UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
For the transition period from to
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Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 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.
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Large accelerated filer | ☐ | ☒ | ||
Non-accelerated filer | ☐ | Smaller reporting company | ||
Emerging growth company | ||||
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MCEWEN MINING INC.
FORM 10-Q
Index
2
PART I – FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
MCEWEN MINING INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (UNAUDITED)
(in thousands of U.S. dollars, except per share)
Three months ended June 30, | Six months ended June 30, | |||||||||||
2023 |
| 2022 |
| 2023 |
| 2022 |
| |||||
Revenue from gold and silver sales | $ | | $ | | $ | | $ | | ||||
Production costs applicable to sales |
| ( |
| ( |
| ( |
| ( | ||||
Depreciation and depletion | ( | ( | ( | ( | ||||||||
Gross profit (loss) | ( | | | ( | ||||||||
OTHER OPERATING EXPENSES: | ||||||||||||
Advanced projects - Los Azules |
| ( | ( | ( | ( | |||||||
Advanced projects - Other | ( |
| ( |
| ( |
| ( | |||||
Exploration |
| ( |
| ( |
| ( |
| ( | ||||
General and administrative |
| ( |
| ( |
| ( |
| ( | ||||
Income (loss) from investment in Minera Santa Cruz S.A. (Note 9) |
| ( |
| |
| ( |
| | ||||
Depreciation |
| ( |
| ( |
| ( |
| ( | ||||
Reclamation and remediation (Note 11) |
| ( | ( |
| ( | ( | ||||||
| ( | ( | ( |
| ( | |||||||
Operating loss |
| ( | ( |
| ( |
| ( | |||||
OTHER INCOME (EXPENSE): | ||||||||||||
Interest and other finance income (expenses), net |
| |
| ( |
| |
| ( | ||||
Other (expense) income (Note 3) | ( |
| |
| ( |
| | |||||
Total other income |
| ( |
| |
| |
| | ||||
Loss before income and mining taxes | ( | ( | ( | ( | ||||||||
Income and mining tax recovery | | — | | | ||||||||
Net loss after income and mining taxes | ( | ( | ( | ( | ||||||||
Net (income) loss attributable to non-controlling interests (Note 17) | | ( | | | ||||||||
Net loss and comprehensive loss attributable to McEwen shareholders | $ | ( | $ | ( | $ | ( | $ | ( | ||||
Net loss per share (Note 13): | ||||||||||||
Basic and diluted | $ | ( | $ | ( | $ | ( | $ | ( | ||||
Weighted average common shares outstanding (thousands) (Note 13): | ||||||||||||
Basic and diluted |
| |
| |
| |
| | ||||
The accompanying notes are an integral part of these consolidated financial statements.
3
MCEWEN MINING INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands of U.S. dollars)
June 30, | December 31, | |||||
| 2023 |
| 2022 | |||
ASSETS | ||||||
Current assets: | ||||||
Cash and cash equivalents (Note 4) | $ | | $ | | ||
Investments (Note 5) |
| |
| | ||
Receivables, prepaids and other assets (Note 6) |
| |
| | ||
Inventories (Note 7) |
| |
| | ||
Total current assets |
| |
| | ||
Mineral property interests and plant and equipment, net (Note 8) |
| |
| | ||
Investment in Minera Santa Cruz S.A. (Note 9) |
| |
| | ||
Inventories (Note 7) | | | ||||
Restricted cash (Note 16) | | | ||||
Other assets |
| |
| | ||
TOTAL ASSETS | $ | | $ | | ||
LIABILITIES & SHAREHOLDERS’ EQUITY | ||||||
Current liabilities: | ||||||
Accounts payable and accrued liabilities | $ | | $ | | ||
Contract liability (Note 16) | | | ||||
Flow-through share premium (Note 12) | | | ||||
Debt, current portion (Note 10) | — | | ||||
Lease liabilities | | | ||||
Reclamation and remediation liabilities (Note 11) |
| |
| | ||
Tax liabilities | | | ||||
Total current liabilities |
| |
| | ||
Lease liabilities | | | ||||
Debt (Note 10) | | | ||||
Reclamation and remediation liabilities (Note 11) |
| |
| | ||
Other liabilities | | | ||||
Total liabilities | $ | | $ | | ||
Shareholders’ equity: | ||||||
Common shares: | $ | | $ | | ||
Non-controlling interests (Note 17) | | | ||||
Accumulated deficit |
| ( |
| ( | ||
Total shareholders’ equity |
| |
| | ||
TOTAL LIABILITIES & SHAREHOLDERS’ EQUITY | $ | | $ | | ||
The accompanying notes are an integral part of these consolidated financial statements.
4
MCEWEN MINING INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (UNAUDITED)
(in thousands of U.S. dollars and shares)
Common Stock | ||||||||||||||
and Additional | ||||||||||||||
Paid-in Capital | Accumulated | Non-controlling | ||||||||||||
Three months ended June 30, 2022 and 2023: |
| Shares |
| Amount | Deficit | Interests | Total | |||||||
Balance, March 31, 2022 |
| | $ | | $ | ( | $ | | $ | | ||||
Stock-based compensation |
| — | | — | — | | ||||||||
Shares issued for debt refinancing | | | — | — | | |||||||||
Issuance of equity by subsidiary | — | | — | | | |||||||||
Net loss | — | — | ( | | ( | |||||||||
Balance, June 30, 2022 |
| | $ | | $ | ( | $ | | $ | | ||||
Balance, March 31, 2023 | | $ | | $ | ( | $ | | $ | | |||||
Stock-based compensation |
| — | | — | — | | ||||||||
Restricted shares issued | | — | — | — | — | |||||||||
Net loss |
| — | — | ( | ( | ( | ||||||||
Balance, June 30, 2023 |
| | $ | | $ | ( | $ | | $ | | ||||
Common Stock |
| ||||||||||||||
and Additional |
| ||||||||||||||
Paid-in Capital | Accumulated | Non-controlling |
| ||||||||||||
Six months ended June 30, 2022 and 2023 |
| Shares |
| Amount | Deficit | Interests | Total |
| |||||||
Balance, December 31, 2021 |
| | $ | | $ | ( | $ | | $ | | |||||
Stock-based compensation |
| — | |
| — |
| — | | |||||||
Sale of flow-through common shares | | | — | — | | ||||||||||
Shares issued for debt refinancing | | | — | — | | ||||||||||
Issuance of equity by subsidiary | — | | — | | | ||||||||||
Net loss | — | — | ( | ( | ( | ||||||||||
Balance, June 30, 2022 |
| | $ | | $ | ( | $ | | $ | | |||||
Balance, December 31, 2022 | | $ | | $ | ( | $ | | $ | | ||||||
Stock-based compensation |
| — | | — | — | | |||||||||
Restricted shares issued | | — | — | — | — | ||||||||||
Proceeds from McEwen Copper financing (Note 17) | — | | — | | | ||||||||||
Net loss |
| — | — | ( | ( | ( | |||||||||
Balance, June 30, 2023 |
| | $ | | $ | ( | $ | | $ | | |||||
The accompanying notes are an integral part of these consolidated financial statements.
5
MCEWEN MINING INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands of U.S. dollars)
Six months ended June 30, | ||||||
2023 |
| 2022 | ||||
Cash flows from operating activities: | ||||||
Net loss | $ | ( | $ | ( | ||
Adjustments to reconcile net loss from operating activities: | ||||||
Loss (income) from investment in Minera Santa Cruz S.A. (Note 9) |
| |
| ( | ||
Depreciation and amortization |
| |
| | ||
Unrealized gain on investments (Note 5) | ( | ( | ||||
Foreign exchange loss on investments (Note 5) | | — | ||||
Foreign exchange (gain) loss | | ( | ||||
Reclamation accretion and adjustments to estimate (Note 11) |
| |
| | ||
Income and mining tax recovery |
| ( |
| ( | ||
Stock-based compensation |
| |
| | ||
Change in non-cash working capital items: | ||||||
Change in other assets related to operations |
| ( |
| ( | ||
Change in liabilities related to operations | ( | ( | ||||
Cash used in operating activities | $ | ( | $ | ( | ||
Cash flows from investing activities: | ||||||
Net additions to mineral property interests and plant and equipment | $ | ( | $ | ( | ||
Investment in marketable equity securities (Note 5) |
| ( |
| — | ||
Dividends received from Minera Santa Cruz S.A. (Note 9) |
| |
| | ||
Cash used in investing activities | $ | ( | $ | ( | ||
Cash flows from financing activities: | ||||||
Proceeds from McEwen Copper financing (Note 17) | $ | | $ | | ||
Issuance of flow-through common shares, net of issuance costs | — | | ||||
Proceeds from promissory note | — | | ||||
Principal repayment on debt (Note 10) | ( | — | ||||
Subscription proceeds received in advance | — | ( | ||||
Payment of finance lease obligations | ( | ( | ||||
Cash provided by financing activities | $ | | $ | | ||
Effect of exchange rate change on cash and cash equivalents | ( |
| | |||
(Decrease) increase in cash, cash equivalents and restricted cash |
| |
| ( | ||
Cash, cash equivalents and restricted cash, beginning of period |
| |
| | ||
Cash, cash equivalents and restricted cash, end of period | $ | | $ | | ||
Supplemental disclosure of cash flow information: | ||||||
Cash received (paid) during period for: | ||||||
Interest paid | $ | ( | $ | ( | ||
Interest received | | | ||||
Tax paid | ( | — | ||||
The accompanying notes are an integral part of these consolidated financial statements.
6
MCEWEN MINING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 2023
(tabular amounts are in thousands of U.S. dollars, unless otherwise noted)
McEwen Mining Inc. (the “Company”) was organized under the laws of the State of Colorado on July 24, 1979. The Company produces and sells gold and silver from its operations in Canada, the United States and Argentina, and has a pipeline of exploration and development assets in Canada, the United States, Mexico and Argentina.
The Company owns a
The interim consolidated financial statements included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and are unaudited. While information and note disclosures normally included in annual financial statements and prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted pursuant to such rules and regulations, the Company believes that the information and disclosures included in the interim consolidated financial statements are adequate and not misleading. Therefore, these interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto and the summary of significant accounting policies included in the Company’s annual report on Form 10-K for the year ended December 31, 2022. Except as noted below, there have been no material changes in the footnotes from those accompanying the audited consolidated financial statements contained in the Company’s Form 10-K for the year ended December 31, 2022.
In management’s opinion, the unaudited Consolidated Statements of Operations and Comprehensive Loss (“Statement of Operations”) for the three and six months ended June 30, 2023 and 2022, the unaudited Consolidated Balance Sheet as at June 30, 2023 and the audited Consolidated Balance Sheet as at December 31, 2022, the unaudited Consolidated Statement of Changes in Shareholders’ Equity for the three and six months ended June 30, 2023 and 2022, and the unaudited Consolidated Statements of Cash Flows for the six months ended June 30, 2023 and 2022, contained herein, reflect all adjustments, consisting solely of normal recurring items, which are necessary for the fair presentation of the Company’s financial position, results of operations and cash flows on a basis consistent with that of the Company’s prior audited consolidated financial statements. However, the results of operations for the interim periods may not be indicative of results to be expected for the full fiscal year. 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.
One-For-Ten Share Consolidation and Articles of Amendment
Effective after the close of trading on July 27, 2022, the Company filed Articles of Amendment to its Second Amended and Restated Articles of Incorporation with the Colorado Secretary of State to, among other items, effect a
The Articles of Amendment also served to reduce the Company’s authorized capital from
7
MCEWEN MINING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 2023
(tabular amounts are in thousands of U.S. dollars, unless otherwise noted)
Effective June 30, 2023, the Company filed Articles of Amendment to its Second Amended and Restated Articles of Incorporation with the Colorado Secretary of State to increase the Company’s authorized capital from
NOTE 2 OPERATING SEGMENT REPORTING
The Company is a mining and minerals production and exploration company focused on precious and base 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 the allocation of resources to these segments at the geographic region level or major mine/project level 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 for accounting purposes. The Company’s business activities that are not considered operating segments are included in General and Administrative and Other Income or Expense line item in the below table, and are provided 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 all segments except for the MSC segment, which is evaluated based on the attributable equity income or loss. 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.
Significant information relating to the Company’s reportable operating segments for the periods presented is summarized in the tables below:
Three months ended June 30, 2023 |
| USA |
| Canada |
| Mexico |
| MSC |
| McEwen Copper | Total | |||||||
Revenue from gold and silver sales | $ | | $ | | $ | — | $ | — | $ | — | $ | | ||||||
Production costs applicable to sales | ( | ( | — | — | — |
| ( | |||||||||||
Depreciation and depletion | ( | ( | — | — | — | ( | ||||||||||||
Gross profit | ( | | — | — | — | ( | ||||||||||||
Advanced projects | ( | — | ( | — | ( |
| ( | |||||||||||
Exploration | ( | ( | — | — | — | ( | ||||||||||||
Loss from investment in Minera Santa Cruz S.A. | — | — | — | ( | — |
| ( | |||||||||||
Segment loss | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | ||||||
General and administrative and other | ( | |||||||||||||||||
Loss before income and mining taxes | $ | ( | ||||||||||||||||
Capital expenditures | $ | | $ | | $ | — | $ | — | $ | | $ | | ||||||
Six months ended June 30, 2023 |
| USA |
| Canada | Mexico | MSC |
| McEwen Copper | Total | |||||||||
Revenue from gold and silver sales | $ | | $ | | $ | — | $ | — | $ | — | $ | | ||||||
Production costs applicable to sales | ( | ( | — | — | — |
| ( | |||||||||||
Depreciation and depletion | ( | ( | — | — | — | ( | ||||||||||||
Gross profit | ( | | — | — | — | | ||||||||||||
Advanced projects | ( | — | ( | — | ( |
| ( | |||||||||||
Exploration | ( | ( | — | — | ( |
| ( | |||||||||||
Loss from investment in Minera Santa Cruz S.A. | — | — | — | ( | — |
| ( | |||||||||||
Segment loss | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | ||||||
General and Administrative and other | ( | |||||||||||||||||
Loss before income and mining taxes | $ | ( | ||||||||||||||||
Capital expenditures | $ | | $ | | $ | — | $ | — | $ | | $ | | ||||||
8
MCEWEN MINING INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 2023
(tabular amounts are in thousands of U.S. dollars, unless otherwise noted)
Three months ended June 30, 2022 |
| USA |
| Canada |
| Mexico |
| MSC |
| McEwen Copper | Total | |||||||
Revenue from gold and silver sales | $ | | $ | | $ | | $ | — | $ | — | $ | | ||||||
Production costs applicable to sales | ( | ( | ( | — | — | ( | ||||||||||||
Depreciation and depletion | ( | ( | — | — | — | ( | ||||||||||||
Gross profit (loss) | | | ( | — | — | | ||||||||||||
Advanced projects | ( | ( | ( | — | ( | ( | ||||||||||||
Exploration | ( | ( | — | — | ( | ( | ||||||||||||
Income from investment in Minera Santa Cruz S.A. | — | — | — | | — | | ||||||||||||
Segment income (loss) | $ | ( | $ | | $ | ( | $ | | $ | ( | $ | ( | ||||||
General and administrative and other | | |||||||||||||||||
Loss before income and mining taxes | $ | ( | ||||||||||||||||
Capital expenditures | $ | | $ | | $ | — | $ | — | $ | | $ | | ||||||
Six months ended June 30, 2022 |
| USA |
| Canada |
| Mexico |
| MSC |
| McEwen Copper | Total | |||||||
Revenue from gold and silver sales | $ | | $ | | $ | | $ | — | $ | — | $ | | ||||||
Production costs applicable to sales | ( | ( | ( | — | — | ( | ||||||||||||
Depreciation and depletion | ( | ( | ||||||||||||||||