Introduction
The Toronto-based McEwen Mining Inc. (NYSE:MUX) released its second quarter 2023 results on May 8, 2023.
Also, on October 11, 2023, McEwen Mining Inc. announced a binding agreement for an additional $10.0 million investment by Nuton LLC, a Rio Tinto Venture and existing McEwen Copper shareholder.
After closing, Nuton will own 14.5% of McEwen Copper on a fully diluted basis, and McEwen Mining will own 47.7%.
Note: This article updates my July 24, 2023 article. I have followed MUX on Seeking Alpha since July 2021.
1 – 2Q23 Results Snapshot
McEwen Mining operates three gold and silver-producing mines and one development Project in Mexico.
Also, the company owns a subsidiary called McEwen Copper (47.7%) after the closing of Nuton LLC. Recent transaction indicated above.
McEwen Mining posted a second-quarter loss of $21.63 million or $0.46 per diluted share, compared to a loss of $12.45 million or $0.26 per share in 1Q22.
Revenues were $34.40 million, up from $30.65 million in 2Q22 and unchanged sequentially. Finally, the 2Q23 generic free cash flow from operations was a negative $29.16 million, compared to a negative $40.92 million in 2Q22.
MUX produced 35,625 GEOs in 2Q23, including production from the San José mine.
As many of you are aware, our gold and silver assets had a weak start for the year. While activities at McEwan Copper’s Los Azules project we’re running at a rapid pace. I’m pleased to say that our mines delivered better results in Q2 than Q1 and the outlook for the second half of the year is significantly better.
2 – Investment Thesis
McEwen Mining had a terrible year in 2022 that culminated in July 2022 with a painful reverse split 1:10 to avoid delisting and a record-low stock price in October 2022. MUX recovered exceptionally well from this dire situation and is now up 109% on a one-year basis.
3 – The Los Azules Project in Argentina is Advancing
One important topic regarding MUX is its main copper project, the Los Azules in Argentina. A critical catalyst for the company is its copper subsidiary, McEwen Copper. The project is amongst the world’s largest copper deposits.
The company has invested $130 million in exploration since 2021 and secured two key strategy partners/sponsors, Rio Tinto and Stellantis.
Note: McEwen Mining released the PEA for Los Azules in June 2023.
MUX now owns a 47.7% interest in McEwen Copper Inc., which holds a 100% interest in the Los Azules copper project in San Juan, Argentina, and the early-stage Elder Creek exploration project in Nevada, USA.
It is a critical project for MUX shareholders, offering significant growth potential. It is an excellent copper project with an initial CapEx between $2.153 billion and $2,462 billion.
Thus, trading short-term MUX LIFO (about 75%) and keeping only a medium core position long-term is recommended.
4 – Stock Performance
MUX is up a whopping 73% after a recovery from its lows in October 2022. MUX has significantly outperformed the VanEck Vectors Gold Miners ETF (GDX).
MUX – Financial Snapshot History Ending 2Q23: The Raw Numbers
Note: Numbers are indicated in US$.
MUX | 2Q22 | 3Q22 | 4Q22 | 1Q23 | 2Q23 |
Total Revenues $ million | 30.65 | 25.99 | 28.24 | 34.75 | 34.40 |
Quarterly Earnings in $ million | -12.45 | -10.53 | -37.36 | -43.08 | -21.63 |
EBITDA $ million | -6.88 | -4.58 | -24.88 | -32.11 | -33.58 |
EPS (diluted) $ Per Share | -0.26 | -0.21 | -0.80 | -0.91 | -0.46 |
Operating Cash Flow $ million | -28.74 | -6.20 | -8.06 | -28.61 | -25.15 |
CapEx in $ | 4.21 | 8.89 | 7.05 | 4.95 | 4.01 |
Free Cash Flow | -32.94 | -15.09 | -15.10 | -33.56 | -29.16 |
Total Cash in $ million | 46.42 | 56.31 | 40.92 | 192.21 | 114.01 |
Total LT Debt in $ million | 63.69 | 63.83 | 63.98 | 64.12 | 40.00 |
Shares Outstanding (diluted) | 47.43 | 50.78 | 45.05 | 47.43 | 47.43 |
Gold and Silver Production | 2Q22 | 3Q22 | 4Q22 | 1Q23 | 2Q23 |
Quarterly Gold Equivalent Oz GEOs | 36,100 | 35,653 | 37,279 | 30,397 | 35,625 |
Quarterly Au Production Oz | 27,600 | 26,200 | 28,970 | 25,900 | 28,700 |
Quarterly Silver Production Oz | 704.600 | 853.000 | 702,000 | 381,200 | 571,210 |
Source: Company 10-Q filing.
McEwen Mining – Gold Production and Balance Sheet Details
1 – Revenues and Trends. Revenues were $34.40 million in 2Q23
2 – Free cash flow was negative $29.16 million in 2Q23
Trailing 12-month free cash flow TTM was negative $84.93 million, and the free cash flow for the second quarter was negative $29.16 million.
3 – Debt situation and the Los Azules copper project
4.1 – Production in GEOs
4.2 – Gold Production details per mine:
Gold production was 28,700 Au ounces in 2Q23.
5 – 2023 Guidance
For 2023, MUX expects a 2023 production of 150K-170K GEOs.
Technical Analysis (Short Term) and Commentary
MUX forms an ascending channel pattern, with resistance at $7.60 and support at $6.55. The RSI is now 60 and elevated, reinforcing that MUX is about to reach a resistance of $7.60.
Ascending channel patterns or rising channels are short-term bullish in that a stock moves higher within an ascending channel, but these patterns often form within longer-term downtrends as continuation patterns. The ascending channel pattern is often followed by lower prices, but only after a downside penetration of the lower trend line.
I suggest selling LIFO about 75% of your position between $7.42 and $7.80 with higher resistance at $8.30 and accumulating on any weakness between $6.65 and $6.40 with possible lower support at $6.00.
The strategy buy-sell-rinse-repeat is the best path for this stock, only keeping a small/medium long-term position you have de-risked with your short-term gains.
Warning: The TA chart must be updated frequently to be relevant. It is what I am doing in my stock tracker. The chart above has a possible validity of about a week. Remember, the TA chart is a tool only to help you adopt the right strategy. It is not a way to foresee the future. No one and nothing can.
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