McEwen Inc (MUX) 2018 Q1 法說會逐字稿

Hi, ladies and gentlemen, and welcome to the McEwen Mining First Quarter Operating Financial Results Conference Call. (Operator Instructions)

As a reminder, this call may be recorded.

I would now like to introduce your host for today's conference, Mr. Rob McEwen, Chief Owner. Please go ahead.

Thank you, operator.

Good morning, fellow shareowners, ladies and gentlemen. Today, we're going to talk about our operating and financial performance in the first quarter 2018 as well as our exploration progress, corporate developments and what to expect for the rest of the year.

Presenting with me today are our CFO, Andrew Elinesky; our COO, Xavier Ochoa; and our SVP of Exploration, Sylvain Guérard.

The first quarter 2018 marked the beginning of an important year for McEwen Mining. We expect the construction of our Gold Bar mine will be completed by year-end, and the mine will be in production early in 2019. Our $15 million exploration program at our Black Fox Complex is a large investment to test the potential of the properties. It has already produced encouraging assay results and generated new areas of promising mineralization.

In Mexico, we're starting the transition, the transition from mining oxide gold ores and processing in a heap leach facility to finalizing our plans to mine our silver and gold ores and through a -- and processing them through a mill. We will be releasing a preliminary economic assessment of this process later in the quarter.

Financially, we have resisted the industry's bad habit of selling royalties, metal streams and hedging because we believe the price of gold is going higher, and we want to maximize our revenues for you. We have no debt. But as we have stated when addressing how we will finance Gold Bar, we are considering taking some debt on in order to complete the Gold Bar construction and to avoid issuing shares at the current price. I can assure you the debt will not be convertible and will not have warrants attached.

I will now ask Andrew to talk about our financial performance in the first quarter.

Thank you, Rob. Good morning, everyone. Thank you for taking time out of your day during a busy season for joining us here.

Further to Rob's opening remarks, the first quarter was a dynamic start for what is going to be a very busy year for us. From the perspective of an operating performance, our production and cost per ounce metrics were right at our planned levels, while from a financial perspective, the net loss we reported was also in line with our expectations as our income statement and treasury balance have started to reflect sizable investments that Rob mentions that we're making at Gold Bar as well as the continued work at Los Azules and the exploration work that we are doing across all of our operations.

Regarding our overall operating result, the company had consolidated production of just over 44,000 gold equivalent ounces. We feel this is a good start to meeting our production guidance of 171,000 ounces for the year.

Production for the quarter was just under 15,000 ounces higher than a year ago. This was primarily attributable to the addition of the Black Fox mine in Timmins, which we purchased last year as well as a 25% increase at our El Gallo Mine in Mexico. In addition, cash costs and all-in sustaining costs were right at expected levels on a consolidated basis, which led to earnings from our mining operations of $19 million or $0.06 per share. This contribution from operations helped to offset the significant investments being made at the Gold Bar Project. These investments resulted in a decrease of our liquid assets by just over $13 million when compared to the end of 2017. In addition, when you combine the exploration and development costs with the realized and unrealized losses on our equity investments, the company reported a net loss of $5.2 million or $0.02 per share.

Moving on to the outlook for the rest of this year.

Firstly, with Mexico. We expect our cost to decline from the first quarter. This is due to the removal of mining costs, which will cease at the end of May. And that is -- as Rob mentioned, we're doing -- that is due to the depletion of our oxide resources. And despite the completion of these mining activities, we will continue to produce gold on a declining basis as we leach for the next 2-plus years. This production profile will allow us to maintain an established presence in the area as we continue with our studies and development on mine life extension using the sulfide resources that Rob mentioned and for which we'll be publishing our findings in the coming month.

Secondly, at Black Fox, we expect production to remain steady throughout the rest of the year when compared to the first quarter. And we expect costs to trend closer to our guidance while we continue with the evaluation of our opportunities in the region.

Thirdly, at San José, we would expect production levels to increase slightly in the second and third quarters, followed with the highest production occurring in the fourth quarter. All of this is in line with the historical production profile that has occurred here over the last decade. Accordingly, we would expect costs at San José to drop slightly, in line with guidance on a per ounce basis as this production increases over the year.

And finally, at Gold Bar. We are on schedule for commissioning of the mine in the fourth quarter of this year, and it is our objective to declare commercial production in the first quarter of 2019. The project is currently on schedule and on budget, with approximately 22% of activities completed and 27% of the costs incurred as of the end of April. In addition, we have locked in prices for approximately 45% of the overall costs on long-lead items such as construction materials, which are very price-sensitive materials.

At this point, I would like to thank you again for taking the time to join us today, and I will now turn the presentation over to our COO, Xavier Ochoa.

Thank you, Andrew.

Dear fellow shareholders. Last quarter was the first steady operating quarter following the acquisition of Black Fox and being problem free at El Gallo. In terms of our production results for the first quarter of the year, on a consolidated basis, we produced 44,344 gold equivalent ounces as planned. We also had a very productive quarter in terms of construction advance at Gold Bar in accordance to plan. At El Gallo in Mexico, the operating team achieved a production of 12,217 gold equivalent ounces and having overcome prior quarter operating problems.

Total cash cost for the year -- or for the quarter were $691 and all-in sustaining costs were $753 per gold equivalent ounce. During the quarter, planning for completion of mining on the current oxide pits was accomplished, confirming that at the end of this month, that is May of this year, mining will cease at both pits, continuing to crush through the end of the second quarter the ore stockpiles and continuing to actively leach through the remainder of the year. That is the reason why Andrew referred to the costs dropping.

Also, during the quarter, we had significant advances on the preliminary economic assessments that both Rob and Andrew alluded to for the El Gallo complex. This study is an exciting, innovative approach towards the future of the El Gallo complex, where we've abandoned the original stand-alone approach towards development of the El Gallo silver mine and advanced towards -- I'm sorry, and advanced towards development of an integrated complex.

What -- where we plan to make things different is that we will build a mill to process our heap. And once we have the mill running for a couple years, we'll be able to accommodate ore to be mined from the El Gallo silver mine. The plan entails using the [Minal] pit at El Gallo Gold as a tailings storage facility. The use of mine pits for tailings storage is a proven practice in several countries, such as Australia, Mexico, Peru. And in a similar manner, it is the use of tailings stack fill in mining that everybody is doing. By doing this, in addition to cost advantages, we can also reduce our closure liabilities at El Gallo Gold. The result of this preliminary assessment will be available later this quarter.

At Black Fox, we produced during the first quarter a total of 12,078 gold equivalent announces while still operating with slack capacity at the mill on a contained basis. Cash costs for the quarter were $934 and all-in sustaining costs were $1,148 per gold equivalent ounce. As a result of this, our efforts during the quarter were aimed at reducing our costs and evaluating the development of expanded ore zones, including the Froome deposit, to increase our mine output and gold production. This work is continuing through the second quarter.

At the San José mine in Argentina, our 49% interest in the mine amounted to 20,049 gold equivalent ounces composed of 1.1 million ounces of silver and 10,822 ounces of gold, with a cash cost of $934 per gold equivalent ounce and an all-in sustaining cost of $1,148 per gold equivalent ounce. Operations there were steady, in line with plan, and the mine team continues to advance on several important sustaining projects.

At Gold Bar, which will be our newest mine, in addition to progressing with construction as planned, we have started evaluating additional mining [opportunities] through mine design and ore haul optimization. This work is being conducted now by our site operating crew, which is now in place. With the addition of experienced talent, we're starting to work on operational readiness for commissioning of the project at the end of this year.

At Los Azules, work advanced to address technical issues and the environmental baseline, which will be required for advancing the project into future permitting stage. As you can appreciate, we have been busy working on the future of production and growth of our company.

Now I will turn over to Sylvain Guérard, our Senior Vice President of Exploration, who will discuss the exciting exploration programs in place. Thanks.

Thank you, Xavier.

We had a positive start to the Black Fox exploration program, with 31,000 meters drilled during the first quarter, representing approximately 30% spending of our $15 million exploration budget. Multiple exploration targets were tested over the southeast Black Fox property area, where the Grey Fox deposit that holds the significant resources and the Gibson target are located. The drilling over this sector led to the identification of new, narrow, high-grade structure and veins, including a very high-grade intersection of 639 gram-per-ton gold over 0.7 meter, part of the 1.3-meter mineral interval. The high-grade drill results represent a new target located 500 meters southwest of the Gibson target. The recent drill results over the Grey Fox-Gibson sectors suggest the potential for the presence of new mineral structure, and additional drilling would be conducted over this area in the next quarters.

Our Q1 drilling at the stock property focused on the E Zone, located 700 meter from our mill and former Stock Mine. Historical results, combined with the Q1 drill intersection, suggest a presence of a zone of mineralization that extends vertically from near surface to a depth of 350 meter and along a strike length of approximately 500 meter. The mineralized horizon extends along the Destor-Porcupine Fault proximal to a northeast-southwest trending structure. Intense alteration, disseminated sulfides, quartz veining and [drusy] characterize the mineralization.

Q1 drill highlights include 5.24 gram-per-tonne gold over 11.9 meter, this is [through wood], including a 26.5 gram per tonne over 1.6 meter. And also, 4.49 gram per tonne over 9.4-meter intersection. The stock property covers 6.5 kilometers in the Destor-Porcupine Fault and is located immediately to the west and adjacent to the Kirkland Lake Gold Taylor property, where positive exploration results were recently announced. Addition drilling is planned in Q2 at the Stock B and over other targets on the Stock property.

A significant part of the drilling in Q1 was focused on the Tamarack zone, where results from surface and underground drilling over the upper and lower lengths have confirmed and delineated significant zone of zinc, lead, silver and also gold mineralization, including a high-grade intersection and base metal and gold. The zone is located proximal to our Black Fox operation. And initial base metal and updated gold resources are planned in Q2, and then we are going to evaluate the economic viability of the zone that could eventually contribute to the Black Fox production.

During Q1, the underground drilling had been almost exclusively focused on the Tamarack zone and extensions. However, results from a sector called the Far West extension of Black Fox have returned encouraging intersections of 4.5 grams over 5.9 meter, and drilling is in progress to better define the potential of this new, encouraging target.

The key drilling program from surface targeting extension of the mine at depth below 1,000 level has been unsuccessful due to difficult ground conditions. We will consider an underground drill platform to allow the drilling of this target, where 3 historical hole completed over this sector have returned encouraging results, including high-grade gold intersection.

Looking forward, the exploration program is continuing at both Black Fox and Stock properties over the coming quarters, and recent new drilling information, new geophysical survey and machine learning have been integrated to our targeting and exploration program.

Finally, in Nevada, resource extension and delineation drilling continue around our Gold Bar deposit. Positive results have been obtained, and a global resource update is planned for later this year.

Thank you, Sylvain.

Back to Rob.

Okay. So you've heard what we've been doing. I'd just like to talk about the Black Fox Complex.

When we bought it, it was a stressed asset. And as such, our purchase price was very low, relative to the money the previous investors had in it. We paid $0.06 on the dollar. We saw this asset as an underexplored property with terrific exploration potential in a world-famous gold district. Our recent exploration results released earlier this week reinforce our belief in our large property package in the Timmins area.

The recent exploration news of a new, high-grade zone at the adjacent Taylor Mine, owned by Kirkland Lake Gold, put a big smile on our face. Why? Because the Taylor Mine is next door on the same geological structure, and we have also encountered high-grade in a new area close to our joint founder. At the Black Fox mine, a lot of effort's been put into defining a very curious, high-grade gold and base metal zone that was ignored by the previous owner. We believe this zone could provide us with a meaningful source of profitable production.

Elsewhere on the property, several very high-grade assays that Sylvain commented are providing us with excitement.

I want to step away from the exploration and just talk briefly.

As Xavier said, we've been working at the Black Fox mine. As I said right at the beginning, it was a distressed asset. It had some challenges. It's providing us just under 50,000 ounces of gold this year. But it's higher cost, and we're looking for ways to reduce it. It has -- It's a -- It has a lot of long-haulage waste from the deep areas. It's a little inefficient in the way that it's been done. It didn't have enough areas developed to provide any constant and increasing flow of material. All of those areas we're looking to address. And it'll take a while before we turn this around, but we believe there's good room to extend that.

Our Los Azules copper project, I have to say that one of the things I really like is that we now have -- this is a remote site with one route into it if you had to cross the river 6 times in a pickup truck where the water almost came in through the window deep enough. We now have another route that looks like it's easy to develop into Chile. The property's right on the border with Chile. And there's a third possible route. And if we're -- if that does work, it will change this property's access dramatically. It would come in. We wouldn't have to encounter any snow or very little snow. It's a low road in and be ideal for power and it would give us 24 -- or, sorry, year-round access. I was going to say 24/7 year-round, but it's -- it would move from remote to very accessible and alter the value of the property.

During the quarter, we were looking at going off and drilling for a location -- confirming locations for tailing sites, for other infrastructure. The season is closing right now due to weather, and we will be pursuing permitting for an airstrip. We're permitting -- looking to submit a permit by the end of the year to develop this site. So we're quite excited by what's going on there.

At Gold Bar, as you heard, the construction's moving along well. We've made large commitments to the purchases of essential equipment. And there is exploration going on at Gold Bar, as Sylvain said. And there's some sulfide zones that really haven't been followed up because we're concentrating on oxides. But just to give you a flavor of some of the historic polls, there were 2 that jump out. One was 23 feet at 8 grams. Another was 70 feet at 3.12 grams. And when you think of the deposit of running it just over a gram, these are areas that appear to have deeper roots, and that's what we're going to test for as the year goes on.

In Argentina, our partner, Hochschild, is continuing to explore the San José property, and it's -- we'll hear more about that later in the year. They're on a different reporting cycle than we are.

And all of this -- I said it was an important year because this year, we're expected to do about 170,000 ounces of gold equivalent, stepping up to 250,000 ounces in 2019, with Gold Bar coming onstream and then slow increments from there. If we -- Xavier's comments on the next stage for our El Gallo property in Mexico, if that moves on, well, it will just lift that production profile up.

So we're happy with the quarter. I would like to have made money rather than report $0.02 loss, but that's -- we're spending a lot of money on exploration and development.

At this point, I would encourage anyone who has a question to ask it. Operator, open the Q&A.

(Operator Instructions) Our first question comes from the line of Jake Sekelsky of Roth Capital.

Starting with El Gallo. I mean, I know an economic assessment is due out this quarter. I'm just trying to get a handle on how we should be viewing the longer-term plan there. I mean, can you guys elaborate at all on the potential synergies between the sulfides in El Gallo Silver?

Yes, this is Xavier. What we found through all the metallurgical work that we've done is that the sulfide content that we have actually makes it very low recovery on a conventional heap leach, sort of passive leaching environment. But if you do a fine grind and you do agitate the leach, you can actually extract the gold and silver present in it. So what the plan is, is to develop a mill that can treat the residuals in the -- on a heap leach. It can -- do contain a little bit of sulfide in places that lock in the gold. And then using that grinding capacity that will be installed and augmenting the processing side of things with a more complex flowsheet than just the agitated leach, it'll allow us to treat ores coming from El Gallo Silver, which has got also some kind of sulfide. But then we have a number of other deposits, that have been drilled over time in the property, that have varying degrees of sulfide content. And by having this flowsheet installed, we'll have the flexibility to treat the sulfides. And it opens a different chapter in eventual exploration because we will now have the ability to go after higher sulfide content minerals that we have been putting aside because we didn't have the treatment facilities.

Got it. So it would kind of be a centralized mill, like a hub-and-spoke kind of situation down there?

Correct.

Perfect. Switching over to Black Fox. It looks like the drill results released earlier this week were positive, particularly at Tamarack. I'm just wondering what, if any, modifications to the mill would be required to bring that material into the mine plant.

What we're seeing at Tamarack is still at early stage. We may have a portion of mineralization that can be treated in our existing mill. The high base metal contents will require a separate milling facility. But considering that the general region in Ontario has a number of mills with available capacity, it really would be a question of looking at what's the best trade-off for us, whether it's shipping out to somebody or augment our existing circuit. It looks, at least at a first blush, that going out to toll milling might make the most sense.

Perfect. And then just lastly at Gold Bar, can you just touch on the remaining capital budget that you spent there? I mean, is there a quarter where larger-ticket equipment and materials are expected? I'm just trying to get a handle on quarterly capital spend there.

It's Andrew here. I -- the second and third quarter are the most intensive quarters, and we have approximately $28 million to $29 million per quarter going out in terms of cash.

Got it. So $28 million to $29 million during those 2 quarters?

No, per quarter. So in total...

Per quarter.

$56 million to $58 million. It's the brunt -- it is the brunt of the capital going in those 2 quarters. Q4 is relatively light, so...

Our next question is from Heiko Ihle from H.C. Wainwright.

Looking at San José, you produced 10,822 ounces with a 48,000-ounce guidance for the year. You mentioned earlier on this call that you expect Q2 and 3 to be better and then Q4 to be best. I know you're going to be careful commenting on 2019, but just conceptually, would it be okay to [trend line] Q4 production to 2019?

It's Andrew here. And the answer to that would be no. Q4 is, by default, a longer period of production heading into the end of the year. So Q4 for the last decade has always been the heaviest month of production year after year, stoppages aside. And Q1 in the last 5 years has become the lightest quarter of production as there is mandatory vacation and a maintenance -- 2-week maintenance period that the folks put in place in those years. It's during the summer months down in Argentina, and it helps with maintaining a low absenteeism rate by having the forced vacation in -- during the first quarter. So it's by design, and it's by plan. So taking out the fourth quarter and extrapolating that would not be correct.

Okay, fair enough. And then on Gold Bar, it said you -- you've capitalized -- [it says here], $15 million for construction in progress. Where should I expect to see that number by the end of Q2 and by the end of Q3 if you have that much visibility?

As mentioned to Jake, I'm expecting an additional $25 million-plus per quarter for Q2 and Q3.

Okay. But that's -- and that's just the ultimate sum?

Sorry, I -- you -- I didn't catch that.

I -- So essentially, we've remodeled $25 million per quarter. That's the final figure?

Yes. And then there's a small component. And so we could be $25 million to $27 million per quarter and then the final balance being in the fourth quarter. But we're still using the same budget of just under $81 million.

Okay. So I'll leave you with a remark. I find it quite impressive. So you got $40 million in working capital here at the end of the quarter, given Black Fox and Gold Bar being ongoing. I find that very impressive.

Thank you.

Thank you.

We've been trying to pull our money close to our chest.

Very well. Well, you're the biggest shareholder.

Our next question is from Mike Kozak of Cantor Fitzgerald.

Just, first one for me, just a housekeeping accounting question. So of the 2018 exploration budget, how much of that is expense versus capitalize? Is any capitalized at all?

So we have a fairly conservative capitalization policy, being a U.S. GAAP issuer, Mike -- sorry, and thank you for calling and the question. So yes, it's fairly conservative. And really, the only portion that would get capitalized of our underground program or open-pit programs are -- is just the infill drilling of reserves. And since we have minimal reserves right now at Black Fox, it's a very small component that we're actually putting on the balance sheet in mineral property interests. And with Gold Bar, all the drilling that we've been focused on so far is the extension of resources on the edge of the pits. So none of that has been capitalized.

Got it, okay. I figured as much. And then on Black Fox, you're doing an updated gold resource and an initial base metal resource, I think, you said this quarter. But the 110,000 in your drill program, I mean, you're only going to be half done at the end of this quarter. So my question is like, how much of new drilling is going to be reflected in that new resource? Or is that new resource only going to be at Tamarack?

Yes, regarding -- Sylvain speaking. Regarding Tamarack, Mike, the drilling has been mostly completed on the zone itself, and most of the assay results are in as we speak. So we are proceeding with the geological model and resources, and the information related to this resource and assay results are already in as we speak. So the information regarding other exploration targets on the property and programs are ongoing, but Tamarack was one of the main focus in Q1, and the drilling is completed so far.

Got it. And then my last one, and maybe I'll just have to wait until the news comes out. But, I mean, at El Gallo, what size of a mill are you kind of looking at to process that -- the material on the heap leach pad? And, I mean, are we talking about something small, something that would then be scaled up to potentially do El Gallo Silver? I mean, just -- but the initial kind of flowsheet, what scale are you looking at?

Well, we're -- we have to deal with different rock hardnesses, this is Xavier. And the softer materials, we're looking at something in the 5,000 tonne-per-day class. But as we start putting some fresh rock from different deposits, it gets restricted down all the way to 3,300 tonnes.

Our next question is from Bhakti Pavani of Euro Pacific Capital.

Just a quick question on Black Fox. I know -- I see that you have increased your exploration budget from $11.5 million to $15 million. Just wanted to understand, given the initial results, how -- bilateral development that you talked about in Q1 with regards to Black Fox, how's that coming along? And with regards to production guidance, do you see production going up in 2019 at this point?

Xavier, do you want to talk about the development, and then...

Given what we know right now, 2019 should see a small improvement. It all depends on the speed at which we can move some of these projects. I think 2019 will be a small step-up. And if anything, we're going to start seeing the big gains to be made into 2020 and onwards.

And lateral development?

Oh, on the lateral development, 2019 should be a bit more heavy handed than this year, but it'll go in hand with the production.

And at this point -- sorry, go ahead.

No, go ahead.

No, I was going to ask, at this point, are you only -- it's only Black Fox into the picture when it comes to mine plan? Or do you anticipate Tamarack or Froome being considered in the mine plan in 2019?

At this point, we -- we're not yet considering seeing any significant production out of the 2 of them. It's such matter of study for later this year to see if some acceleration could happen. But I didn't -- couldn't ascertain that.

Okay. Just last one. With regards to the exploration spending, 30% has been already spent in Q1 when it comes to Black Fox. How should we look about the remaining -- the -- of the spend throughout the quarters?

Sylvain speaking. We are going to spend probably most of our exploration money by beginning of the quarter 4. So it's highly active in the first 3 quarters of the year, and it will slow down as we get into Q4 to digest all of this new information we are getting there. Back to your questions regarding our encouragement in results that we have received so far, I would say that we are quite encouraged with the programs. It's a very positive start. Results are coming from multiple different zones. We have, as mentioned earlier, very high-grade mineralization in the southeast property area over the Grey Fox but also over new targets in this sector there. Stock -- then Stock properties, Stock East Zone is coming a bit as a positive surprise. Nothing much has been talked in the past regarding Stock potential exploration upside, and what we see at Stock, along the Destor-Porcupine Fault, is highly positive, and we have all the right ingredients there for a quality greenstone Archaean gold deposit. It's still early stage. We are proceeding with resampling of this historical core. So that will provide us additional new drilling information, together with our Q1 drill results. And also, we are going to go back into the zone for additional drilling in Q2 and over the coming quarters. So Stock is coming as a positive addition to our Black Fox Complex program. And as also discussed, Tamarack. We have pushed Tamarack hard, had a significant infill and delineation program. And really, the objective of that is really to have a good understanding of what we have there at Tamarack. It's -- we see it as a late mineralized event hosting a massive sulfide, base metal and also gold. And for the first time, we'll be producing a resource for the base metal in Tamarack, and we'll update on existing resources for the gold. And Tamarack, as you know, is quite proximal to our Black Fox mine. So I would say overall, it's a very good start. Results are coming from different zones with high encouragement, and we look forward for the rest of the program.

Perfect. Switching to Gold Bar. At this point, are there any ticket items that you think might delay the expected production start date at the project?

Bhakti, it's -- the key item for Gold Bar is equipment deliveries in the ADR plants. Right now, things are all on schedule, but executing on those items are going to be the lynchpin to commissioning in the fourth quarter, and we'll have a better idea on that during the third quarter.

Our next question is from [Bill Powers], a private investor.

A couple of things. I guess the first one is on the debt financing that you are going forward with as far as -- there seems to be a lot of short interest in your shares right now, and I think that's -- a little bit has to do with potential -- the belief that there may have been an equity financing. I guess, when is the timing on whether it's a debt or some sort of revolving line that we could expect to hear some news on as far as going forward on that?

Thank you, [Bill]. The debt financing -- I agree with you. I think once we get that -- the financing behind us, that, that expectation of an equity issue will disappear, and we should see the stock lift. And we'd like to see it done before the end of the quarter.

Okay, great. It is great to hear. I guess my second question has to do with -- it sounds like you're doing a new mine plan to incorporate into the El Gallo Silver. I guess -- and you had -- I guess my understanding was that it was to get the silver up and running. It was a pretty significant capital cost. I guess, what is the ballpark range that you would envision the combined, I guess, sulfide processing plant that would be able to accommodate El Gallo Silver? If you could just give us a ballpark that you might be looking at on that front.

We will have some numbers out at our annual meeting, which would be on the 24th of May.

Okay, great. Great. And finally, I thought that you guys purchased an adjacent property at Romios, I believe, the -- is the name of the property in Ontario. And I guess if you'd just give us a little color on that acquisition and what your plans are moving forward, given that it's adjacent to -- it's very close to your existing mine?

It's at the southeast end of our property. It's on structure. It had a couple of historic drill holes where they encountered gold. We thought it was complementary to and adjacent to the Grey Fox discovery and resource. But it came at an attractive price, and we're just expanding our area.

Yes, that's correct, Rob. This is adjacent to our property to the south. It has seen a bit of drilling. High-grade gold intersection had been intersected on the property, similar style to our Grey Fox project. So it was something that makes sense as an addition or land expansion to Black Fox.

Okay. And -- but there's no plans, I guess, this year for drilling on the recently acquired property? Is that correct, fair to say?

It's too early to say, [Bill]. But we've got a plan laid out for the year, and we're following through with that. And then if in the future we see extensions, we'll consider going over there.

Our next question is from [Terry Devrise], private investor.

A bit of a question for you. Maybe it's -- I think we're entering into a period of stagflation, whether it takes 6 months or a year, 1970s inflation. I'm watching a few markets really closely. I think the Dow is in a bear market. We could confirm another lower low in the transports and the industrials any day now. So any rally that's to the upside is a sell rally. But the -- they're saying with 2.3% GDP in Q1, the U.S. economy is rolling. With the unprecedented monetary expansion of years and years, if that's all they can get, I say they're wrong. The U.S. yields are pushing the upper barrier on the 10-year at 3%, and I think the gold market is wrong in assuming it's because of U.S. strength. I think what we're seeing is inflation with rising commodity prices. So if my thesis is correct, I'm not doing anyone who probably holds it, but if we are entering into a period of stagflation, how can I expect gold mining stocks to perform?

Gold is performing -- it depends on the currency you're buying your gold in. And right now, if you bought it in Turkish lira from the 1st of January of 2016, you'd be up over 70% in Turkish lira. In dollar terms, you're up over 20%. I think the large debt loads that have continued to grow in size to the debasement of the currency, it's just adding fuel to the fire, and you have people starting to look at gold as a contrary investor would, that it's been an underperforming asset in the minds of most people. But it's been in a -- I believe it's been in a bull market since the beginning of 2016. But bull markets start slowly.

Well, I certainly agree with you there. But as you know, the mining shares have really, really been in a bear market, cheap as they have been in years, I would say.

Well, right now, they're considerably higher than their lows of the summer of '15.

Yes, got you. Certainly, does this mean that...

But, I mean, they've corrected, and we've -- all the shares have given up quite a bit from the highs they achieved in the recent times. But I -- you -- gold performs well or has performed well in the past during stagflation periods. It's about confidence in currency.

I guess we'll just watch to see it. At $1,307 right now, at the bottom of the trading range, hopefully that holds. And I guess we're looking for $1,360 positive break and rosy skies ahead.

That's right.

And I'm showing no further questions on the phone lines. I'd like to turn the call back over to Mr. McEwen.

Thank you, operator.

We have several that came in by email. I'll start with one of them, a Mr. [Jeffrey Haul], he asked -- the question was, "You have repeatedly stated that the goal of McEwen Mining is to be included in the S&P 500 Index. Seems like a lofty goal at this point. What market cap is needed to obtain that goal? And do you see the share price at least obtaining a $5 share price?"

So yes, the 500 index, getting into it, has been our goal, remains our goal. And the reason for it is because it -- I believe it provides a competitive advantage being in the S&P 500. If you just take a look at the market capitalizations of all the public companies in America, that's valued around $31 trillion, and the S&P 500, just the market cap of all the companies in it, is -- represents 80% of that value or about $24.8 billion -- trillion. Now within the S&P 500 -- so it represents 80% of all the public money in America, and there's only one gold stock in it. And that's Newmont. And its market cap is about $20 billion to $21 billion. Expressed as a percentage of the market cap of all the S&P, it works out to 0.08%. So what you have is a very, very under-owned sector -- industry in the S&P 500 and by investors in America. There will be a time, and I think it's soon, that more and more people will be looking to buy gold and gold stocks, and they will be turning to the stocks that are in the index in greater numbers. There are only -- the 3 largest gold producers next to Newmont -- and these are the 3 that conceivably could get into the index if they do some M&A, would be Coeur, Hecla and ourselves. Now 99% of all the precious metal producers in the world are ineligible getting into the S&P 500, didn't have to be an American company. And America is the largest market for gold shares in the world. And Newmont, by virtue of being in the index, enjoys a very low cost of capital compared to the other companies in the industry and a more stable shareholder base. And with the market going more and more towards passive investment, ETFs, with more than 50% of the trade on the markets daily now, the shift will be quite profound. In fact, if you were just to move that weighting from 0.08% to 1%, you would need another 11 Newmont or another $220 billion moving into the gold space into the -- into stocks that are in the S&P. So what do you need to obtain that? Well, it's a little more than our market cap right now. You need to be $6.2 billion in market cap, and it's about 1/10 where we -- we're about 1/10 of that right now. But ambitious goals are good. I think the -- what you capture when you get there will be very important to our share price. We will have to do some M&A, and we'll have to rely on Sylvain to come along and find a lot more gold in Timmins, in Gold Bar, Mexico. But we know he can do that. And Xavier is going to run the operations so that they're flying. And since I own just under 80 million shares of McEwen Mining personally, my -- and I take $1 a year in salary, my goal is to see a much higher share price.

Thank you very much, [Jeffrey].

Andrew, you have a question?

I do, Rob, thanks. It's from a gentleman named Mr. [Neil Davis], a fellow shareholder. His comment and question are, "I like the tax-free benefit of the return of capital that McEwen distributes to its shareholders. I'm just curious as to why most companies don't also use this tax-friendly method instead of the traditional dividend. Any thoughts? Thank you very much." And [Neil], if I may call you that, is I'd like to thank you for the question. It's a question right up my alley as an accountant in tax because it's a tax issue. And Rob has mentioned before that he considers the dividend that -- it's a small dividend, but it's a dividend nonetheless that we pay out as a -- basically a rent payment to our shareholders for the use of their capital. And we are taking advantage of 2 things: one, we have historical losses, and two, we have a lack of taxable profits. So that is why it is classified as a return of capital. However, in 2017, there was a last-minute piece of U.S. tax legislation which swung us from a taxable loss for the year to a taxable profit. The tax legislation was very favorable to us, particularly toll -- the toll charge reform, which some people may be familiar with. And that had us swing into a taxable gain for the year, with the inclusion of foreign income that was forced to be repatriated. So that was 2017 and each year is looked at separately. So for 2018, the outlook is that we do think they will be returns of capital and not classified as dividends. However, the work that we're doing now is to an additional piece of tax reform. And sorry to bore you, but it's called the Global Intangible Low-Taxed Income calculation or the acronym they use is called GILTI, which is one heck of an acronym. So we're working on that and trying to come up with the calculations. And when they're done later on in the third quarter of this year, we will know our -- well, the better estimate of our taxable income or loss position, and we'll be able to advise shareholders accordingly. But thank you for the opportunity to talk about this item once again.

Thank you, Andrew.

Now there was one other question that came in from a Mr. [Carl Barnhart], and it was 2 parts, 2 questions. The first one, "The first stated goal is to extend mineralization at the Black Fox Complex around known deposits. How will what we have learned in Q1 exploration lead to an increase in annual production from existing operations, an increase in mine life or a lower all-in sustaining cost on the same or higher production rates? Maybe some color on what type of exploration results would lead to actionable production and the timeline this could take would be helpful." So will the production lead to -- or will the exploration results lead to an increase in production? That's our hope. I cannot see it happening this year. The mine, we went into it knowing that it didn't have a good mine plan. It didn't have a good sense of what the geology was like, and we wanted to take time to get a better picture of the geology and put a, let's say, improve the planning of the mining going underground, improve the mine plan. And yes, the hope is that will both extend the life and lower the cost. But that's work in progress this year. And what would lead to actionable production change? Just being able to better define where we're going to work in a more efficient manner. The second question is, "The second stated goal is to test close to the mine and the mill. You have actionable deposits -- are located in this process and the timeline from discovery to production, given its proximity to existing operations. Do you have any Q1 exploration results which will appear actionable? Or is it more -- is more exploration necessary? More exploration is necessary.

Thank you for your questions. Thank you for joining us on the call. And I hope all of your investments are golden. Thank you, operator.

Ladies and -- you're welcome. Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program, and you may all disconnect. Everyone, have a great day.