company’s reportable segments. The |
| | | | Company’s business activities that are not considered operating segments are included in General and Administrative and |
| | | | | | other and are provided in this note for reconciliation purposes. |
| | | | |
| | | | | | The CODM reviews segment income or loss, defined as gold and silver sales less production costs applicable to sales, |
| | | | | depreciation and depletion, advanced projects, and exploration costs, for al segments except for the MSC segment which |
| | | | is evaluated based on the at ributable equity income or loss pickup. Gold and silver sales and production costs applicable |
| | | | | to sales for the reportable segments are reported net of intercompany transactions. |
| | |
| | | | Capital expenditures include costs capitalized in mineral property interests and plant and equipment in the respective |
| | | | periods. |
| | |
| | | | | | |
| | | | |
| | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | | |
| | | | | |
| | |
| | |
| | | | |
| | |
| | |
| | | | |
| | | | | |
| | | | |
| | | | | |
| | |
| | | | | |
| | | | | |
| | |
| | | 93 |
| | | | | |
| | | | | | |
| | | | | |
| | | | |
| | | | | |
| | |
| MCEWEN MINING INC. |
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| December 31, 2021 |
| | (tabular amounts are in thousands of U.S. dollars, unless otherwise noted) (Continued) |
| | | |
| | | | Significant information relating to the Company’s reportable operating segments for the periods presented is summarized |
| | | | in the tables below: |
| | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | Year ended December 31, 2021 | | | | | | | | | | USA | Canada Mexico | | | MSC Los Azules | | | | Total |
| | | | Revenue from gold and silver sales | $ 79,205 $ 50,704 $ 6,632 $ | | | | | | | — $ | — $ 136,541 |
| | | | Production costs applicable to sales | (73,991) | | | (32,961) (12,272) | | | | — | — (119,224) |
| | | | Depreciation and depletion | (8,502) | | | (15,296) | | | — | — | — (23,798) |
| | | | Gross profit (loss) | (3,288) | | | | | | | | | | | 2,447 (5,640) | — | — (6,481) |
| | | | | | | | | | | | | | | | | |
| | | | Advanced projects | | | | | | | | | | (440) | (2,635) (4,345) | | | | — $ (5,019) (12,439) |
| | | | Exploration | (5,875) | | | (15,017) | | | (14) | — (1,698) (22,604) |
| | | | Impairment of mineral property interests and plant |
| | | | and equipment (Note 8) | | | | | | | | | | — | — | — | — | — | | — |
| | | | Loss from investment in Minera Santa Cruz S.A. | | | | | | | | | | — | — | — (7,533) | | — (7,533) |
| | | | Other operating | | | | | | | | | | — | — | — | — | — | | — |
| | | | Segment loss | | $ (9,603) $ (15,205) $ (9,999) $ (7,533) $ (6,717) $ (49,056) |
| | | | General and Administrative and other | | | | | | | | | | — | — | — | — | — (15,143) |
| | | | Loss before income and mining taxes | | | | | | | | | | — | — | — | — | — $ (64,199) |
| | | | | | | | | | | | | | | | | |
| | | | Capital expenditures | $ 2,416 $ 33,617 $ | | | | | | — $ | — $ | — $ 36,033 |
| | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | Year ended December 31, 2020 | | | | | | | | | | USA | Canada Mexico | | | | MSC Los Azules | | | Total |
| | | | Revenue from gold and silver sales | $ 48,884 $ 41,452 $ 14,453 $ | | | | | | | — $ | — $ 104,789 |
| | | | Production costs applicable to sales | (58,465) | | | (34,639) (15,723) | | | | — | — (108,827) |
| | | | Depreciation and depletion | (11,785) | | | (10,883) | | | | | | | | | | (242) | — | — (22,910) |
| | | | Gross (loss) profit | (21,366) | | | (4,070) (1,512) | | | | — | — | (26,948) |
| | | | | | | | | | | | | | | | | |
| | | | Advanced projects | (1,071) | | | (6,088) (4,522) | | | | — | — (11,681) |
| | | | Exploration | (6,777) | | | (6,450) | | | | | | | | | | (513) | — (2,121) (15,861) |
| | | | Impairment of mineral property interests and plant |
| | | | and equipment (Note 8) | (83,805) | | | | | — | — | — | — (83,805) |
| | | | Loss from investment in Minera Santa Cruz S.A. | | | | | — | — | — (1,517) | | — (1,517) |
| | | | Other operating | (1,390) | | | | | | | | | | | (578) | — | — | — (1,968) |
| | | | Segment loss | $ (114,409) $ (17,186) $ (6,547) $ (1,517) $ (2,121) $ (141,780) |
| | | | General and Administrative and other | | | | | | | | | | — | — | — | — | — (11,935) |
| | | | Loss before income and mining taxes | | | | | | | | | | — | — | — | — | — $ (153,715) |
| | | | | | | | | | | | | | | | | |
| | | | Capital expenditures | $ 4,821 $ | | | | | | | | | | | 9,104 $ | — $ | — $ | — $ 13,925 |
| | | | |
| | | 94 |
| MCEWEN MINING INC. |
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| December 31, 2021 |
| | (tabular amounts are in thousands of U.S. dollars, unless otherwise noted) (Continued) |
| | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | Year ended December 31, 2019 | | | | | | | | | | USA | Canada Mexico | | | | | | | MSC Los Azules | Total |
| | | | Revenue from gold and silver sales | $ 43,847 $ 50,058 $ 23,114 $ | | | | | | | — $ | — $ 117,019 |
| | | | Production costs applicable to sales | (33,614) (31,121) (18,545) | | | | | | | — | — (83,280) |
| | | | Depreciation and depletion | (10,934) (13,271) | | | | | | | | | | | | (548) | — | — (24,753) |
| | | | Gross profit | | (701) | | | 5,666 4,021 | | | | — | — | 8,986 |
| | | | | | | | | | | | | | | | | | |
| | | | Advanced projects | | (649) | | | (1,636) (7,235) | | | | — | — (9,520) |
| | | | Exploration | (8,554) (25,779) | | | | | | — | — (3,411) (37,744) |
| | | | Loss from investment in Minera Santa Cruz S.A. | | | | | — | — | — (8,754) | | — (8,754) |
| | | | Segment (loss) income | $ (9,904) $ (21,749) $ (3,214) $ (8,754) $ (3,411) $ (47,032) |
| | | | General and Administrative and other | | | | | | | | | (16,559) |
| | | | Loss before income and mining taxes | | | | | | | | | $ (63,591) |
| | | | | | | | | | | | | | | | | | |
| | | | Capital expenditures | $ 18,806 $ 11,464 $ | | | | | | — $ | — $ | — $ 30,270 |
| | | | |
| | | | Geographic information |
| | | | Geographic information includes the following long-lived assets balances and revenues presented for the Company’s operating |
| | | | segments: |
| | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Long-lived Assets | | | | | | | Revenue (1) |
| | | | | | | | | | | | | | | | | | December 31, | December 31, | | | Year ended December 31, |
| | | | | | 2021 | | | 2020 | | | 2021 | 2020 | | | | | | | | | 2019 |
| | | | USA | | | | | | | | | | | | | | $ | 37,878 $ | | | 46,801 | | $ | 79,205 $ | 48,884 $ | 43,847 |
| | | | Canada | | 93,294 | | | 78,986 | | | 50,704 | 41,452 | 50,058 |
| | | | Mexico | | | | | | | | | | | | | | | 26,561 | | | 20,021 | | | 6,632 | 14,453 | 23,114 |
| | | | Argentina (2) | | | | | | | | | | | | | | | | 282,583 | 299,816 | | | — | — | | | | — |
| | | | Total consolidated | | | | | | | | | | | | | | $ | | 440,316 $ | 445,624 | | $ | | | | | | | 136,541 $ | 104,789 $ | 117,019 |
| | | | | | | | | | | | | |
| | | | (1) Presented based on the location from which the product originated. |
| | | | (2) Includes Investment in MSC of $90.9 million as of December 31, 2021 (December 31, 2020 - $108.3 mil ion). |
| | | | (3) Total excludes $0.4 mil ion (December 31, 2020 - $0.6 mil ion) related to the Company’s ROU of ice lease asset as the business |
| | | | activities related to corporate are not considered to be a part of the operating segments. |
| | | | As gold and silver can be sold through numerous gold and silver market traders worldwide, the Company is not |
| | | | economically dependent on a limited number of customers for the sale of its product. In 2021, 2020 and 2019, sales to |
| | | | Bank of Nova Scotia and Asahi Refining Inc. were $nil and $134.7 mil ion (98.8%), $33.0 million (32%) and $67.0 mil ion |
| | | | (64%), and $103.6 million (89%) and $4.9 million (4%), respectively, of the total gold and silver sales. |
| | | | |
| | | | NOTE 4 OTHER INCOME |
| | | | The following is a summary of other income (expense) for the years ended December 31, 2021, 2020 and 2019: |
| | | | |
| | | | | | | | | | | | | | | | | | | | | | Year ended December 31, |
| | | | | | 2021 | 2020 | | | | 2019 |
| | | | COVID-19 relief | $ | 3,541 $ | 6,420 $ | | | | — |
| | | | Unrealized and realized gain (loss) on investments (Note 5) | | 28 | (619) | | | | 5,259 |
| | | | Foreign currency gain | | 513 | 1,078 | | | | 1,697 |
| | | | Other income, net | | 2,199 | 14 | | | | 184 |
| | | | Total other income | $ | 6,281 $ | 6,893 $ | | | | 7,140 |
| | | | |
| | | 95 |
| MCEWEN MINING INC. |
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| December 31, 2021 |
| | (tabular amounts are in thousands of U.S. dollars, unless otherwise noted) (Continued) |
| | | |
| | | | NOTE 5 INVESTMENTS |
| | | | The Company’s investment portfolio consisted of marketable equity securities and warrants of certain publicly-traded |
| | | | companies. |
| | | | The following is a summary of the activity in investments for the years ended December 31, 2021 and 2020: |
| | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | As at | Additions/ | | | | | | | | | | Disposals/ | Unrealized | Fair value |
| | | | | December 31, transfers during Net gain (loss) on transfers during | | | | | | | | | | gain on December 31, |
| | | | | | | | | 2020 | period securities sold | | | | | | | year securities held | | | | | 2021 |
| | | | Marketable equity securities | $ | | | | — $ | 1,616 $ | | | | | | — $ | — $ | 28 $ | | | | 1,644 |
| | | | Warrants | | | | | — | | | | | | | | 162 | — | — | — | | | | 162 |
| | | | Investments | | $ | | | | — $ | 1,777 $ | | | | | | — $ | — $ | 28 $ | | | | 1,806 |
| | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | As at | | | | | | | | Additions/ | Net | | | | Disposals/ | Unrealized | Fair value |
| | | | | December 31, transfers during | | | | | | | | | | | | | (loss) on transfers during | (loss) on December 31, |
| | | | | | | | | 2019 | period securities sold | | | | year securities held | | | | | 2020 |
| | | | Marketable equity securities | | | | | | | | | $ | 1,885 $ | — $ | | | (619) $ | | | | (1,266) $ | — $ | | | | — |
| | | | |
| | | | On June 23, 2021, the Company closed the sale of two projects in Nevada, Limousine Butte and Cedar Wash, with Nevgold |
| | | | Corp. (“Nevgold”, formerly Silver Mountain Mines Inc.). In addition to $0.5 mil ion of cash received as part of the |
| | | | consideration, the Company received 4,963,455 common shares and 2,481,727 warrants of Nevgold. Upon issuance, the |
| | | | common shares received by the Company represented 10% of the issued and outstanding shares of Nevgold. The warrants |
| | | | have an exercise price of $0.60 per share and are exercisable until June 23, 2023. The common shares trade on the TSX |
| | | | Venture Exchange. |
| | | | During the years ended December 31, 2021, 2020 and 2019, the Company sold marketable equity securities for $nil, $1.3 |
| | | | million and $6.8 million, respectively. |
| | | | |
| | | | NOTE 6 RECEIVABLES AND OTHER CURRENT ASSETS |
| | | | Receivables and other current assets as at December 31, 2021 and 2020 consisted of the following: |
| | | | |
| | | | | | | | | | | | | | | | | | | | | December 31, 2021 | December 31, 2020 |
| | | | Government sales tax receivable | | | | | | | 3,708 $ | | | | | 1,810 |
| | | | Prepaids and other assets | | | | | | | 6,883 | | | | | 3,880 |
| | | | Receivables and other current assets | | | | | | $ | 10,591 $ | | | | | 5,690 |
| | | | | Included in government sales tax receivable for the year ended December 31, 2021 is $2.2 million HST receivable from |
| | | | our operations in Black Fox (December 31, 2020 - $0.4 million). The timing of receipt of these funds is uncertain due to |
| | | | ongoing review conducted by tax local authorities. |
| | | | |
| | | 96 |
| MCEWEN MINING INC. |
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| December 31, 2021 |
| | (tabular amounts are in thousands of U.S. dollars, unless otherwise noted) (Continued) |
| | | |
| | | | NOTE 7 INVENTORIES |
| | | | Inventories at December 31, 2021 and 2020 consist of the fol owing: |
| | | | |
| | | | | | | | | | | | | | | | | | December 31, 2021 | December 31, 2020 |
| | | | Material on leach pads | | $ | | | | | | | 4,660 | $ | | | | | 21,003 |
| | | | In-process inventory | | | | | | | | | 3,049 | | | | | | 3,922 |
| | | | Stockpiles | | | | | | | | | 5,105 | | | | | | 635 |
| | | | Precious metals | | | | | | | | | 1,819 | | | | | | 1,344 |
| | | | Materials and supplies | | | | | | | | | 3,702 | | | | | | 4,845 |
| | | | | | $ | | | | | | | 18,335 | $ | | | | | 31,749 |
| | | | Less long-term portion | | | | | | | | | (2,543) | | | | | | (4,785) |
| | | | | | | | | | | | | 15,792 | | | | | | 26,964 |
| | | | |
| | | | During the year ended December 31, 2021, the inventory of Black Fox, Gold Bar and El Gallo were written down to their |
| | | | net realizable value by $2.1 million, $1.4 million, and $3.3 million respectively. Of these write-downs, a total of $6.0 |
| | | | mil ion was included in production costs applicable to sales (December 31, 2020 - $13.9 mil ion) and $0.8 million was |
| | | | included in depreciation and depletion (December 31, 2020 - $2.1 million) in the Statement of Operations. |
| | | | |
| | | | NOTE 8 MINERAL PROPERTY INTERESTS AND PLANT AND EQUIPMENT |
| | | | The cost and carrying value of mineral property interests and plant and equipment at December 31, 2021 and 2020 are as |
| | | | follows: |
| | | | |
| | | | | | | | | | | | | | | | | | | | | | | | December 31, 2021 | December 31, 2020 |
| | | | Mineral property interests, cost | | | | | | | | $ | 344,529 $ | | | | | 314,719 |
| | | | Less: accumulated depletion | | | | | | | | | (47,197) | | | | | (34,601) |
| | | | Mineral property interests, carrying value | | | | | | | | $ | 297,332 $ | | | | | 280,118 |
| | | | | | | | | | | | | | | | | | | |
| | | | Plant and equipment, cost | | | | | | | | | | | | | | | |
| | | | Land | | | | | | | | $ | 8,949 $ | | | | | 8,804 |
| | | | Construction in progress | | | | | | | | | 4,078 | | | | | 2,945 |
| | | | Plant and equipment | | | | | | | | | 76,887 | | | | | 72,188 |
| | | | Subtotal | | | | | | | | $ | 89,914 $ | | | | | 83,937 |
| | | | Less: accumulated depreciation | | | | | | | | | (44,942) | | | | | (34,943) |
| | | | Plant and equipment, carrying value | | | | | | | | $ | 44,972 $ | | | | | 48,994 |
| | | | | | | | | | | | | | | | | | | |
| | | | Mineral property interests and plant and equipment, carrying value | | | | | | | | $ | 342,303 $ | | | | | 329,112 |
| | | | |
| | | 97 |
| MCEWEN MINING INC. |
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| December 31, 2021 |
| | (tabular amounts are in thousands of U.S. dollars, unless otherwise noted) (Continued) |
| | | |
| | | | Mineral property interest carrying value at December 31, 2021 and 2020 includes the following: |
| | | | |
| | | | | | | | | | | | | | | | Name of Property/Complex | State/Province Country | | | 2021 | 2020 |
| | | | Fox Complex | | Ontario | Canada | $ 37,678 $ 17,580 |
| | | | Lexam | | Ontario | Canada | 41,595 41,595 |
| | | | Los Azules Copper Project | | San Juan Argentina | | 191,490 191,490 |
| | | | Tonkin Properties | | Nevada United States | | 4,833 4,833 |
| | | | Gold Bar Project | | Nevada United States | | 11,790 14,675 |
| | | | Bat le Mountain Complex | | Nevada United States | | | 785 | 785 | |
| | | | El Gal o Project | | Sinaloa | Mexico | 3,353 3,353 |
| | | | Fenix Project Properties | | Sinaloa | Mexico | 5,807 5,807 |
| | | | Total mineral property interests | | | | $ 297,332 $ 280,118 |
| | | | |
| | | | Black Fox and Gold Bar mineral property interest are depleted based on the units of production method from production |
| | | | commencement date over the estimated proven and probable reserves. |
| | | | The El Gallo Project is depleted and depreciated using the straight line or units-of-production method over the stated mine |
| | | | life, as the project does not have proven and probable reserves compliant with S-K 1300. |
| | | | The definition of proven and probable reserves is set forth in the S-K 1300. If proven and probable reserves exist at the |
| | | | Company’s properties, the relevant capitalized mineral property interests and asset retirement costs are charged to expense |
| | | | based on the units of production method upon commencement of production. The Company’s Gold Bar, Black Fox and |
| | | | San José properties have proven and probable reserves estimated in accordance with SEC Industry S-K 1300. |
| | | | The Company conducts a review of potential triggering events for impairment for all its mineral projects on a quarterly |
| | | | basis or when events or changes in circumstances indicate that the related carrying amounts may not be recoverable. |
| | | | During the year ended December 31, 2021, no indicators of impairment have been noted for any of the Company’s mineral |
| | | | property interests. The Company’s evaluation resulted in an impairment charge of $83.8 million for the year ended |
| | | | December 31, 2020. |
| | | | |
| | | | NOTE 9 INVESTMENT IN MINERA SANTA CRUZ S.A. (“MSC”) - SAN JOSÉ MINE |
| | | | The Company accounts for investments over which it exerts significant influence but does not control through majority |
| | | | ownership using the equity method of accounting. In applying the equity method of accounting to the Company’s |
| | | | investment in MSC, MSC’s financial statements, which are original y prepared by MSC in accordance with International |
| | | | Financial Reporting Standards as issued by the International Accounting Standards Board, have been adjusted to conform |
| | | | with U.S. GAAP. As such, the summarized financial data presented under this heading is in accordance with U.S. GAAP. |
| | | 98 |
| MCEWEN MINING INC. |
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| December 31, 2021 |
| | (tabular amounts are in thousands of U.S. dollars, unless otherwise noted) (Continued) |
| | | |
| | | | A summary of the operating results of MSC for the year ended December 31, 2021, 2020, and 2019, is as follows: |
| | | | |
| | | | | | | | | | | | | | | | | | | Year ended December 31, | | |
| | | | | | | 2021 | 2020 | | 2019 | |
| | | | Minera Santa Cruz S.A. (100%) | | | | | | |
| | | | Revenue from gold and silver sales | | $ | | | | | 271,863 $ | 219,020 $ | 263,887 | |
| | | | Production costs applicable to sales | | | | | | (196,033) | (138,182) | (159,915) |
| | | | Depreciation and depletion | | | | | | (39,948) | (29,809) | (69,995) |
| | | | Gross profit | | | | | | 35,882 | 51,029 | 33,977 | |
| | | | Exploration | | | | | | (10,602) | (10,446) | (10,635) |
| | | | Other expenses(1) | | | | | | (17,077) | (30,515) | (13,065) |
| | | | Net income before tax | | $ | | | | | 8,203 $ | 10,068 $ | 10,277 | |
| | | | Current and deferred tax expense | | | | | | (7,934) | (4,466) | (14,556) |
| | | | Net income (loss) | | $ | | 269 $ | | | | 5,602 $ | (4,279) |
| | | | | | | | | |
| | | | Portion attributable to McEwen Mining Inc. (49%) | | | | | | | |
| | | | Net income (loss) | | $ | | 132 $ | | | | 2,745 $ | (2,097) |
| | | | Amortization of fair value increments | | | | | | (8,331) | (5,390) | (9,448) |
| | | | Income tax recovery | | | 666 | | | | 1,128 | 2,791 | |
| | | | (Loss) income from investment in MSC, net of amortization | $ | | | | | (7,533) $ | (1,517) $ | (8,754) |
| | | | | | | |
| | | | (1) Other expenses include foreign exchange, accretion of asset retirement obligations and other finance related expenses. |
| | | | Costs related to the COVID-19 pandemic for MSC were recognized in cost of sales and totaled $19.3 million for the year |
| | | | ended December 31, 2021. During the year ended December 31, 2020, shutdown costs related to COVID-19 totaled $11.4 |
| | | | mil ion and were recognized in other expenses. |
| | | | The loss from investment in MSC attributable to the Company includes amortization of the fair value increments arising |
| | | | from the initial purchase price al ocation and related income tax recovery. The income tax recovery reflects the impact of |
| | | | devaluation of the Argentine peso against the U.S. dollar on the peso-denominated deferred tax liability recognized at the |
| | | | time of acquisition, as well as income tax rate changes over the periods. |
| | | | Changes in the Company’s investment in MSC for the year ended December 31, 2021 and 2020 are as follows: |
| | | | |
| | | | | | | | | | | December 31, 2021 | | | | | | December 31, 2020 |
| | | | Investment in MSC, beginning of period | $ | | | | 108,326 $ | 110,183 |
| | | | Attributable net income from MSC | | | | | 132 | 2,745 |
| | | | Amortization of fair value increments | | | | | (8,331) | (5,390) |
| | | | Income tax recovery | | | | | 666 | 1,128 |
| | | | Dividend distribution received | | | | | (9,832) | (340) |
| | | | Investment in MSC, end of period | $ | | | | 90,961 $ | 108,326 |
| | | | |
| | | 99 |
| MCEWEN MINING INC. |
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| December 31, 2021 |
| | (tabular amounts are in thousands of U.S. dollars, unless otherwise noted) (Continued) |
| | | |
| | | | A summary of the key assets and liabilities of MSC as at December 31, 2021 and 2020, before and after adjustments for |
| | | | fair value increments arising from the purchase price al ocation, are as follows: |
| | | | | | | | | | | | | | | Balance excluding | | Balance including |
| | | | As at December 31, 2021 | | | FV increments | | | Adjustments | | | FV increments |
| | | | Current assets | $ | | | | | | | 89,876 $ | 469 $ | | | | 90,345 |
| | | | Total assets | $ | | | | | | | 180,302 $ | 89,975 $ | 270,277 |
| | | | | | | | | | | | | | |
| | | | Current liabilities | $ | | | | | | | (51,244) $ | — $ | | | | (51,244) |
| | | | Total liabilities | $ | | | | | | | (82,075) $ | (2,577) $ | | | (84,652) |
| | | | |
| | | | | | | | | | | | | | | Balance excluding | | Balance including |
| | | | As at December 31, 2020 | | | FV increments | | | Adjustments | | | FV increments |
| | | | Current assets | $ | | | | | | | 94,965 $ | 362 $ | | | | 95,327 |
| | | | Total assets | $ | | | | | | | 186,438 $ | 107,821 $ | 294,259 |
| | | | | | | | | | | | | | |
| | | | Current liabilities | | $ | | | | | | | (40,396) $ | — $ | | | | (40,396) |
| | | | Total liabilities | | $ | | | | | | | (69,255) $ | (3,936) $ | | | (73,191) |
| | | | |
| | | | NOTE 10 LEASE LIABILITIES |
| | | | The Company’s lease obligations include equipment, vehicles and office space. Leased assets are included in plant and |
| | | | equipment (Note 8). The terms and conditions contained in the Company’s leases do not contain variable components. |
| | | | Lease liabilities as at December 31, 2021 and 2020 are as fol ows: |
| | | | |
| | | | | | | | | | | | | | | | | | Total discounted lease liabilities |
| | | | | | | | December 31, 2021 | | December 31, 2020 |
| | | | Finance leases | | | $ | | | 3,833 | $ | | | | 4,735 |
| | | | Operating lease | | | | | | 583 | | | | | 761 |
| | | | Lease liabilities | | | $ | | | 4,416 | $ | | | | 5,496 |
| | | | Current portion | | | | | | (2,901) | | | | | (2,440) |
| | | | Long-term portion | | | $ | | | 1,515 | $ | | | | 3,056 |
| | | | |
| | | | Lease liabilities as at December 31, 2021 are recorded using a weighted average discount rate of 6.67% and 8.73%, |
| | | | respectively, for finance and operating leases and have average remaining lease terms of 1 year and three years, |
| | | | respectively. |
| | | | During the year ended December 31, 2021, the Company recorded $2.0 mil ion (December 31, 2020 – $1.3 million) in |
| | | | interest and other finance costs related to leases. A breakdown of the lease related costs for the year ended December 31, |
| | | | 2021 and 2020 are as follows: |
| | | | |
| | | | | | | | | | | | | | | | | | December 31, 2021 | | | December 31, 2020 |
| | | | Finance leases: | | | | | | | | | | | | |
| | | | Amortization of ROU assets | | | $ | | | 1,659 | $ | | | | 878 |
| | | | Interest expense | | | | | | 329 | | | | | 392 |
| | | | Total | | | $ | | | 1,988 | $ | | | | 1,270 |
| | | | | | | | | | | | | | | | |
| | | | Operating lease: | | | | | | | |
| | | | Rent expense | | | $ | | | 135 | $ | | | | 194 |
| | | | |
| | | 100 |
| MCEWEN MINING INC. |
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| December 31, 2021 |
| | (tabular amounts are in thousands of U.S. dollars, unless otherwise noted) (Continued) |
| | | |
| | | | Future minimum undiscounted lease payments as at December 31, 2021 are as follows: |
| | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | Payments due by period |
| | | | | | 2022 | | | | | | 2023 | 2024 | 2025 | 2026 | Total |
| | | | Operating lease obligation | $ | 246 $ | | | | | | 250 $ | 167 $ | — $ | — $ | 663 |
| | | | Finance lease obligations | | | 2,704 | | | | | | 808 | | 274 | | — | | — 3,785 |
| | | | Total future minimum lease payments $ | 2,949 $ | | | 1,058 $ | | | | 441 $ | — $ | — $ 4,448 |
| | | | Less: Imputed interest | | | | | | | | | (32) |
| | | | Total | | | | | | | | 4,416 |
| | | | |
| | | | NOTE 11 LONG-TERM DEBT |
| | | | On August 10, 2018, the Company finalized a $50.0 million senior secured three year term loan facility with Royal Capital |
| | | | Management Corp., as administrative agent, and the lenders party thereto. Interest on the loan accrued at the rate of 9.75% |
| | | | per annum with interest due monthly and the loan was collateralized by a lien on certain of the Company’s and its |
| | | | subsidiaries’ assets. |
| | | | On June 25, 2020, the Company entered into an Amended and Restated Credit Agreement (“ARCA”) which refinanced |
| | | | the outstanding $50 mil ion and which terms differed in material respects from the original loan as follows: |
| | | | • | | | | | | | Sprott Private Resource Lending II (Collector), LP replaced Royal Capital Management Corp. as the |
| | | | | | | | | | | administrative agent. |
| | | | • | | | | | | | Sprott Private Resource Lending II (Collector), LP replaced certain lenders. An affiliate of Robert McEwen |
| | | | | | | | | | | remains as a lender. |
| | | | • | | | | | | | Scheduled repayments of the principal are extended by two years. Monthly repayments of principal in the amount |
| | | | | | | | | | | of $2.0 mil ion are due beginning on August 31, 2022, and continuing for 12 months, followed by a final principal |
| | | | | | | | | | | payment of $26.0 million plus any accrued interest on August 31, 2023. Subsequent to year end, we have come |
| | | | | | | | | | | to terms in implementing an agreement with our lenders to defer the principal repayments to August 31, 2023. |
| | | | • | | | | | | | The minimum working capital maintenance requirement was reduced from $10.0 million under the original term |
| | | | | | | | | | | loan to $nil at June 30, 2020 to December 31, 2020 and from $10.0 million to $2.5 million at March 31, 2021 to |
| | | | | | | | | | | December 31, 2021. The minimum working capital maintenance requirement increases to $5.0 million for March |
| | | | | | | | | | | 31, 2022, $7.0 million for June 30, 2022, and $10.0 mil ion for September 30, 2022 and thereafter. Subsequent to |
| | | | | | | | | | | year end, the minimum working capital maintenance requirement has been reduced to $5.0 million. |
| | | | • | | | | | | | The Company issued 2,091,700 shares valued at $1,875,000 to the lenders as bonus interest, accounted for as a |
| | | | | | | | | | | financing cost. The value of the shares plus the unamortized costs of the original term loan wil be amortized over |
| | | | | | | | | | | the modified term of the loan. |
| | | | A reconciliation of the Company’s long-term debt for the year ended December 31, 2021 and 2020 is as follows: |
| | | | |
| | | | | | | | | | | | | | | | | | | | | Year ended December | Year ended |
| | | | | | | | | | | | | | 31, 2021 | December 31, 2020 |
| | | | Balance, beginning of period | | | $ | | | | | | | | 48,160 $ | 49,516 |
| | | | Interest expense | | | | | | | | | | | 5,581 | 5,394 |
| | | | Interest payments | | | | | | | | | | | (4,875) | (4,875) |
| | | | Bonus Interest - Equity based financing fee | | | | | — | (1,875) |
| | | | Balance, end of period | | | $ | | | | | | | | 48,866 $ | 48,160 |
| | | | |
| | | 101 |
| MCEWEN MINING INC. |
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| December 31, 2021 |
| | (tabular amounts are in thousands of U.S. dollars, unless otherwise noted) (Continued) |
| | | |
| | | | NOTE 12 RECLAMATION AND REMEDIATION LIABILITIES |
| | | | The Company is responsible for reclamation of certain past and future disturbances at its properties. The most significant |
| | | | properties subject to these obligations are the Gold Bar and Tonkin properties in Nevada, the Timmins properties in |
| | | | Canada, and the El Gallo Project in Mexico. |
| | | | A reconciliation of the Company’s asset retirement obligations for the years ended December 31, 2021 and 2020 are as |
| | | | follows: |
| | | | |
| | | | | | | | | | | | December 31, 2021 | December 31, 2020 |
| | | | Reclamation and remediation liability, beginning balance | $ | | | | 34,000 | $ | | | | 32,201 | |
| | | | Settlements | | | | | (2,225) | (267) |
| | | | Accretion of liability | | | | | 2,405 | | | | | 1,901 | |
| | | | Revisions to estimates and discount rate | | | | | 1,257 | | | (54) |
| | | | Foreign exchange revaluation | | 15 | | | 219 | |
| | | | Reclamation and remediation liability, ending balance | $ | | | | 35,452 | $ | | | | 34,000 | |
| | | | Less current portion | | | | | 5,761 | | | | | 3,232 | |
| | | | Long-term portion | $ | | | | 29,691 | $ | | | | 30,768 | |
| | | | |
| | | | The adjustment reflecting updated estimates during the year ended December 31, 2021 primarily relates to a $0.5 million |
| | | | increase in obligations in Nevada, $0.6 mil ion increase in the estimated environmental obligations for the Black Fox, and |
| | | | $0.1 mil ion increase in obligations in Tonkin Springs LLC (2020 – related to $0.1 mil ion increase in obligations in |
| | | | Nevada) |
| | | | Reclamation expense in the Statement of Operations includes adjustments for updates in the reclamation liability for |
| | | | properties that do not have reserves in compliance with S-K 1300. Reclamation accretion for all properties is as follows: |
| | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year ended December 31, |
| | | | | 2021 | 2020 | | 2019 |
| | | | Reclamation adjustment reflecting updated estimates | $ | | 1,045 $ | (113) $ | | 1,851 |
| | | | Reclamation accretion | | | 2,405 | 1,901 | | 1,680 |
| | | | Total | $ | | 3,450 | 1,788 $ | | 3,531 |
| | | | |
| | | | NOTE 13 SHAREHOLDERS’ EQUITY |
| | | | Amendment to the Articles of Incorporation On June 30, 2021, the Company filed Articles of Amendment to its Amended and Restated Articles of Incorporation with |
| | | | the Colorado Secretary of State providing for an increase in its authorized capital to increase the number of shares of |
| | | | common stock that the Company can issue from 500,000,000 to 675,000,000. The Amendment was approved by the |
| | | | Company’s shareholders at the annual meeting held on June 28, 2021. |
| | | | Equity Issuances |
| | | | Equity Financing |
| | | | On February 9, 2021, the Company completed a registered direct offering of common stock with several existing and new |
| | | | institutional investors and issued 30,000,000 shares priced at $1.05 per share for gross proceeds of $31.5 million. The |
| | | | purpose of this financing was to fund the continued development of the Froome deposit, which is part of the Fox Complex |
| | | 102 |
| MCEWEN MINING INC. |
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| December 31, 2021 |
| | (tabular amounts are in thousands of U.S. dollars, unless otherwise noted) (Continued) |
| | | |
| | | | in Timmins, Ontario, and to strengthen the Company’s balance sheet and working capital position. Total issuance costs |
| | | | amounted to $1.7 million for net proceeds of $29.9 million. |
| | | | Flow-Through Shares Issuance – Canadian Development Expenses (“CDE”) |
| | | | On January 29, 2021, the Company issued 12,600,600 flow-through common shares priced at $1.01 per share for gross |
| | | | proceeds of $12.7 mil ion. The purpose of this offering was also to fund the continued development of the Froome deposit. |
| | | | The total proceeds were allocated between the sale of tax benefits and the sale of common shares. The total issuance costs |
| | | | related to the issuance of the flow-through shares were $0.7 million, which were accounted for as a reduction to the |
| | | | common shares. The net proceeds of $12.0 million were al ocated between the sale of tax benefits in the amount of $1.2 |
| | | | mil ion and the sale of common shares in the amount of $10.8 million. |
| | | | The Company is required to spend these flow-through share proceeds on flow-through eligible CDE as defined by |
| | | | subsection 66.2(5) of the Income Tax Act (Canada). As of December 31, 2021, the Company had reached the total $12.7 |
| | | | million CDE spend requirement. |
| | | | Flow-Through Shares Issuance – Canadian Exploration Expenditures (“CEE”) |
| | | | On December 31, 2020, the Company issued an additional 7,669,900 flow-through common shares priced at $1.28 per |
| | | | share for gross proceeds of $9.8 mil ion. The purpose of this offering was to fund exploration activities on the Company’s |
| | | | properties in the Timmins region of Canada. The total proceeds were allocated between the sale of tax benefits and the |
| | | | sale of common shares. No issuance costs were incurred as part of this issuance. Proceeds of $9.8 million were allocated |
| | | | between the sale of tax benefits in the amount of $2.1 mil ion and the sale of common shares in the amount of $7.7 million. |
| | | | On September 10, 2020, the Company issued 6,298,166 flow-through common shares priced at $1.65 per share for gross |
| | | | proceeds of $10.4 million. The purpose of this offering was to fund exploration activities on the Company’s properties in |
| | | | the Timmins region of Canada. The total proceeds were al ocated between the sale of tax benefits and the sale of common |
| | | | shares. The total issuance costs related to the issuance of the flow-through shares was $0.6 million, which are accounted |
| | | | for as a reduction to the common shares. The net proceeds of $9.8 million were al ocated between the sale of tax benefits |
| | | | in the amount of $2.0 million and the sale of common shares in the amount of $7.8 million. |
| | | | The Company is required to spend flow-through share proceeds on flow-through eligible Canadian exploration |
| | | | expenditures (“CEE”) as defined by subsection 66(15) of the Income Tax Act (Canada). To date, the Company has incurred |
| | | | a total of $12.7 million in eligible CEE. The Company expects to fulfill its CEE commitments by the end of 2022. |
| | | | June 2020 Amended and Restated Credit Agreement |
| | | | Pursuant to the ARCA executed on June 25, 2020, the Company issued 2,091,700 shares of common stock to the lenders |
| | | | as consideration for the maintenance, continuation, and the extension of the maturity date of the loan. The Company valued |
| | | | the shares at $1.9 million. |
| | | | Shares Issued for Acquisition of Mineral Property Interests |
| | | | The Company did not issue any shares toward the acquisition of mineral property interests during the year ended December |
| | | | 31, 2021. During the year ended December 31, 2020, the Company issued a total of 53,600 shares of common stock for |
| | | | the acquisition of mineral interests adjacent to Gold Bar, valued at $0.1 million. During the year ended December 31, 2019 |
| | | | the Company issued 353,570 shares of common stock for the acquisition of mineral interests adjacent to Gold Bar. |
| | | 103 |
| MCEWEN MINING INC. |
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| December 31, 2021 |
| | (tabular amounts are in thousands of U.S. dollars, unless otherwise noted) (Continued) |
| | | |
| | | | November 2019 Offering |
| | | | On November 20, 2019 (the “November Offering”), the Company issued 37,750,000 Units at $1.325 per Unit, for net |
| | | | proceeds of $46.6 million (net of issuance costs of $3.5 million). Each Unit consisted of one share of common stock and |
| | | | one-half of one warrant. Each whole warrant is exercisable at any time for one share of common stock of the Company at |
| | | | a price of $1.7225, subject to customary adjustments, expiring five years from the date of issuance. The warrants provide |
| | | | for cashless exercise under certain conditions. The warrants under the November Offering are listed for trading on an over |
| | | | the counter market. |
| | | | The Company concluded that both common stock and warrants are equity-linked financial instruments and should be |
| | | | accounted for permanently in the shareholders’ equity section in the Consolidated Balance Sheets, with no requirement to |
| | | | subsequently revalue any of the instruments. Of the net proceeds of $46.6 million, $37.3 million was allocated to common |
| | | | stock and $9.3 million was allocated to warrants, based on their relative fair values at issuance. |
| | | | The Company used the Black-Scholes pricing model to determine the fair value of warrants issued in connection with the |
| | | | November Offering using the following assumptions: |
| | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | November 20, 2019 |
| | | | Risk-free interest rate | | | | 1.55 % |
| | | | Dividend yield | | | | 0.00 % |
| | | | Volatility factor of the expected market price of common stock | | | | 60 % |
| | | | Weighted-average expected life | | | | | 5 years |
| | | | Weighted-average grant date fair value | | $ | | | 0.52 |
| | | | |
| | | | All 21,706,250 warrants issued under the November Offering remain outstanding and unexercised as at December 31, |
| | | | 2021. |
| | | | March 2019 Of ering |
| | | | On March 29, 2019, the Company issued 14,193,548 Units at $1.55 per Unit, for net proceeds of $20.3 million (net of |
| | | | issuance costs of $1.7 mil ion). Each Unit consisted of one share of common stock and one-half of one warrant. Each |
| | | | whole warrant is exercisable at any time for one share of common stock at a price of $2.00, subject to customary |
| | | | adjustments, expiring three years from the date of issuance. The warrants issued under the offering are not listed for |
| | | | trading. |
| | | | On March 29, 2019, the Company also issued 1,935,484 Subscription Receipts at $1.55 per Subscription Receipt to certain |
| | | | executive officers, directors, employees and consultants. Upon shareholder and NYSE approval on May 23, 2019, the |
| | | | Subscription Receipts were converted into 1,935,484 Units for net proceeds of $2.6 million (net of issuance costs of $0.4 |
| | | | million). All Units issued under the offering have identical terms. |
| | | | At-the-Market (“ATM”) Offering |
| | | | Pursuant to an equity distribution agreement dated November 8, 2018, the Company was permit ed to offer and sell from |
| | | | time to time shares of its common stock having an aggregate offering price of up to $90.0 mil ion, with the net proceeds |
| | | | to fund working capital and general corporate purposes. During the three months ended March 31, 2019, the Company |
| | | | issued an aggregate of 1,010,545 shares of common stock for proceeds of $1.9 mil ion. The Company terminated the |
| | | | agreement on March 13, 2019. |
| | | 104 |
| MCEWEN MINING INC. |
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| December 31, 2021 |
| | (tabular amounts are in thousands of U.S. dollars, unless otherwise noted) (Continued) |
| | | |
| | | | Stock Options |
| | | | The Company’s Amended and Restated Equity Incentive Plan (“Plan”) allows for equity awards to be granted to |
| | | | employees, consultants, advisors, and directors. The Plan is administered by the Compensation Committee of the Board |
| | | | of Directors (“Committee”), which determines the terms pursuant to which any award is granted. The Commit ee may |
| | | | delegate to certain officers the authority to grant awards to certain employees (other than such officers), consultants and |
| | | | advisors. | The number of shares of common stock reserved for issuance thereunder is 17.5 mil ion shares, including shares |
| | | | issued under the Plan before it was amended, with no more than 1 million shares subject to grants of options to an individual |
| | | | in a calendar year. The Plan provides for the grant of incentive options under Section 422 of the Internal Revenue Code |
| | | | (the “Code”), which provide potential tax benefits to the recipients compared to non-qualified options. |
| | | | During the year ended December 31, 2021, 950,000 stock options were granted to officers, directors, and certain employees |
| | | | at a weighted average exercise price of $1.22. As at December 31, 2021, 6,171,167 options were outstanding under the |
| | | | plan (December 31, 2020 – 7,012,334) |
| | | | During the year ended December 31, 2021, no stock options were exercised under the Plan and no shares were issued. |
| | | | During the year ended December 31, 2020, 135,000 shares were issued upon the exercise of stock options at a weighted |
| | | | average exercise price of $1.02 per share for proceeds of $0.1 million. |
| | | | Shareholder Distributions |
| | | | During the year ended December 31, 2021 and December 31, 2020 the Company did not make any shareholder |
| | | | distributions. |
| | | | Pursuant to the ARCA (Note 11), the Company is prevented from paying any dividends on its common stock, so long as |
| | | | the loan is outstanding. |
| | | 105 |
| MCEWEN MINING INC. |
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| December 31, 2021 |
| | (tabular amounts are in thousands of U.S. dollars, unless otherwise noted) (Continued) |
| | | |
| | | | Stock-Based Compensation |
| | | | The following table summarizes information about stock options outstanding under the Plan at December 31, 2021: |
| | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | Weighted | | | | | |
| | | | | | | | | Weighted | Average | | | | | |
| | | | | | | | | | | | Average | | Remaining | | | | | |
| | | | | | Number of | | | | | | Exercise | | Contractual | | | | Intrinsic | |
| | | | | | Shares | | | | | | Price | | Life (Years) | | | | Value | |
| | | | | | | (in thousands, except per share and year data) | | | |
| | | | Balance at December 31, 2018 | | 4,243 $ | | | | | | 2.33 | 2.0 $ | | | 1,475 |
| | | | Granted | | 3,050 | | | | | | 1.73 | — | — |
| | | | Exercised | | (535) | | | | | | 1.01 | — | | | 419 |
| | | | Forfeited | | (700) | | | | | | 2.56 | — | — |
| | | | Expired | | (789) | | | | | | 2.90 | — | — |
| | | | Balance at December 31, 2019 | | 5,269 $ | | | | | | 2.00 | 3.0 $ | | | 364 |
| | | | Granted | | 5,097 | | | | | | 1.22 | — | — |
| | | | Exercised | | (135) | | | | | | 1.02 | — | 10 |
| | | | Forfeited | | (1,968) | | | | | | 2.18 | — | 2 |
| | | | Expired | | (1,251) | | | | | | 1.19 | — | — |
| | | | Balance at December 31, 2020 | | 7,012 $ | | | | | | 1.55 | 4.2 $ | 53 |
| | | | Granted | | | | | | | | | 950 | 1.22 | — | — |
| | | | Exercised | | | — | — | — | 10 |
| | | | Forfeited | | (1,589) | | | | | | 1.46 | — | 2 |
| | | | Expired | | (202) | | | | | | 7.10 | | — | | — |
| | | | Balance at December 31, 2021 | | 6,171 $ | | | | | | 1.34 | 4.2 $ | 53 |
| | | | Exercisable at December 31, 2021 | | 2,265 $ | | | | | | 1.47 | 2.6 $ | — |
| | | | |
| | | | Stock options have been granted to key employees, directors and consultants under the Plan. Options to purchase shares |
| | | | under the Plan were granted at or above market value of the common stock as of the date of the grant. During the year |
| | | | ended December 31, 2021, the Company granted stock options to certain employees and directors for an aggregate of 1.0 |
| | | | mil ion shares of common stock (2020 – 5.1 million, 2019 – 3.1 million) at a weighted average exercise price of $1.22 per |
| | | | share (2020 – $1.22, 2019 – $1.73). The options vest equal y over a three-year period if the individuals remain affiliated |
| | | | with the Company (subject to acceleration of vesting in certain events) and are exercisable for a period of five years from |
| | | | the date of grant. |
| | | | The fair value of the options granted under the Plan was estimated at the date of grant, using the Black-Scholes option- |
| | | | pricing model, with the following weighted-average assumptions: |
| | | | |
| | | | | | | | | | | | | | | | | | | | | | 2021 | | | | | | | 2020 | 2019 |
| | | | Risk-free interest rate | | 0.519% to 0.873% 0.157% to 0.322% 1.45% to 1.87% |
| | | | Dividend yield | | | | 0.00% | | | | | | 0.00% | | | | 0.00% |
| | | | Volatility factor of the expected market price of common stock | | | 63% | | | | | 59% | | | | 58% |
| | | | Weighted-average expected life of option | | | | | | | | | | 3.5 years | | 3.5 years | | | | 3.5 years |
| | | | Weighted-average grant date fair value | | $ | | 1.22 | | | | $ | 1.22 | $ | | | 1.73 |
| | | | |
| | | | During the year ended December 31, 2021, the Company recorded stock option expense of $0.84 million (2020 – |
| | | | $0.6 mil ion, 2019 – $0.7 million) while the corresponding fair value of awards vesting in the period was $0.8 million |
| | | | (2020 – $0.1 mil ion and 2019 – $0.4 million). |
| | | 106 |
| MCEWEN MINING INC. |
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| December 31, 2021 |
| | (tabular amounts are in thousands of U.S. dollars, unless otherwise noted) (Continued) |
| | | |
| | | | At December 31, 2021, there was $0.6 million (2020 – $1.4 mil ion, 2019 - $1.0 million) of unrecognized compensation |
| | | | expense related to 3.9 mil ion (2020 – 6.1 million, 2019 – 3.0 million) unvested stock options outstanding. This cost is |
| | | | expected to be recognized over a weighted-average period of approximately 1.4 years (2020 – 1.6 years, 2019 – 1.5 years). |
| | | | The following table summarizes the status and activity of non-vested stock options for the year ended December 31, 2021, |
| | | | for the Company’s Plan and the replacement options from the acquisition of Lexam: |
| | | | |
| | | | | | | | | | | | | Weighted Average |
| | | | | | | Grant Date |
| | | | | | | | Number of | | Fair Value |
| | | | | | | | Shares | | Per Share |
| | | | | | (in thousands, except per share amounts) |
| | | | Non-vested, beginning of year | | | | | 6,093 $ | 0.44 |
| | | | Granted | | | | | 950 $ | 0.44 |
| | | | Cancel ed/Forfeited | | | | (1,339) $ | 0.46 |
| | | | Vested | | | | (1,799) $ | 0.45 |
| | | | Non-vested, end of year | | | | | 3,906 $ | 0.43 |
| | | | |
| | | | NOTE 14 NET LOSS PER SHARE |
| | | | Basic net income (loss) per share is computed by dividing the net income or (loss) available to common shareholders by |
| | | | the weighted average number of common shares outstanding during the period. Diluted net income per share is computed |
| | | | similarly except that the weighted average number of common shares is increased to reflect al dilutive instruments. Diluted |
| | | | net income per share is calculated using the treasury stock method. In applying the treasury stock method, employee stock |
| | | | options with an exercise price greater than the average quoted market price of the common shares for the period outstanding |
| | | | are not included in the calculation of diluted net income per share as the impact is anti-dilutive. Potentially dilutive |
| | | | instruments are not considered in calculating the diluted loss per share, as their effect would be anti-dilutive. |
| | | | Below is a reconciliation of the basic and diluted weighted average number of common shares and the computations for |
| | | | basic and diluted net (loss) per share for the years ended December 31, 2021, 2020 and 2019: |
| | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year ended December 31, | | | |
| | | | | | | | | | | 2021 | 2020 | | | | | 2019 |
| | | | | | | | | | | (amounts in thousands, unless otherwise noted) |
| | | | Net loss | | | | | | | $ | (56,712) $ (152,325) | | $ (59,747) |
| | | | | | | | | | | | | | | | | | | | |
| | | | Weighted average common shares outstanding: | | | | | | | | 454,899 403,457 | | | 361,845 | | | | |
| | | | Diluted shares outstanding: | | | | | | | 454,899 | 403,457 | | 361,845 | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | Net loss per share - basic and diluted | | | | | | | $ | (0.12) $ | (0.38) $ | | | | | | (0.17) |
| | | | |
| | | | For the years ended December 31, 2021, 2020 and 2019, all outstanding options to purchase shares of common stock and |
| | | | share purchase warrants were excluded from the respective computations of diluted loss per share, as the Company was in |
| | | | a loss position, and al potentially dilutive instruments were anti-dilutive and therefore not included in the calculation of |
| | | | diluted net loss per share. |
| | | | |
| | | 107 |
| MCEWEN MINING INC. |
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| December 31, 2021 |
| | (tabular amounts are in thousands of U.S. dollars, unless otherwise noted) (Continued) |
| | | |
| | | | NOTE 15 RELATED PARTY TRANSACTIONS |
| | | | The Company incurred the following expense in respect to the related parties outlined below during the periods presented: |
| | | | |
| | | | | | | | | | | | | | | Year ended December 31, |
| | | | | | | | 2021 | 2020 | | | | 2019 |
| | | | Lexam L.P. | $ | 78 $ | 99 $ | | | 133 |
| | | | REVlaw | | 347 | | 158 | | | | 188 |
| | | | |
| | | | The Company has the following outstanding accounts payable balance in respect to the related parties outlined below: |
| | | | |
| | | | | | | | | | | | | | December 31, 2021 | | December 31, 2020 |
| | | | Lexam L.P. | $ | — $ | | | | 72 |
| | | | REVlaw | | 137 | | | | 90 |
| | | | |
| | | | An aircraft owned by Lexam L.P. (which is controlled by Robert R. McEwen, limited partner and beneficiary of Lexam |
| | | | L.P. and the Company’s Chairman and Chief Executive Officer) has been made available to the Company in order to |
| | | | expedite business travel. In his role as Chairman and Chief Executive Officer of the Company, Mr. McEwen must travel |
| | | | extensively and frequently on short notice. Mr. McEwen is able to charter the aircraft from Lexam L.P. at a preferential |
| | | | rate approved by the Company’s independent board members under a policy whereby only the variable expenses of |
| | | | operating this aircraft for business related travel are eligible for reimbursement by the Company. |
| | | | REVlaw is a company owned by Ms. Carmen Diges, General Counsel of the Company. The legal services of Ms. Diges |
| | | | as General Counsel and other support staff, as needed, are provided by REVlaw in the normal course of business and have |
| | | | been recorded at their exchange amount. |
| | | | An affiliate of Mr. McEwen participated as a lender in the $50.0 million term loan by providing $25.0 million of the total |
| | | | $50.0 mil ion funding and continued as such under the ARCA. During the year ended December 31, 2021, the Company |
| | | | paid $2.8 million (year ended December 31, 2020 – $2.4 million) in interest to this affiliate. Furthermore, pursuant to the |
| | | | ARCA, 1,045,850 shares of common stock valued at $0.9 million were issued to the affiliate. The payments to the affiliate |
| | | | of Mr. McEwen are on the same terms as the non-affiliated lender (Note 11). |
| | | | On August 23, 2021, an affiliate of Mr. McEwen participated in the Series B private placement offering conducted by |
| | | | McEwen Copper Inc. (“McEwen Copper”) (Note 20). |
| | | | |
| | | | NOTE 16 FAIR VALUE ACCOUNTING |
| | | | As required by accounting guidance, assets and liabilities are classified in their entirety based on the lowest level of input |
| | | | that is significant to the fair value measurement. |
| | | | Warrants |
| | | | Upon initial recognition, the warrants received as part of the asset sale to Nevgold (Note 4) were fair valued using the |
| | | | Black-Scholes valuation model as they are not quoted in an active market. Subsequently, the warrants have been accounted |
| | | | for as equity investment at cost. Average volatility of 94.6% was determined based on a selection of similar junior mining |
| | | | companies. The warrants are exercisable upon receipt and have an exercise price of $0.60 per share and expire June 23, |
| | | | 2023. As of December 31, 2021, no warrants related to the Nevgold transaction have been exercised. |
| | | 108 |
| MCEWEN MINING INC. |
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| December 31, 2021 |
| | (tabular amounts are in thousands of U.S. dollars, unless otherwise noted) (Continued) |
| | | |
| | | | Assets and liabilities measured at fair value on a recurring basis |
| | | | The following tables identify the Company’s assets and liabilities measured at fair value on a recurring basis (at least |
| | | | annually) by level within the fair value hierarchy as at December 31, 2021 and 2020, as reported in the Consolidated |
| | | | Balance Sheets: |
| | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | Fair value as at December 31, 2021 Fair value as at December 31, 2020 |
| | | | | Level 1 Level 2 | | | | | | Total Level 1 Level 2 | Total |
| | | | Marketable equity securities | | $ 1,644 $ | | — $ 1,644 $ | | — | $ | — | $ | | — |
| | | | Total investments | | $ 1,644 $ | | — $ 1,644 $ | | — $ | — $ | | — |
| | | | |
| | | | The Company's investments as at December 31, 2021 mainly consist of marketable equity securities which are exchange- |
| | | | traded and are valued using quoted market prices in active markets and as such are classified within Level 1 of the fair |
| | | | value hierarchy. The fair value of the investments is calculated as the quoted market price of the marketable equity security |
| | | | multiplied by the quantity of shares held by the Company. |
| | | | The fair value of other financial assets and liabilities were assumed to approximate their carrying values due to their short- |
| | | | term nature and historically negligible credit losses. |
| | | | |
| | | | NOTE 17 COMMITMENTS AND CONTINGENCIES |
| | | | Commitments |
| | | | The following are minimum commitments of the Company as at December 31, 2021, and related payments due over the |
| | | | following five years: |
| | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Payments due by period |
| | | | | | | | | | | | | | 2022 | | | 2023 | | | | 2024 | 2025 | Thereafter | | | Total |
| | | | Mining and surface rights | | | | | | | | | | $ | 492 | $ | | | 488 | | | $ | 470 | $ | 443 | $ | | | | | — | $ | | 1,893 |
| | | | Exploration | | | | | | | | | | | 8,116 | | | | 15,080 | | | | — | | — | | | | | | — | | 23,196 |
| | | | Reclamation costs(1) | | | | | | | | | | 6,358 | | | 5,873 | | | | 525 | 1,186 | 29,215 | 43,157 |
| | | | Long-term debt | | | | | | | | | | 4,875 | | | 14,712 | | | 32,710 | | 10,027 | | | | | | — | 62,324 |
| | | | Lease obligations | | | | | | | | | | 2,949 | | | 1,058 | | | | 441 | — | | | | | | — | 4,448 |
| | | | Total | | | | | | | | | $ | 22,791 $ | | | 37,210 $ | | | 34,146 $ | | 11,656 $ | 29,215 $ 135,018 |
| | | | | | | | | | | | |
| | | | (1) Amounts presented represent the undiscounted uninflated future payments. |
| | | | Reclamation Bonds |
| | | | As part of its ongoing business and operations, the Company is required to provide bonding for its environmental |
| | | | reclamation obligations of $25.3 mil ion in Nevada pertaining primarily to the Tonkin and the Gold Bar properties and |
| | | | $12.4 million (C$15.6 million) in Canada with respect to the Black Fox Complex. In addition, under Canadian regulations, |
| | | | the Company was required to deposit approximately $0.1 million with respect to its Lexam properties in Timmins, which |
| | | | is recorded as non-current restricted cash (Note 18). |
| | | | Surety Bonds |
| | | | As at December 31, 2021, the Company had a surety facility in place to cover al its bonding obligations, which include |
| | | | $25.3 mil ion of bonding in Nevada and $12.4 million (C$15.6 million) of bonding in Canada. The terms of the facility |
| | | | carry an average annual financing fee of 2.3% and require a deposit of 10%. The surety bonds are available for draw-down |
| | | 109 |
| MCEWEN MINING INC. |
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| December 31, 2021 |
| | (tabular amounts are in thousands of U.S. dollars, unless otherwise noted) (Continued) |
| | | |
| | | | by the beneficiary in the event the Company does not perform its reclamation obligations. If the specific reclamation |
| | | | requirements are met, the beneficiary of the surety bonds will release the instrument to the issuing entity. The Company |
| | | | believes it is in compliance with all applicable bonding obligations and will be able to satisfy future bonding requirements, |
| | | | through existing or alternative means, as they arise. As at December 31, 2021, the Company recorded $3.6 million in |
| | | | restricted cash as a deposit against the surety facility (Note 18). |
| | | | Streaming Agreement |
| | | | As part of the acquisition of the Fox Complex in 2017, the Company assumed a gold purchase agreement (streaming |
| | | | contract) related to production, if any, from certain claims. Under the streaming contract, the Company is obligated to sell |
| | | | 8% of gold production from the Black Fox mine and 6.3% from the adjoining Pike River property (Black Fox Extension) |
| | | | to Sandstorm Gold Ltd. at the lesser of market price or $561 per ounce (with inflation adjustments of up to 2% per year) |
| | | | until 2090. |
| | | | The Company records revenue on these shipments based on the contract price at the time of delivery to the customer. |
| | | | During the year ended December 31, 2021, the Company recorded revenue of $1.3 million (2020 – $1.2 million) related |
| | | | to the gold stream sales. |
| | | | Flow-through Eligible Expenses |
| | | | In January 2021, the Company close a flow-through share issuance to fund the development at the Froome deposit. As of |
| | | | December 31, 2021, the Company incurred the full required spend of $12.7 million in CDE. |
| | | | In 2020, the Company completed two flow-through share issuances. The total proceeds of $18.3 million will be used to |
| | | | incur qualifying CEE in the Timmins region of Ontario by December 31, 2022. As of December 31, 2021, the Company |
| | | | has incurred $12.7 million of the required CEE spend (December 31, 2020 - $1.9 million). |
| | | | Other potential contingencies |
| | | | The Company’s mining and exploration activities are subject to various laws and regulations governing the protection of |
| | | | the environment. These laws and regulations are continual y changing and general y becoming more restrictive. The |
| | | | Company conducts its operations so as to protect public health and the environment, and believes its operations are |
| | | | materially in compliance with all applicable laws and regulations. The Company has made, and expects to make in the |
| | | | future, expenditures to comply with such laws and regulations. |
| | | | The Company and its predecessors have transferred their interest in several mining properties to third parties throughout |
| | | | its history. The Company could remain potentially liable for environmental enforcement actions related to its prior |
| | | | ownership of such properties. However, the Company has no reasonable belief that any violation of relevant environmental |
| | | | laws or regulations has occurred regarding these transferred properties. |
| | | 110 |
| MCEWEN MINING INC. |
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| December 31, 2021 |
| | (tabular amounts are in thousands of U.S. dollars, unless otherwise noted) (Continued) |
| | | |
| | | | NOTE 18 CASH AND CASH EQUIVALENTS AND RESTRICTED CASH |
| | | | The following table provides a reconciliation of cash and cash equivalents, and restricted cash reported within the |
| | | | Consolidated Balance Sheets that sum to the total of the same such amounts shown in the Consolidated Statements of Cash |
| | | | Flows: |
| | | | |
| | | | | | | | | | | | | December 31, 2021 | December 31, 2020 |
| | | | Cash and cash equivalents | | $ | | | 54,287 $ | 20,843 |
| | | | Restricted cash - current | | | | | 2,550 | | - |
| | | | Restricted cash - non-current | | | | | 3,797 | 3,595 |
| | | | Total cash, cash equivalents, and restricted cash | | $ | | | 60,634 $ | 24,438 |
| | | | |
| | | | Cash and cash equivalents include $37.3 mil ion from the first tranche of private placement for the advancement of the |
| | | | operations of McEwen Copper (Note 15). |
| | | | The current portion of restricted cash are proceeds received as at December 31, 2021 as part of the Company’s ongoing |
| | | | second tranche financing for McEwen Copper. The non-current portion of restricted cash includes deposits related to the |
| | | | Company’s reclamation obligations and surety facility (Note 17). |
| | | | |
| | | | NOTE 19 INCOME AND MINING TAXES |
| | | | The Company’s deferred income and mining tax benefit consisted of: |
| | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2021 | 2020 | | | 2019 |
| | | | United States | | | | | | | | $ | 387 | | $ | 817 | | | | | | $ | 2,420 |
| | | | Foreign | | | | | | | | | 6,928 | | 573 | | | | | | | 1,424 |
| | | | Deferred tax benefit | | | | | | | | $ | 7,315 $ | | 1,390 | | | | | | $ | 3,844 |
| | | | |
| | | | The Company’s net loss before income and mining tax consisted of: |
| | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2021 | 2020 | | | 2019 |
| | | | United States | | | | | | | | $ | (24,808) $ | | | (127,524) $ | (22,319) |
| | | | Foreign | | | | | | | | | (39,391) | | | (26,191) | (41,272) |
| | | | Loss before income and mining taxes | | | | | | | | $ | (64,199) $ | | | (153,715) $ | (63,591) |
| | | | |
| | | 111 |
| MCEWEN MINING INC. |
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| December 31, 2021 |
| | (tabular amounts are in thousands of U.S. dollars, unless otherwise noted) (Continued) |
| | | |
| | | | A reconciliation of the tax provision for 2021, 2020 and 2019 at statutory U.S. Federal and State income tax rates to the |
| | | | actual tax provision recorded in the financial statements is computed as follows: |
| | | | |
| | | | | | | | | | | | | | Expected tax recovery at | | 2021 | 2020 | | 2019 |
| | | | Loss before income and mining taxes | | $ | | | | (64,199) $ | (153,715) $ | (63,591) |
| | | | Statutory tax rate | | | | | | 21% | 21% | 21% |
| | | | US Federal and State tax expense at statutory rate | | | | | | (13,482) | (32,280) | (13,354) |
| | | | Reconciling items: | | | | |
| | | | Equity pickup in MSC | | | | | | 1,326 | 374 | 2,626 |
| | | | Deferred foreign income inclusion | | | — | 795 | 598 |
| | | | Realized flow-through expenditures | | | | | | 6,148 | 496 | 3,150 |
| | | | Realized flow-through premium | | | | | | (3,486) | (338) | (2,954) |
| | | | Adjustment for foreign tax rates | | | | | | (3,039) | (2,043) | (200) |
| | | | Other permanent differences | | | | | | 9,353 | (2,546) | 8,421 |
| | | | NOL expires and revisions | | | 241 | | | | 1,066 | 810 |
| | | | Valuation allowance | | | | | | (4,377) | 33,086 | (2,941) |
| | | | Income and mining tax recovery | | $ | | | | (7,315) $ | (1,390) $ | (3,844) |
| | | | |
| | | | The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax |
| | | | liabilities as at December 31, 2021 and 2020 respectively are presented below: |
| | | | |
| | | | | | | | | | | | | | | | | | | | | 2021 | 2020 | |
| | | | Deferred tax assets: | | | | | | | | | |
| | | | Net operating loss carryforward | | | | | $ | 70,830 | $ | 66,085 |
| | | | Mineral Properties | | | | | | 59,426 | | 66,038 |
| | | | Other temporary differences | | | | | | 29,009 | | 30,999 |
| | | | Total gross deferred tax assets | | | | | | 159,265 | | 163,122 |
| | | | Less: valuation allowance | | | | | | (149,921) | | (154,298) |
| | | | Net deferred tax assets | | | | | $ | 9,344 | $ | 8,824 |
| | | | Deferred tax liabilities: | | | | | | | | | |
| | | | Acquired mineral property interests | | | | | | (9,344) | | (12,637) |
| | | | Total deferred tax liabilities | | | | | $ | (9,344) | $ | (12,637) |
| | | | Deferred income and mining tax liability | | | | | $ | — | $ | (3,813) |
| | | | |
| | | | The Company reviews the measurement of its deferred tax assets at each balance sheet date. On the basis of available |
| | | | information at December 31, 2020, the Company has provided a valuation al owance for certain of its deferred assets |
| | | | where the Company believes it is more likely than not that some portion or all of such assets will not be realized. |
| | | | The table below summarizes changes to the valuation allowance: |
| | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | Balance at | Balance at |
| | | | | | | | | | | For the year ended December 31, | | beginning of year Additions(a) Deductions(b) | | | | | | | | | | | | | end of year |
| | | | | | | | | | | | | | 2021 | $ | | | 154,298 $ | | | | | | 4,058 $ | (8,435) $ | 149,921 |
| | | | | | | | | | | | | | 2020 | | | | 121,212 | | | | | | 39,794 | (6,708) | 154,298 |
| | | | | | | | | | | | | | 2019 | | | | 124,153 | | | | | | 2,104 | (5,045) | 121,212 |
| | | | | | | | | | | | | | | |
| | | | (a) The additions to valuation allowance mainly result from the Company and its subsidiaries incurring losses and exploration |
| | | | expenses for tax purposes which do not meet the more-likely-than-not criterion for recognition of deferred tax assets. |
| | | | (b) The reductions to valuation allowance mainly result from release of valuation allowance, expiration of the Company’s tax |
| | | | attributes, foreign exchange reductions of tax attributes in Canada, Mexico and Argentina and inflationary adjustments to tax |
| | | | attributes in Argentina. |
| | | 112 |
| MCEWEN MINING INC. |
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| December 31, 2021 |
| | (tabular amounts are in thousands of U.S. dollars, unless otherwise noted) (Continued) |
| | | |
| | | | As at December 31, 2021 and 2020, the Company did not have any income-tax related accrued interest and tax penalties. |
| | | | The following table summarizes the Company’s losses that can be applied against future taxable profit: |
| | | | |
| | | | | | | | | | | | | Country | | | | | | Type of Loss | | | | Amount Expiry Period |
| | | | | | | | | United States(a) | | Net-operating losses | | $ | | | 190,271 2027-Unlimited |
| Mexico | | | Net-operating losses | | | | | 45,641 | | 2022-2030 |
| Canada(a) | | | Net-operating losses | | | | | 30,720 | | 2025-2040 |
| Argentina(a) | | | Net-operating losses | | | | | 26,367 | | 2021-2025 |
| | | | | | | | | | | |
| | | | (a) The losses in the United States, Canada, and Argentina are part of multiple consolidating groups, and therefore, may be restricted |
| | | | in use to specific projects. |
| | | | The Company or its subsidiaries file income tax returns in the United States, Canada, Mexico, and Argentina. These tax |
| | | | returns are subject to examination by local taxation authorities provided the tax years remain open to audit under the |
| | | | relevant statute of limitations. The following summarizes the open tax years by major jurisdiction: |
| | | | United States: 2017 to 2020 |
| | | | Canada: 2013 to 2020 |
| | | | Mexico: 2016 to 2020 |
| | | | Argentina: 2016 to 2020 |
| | | | |
| | | | NOTE 20 NON-CONTROLLING INTERESTS |
| | | | |
| | | | On August 23, 2021, the Company announced that its subsidiary, McEwen Copper, closed the first tranche of Series B |
| | | | private placement offering where McEwen Copper issued 4,000,000 common shares at a price of $10.00 per share for |
| | | | gross proceeds of $40.0 million. An affiliate of Mr. McEwen purchased al the shares pursuant to this first tranche. As of |
| | | | December 31, 2021, the affiliate holds 18.6% ownership of McEwen Copper. |
| | | | As a result of the common shares issued, the Company’s 100% ownership in McEwen Copper was reduced by 18.6%. |
| | | | The Company assessed the 18.6% as non-redeemable non-controlling interests. Consequently, the Company recorded |
| | | | $14.8 mil ion as non-controlling interests and $25.2 million as additional paid-in-capital. |
| | | | |
| | | | |
| | | | NOTE 21 UNAUDITED SUPPLEMENTARY QUARTERLY INFORMATION |
| | | | The following table summarizes unaudited supplementary quarterly information for the years ended December 31, 2021 |
| | | | and 2020. |
| | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Three months ended |
| | | | | | | | | | | | March 31, 2021 June 30, 2021 September 30, 2021 December 31, 2021 |
| | | | | | | | | | | | | (unaudited) (in thousands, except per share) |
| | | | Revenue from gold and silver sales | | | | | | | | $ | 23,740 $ | | | | | | | | | | 40,706 $ | 37,129 $ | | | | | | 34,966 |
| | | | Gross (loss) | | | | | | | | | (4,986) | | | | | | | | | | 4,059 | 344 | | | | | | (5,897) |
| | | | Net loss attributable to McEwen shareholders | | | | | | | | | (12,466) | | | | | | | | | | (5,989) | (17,401) | | (21,028) |
| | | | Net loss per share: | | | | | | | | | | | |
| | | | Basic and diluted | | | | | | | | $ | (0.03) $ | | | | | | | | | | (0.01) $ | (0.04) $ | | | | | | (0.05) |
| | | | Weighted average shares outstanding: | | | | | | | | | | | |
| | | | Basic and diluted | | | | | | | | | 441,794 | | | | | | | | | | 459,187 | 459,187 | | 454,899 |
| | | | |
| | | 113 |
| MCEWEN MINING INC. |
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| December 31, 2021 |
| | (tabular amounts are in thousands of U.S. dollars, unless otherwise noted) (Continued) |
| | | |
| | | | | | | | | | | | | | | | | | | | | | | Three months ended | | |
| | | | | March 31, 2020 June 30, 2020 September 30, 2020 December 31, 2020 |
| | | | | | (unaudited) (in thousands, except per share) | | | |
| | | | Revenue from gold and silver sales | $ | 31,400 | | | $ | | | | 18,291 | $ | | | | 27,395 | $ | | | | 27,703 | |
| | | | Gross profit | | (3,685) | | | | | | | (8,875) | (701) | (13,687) |
| | | | Net loss attributable to McEwen shareholders | | (99,191) | | | | | | | (19,814) | (9,778) | (23,542) |
| | | | Net loss per share: | | | | | |
| | | | Basic and diluted | $ | (0.25) $ | | | | | | | (0.05) $ | (0.02) $ | (0.06) |
| | | | Weighted average shares outstanding: | | | | | |
| | | | Basic and diluted | | 400,370 | | | | | | | 400,513 | 403,887 | 408,959 | |
| | | | |
| | | | NOTE 22 COMPARATIVE FIGURES |
| |
| | | | Certain amounts in prior years have been reclassified to conform to the current year’s presentation. Reclassified amounts |
| | | | were not material to the financial statements and relate to the presentation of Other Operating Expenses. Advanced projects |
| | | | in the Statement of Operations includes mine development costs, property holding and general and administrative costs |
| | | | associated with advanced stage projects. Exploration in the Statement of Operations includes exploration expenses, |
| | | | property holding and general and administrative costs associated with exploration stage projects. General and |
| | | | Administrative in the Statement of Operations include corporate (head office) general and administrative costs. |
| | | | |
| | | | NOTE 23 SUBSEQUENT EVENTS |
| | | | Flow-Through Financing |
| | | | On March 2, 2022, the Company closed the private placement offering of 14,500,000 flow-through common shares priced |
| | | | at $1.04, previously announced on February 11, 2022. The gross proceeds of $15.1 mil ion from the financing will be used |
| | | | to fund qualified Canadian Exploration Expenditures at the Fox Complex. |
| | | | |
| | | | |
| | | 114 |
| ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND |
| | FINANCIAL DISCLOSURE |
| None. |
| |
| ITEM 9A. CONTROLS AND PROCEDURES |
| During the fiscal period covered by this report, our management, with the participation of the Chief Executive Officer and |
| Chief Financial Officer of the Company, carried out an evaluation of the effectiveness of the design and operation of our |
| disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act). Based on such |
| evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered |
| by this report, our disclosure controls and procedures were effective to ensure that information required to be disclosed by |
| us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the |
| required time periods specified in the Commission’s rules and forms and are designed to ensure that information required |
| to be disclosed in our reports is accumulated and communicated to our management, including our Chief Executive Officer |
| and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. |
| There have been no changes in the Company's internal control over financial reporting during the year ended December |
| 31, 2021 that have material y affected, or are reasonably likely to material y affect, the Company's internal control over |
| financial reporting. |
| Management’s report on internal control over financial reporting and the attestation report of Ernst & Young LLP, an |
| independent registered public accounting firm, are included in Item 8 | | . Financial Statements and Supplementary Data of |
| this annual report on Form 10-K. |
| |
| ITEM 9B. OTHER INFORMATION |
| None. |
| ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS |
| Not applicable. |
| PART III |
| ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE |
| Pursuant to General Instruction G of Form 10-K, the information contained in this Item 10 is incorporated by reference to |
| our Definitive Proxy Statement for our 2022 Annual Meeting of Shareholders, expected to be filed with the SEC on or |
| before April 30, 2021. |
| The Company has a code of business conduct and ethics that applies to all of its employees, officers and directors. The |
| code of business conduct and ethics is available on our website at www.mcewenmining.com and we wil post any |
| amendments to, or waivers, from, the code of ethics on that website. |
| |
| ITEM 11. EXECUTIVE COMPENSATION |
| The information contained in this Item 11 is incorporated by reference from our Definitive Proxy Statement for our 2021 |
| Annual Meeting of Shareholders. |
| |
| ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND |
| RELATED STOCKHOLDER MATTERS |
| The information contained in this Item 12 is incorporated by reference from our Definitive Proxy Statement for our 2021 |
| Annual Meeting of Shareholders. |
| |
| 115 |
| PART IV |
| ITEM 15. EXHIBITS FINANCIAL STATEMENT SCHEDULES |
| The exhibits listed in this Item 15 are filed or furnished (except where otherwise indicated) as part of this report: |
| | | |
| | | 3.1.1* Second Amended and Restated Articles of Incorporation of the Company as filed with the Colorado Secretary of State on |
| | January 20, 2012 (incorporated by reference from the Current Report on Form 8-K filed with the SEC on January 24, 2012, |
| | Exhibit 3.1, File No. 001 33190) |
| | | | | 3.1.2* Articles of Amendment to the Second Amended and Restated Articles of Incorporation of the Company as filed with the |
| | Colorado Secretary of State on January 24, 2012 (incorporated by reference from the Current Report on Form 8 K filed with |
| | the SEC on January 24, 2012, Exhibit 3.2, File No. 001 33190) |
| | | | | | 3.1.3* Second Articles of Amendment to the Second Amended and Restated Articles of Incorporation of the Company as filed with |
| | the Colorado Secretary of State on June 30, 2021 (incorporated by reference from the Current Report on Form 8-K filed with |
| | the SEC on June 30, 2021, Exhibit 3.1, File No. 001-33190) |
| 3.2* | Amended and Restated Bylaws of the Company (incorporated by reference from the Current Report on Form 8-K filed with |
| | the SEC on March 12, 2012, Exhibit 3.2, File No. 001-33190) |
| | | | | | 4.1* | Description of Capital Stock (incorporated by reference from the Annual Report on Form 10-K for the fiscal year ended |
| | December 31, 2019, filed with the SEC on March 16, 2020, Exhibit 4.1, File No. 001-33190) |
| 4.2* | Form of Warrant issued by the Company in connection with November 2019 financing (incorporated by reference from the |
| | Current Report on Form 8-K filed with the SEC on November 22, 2019, Exhibit 4.1, File No. 001-33190) |
| 4.3* | Form of Warrant issued by the Company in connection with March 2019 financing (incorporated by reference from the Current |
| | Report on Form 8-K filed with the SEC on March 29, 2019, Exhibit 4.1, File No. 001-33190) |
| 10.1*+ Amended and Restated Equity Incentive Plan dated as of March 17, 2015 (incorporated by reference from the Current Report |
| | on Form 8-K filed with the SEC on May 29, 2015, Exhibit 4.1, File No. 001-33190) |
| | | | | | | 10.2* | + First Amendment to the Amended and Restated Equity Incentive Plan dated April 16, 2021 (incorporated by reference from |
| | the Current Report on Form 8-K filed with the SEC on June 30, 2021, Exhibit 10.1, File No. 001-33190) |
| | | | | | | | 10.3 | | Form of Stock Option Agreement for executives of the Company (incorporated by reference from the Annual |
| | Report on Form 10-K filed with the SEC on March 11, 2016, Exhibit 10.3, File No. 001-33190) |
| 10.4* Form of Indemnification Agreement between the Company and its officers and directors (incorporated by reference from the |
| | Current Report on Form 8-K dated December 7, 2005, Exhibit 10.1, File No. 000-09137) |
| | | | | | | 10.5* Amended and Restated Credit Agreement among the Company, as Borrower, the Lenders party to the Agreement and Sprott |
| | Private Resource Lending II (Col ector), LP, as Administrative Agent, dated June 25, 2020 (incorporated by reference from |
| | the Current Report on Form 8-K filed with the SEC on June 29, 2020, Exhibit 10.1, File No. 001-33190) |
| 10.6*+ Employment Agreement between the Company and Anna Ladd-Kruger, dated October 2, 2020 (incorporated by reference |
| | from the Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2020 filed with the SEC on October |
| | 29, 2020, Exhibit 10.1, File No. 001-33190) |
| 10.7*+ Employment Agreement between the Company and G. Peter Mah, effective April 6, 2020 (incorporated by reference from the |
| | Current Report on Form 8-K filed with the SEC on April 7, 2020, Exhibit 10.1, File No. 001-33190) | | | | | |
| 10.8*+ Employment Agreement between the Company and Segun Odunuga, effective August 11, 2021 |
| 10.9*+ Employment Agreement between the Company and Steven Woolfenden effective May 27, 2019 |
| 10.10* Placement Agency Agreement among the Company, Cantor Fitzgerald & Co, and Roth Capital Partners dated February 5, |
| | 2021 (incorporated by reference from the Current Report on Form 8-K filed with the SEC on February 9, 2021, Exhibit 10.1, |
| | File No. 001-33190) |
| 10.11* Form of Securities Purchase Agreement, dated as of February 5, 2021, between the Company and Certain Purchasers |
| | (incorporated by reference from the Current Report on Form 8-K filed with the SEC on February 9, 2021, Exhibit 10.2, File |
| | No. 001-33190) |
| 10.12.1* Option and Joint Venture Agreement, by and among Minera Andes Inc., Minera Andes S.A., and Mauricio Hochschild & CIA. |
| | LTDA., dated March 15, 2001 (the “OJVA”) (incorporated by reference from the Annual Report on Form 10-K filed with the |
| | SEC on March 1, 2017, Exhibit 10.12, File No. 001-33190) |
| 10.12.2* First Amendment to OJVA, dated May 14, 2002 (incorporated by reference from the Annual Report on Form 10-K filed with |
| | the SEC on March 1, 2017, Exhibit 10.12.1, File No. 001-33190) |
| 10.12.3* Second Amendment to OJVA, dated August 27, 2002 (incorporated by reference from the Annual Report on Form 10-K filed |
| | with the SEC on March 1, 2017, Exhibit 10.12.2, File No. 001-33190) |
| 10.12.4* Third Amendment to OJVA, dated September 10, 2004 (incorporated by reference from the Annual Report on Form 10-K |
| | filed with the SEC on March 1, 2017, Exhibit 10.12.3, File No. 001-33190) |
| 10.12.5* Fourth Amendment to OJVA, dated September 17, 2010 (incorporated by reference from the Annual Report on Form 10-K |
| | filed with the SEC on March 1, 2017, Exhibit 10.12.4, File No. 001-33190) |
| 21* | List of subsidiaries of the Company |
| | | | |
| 117 |
| 23.1* Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm |
| | | 23.2* Consent of Solium Consulting Group |
| 23.3* Consent of Mining Plus US Corporation |
| 23.4* Consent of CSA Global Canada Ltd. |
| 23.5* Consent of Michael C. Bauman |
| 23.6* Consent of P&E Mining Consultants Inc. |
| 23.7* Consent of Eric Sel ars |
| 23.8* Consent of Aleksandr Mitrofanov |
| 23.9* Consent of Daniel D. Downton |
| 23.10* Consent of Dave Tyler |
| 23.11* Consent of Kenneth Tylee |
| 23.12* Consent of Benjamin Bermudez |
| 23.13* Consent of Kevin W. Kunkel |
| 23.14* Consent of Independent Mining Consultants Inc. |
| 23.15* Consent of Forte Dynamics |
| 23.16* Consent of Channa Kumarage |
| 23.17* Consent of SLR Consulting Ltd. |
| 23.18* Consent of Wood Canada Ltd. |
| 31.1** Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for Robert R. McEwen, principal executive officer. |
| | | |
| 31.2** Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for Anna Ladd-Kruger, principal financial officer. |
| | | |
| 32** | | | Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for Robert R. McEwen and Anna Ladd-Kruger. |
| | | |
| 95* | | | Mine safety disclosure |
| 96.1* Technical Report Summary for San Jose |
| 96.2* Technical Report Summary for Los Azules |
| 96.3* Technical Report Summary for Gold Bar |
| 96.4* Technical Report Summary for Black Fox |
| 101* | | | The fol owing materials from the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 are filed |
| | | | herewith, formatted in Inline XBRL (Extensible Business Reporting Language): (i) the Audited Consolidated Statements of |
| | | | Operations and Other Comprehensive (Loss) for the years ended December 31, 2021, 2020 and 2019, (i ) the Audited |
| | | | Consolidated Balance Sheets as of December 31, 2021 and 2020, (i i) the Audited Consolidated Statement of Changes in |
| | | | Shareholders’ Equity for the years ended December 31, 2021, 2020 and 2019, (iv) the Audited Consolidated Statements of |
| | | | Cash Flows for the years ended December 31, 2021, 2020 and 2019, and (v) the Notes to the Audited Consolidated Financial |
| | | | Statements |
| 104* | | | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
| | | |
| * | Previously filed with or incorporated by the reference in the Original Filing on March 7, 2022 |
| ** Filed or furnished with this report |
| + | Management compensatory plan, contract or arrangement | | | | |
| |
| ITEM 16. FORM 10-K SUMMARY |
| None |
| |
| | | | | | | |
| 118 |
