McEwen Mining (TSX:MUX,NYSE:MUX) has suspended a planned distribution of 0.5 cents per share to shareholders, on the basis of lower-than-expected revenue during Q1 2019, the company announced on Thursday (March 7).
The miner reported that operating issues at the Black Fox mine and the start-up of the Gold Bar mine were the reasons behind the decline in revenue.
“We have experienced operating issues at our Black Fox Mine and with the startup of our Gold Bar Mine. While viewed as temporary, these issues have resulted in much lower revenue this quarter than planned,” said Rob McEwen, chairman and chief owner.
“As a result, we decided the prudent and responsible course of action was to conserve our cash and suspend the distribution,” he added.
The company alluded to the operating problems at the Black Fox mine when McEwen Mining released its full-year and fourth-quarter results last month.
McEwen noted “challenges reaching targeted productivity levels” when addressing the mine, located in Timmins, Ontario.
According to the miner, Black Fox produced 48,928 gold equivalent ounces in 2018 at a cash cost of US$845 per ounce. In 2019, the mine is forecast to produce 50,000 gold equivalent ounces at a cash cost of US$905 per ounce.
“The Black Fox mine is undergoing significant changes in management, workforce and mining practices, with the objective of improving the overall economic performance of the mine in 2019-2020,” the company said at the time. Adding, “so far in 2019 the mine has faced some challenges reaching targeted productivity levels.”
Despite these setbacks, McEwen said that they were temporary and should not impact its planned output for 2019.
At the new Gold Bar mine, located in the highly-valued Nevada area, it was reported that heavy snowfall paired with understaffing negatively impacted the operating activities at the asset, which delayed the ramp-up of the crushing plant. Additionally, commercial production was pushed back beginning the second quarter of this year.
“December and January were challenging months on site with heavy snow and cold temperatures delaying some work. Remaining activities to complete the process plant include electrical work, instrumentation installation, and commissioning of the gold refinery circuit,” the miner noted in a press release from last month.
The miner also forecast higher-than-projected cash costs for Gold Bar for 2019, citing an increase in the amount of waste stripping. This led McEwen to revise the mining schedule, which will hopefully better position the new mine in its second year of production.
Gold Bar is expected to produce 55,000 ounces of gold at a cash cost of US$960 per ounce this year.
As of 3:06 p.m. EST on Wednesday, shares of McEwen were down 2.36 percent, trading at C$2.22.
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Securities Disclosure: I, Nicole Rashotte, hold no direct investment interest in any company mentioned in this article.
