McEwen Inc (MUX) 2021 Q2 法說會逐字稿

Hello, ladies and gentlemen. Welcome to the McEwen Mining's Q2 2021 Operating and Financial Results Conference Call. Present from the company today are Rob McEwen, Chairman and Chief Owner; Anna Ladd-Kruger, Chief Financial Officer; Peter Mah, Chief Operating Officer; and Steve McGibbon, Executive Vice President of Exploration. (Operator Instructions)

I will now turn the call over to Mr. Rob McEwen, Chief Owner. Please go ahead, sir.

Thank you, operator. Good afternoon, fellow shareholders and interested investors. I'm very pleased to welcome you to our Q2 2021 conference call. Over the past 15 months, we have rebuilt our senior management team at head office and at our mine, and it is these talented individuals who are responsible for the turnaround we are currently experiencing. Today, Peter, Anna, Steve and I are going to share with you the significant improvements in performance of our operation and financial strength, along with a review of the highlights of our exploration program and our plans for surfacing value of our giant copper project, Los Azules.

But first, I'm truly delighted to say that our mines are operating much more efficiently such that we are back to delivering on our production guidance. We are building our treasury, and our share price is regaining some of the ground it lost last year. These are very encouraging indications that we're getting back on track and that the trend is definitely up. However, there's still a lot of ground to recapture, and I want to assure you that we are fully committed in driving hard to do so, to regain that ground.

Now I will ask Anna to share with you the positive transformation of our financial condition, as seen in our results for Q2 and first half of this year. Anna, to you.

Thank you, Rob, and good afternoon, everyone. Q2 was a quarter demonstrating operational progress in our turnaround strategy, lower cost and a strengthening treasury, all resulting in improved financials. Strong production from our operations translated into solid revenue on our gold and silver sales for the quarter.

Our revenues from our 100% owned operations during the quarter was $40.7 million, which is an increase of 123% compared to Q2 of last year. Average realized sales prices in the quarter were $1,830 per gold equivalent ounces compared to prices of $1,733 realized in Q2 of last year.

Our cash gross profit, which is a non-GAAP measure that excludes depreciation, was $9.6 million for the quarter, an increase of $13.6 million from Q2 of last year's cash gross loss of negative $4.1 million. The change in Q2 is attributed to increased production and sales, higher average realized gold prices and decreased cash cost plans at both our Gold Bar and Fox Complex operations, which Peter Mah will discuss in a bit more detail shortly.

We reported a net loss of $6 million or negative $0.01 per share for Q2. This does include a total of $7.7 million invested in our exploration and advanced projects. This compares to a net loss of $19.8 million or negative $0.05 per share in Q2 2020, again, an improvement primarily driven by the increase in improved operation.

Our exploration activities wrapped up in 2021, and we spent approximately $0.9 million to date, managing new high potential targets in both Ontario and Nevada. We're also incurring eligible Canadian exploration expenditures in the Timmins region of Ontario. Steve McGibbon will give further updates on our various exploration programs shortly. We also spent just under $1 million on advanced projects during the quarter. This includes continued spending on our Fox Complex PEA, or Preliminary Economic Assessment, and the Fenix Project in Mexico.

Our total liquid assets as of June 30 was $48.9 million compared to $20.8 million for the same period last year. This is reflecting higher cash and cash equivalents, restricted cash, investments and our precious metals inventory. We also received $2.6 million in dividends in Q2 from our interest in the San Jose mine for a total of $7.6 million in H1. This compares to the $0.3 million we've seen during the first half of last year.

Net cash used in investing activities of $12.3 million in the first half of this year is largely attributed to the capital development costs at our Froome mine at our Fox Complex. We remain on track to reach commercial production in Q4. We ended Q2 with $74.9 million in current assets and a positive working capital of $39 million.

Thank you. I will now turn the call to Peter Mah, our Chief Operating Officer.

Thank you, Anna, and good day to all. We are pleased to report on another good quarter at McEwen Mining with production trending up on track with our 2021 guidance. Costs are trending down with teams focused on continuous improvement, and the expansion project at the Fox Complex is progressing well.

Consolidated gold production in Q2 2021 was 40,700 gold equivalent ounces, over 2x higher than production during the same period last year. Total production for the first half of 2021 was 71,300 GEOs, in line with the lower end of our guidance range of 141,000 to 160,400 GEOs. Q2 production from our 100% owned mines was 22,400 GEOs, which increased by 12,300 as compared to Q2 last year.

Q2 consolidated cost per GEO for our 100% owned mines and operations was $1,286 for cash costs or 41% lower than last year and $1,447 for all-in sustaining cost, which was 47% lower than last year.

Moving on to each region. At the Gold Bar mine in Nevada, Q2 production was 14,100 gold equivalent ounces, reflecting a 132% increase over last year. The production increased in the first half of 2021 to 21,500 gold equivalent ounces from 15,300 for the same period last year. Cash cost per GEO for the quarter reduced 18% to $1,463, while all-in sustaining costs reduced 35% to $1,619 compared to the same period last year. Improved production and costs were driven by the increased gold production, operational improvements and efficiencies and no COVID interruptions to production.

Moving on to Canada. Q2 production at the Fox Complex was 7,100 GEOs, reflecting more than a threefold increase from the 2,200 GEOs produced in Q2 of last year. The increase beat our expectations according to the mine plan as mining wound down at Black Fox and transitioned to the ramp-up at Fox mine, modestly better than expected. Cash cost per ounce in Q2 decreased to $917 compared to $3,121 in 2020, while all-in sustaining cost per ounce in Q2 decreased to $1,088 compared to $3,332 in 2020. The decrease in cost reflects the improved gold production, better mining efficiencies, more consistent mill throughput and more reliable grade control programs.

In addition, the Q2 2021 cost per ounce benefited from an optimized mine design, reducing underground development cost and schedule at the Froome deposit and no production interruptions due to COVID. Froome remains on track to reach commercial production in Q4 of this year. Grade reconciliation was on plan. Metallurgical recoveries has slightly outperformed our expectations, and further optimization of recovery versus grind size is ongoing. Underground resource and reserve definition drilling is underway with the aim to extend the life of mine at Froome and help bridge gold production while the Grey Fox and Stock projects are advanced.

The Fox Complex expansion drill results and model updates are expected to be delivered in Q3 and the Preliminary Economic Assessment subsequently in Q4 of this year. Plans are underway to select the mining contractor to start dewatering the Stock mine shaft in Q4 this year. This will provide access to the existing underground development from which the company plans to conduct underground drilling at Stock.

At El Gallo in Mexico, Q2 production was 1,300 gold equivalent ounces from residual leaching of the existing heap leach pad. Residual leach activities are projected to wind down towards early 2022. We are currently evaluating multiple strategic alternatives, including the potential divestiture of our Mexican business unit.

Shifting to Argentina at the San Jose mine. Q2 production attributed to our 49% interest was 18,200 GEOs, nearly 2x the production for the same period last year due to higher ore tonnes processed and reduced impact from COVID. Increases were slightly offset by lower processed grades due to delayed timing of stoping and lower grade mill feed substituted for development.

Cash costs were $1,105 per GEO, slightly lower than Q2 2020 for reasons mentioned, while all-in sustaining were on par for the same period last year at $1,500 gold -- $1,500 per gold equivalent ounce.

Thank you. I will now turn the call over to Steve McGibbon, our Executive Vice President of Exploration.

Thank you, Peter. Exploration activities ramped up significantly in Q2 across all projects in Canada, the United States and Argentina, with a total investment of some $6.9 million. In all, nearly 35,000 meters of core and RC drilling, equivalent to more than 114,000 feet, was completed. The focus of exploration remained on cost-effective discoveries and extending deposits adjacent to our existing operations in order to sustain near- to medium-term gold production.

Firstly, I will update work at our 49% owned San Jose property, which was operated by our joint venture partner, Hochschild Mining. On a 100% basis, the 2021 exploration budget for San Jose was $9.3 million, with $2.9 million spent in Q2 2021, raising exploration expenditures for the first half of the year to $5.2 million. Proximal to current San Jose operations, resource drilling is completed in the Escondida and the [timing of] veins.

From the 3,410 meters of drilling, several encouraging drill intercepts of 1.5 meters to 2.5 meters, creating typically between 2.5 and 3.5 grams per tonne gold and 200 and 300 grams per tonne silver were realized. One additional intercept called [SJD-2267 ran] 18.4 grams per tonne gold and 1,879 grams per tonne of silver along a 1.4-meter core length. I will remind the listener that gold and silver deposits at San Jose are ecothermal and will often produce highly variable drill results through normal -- through the normal course of the drill program.

At Betania, some 283 meters were completed and include a 3.1-meter intercept grading 5.5 grams per tonne gold and 6 grams per tonne silver in hole SJD-2328. During the third quarter, 3,000 meters of drilling will be carried out on the Betania structure in addition to testing a geophysical target to south of San Jose.

At the Gold Bar mine, in Q2, exploration incurred $1.3 million in expenditure in the Gold Bar mine area, which included 4,700 meters or 15,400 feet of core and RC drilling. This makes up part of our planned program for 2021 of about $5 million exploration spending.

Drilling activities during the quarter were focused primarily on the Ridge deposit located west of the active Pick mine and up the nearby producing Atlas mine. Exploration efforts sought to derisk known mineralization and to test potential deposit expansion of each area. The Ridge core drill program confirmed mineralization locally and return intercepts that were reported in our May 10 exploration and definition update.

Exploration activities at the Atlas Pit included drilling 1,500 meters in 10 RC holes after mine mapping and modeling identified several drill targets for evaluation. Some assays remain pending, but our best result to date is a deeper intercept that comprises -- or that composites at about 27 meters or 90 feet of 3.10 grams per tonne gold in hole [OGB-010]. This includes a higher-grade interval of about 10.7 meters or 35 feet of 6.23 grams per tonne gold. A further 3 oriented core holes are planned for the third quarter and will round out the initial phase of drilling at Atlas.

Activities at the Tonkin property included starting a property-wide reevaluation of regional geology, mineralization controls and their context in relation to other large Carlin-type systems in East Pick. The early indications of this work suggests Tonkin has greater similarities to other properties hosting large Carlin-type systems to the north than previously thought, including the geological setting of Lower Plate rocks. A 19-hole RC and 4-hole core drilling program, totaling some 1,500 meters, has been underway during the third quarter, primarily testing oxide mineralization of the known Rooster deposit. This work is being integrated into an updated geologic model that will dovetail historic drilling with our improved property-wide understanding.

Ongoing exploration activities at Tonkin, East Pick, Cabin, Pot Canyon and Gold Canyon are planned to continue throughout the second half of 2021. Exploration at Gold Bar South has successfully enhanced the project and is expected to contribute to Gold Bar's future production.

At the Fox Complex in Canada, exploration will continue throughout 2021. As production in this area shifts to the Froome mine, underground exploration drilling on its East and West flank has been underway with the objective of extending the Froome deposit near existing and planned infrastructure. The Froome deposit also remains open at depth. Potential exists for nearby subparallel mineralization in the hanging-wall and footwall that will also be drill-tested.

Underground drilling at the Black Fox mine continued to return encouraging high-grade results at the 160 West and 130 East targets proximal to the main ramp. Underground diamond drilling is being completed to identify additional mineralization adjacent to the Black Fox ore body that could be inserted into future mine planning.

In the second quarter, we invested $3.5 million in exploration activities, including some 26,500 meters of core drilling focused around the Stock West, Stock Main targets at the Stock property and the Whiskey Jack and Gibson targets at Grey Fox. The Stock exploration area sits adjacent to our Stock Mill, which currently processes ore from our Black Fox and Froome mines. The mill processed ore from the historical underground Stock Mine, which operated intermittently from the early 1980s until 2004, and produced 137,000 ounces of gold.

The Stock West mineralized zone was discovered in the mid-2019. And in 2020, exploration activities were focused on follow-up drilling. Initial results suggest the potential to define a significant new zone of mineralization at 0.5 mile or about 800 meters from our Stock processing facility. In Q2 2021, 4 drill rigs were secured at Stock to infill and expand the known dimensions of gold mineralization. A total of 20,008 meters of surface exploration drilling was completed during the quarter at Stock West and Stock Main, with the primary focus at the Stock West zone. Two drill rigs also completed 1,861 meters to test the depth extension of shoots below the underground workings of the Stock Mine.

Activities at the Grey Fox projects included drilling [shallow] targets with a focus on the reinterpretation of local veining trends at the Whiskey Jack and Gibson targets. We expect the resource model to be updated to the second half of 2021. During the second quarter, we reported new Stock West assay results in our previously mentioned May 10 update. We have made good progress improving sample analysis (inaudible) assay labs in both Ontario and Nevada and on increasing drilling capacity with additional rigs in both jurisdictions. As a result, we anticipate updating exploration and delineation results before the end of Q3.

I now return the phone back to Rob.

Thank you, peter. I understood I was silent. These phones have silencers [muting on me]. Sorry. So thanks, Steve. Now I'd like to talk about how we're going to develop one of our assets in a way that I believe has the potential to create significant value for McEwen Mining.

As you know, we have a large copper project, Los Azules. It's a giant within our portfolio of properties and a giant on a global scale. I do not believe the potential value of Los Azules is reflected in our price, In our share price. And that's something that we're determined to change. Furthermore, I believe there are several reasons why it has remained undervalued.

First, Los Azules has a number of risks associated with it. It is remote, with limited access, with only road access 5 months of the year. It is only at a Preliminary Economic Assessment stage. So uncertainty remains about its resources, its economic projections, CapEx and permitting. And large investment is required to reduce these risks. And unfortunately, the funding requirements are significantly greater in McEwen Mining's treasury without resorting to a financing that would lead to considerable share dilution.

Second, McEwen Mining hasn't had the management depth and copper experience to develop, or at least perceived by the market. And we've done quite a bit to correct that situation, putting together a large team of very experienced copper people.

And third, the market prefers -- appears to prefer to invest in a pure copper play, a pure copper development company over a small gold producer such as ourselves with a large cash-hungry copper development story.

So to surface the value of Los Azules, we considered a number of alternatives. The first one was to self-fund it. But because of the large potential dilution involved with funding it ourselves, we dismissed that alternative as unattractive.

The second was to seek out a joint venture or an outright sale. And we had discussions with a number of major mining companies who have the treasury and the experience to build it. But we wanted to maintain a continuing interest. And none of the companies we spoke to wanted to joint venture. They all wanted to buy about 100%, and we'd be left with no continuing interest in the property. We did suggest to all of them that we'd like to retain a royalty because this property is at a 36-year life. And it has, well, very robust economics at this point. And it would be a shame to give it away at an early stage when the copper price seems to be going higher through to the electrification of the world's transportation system and renewable energies, all big users of copper and a projected deficit coming in the future in terms of the supply of copper.

The third option was distributing to our shareholders. This idea has been around since the days of Minera Andes, which we ceded in McEwen Mining. It never gained traction for a couple of reasons, and they remain. There's a complex tax structure that needs to be dismembered. And upon distribution to our shareholders, there'd be a tax event both for McEwen Mining and for the shareholders receiving the development -- or the distribution. In addition, distributing it, the company would have to go out and do some fundraising. And it's not at a stage right now, because of the issues I mentioned earlier on, to get a large value for the assets.

The fourth option we looked at and have decided we want to go forward with is to privately fund the subsidiary that holds Los Azules and advance the project, moving it towards a pre-feasibility study and then laterally onto a feasibility stage but getting it towards a pre-feasibility, getting year-round access constructive, which is underway right now, and then within 12 to 14 months, taking it public. If you look at -- and we believe this is a good -- the best alternative for maximizing the value for McEwen shareholders.

If you look at copper projects, that large copper projects that have been purchased between 2010 and 2018, you can see that the stage of development of the project is clearly reflected in the value paid per pound. So at the earliest stage where you have some drill results and you come up with a resource that is the lowest amount and when you go all the way from that to Preliminary Economic Assessment onto a pre-feasibility and then onto a feasibility study, the value incrementally increases.

And that's the strategy we've taken, that we can see a significant increase in the value of the property by solving the access problem by doing more drilling and completing the studies, environmental, metallurgical and other, to produce a pre-feasibility study and then you go on to the feasibility study.

To get the ball rolling, we didn't have the money in. We are at a disadvantage in terms of going public. And I decided personally to get this ball rolling by committing $40 million of the -- up to $80 million we're looking to raise. And that will allow us to move the project ahead quite aggressively. In fact, the road into the property, the new route, is now into its 15th day of construction. It will take us the better part of the year to complete that, but it'll be -- make a huge difference on those projects.

What might it do in my investment is a related party transaction. We asked the disinterested directors onboard, which is everyone except myself, to engage an independent valuer to look at what McEwen Mining was getting relative to the market. And so we were looking at $175 million on the property plus a royalty of 1.25%. And we think right now, the project's valued at about -- just on the copper, the 29.5 billion pounds of copper in the indicated and inferred categories, is valued at about $0.006.

Moving to the pre-feasibility and the feasibility, you can move to $0.03 a pound to $0.06 a pound and even higher than that if you're in a strong market. And if you do the math, you can understand why we see it is creating the biggest value in McEwen Mining rather than selling out to a company today at the early stage of what appears to be a strong bull market developing in copper.

At this point, I'd like to thank you for attending and invite you to our question-and-answer period. Operator, could you open up the phones for question and answer?

(Operator Instructions) And your first question comes from Jake Sekelsky of Alliance Global Partners.

So it's good to see that costs at Gold Bar are trending down. I'm just curious if we should expect to see some further improvements here over the next few quarters. And if so, if you can maybe touch on some of the operational improvements that are driving this.

Certainly, I'll pass that question over to Peter.

Yes. Jake, thanks for your question. We released the feasibility as you're aware, and we're driving towards that guidance. We're not providing updated cost guidance at this time, but we can certainly see from our production profile, and costs are trending quite well relative to the feasibility. That's best information we can share at this time.

I think regarding where to improve with the same areas we spoke on the last quarters regarding the mine, the process plants and just general administration are areas of focus. We continue to look for improvements in our mining with our mining contractors. Regarding processing, we've been completing that leach program, which I think we talked about last call. And that was targeting run-of-mine leaching.

So those tests are just coming through. They've been fairly positive. But we're in the analysis stage of what that means to the split of how much we can place on the pad of ROM versus a crusher (inaudible). And lots of business improvements through admin and areas, working through synergies, some of our synergies with our Mexican operation. We've been utilizing some of the team there to support our Nevada team, and they're going quite well.

Okay. That's helpful. And then speaking of Mexico, I mean it looks like residual leaching at El Gallo. It's probably going to conclude in the first half of next year. And I think you guys touched on this a bit earlier, but do you have any more color on sort of plans for the Mexican assets going forward, whether it be on the M&A front or looking at development of Fenix? Just any color you have on Mexico would be helpful.

Peter? Someone? Anybody there? Can you hear me? You can hear me, Jake?

Yes.

We're looking at Fenix. We're just pushing on a couple of levers there to try to improve the economics of the project and also looking at source of funding.

Okay. So you haven't really started to lean one way or the other, whether it's M&A there or develop that yourselves yet?

That's right.

Got it. Okay. That's all on my end. Congrats on a good quarter.

Okay. Thank you.

Your next question is from Heiko Ihle.

Can you hear me all right?

Yes, Heiko.

Wonderful. With the PEA at the Fox Complex, would you be able to give a little bit more color when you expect to see it? And more importantly, what do you think a, call it, good to amazing outcome scenario for the site would look like?

Peter, would you care to answer Heiko?

Sorry, my potato finger hit the wrong button there. I just hopped back in. I couldn't catch that question, Heiko.

No worries. I'll repeat it. With the PEA at the Fox Complex, would you be willing to provide just a little bit more color on, a, when you think it's going to be shared with the marketplace? But more importantly, also, what do you think a good to amazing outcome scenario for the site would look like, in other words, we should expect to see?

Sure. Good to amazing. I'll touch on that second. Yes, we're doing obviously some extra work in the drilling that Steve shared with you. We're targeting Q4 of releasing the PEA, likely to the earlier side of that, our current schedule shows. So I expect to see that before the year-end.

Good to amazing. So how big do we want to dream here? In the PEA, it's the first step of our expansion. We're targeting a 10-year mine life of something north of 100,000 ounces a year with the project charter, which we're still analyzing the resources and waiting on some results and optimizing our mine plans there. So it's trending well. We don't have everything consolidated yet to give you a view on that, and that will come out in Q4 this year.

Got it. Okay. Moving on to McEwen Copper and the interest in Los Azules. It's been -- tomorrow, it will have been a month since the initial announcement. How is the deal coming along? And is there any other future time lines that you can maybe disclose? I know you said 12 months in the original press release that came out in July. But is there any other maybe hard or even soft time lines that you're willing to talk about or what you think we should expect to see maybe quarter-by-quarter?

Yes. Well, we'll probably close in 2 stages, Heiko, one during this month, in the -- around the middle of the month. And there's a legacy of a lot of subsidiaries that came with Los Azules, the previous owners of Los Azules. Minera Andes had a labyrinth of subsidiaries in Cayman, Canada and Argentina. And those all have to be cleaned up, and it's taking a little longer than we thought it would. So we're looking to close that to simplify that structure by mid-August and then again by the end of September. In terms of a go public, we'd be looking at up to 12 months after the end of September.

Your next question is from John Tumazos.

Congratulations both on the progress and the energy of all the members of the McEwen team. I'm thinking of a February 1 announcement where another company, i-80 Gold, said they were creating a new management team, a stronger management team. And they hired a former CEO of Tahoe Resources -- former CEO of Nevada Copper for that one jurisdiction, Nevada company. And I'm just thinking how the Fox Complex is at least 3 deposits. And the Stock complex is at least 3 deposits. And the Timmins downtown, Lexam VG projects are at least 3 projects. And Gold Bar is over 3 deposits. And then there's El Gallo and an $80 million program up in the Andes in Argentina.

So is there a whole new management structure to be rolled out for Argentina? Or are Peter and Steve and Stefan and the team working 72 hours a day? Or should we just assume that El Gallo and what I call the downtown Timmins, Lexam VG properties are on a back burner because there's only so much you can do at Fox and Stock and Gold Bar and Los Azules? It's just a remarkable treasure of opportunities.

Excellent question, John. And yes, they're working 76 hours a day. But Peter, do you want to talk about the team that's been assembled for Los Azules? It's quite extensive, very deep in copper experience.

Absolutely. And thanks, John, various deep questions. And yes, there's more than 76 hours in a day. Coffee is good. Yes. We've assembled quite a support team around the project, which includes some internal sort of consultants, some additional people on the ground in San Jose sorry, in San Juan and also external consultants.

So internally, we've beefed up with the construction manager, Gary Cochran, former Anglo employee, very, very decorated career of mine building. We brought on Bill Thomas. One of his last projects was Constancia. Dave Tyler, who's been doing work for us on all our technical projects, is starting to get more involved. And then Jim Sorensen from Samuel, who you may have heard of, has quite a large project career.

In addition to Samuel on the external side and their team that we brought on, we brought on Bechtel and their copper excellence group, Dave Meadows, who was the study manager for the El Pachon project that they recently come into the fold. And then SRK, Steve assembled a very top team, Dr. Sullivan and Sylvia for the resource development. So they're actively engaged with our team on developing drill plans.

On the mine engineering side, we've involved Gerald Whittle and his group and the enterprise optimizer. And that actually -- that work kicked off today. We're looking at sort of optimizations around phasing and all of that. So we have quite an extensive group infrastructure. I could, I guess, going on and on and on. But it's -- I don't know, I lost track. It's over 200 years of experience in large copper projects, successful projects that we've assembled. So quite a team advancing that, John.

So you and Steve and Stefan aren't managing the Argentina theater of operations, where in Nevada and Ontario are plenty with a touch of Sinaloa.

Our management team, so myself, Anna, Steve and Ruben Wallin on permitting, environmental, health, safety are providing the oversight to that team. So they -- and sort of governance and controls. We monitor and drive out objectives through that team. There's an extensive team under each one of those areas that is actually executing the work done.

Super. Is it too much to -- let's just assume for a second that the management team is delegating and supervising Argentina, but you still have Froome and the Stock restart and all these different good zones at Gold Bar. You guys manage 3 theaters of operation in North America?

Absolutely. I think our results -- we've been doing it. For this year, the results are speaking for themselves. At Froome, we're on track and potentially a beat on commercial production. We have a very solid team. We've beefed up operating team as well. Brought in managers beneath the Director of Operations in Canada. We have a Director of Operations for Nevada. So there's been a lot of expansion of those organizational charge ahead of all of this. And of course, El Gallo doesn't take a lot of our time and we're looking at strategic options.

I think we're fairly right fit for this year. We're not in any dire need of roles. So there's always a recruitment process going on. And we want to hire the right people to advance all of our regions. Once the PEA is done, we'll know more clearly what the next steps are for the Fox expansion. And as I mentioned earlier, we're well positioned to select the contractor and go down the Stock shaft for dewatering and get the underground drilling there going to advance the projects.

But once we get more clarity on the strategic options and move forward, we'll be able to right fit what's remaining at McEwen Mining in terms of our organizational structure. Anna can certainly speak to the finance and inside and all the other areas where there's been significant recruitment success and building up of her team.

John, I mean that is a very, very good question. We need people to run things. And just on sort of the admin arm of things, we are usually putting in systems to really help a lot of the streamline and automation. So we've got actually an ERP system, a budget and forecasting system, a number of other operational systems on the go this year, to be delivered by end of year, Q1. That will certainly help. We are recruiting, as Peter said, additional folks sort of underneath us, director level, VP levels and thinking about succession planning.

I'll also comment that on McEwen Copper specifically, the path is to get it public within a year or less. And the intention at that time is to obviously, once it's a fully public company, it will need a more dedicated management team with compliance and reporting as a public company as an example. So for now, we monitor and we work quite closely as a team. And some of the results you've seen sort of speak to some of that energy that you're seeing today for the company.

If I could ask a different follow-up. Your results improved to lose only $0.01 with all this activity and new hiring going on. Can you talk to what the CapEx was in the June quarter? And how many of these new people are capitalized versus expensed?

Most of the capital for the quarter really related to the Froome mine project. That was just shy of, I think, $12 million, John. None of the individuals that we're speaking of were capitalized. it would be sort of ongoing management team. A lot of them were -- these positions were sort of already there, and we really are just -- some of them are replacements. Some of them are sort of combining positions and finding the right people (inaudible). In terms of even just at your executive level, I don't think we've added any new positions at that level in terms of place.

Are the Argentine consultants and team members capitalized for Los Azules? Or is that expensed?

At the moment, according to U.S. GAAP, they are expensed. When we go forward into McEwen Copper, and at the moment, we're thinking Canadian listing, we'll be able to follow IFRS and we'll be capitalizing those expenditures.

So it's really amazing that you only lost $0.01 with all this activity going on. Congratulations.

Thank you.

Thank you.

Our next question is from David Denison.

Rob and team, [David Denison], an individual investor and involved with this company since 2004, I think, with Minera Andes. So a couple of questions, again, just as an individual investor. First question is, what can I expect as a current McEwen Mining investor in the next 12, 18, 20 months as the McEwen Copper progresses and things come to fruition as you hope or expect?

And then the second question is the 100% owned -- and maybe I misheard this, so correct me if I'm wrong. But the 100% owned property or assets that you have down next to the San Jose mine that you're drilling, what does that mean if you find something? Does that mean it gets zoomed under the current structure where you get 49%? Or you don't know that yet, over?

Okay. I'll deal with San Jose first. The properties that Minera Andes held -- there were 2 sets of properties around the mine. Minera Andes had one. Hochschild had another. And a number of years ago, we merged those 2 interests together so they are all contained within the San Jose mine property and under Minera Santa Cruz, which is the sub that controls the mine. We own 49% of that company, which is the mine and the properties. And each of Hochschild and ourselves retained a 2% NSR on the properties we've ended in. So we don't have any 100% owned properties in the vicinity of San Jose any longer.

Okay. Okay. I missed -- I guess I [missed it or that] it was drilling and 100% owned or something like that. So okay.

And on the copper project, because it's Argentina and because it's sort of limited access, we will gain to access to the property in November. We have a plan to do 53,000 meters of drilling. There are ongoing studies for environmental permitting, metallurgical, economic, community relations. We hope to advance the project significantly next year through the drilling, increase the confidence in the resources as they're done.

First step will be updating the Preliminary Economic Assessment. It was done in 2017. And we're just looking at what the costs, how costs have changed, looking at how we have proposed to mine and if there are ways of reducing costs and lowering capital there and then moving on to a pre-feasibility study. That would probably be completed no earlier than the end of next year, but we would want to go public before that.

But you have a drill season right now that really runs from November till the end of March, early April. We're putting in camps that will allow us operate through that period. Road construction has started on what we call the Northern route, which we believe will give us 12-month access to the property via a lower altitude, less problems with the snow. The current route, you have to go over 2 passes, one 4,000 meters and the other 4,200 meters. And there's -- again, with the drifting snow, and you can have 20 feet of snow in there. So -- and it's [hairpin trigger] all the way up and down from those passes.

So we really struggled for a long time trying to economically drill the project because you have this tiny little window where you can get in, set up the drill, start drilling. And then you have to take them out each year. So it'd be a huge boost in my mind for this property. So I'd like to take it public within 12 months -- 12 to 14 months from where we are today. Hope that answers your question.

Mostly. I guess looking in your crystal ball, Rob, in 12, 18 or let's say 25 months from now, things progress as you want and no big obstacles and McEwen Copper has gone public. There's interest from the markets. As a current McEwen Mining shareholder, do I get anything from that? Or do I simply have to buy into that as it develops, over?

Under our current plan, we look at distribution to shareholders of an interest. And that has tax consequences for both McEwen Mining and for the shareholders receiving that distribution. So you have a taxable event. Many people will probably want to sell to cover off the taxes. So we've looked at it and said, well, the best way to get the value will be to advance the project.

If you look at the financing, we're looking to raise $40 million and up to $80 million at the current price of the issue. If we just raise $40 million, there will be -- McEwen Mining will continue to hold 82% interest in the company prior to going public and have 1.25% interest on that property.

If you look at the past 12 large copper transactions between 2010 and 2018, you can see a progression in value as you move from a resources and then a PEA and then a pre-feasibility study and a feasibility study in progression and value. So if we said our drilling confirms an upgrade of resource and we have 29 -- continue to have 29.5 billion pounds of cooper there and you got $0.03 a pound for that, you'd be looking at value of $885 million. If you got $0.05 a pound, you'll be looking at $1.475 billion. And McEwen, we have a large interest in that property -- in that company.

So there are -- I think Los Azules in this new vehicle would be a very attractive asset and quite comparable to a number of the large single-asset copper developers out there right now and carries significantly higher market cap. But we have to do the work first to justify the market cap.

Rob, sorry if those questions were a little remedial. I'm not a mining expert by any stretch, just an individual investor.

Not at all. You're welcome. Anytime.

There are no further questions at this time. I'll turn the call back over to you, Mr. McEwen.

Thank you, operator. I'd like to thank everyone for joining us today. Stay tuned. Best is yet to come. Thank you.

Thank you. This does conclude today's conference call. You may now disconnect.