viewMcEwen Mining Inc

McEwen reports 8% fall in Q2 output, announces impairment charge on Los Azules


McEwen Mining (NYSE:MUX)(TSE:MUX) reported Thursday that second quarter production declined from the same period last year, but said output is still in line with its full year guidance. The company also announced an estimated impairment charge of $90 to $135 million on its Los Azules asset in Argentina.

Shares increased by 5.6 percent to $3.19 as gold prices rallied Thursday amid renewed safe haven demand. 

For the second quarter, production totaled 31,200 gold equivalent ounces, a decline of eight percent from the second quarter of 2013 and down 3 percent from the first quarter this year.

The company, which produces gold and silver from its San Jose mine in Argentina and the El Gallo 1 property in Mexico, said full year guidance remains unchanged at 135,000 to 140,000 gold equivalent ounces as production is expected to increase in the fourth quarter. 

This is due to 50 percent more processing capacity at El Gallo 1, and higher grades at San Jose, McEwen said.

Production at the San Jose mine during the second quarter was lower year-over-year due to lower gold and silver grades.

Separately, the company also announced Thursday that it is conducting an impairment test of its Los Azules project in Argentina as a result of the recently announced acquisition of Lumina Copper by First Quantum Minerals for C$470 million.

Lumina's sole major project is the Taca Taca copper project located in Salta, Argentina. 

"While there are some notable differences between Taca Taca and Los Azules, we believe the similarities in project scale and location within Argentina warrant consideration for the Lumina transaction to be a triggering event for impairment analysis," said the company in its statement. 

The miner said a preliminary analysis indicates a pre-tax asset impairment charge of up to $135 million, with the actual amount to be reported in the company's quarterly report to be filed on August 7, when the final impairment assessment is finished.

"With First Quantum acquiring Lumina Copper and their Taca Taca project, Los Azules moves to the forefront in terms of world-class, undeveloped, high-grade copper assets not owned by a major mining company," said chairman and CEO Rob McEwen. 

"As we have said in the past, Taca Taca serves as a good proxy for the value of Los Azules and we believe this transaction demonstrates value in projects located in Argentina."

Quick facts: McEwen Mining Inc

Price: 1.13 USD

Market: NYSE
Market Cap: $452.31 m

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