McEwen Mining's (MUX) CEO Rob McEwen on Q2 2016 Results - Earnings Call Transcript

| About: McEwen Mining (MUX)

McEwen Mining Inc. (NYSE:MUX)

Q2 2016 Earnings Conference Call

August 04, 2016 11:00 AM ET

Executives

Rob McEwen - Chief Owner

Andrew Elinesky - CFO

Colin Sutherland - President

Analysts

Operator

Good afternoon, ladies and gentlemen. And welcome to the McEwen Mining Second Quarter 2016 Financial and Operational Conference Call. I would like to turn the meeting over to Mr. Rob McEwen, Chief Owner. Please go ahead, sir.

Rob McEwen

Thank you, Operator. Good morning, ladies and gentlemen. Welcome to our conference call on the second quarter and our plans for the future. Today, we are going to talk about, as I said, the second quarter and our future plans. And I’m pleased to say we are all still smiling. The higher gold and silver prices have demonstrated very quickly and dramatically that investors can once again make big money buying and selling shares of precious metals companies. Our leverage to gold, silver and copper, and Argentina has been a powerful factor moving our share price higher. In addition, the threat of being delisted from the New York Stock Exchange was eliminated this January.

Before asking Andrew and Colin to give their talk on the finances and the operations, I just want to give you a sense of a measurable change that’s occurred in the past 12 months. Gold has increased since last August by 26%, sliver by 39%, the senior gold stocks, as measured by the GDX index, have increased 137%; the junior gold shares measured by the GDXJ index, have increased by 177%; and shares in McEwen Mining have increased by 544% during that same period. And you might ask why have we gone up so much? One, I mentioned the threat of New York delisting us has been removed, but in addition to that, we are very asset-rich Company. And to illustrate that point, allow me to use an industry practice of converting other metals to gold.

So, if we take all of our mineral resources of gold, silver and copper, and convert them into resources into resources of gold equivalent, we would have over 45 million ounces or 0.15 gold equivalent ounces per share. In addition to our large resource base, we have over $50 million in liquid assets in our treasury; we have no debt; we have a yield of 0.23%. We believe gold, silver and copper prices are going higher and therefore we have not sold future revenue growth; we’ve sold no metal streams, no royalties or hedged our future production. In fact, we even bought back royalty on one of our properties.

We have two producing gold and silver mines. Our current production mix is 67% gold and 33% sliver. We have two development projects that will be producing more gold and silver for us, and a very large copper deposit.

With that introduction, I’m going to ask Andrew Elinesky, our CFO, to talk about our financial performance. And he will be followed by Colin Sutherland, our President, who will talk about our operational performance.

Andrew Elinesky

Thank you, Rob. As, Rob mentioned, the Company continued the strong start to the year with another excellent quarter. This was a combination of solid production at our El Gallo Mine in Mexico at low cash and all-in sustaining costs as well as the continued stable performance of the San Jose mine in Argentina. This strong performance allowed us to make some significant investment in our assets during the quarter, while at the same time, continuing to add to our solid working capital and treasury balances, as Rob mentioned.

Consolidated gold equivalent production for the quarter was 39,500 ounces, which was a slight increase when compared to the same quarter in 2015. And as a result of decreased costs, and higher gold and silver prices, our earnings from mine operations increased significantly by 44% to $19.3 million for the quarter. Strong performance from both of our mines is reflected in our improved treasury. We ended the quarter with liquid assets of just over $55 million, which compares to $43 million at the end of the first quarter. This increase in liquidity allowed the Company to purchase the royalty on the El Gallo properties in Mexico. We made the initial payment of $5.25 million in the quarter, and this royalty was actually causing us over $40 per ounce for the El Gallo mine, as wells representing a potential cost of the El Gallo Silver project. Company decided it was very beneficial to remove this cost as well as the potential future cost, and take advantage of the increased leverage to gold and silver prices, as well as any future resource growth at both of these projects.

The quarterly consolidated gold equivalent cash costs of $719 per ounce continued to be lower than our full year guidance of $780, while the all-in sustaining costs of $942 per ounce was in line with our fully year guidance of $935. The year-to-date consolidated cash costs of $663 per ounce and all-in sustaining costs of $873 continued to be under our full year guidance. We do expect our per ounce cash cost of the El Gallo mine to trend upwards towards our full year guidance as we continue our planned transition to the lower grade Lupita pit during the year.

In Mexico, this was the sixth consecutive quarter of strong production and significantly lower costs. This was a result of operating improvements and increased grades combined with the cost and input savings as well as the weaker Mexican peso when compared to the U.S. dollar.

While the planned gold grade is expected to decline for the second half of the year, we continue to be aggressive with our work on reducing costs. In Argentina, continued steady operational performance has been helped by the export tax eliminations, made by the new federal government earlier in the year, as well as the continued foreign exchange savings. Our attributable income from the mine was once again significantly higher than the period in the prior year. This rose to an income of just over $4 million in the quarter compared to a loss of just under $3 million in 2015. This continued increase in profitability has resulted in the Company receiving a dividend of $2.8 million in the quarter. This brings the year-to-date dividends received to $5.4 million, and we expect to receive further dividends throughout the year. For comparison purposes, the total dividend that we received throughout the entire year of 2015 was only $0.5 million.

Regarding our financial statements, the strong operational performance resulted in earnings from mine operations of $19.3 million or $0.07 per share. We also reported a net income for the quarter of $8.4 million or $0.03 per share. Our cash flow from operations was $4.8 million or $0.02 per share.

Before handing the presentation over to Colin, I would just like to remind our shareowners that the Company will be paying the next return of capital to them on the 29th of August.

Thank you very much for your time. And I’ll now turn the presentation over to our President, Colin Sutherland.

Colin Sutherland

Thanks, Andrew. Good morning, ladies and gentleman and fellow shareowners.

I wanted to take this opportunity to update you on our operations. And as Rob has mentioned, we’re an asset-rich Company, and we have tremendous organic growth opportunities at each of our assets. We believe that it is important for each of you to understand where our growth will occur and how are we are setting up to take advantage of higher precious metal prices.

Starting in Mexico, while we recognize the short comings of the short mine life at El Gallo, we’re committed to an ongoing exploration budget of $4 million in 2016. The work done by our team has identified some high priority targets, and we have an expectation that at a minimum, we will be able to replace the ounces mined to extend the mine life. We’ve also been evaluating several of the satellite pitch hits which exist around our main El Gallo mine and are working on a plan to extract ounces which yield us the highest rates of return.

Our other relevant asset in Mexico, called El Gallo Silver, has now become economic at higher sliver prices. With silver prices staying at or above $20 per ounce, we decided to proceed with an internal economic scoping study for the project, which has yielded positive results. As most of you know, this is our permitted project 5 kilometers away from our existing El Gallo gold mine. Given the economics of these silver prices, we have now advanced to feasibility study stage and expect it to be completed later this year.

Looking out a couple of years in post-build, we could expect this to contribute production of approximately $3.5 million silver ounces per annum or approximately 45,000 to 50,000 gold equivalent ounces.

The other growth engine for the Company is our Gold Bar asset in Nevada. Since the September 2015 feasibility study and at current gold prices, we have seen improvements in the projected internal rate of return; our projected average annual cash flow; and our projected operating profit margin has increased to well over $550 per ounce. Ongoing work continues such as submission of key permits, updating the mine design, and additional metallurgical tests are moving the project to construction ready for early 2017.

In Argentina, the benefits of increased gold and silver prices and positive policy reforms are contributing to enhanced dividends from our San Jose mine. As Andrew has mentioned, we have received $5.4 million in dividends year-to-date and we are optimistic we will receive additional dividends throughout the year, provided gold and silver prices remain at these levels. The other exciting news is the exploration budget has been increased to $6.5 million with the objective of drilling high priority targets as the weather improves. As most of you know, the project has responded well in the past to drilling.

And lastly, we’re preparing an updated Preliminary Economic Assessment for Los Azules and expect to have this completed in September. We believe the recent policy shifts in Argentina can improve the overall economics of the project from the previous PEA prepared in 2013. With that, we’re also preparing for an upcoming drill program at the project in early 2017.

So, in summary, our Companywide exploration program of $12 million and the advancement of our development projects gives us tremendous opportunities to grow the production profile over the next couple of years and take advantage of higher precious metal prices.

So, with that, I’ll now pass it back to our Chief Owner, Rob McEwen.

Rob McEwen

Thanks, Colin. So, I’d like to talk about our two producing mines. And our current production mix is 67% gold and 33% silver. You heard, we have active exploration programs around those mines with the expectation -- or maybe I call I hope that we’ll have -- be able to extend the lives of both those projects. And our development projects, Gold Bar and El Gallo Silver, at current metal prices, both of those projects are projected to generate better than 20% after tax internal rates of returns; so meeting our threshold. When we look at an investment, we’d like to see a 20% after-tax internal rate of return and payback in less than three years, and relatively low capital.

So it’s always cheaper to have organic growth than go and buy growth. And in our case, we have growth assuming Gold Bar and El Gallo Silver are built in the next two years, our annual production in 2019 could be 230,000 ounces of gold equivalent. And this represents a 60% increase over a current production rate. At that production rate we would be 42% silver, producing 6.8 million ounces of silver and 58% gold, producing 140,000 ounces of gold. Now that’s using a 75 to 1 exchange rate for ounces of silver to gold. It’s currently in the 60s and it looks like that exchange rate shows heading lower, so the leverage to silver is going to be increasing in our portfolio.

So, I’d just like to say, conclude, we have a strong balance sheet. We haven’t encumbered the upside through the sale of instruments that would take away our revenues such as streams, royalties, we haven’t hedged. If for some reason there is a short-term correction in the gold market, we offer the downside protection of a strong balance sheet with no debt and no pressures on us. But, we’ve preserved the upside by not having sold future. We have picked our beta; it’s 2.7 times that of gold. So, in a running gold market, we little faster than gold, and when it goes the way, we move faster down. And great trading liquidity, our average daily volume right now is running over 4 million shares a day.

I want to thank all of you that are shareowners and for being shareowners. We look forward to sharing our golden future together with you.

I’d now like to open the session for questions.

Question-and-Answer Session

Thank you. Ladies and gentlemen, at this time, we will take questions submitted through the webcast. We’ll pause for just a moment to allow participants to enter their questions. Your first question comes from the line of Bernie Babtkis who asks, are you able to provide an update on the 2016 drill programs for all of McEwen Mining’s properties?

A - Rob McEwen

Yes, we are, Bernie. Thank you for the question. I’ll ask Colin to address that question.

Colin Sutherland

Thanks for the question, Bernie. In Mexico, we committed about $4 million to the overall $12 million exploration budget. This is primarily focused on targets that we’ve identified in and around the El Gallo gold mine, as well as up in the El Gallo Silver area. In Nevada, we have committed about $1.5 million. Given that we are not able to drill right now on the gold bar asset, we have been focused a little bit on our Afghan project, which is something we acquired earlier in the year, as well as some of other projects that are located in Nevada. In Argentina, as I’ve mentioned, we are committed to $6.5 million to the exploration program. And again, this is focused on some fairly high priority targets that ourselves, and Minera Hochschild have identified, and we’ll spend $12 million for the year.

Operator

Your next question comes from Michael Riley who asks if silver prices were to hit $25 per ounce, how would this affect McEwen Mining?

Rob McEwen

We’d have a bigger smile, thank you for that question. I think the entire industry would be very excited. At $25 silver, we did the feasibility study for El Gallo Silver, and it was very, very accretive to us. So, $25 silver would be quite an attractive price.

Operator

Another question from the webcast asks, are you able to tell us from the exploration and mining companies that McEwen Mining has an invested interest in?

Rob McEwen

Yes, we have an investment in two companies right now. One is Golden Predator, and they have exploration ongoing in the Yukon on two properties, one is a property with a former mine on it called Brewery Creek and then other property is called 3 Aces. The other company we have is an investment in is a smaller exploration company with property in northern Quebec called Visible Gold. They stake property all along of road called Route-North by the North Route in Quebec and it is really driving the road right up to the Arctic. There are number of mines that have opened in that area. And the company has an interesting way of prospecting. They just went along the road and took rock chip samples and found mineralization. They haven’t found yet what they were hoping to find, but it’s early days. But those are the two companies we have an investment in mining.

Operator

Your next question comes from Clive Ginsberg who asks what was the gold silver ratio for the second quarter, and at the current ratio of 66 to 1, how does this affect AISC?

Rob McEwen

We’re using the same ratio as we used in the first quarter and that was 75 to 1. Right now, the ratio is 66 to 1. And if you did the calculation, we are forecasting a 144,000 of gold equivalent this year using that 75 to 1 ratio. If you use the current, we would be over a 150,000 ounces gold equivalent right now and be about 151,000, 152,000 ounces. Hope that answers your question.

As to the all-in cost, we haven’t done that calculation yet.

Andrew Elinesky

So, obviously, you increase those numbers of gold equivalent ounces produced and our cost per ounce would go down roughly by the same percentage of the ratios improving by.

Rob McEwen

So, 3% reduction in cost, all-in sustaining cost.

Operator

Your next question from the web is what are the financing needs to get El Gallo Silver into production and what is the timing on building the mine?

Rob McEwen

For financing El Gallo, it’s a curious property because it was permitted last summer by the Mexican government. We’ve changed the process a bit, so we’ll have to put it back in for permitting, but we don’t expect many issues there. The original feasibility was for a $180 million doing 5,000 tons a day. Right now, we are looking at a smaller scenario of 2,500 tons a day, and with that comes a reduction in the CapEx. While we haven’t done the feasibility, internal scoping numbers would suggest using a 25% contingency in those numbers we’d be at about 110 million CapEx. In terms of how long it will take to build, it’d be a year and a half build. So, it’s conceivable it’d be up and running in 2019 if we start soon.

Operator

Steve Richards asks, can you please identify what security was sold in the quarter where McEwen Mining realized $100,000 gain?

Rob McEwen

I’ll ask Andrew to answer that question.

Andrew Elinesky

There was an investment that we had in Westfield Mining.

Operator

Another question from the web asks, are there any plans to purchase or develop mines in Canada?

Rob McEwen

When the right situation comes along, Canada is very attractive place to be developing the mine. So, we’ve been looking at opportunities through the country, and we will continue to do so.

Operator

Terry Devries asks, would you please speak to your thoughts on M&A at this time and your long-term goal of becoming a member of the S&P 500?

Rob McEwen

Certainly. Thank you, Terry. In terms of M&A, I think the cheapest way to grow is organically, and we have two good projects in front of us that doesn’t stop us from looking for other opportunities. And I do believe that we will need to have some M&A to get to our goal of getting in the S&P 500. The area of focus has been through the Americas, North, South, Central America and parts of Europe. And I won’t call it the long term goal to get into the S&P 500; I would like to see that in the intermediate term or near term.

Operator

The next question from the web is McEwen Mining was added to the GDX this past June. Do you anticipate being added to the HUI or any other indices?

Rob McEwen

Being added to indexes is a function of market capitalization, trading volume and the requirements of each index. I can say that when we were put back into the GDX, we were rebalanced in the GDXJ and also in the S&P TSX Gold. I was quite surprised that week we traded 55 million shares, which was greater than one-sixth of our outstanding shares, and that really underlined and highlighted what happens when you get into some of these indexes in the largest market for gold shares in the world. So, we’ll just keep working the way and hopefully, the HUI looks at us and says we’re large enough to be in their soon.

Operator

Your next question from the web asks, how much interest is being expensed in purchasing the copper mine and how would this sale provide the funds needed to develop the prospective mines without dilution of current share holders?

Rob McEwen

The copper project Los Azules is a very large copper deposit; it’s in indicated and inferred resources; it’s 19.7 billion pounds of copper, it has about 4 million ounces gold and about 100 million ounces silver. And several years ago, we attempted to sell it, but it seemed to be the wrong time to put it on the market; no one was buying and Argentina was certainly a problem. Since then, the government has changed in Argentina. And it’s a much more favorable economic environment. And in fact, we’re currently looking at the economics of the project and believe we can make significant inroads into the CapEx and OpEx. And it’s largely due to the removal of tax on concentrate, [it] has allowed us to look at another process that is quite a bit cheaper to build and to operate. We’re doing quite a bit of analysis on this and hope we have some numbers out in September, that would give a sense of how much the capital is dropping. But probably, if you were to look at it, you can probably expect about 30% to 40% drop in CapEx off of $3.9 billion number. So, in going forward, we look to optimize the value of the project. And if someone came along and expected interest in the property and the number looked right, it would certainly cover up all of our development capital needs and more going forward.

Operator

Your next question from the web asks a budget of $12 million for exploration for a $1.3 billion company seems light. Is your budget in line with your competitors?

Rob McEwen

Good question. Exploration is the R&D of the mining industry. I think everybody -- I probably have to say right now, most people, I thought, would refer to most ex-mining companies [as] to light exploration budgets. It’s a big improvement over last year when treasuries were under pressure, lower metal prices. We’re certainly prepared to increase the budget. We’ve been encouraging exploration results. We’ve already seen that happen in Argentina. Initial budget was for $4.5 million and it’s been increased to $6.5 million at the joint venture level. And as I said, if we have the promising results, then I can see those numbers going up, because that’s how you build value.

Operator

Your next question from the web asks what is the current status of the potential sale of the Argentina copper mine? Could you review possible total proceeds that could be generated at different price points for the potential sale, and how do the potential proceeds compare to the present basis on the books?

Rob McEwen

Well, at the moment, I don’t care to speculate on what it might sell for. All you could use is historic gauges. There have been several sales of properties in the last few years. There was a sale in 2014 for $0.015 a pound, slightly larger deposit lower grade. That was project called Taca Taca, that has sold for $0.015 a pound [in] 2014. In 2011, there was a property that’s 30 - 40 kilometers away called Altar and it sold $0.04 a pound. You really need to see a stronger copper price, I think, before the buyers will materialize. There are issues in the copper market itself, some of the largest producers are finding they have to add significant amount of capital to keep their production at current levels and if they want to grow. And when I say significant, Codelco said it spend $15 billion over the next five years just to keep their production flat. So, there [are] water issues in Chile that’s curtailing some production and adding to cost. I think our Los Azules is an attractive asset. When we have the numbers out in September we’ll have a better sense what its value is. So, I’d like to defer the answer to that later this year.

Operator

Your next question asks are there any plans to buy or develop mines in Europe?

Rob McEwen

Europe is an area that we are looking into for M&A opportunities, as is the Americas. We have no current plans, we have no negotiations ongoing at the moment with any property in Europe.

Operator

Your next question from the web asks what other metals are of interest for McEwen Mining?

Rob McEwen

Gold; silver; copper, that gives us a pretty full plate and lots of opportunity. The precious metals are monetary metals and I think we’re coming into an economic situation globally, where the precious metals will be highly valued. That’s where we’ll get our largest margins.

Operator

Your next question asks please discuss the write-down from Minera Santa Cruz and whether this can be reversed at current or higher hold into the prices?

Rob McEwen

I’ll ask Andrew Elinesky to address that question.

Andrew Elinesky

The last write-down that we had from Minera Santa Cruz was in 2015. It was preceded by a number of write-downs before that as well, post acquisition of Minera Andes by U.S. Gold. Write-downs, under U.S. GAAP, are not allowed to be reversed. It’s not the same as IFRS and you cannot take the values back up. The values can only grow as to what we’re adding in terms of our equity pick up less the dividends we receive. You can see that in our notes to our financial statements that provides that reconciliation, and you can see how that’s balanced from our balance sheet, [which] has grown over the last six months as we are reporting a pickup of a net income from the joint venture, offset by the dividends we received. Hopefully that answers the question. Thank you.

Operator

Your next question asks, if you were to acquire a project or another company, would you rather use cash or stock?

Rob McEwen

We have just under $60 million of liquid assets, and most of the companies we would be buying would probably be more than that. So, I’d say most of the transactions, most of the players in the industry and shareowners in the industry would want to see a piece of paper rather than cash, unless it was an asset sale. If it was a public company you are buying, you are likely to buy it with shares, and it’s a single asset being sold by the company and it’s a good chance it could be a combination of cash and paper.

Operator

Your next question asks you have predicted a $5,000 gold price. When do you believe this target will be reached and what is your target or view for silver prices?

Rob McEwen

Well, this year, I think we’re going to see gold testing in the high teens and might even push against $2,000 an ounce. But I think four years out, all the issues that are going on in the world, elections going on around the world and the governments of western world focus on trying to stimulate consumer demand by something in money and incurring greater and greater levels of debt, are going to ensure that the gold price is going higher. And four years out, I think you can see $5,000. And with respect to silver, you are going to be talking numbers that are in the hundreds. If you took just the current number of 66 ounces of silver to do this for 5,000, you are probably up around $200 an ounce per silver. That should be pretty exciting.

Operator

[Operator Instructions]

Rob McEwen

Operator, can I make a comment right now?

Operator

Please go ahead.

Rob McEwen

Just to those on the line, I want to give an illustration of how dramatic the turnaround has been in Argentina. As Andrew spoke earlier, last year our dividend out of Argentina was $0.5 million, but three years earlier in 2012, we had a $20 million dividend. This year, our partners put a budget together using $1,050 gold price and a $14 silver price, and that was going to generate a $7.5 million dividend to our accounts. If you look at how the silver and gold prices have increased since that budget was created, silver is up now at $20.38 or $6.38 higher, and gold has gone somewhere $1,050 to 1,357 or $307 higher. We’re going to produce more than 3.3 million ounces of silver to our credit and then 45,000 ounces of gold. When you do the math multiplying that difference in price by the production on a silver, it would mean and if you assume the prices ran for a full year, that would be an incremental increase of $21 million in silver and just under $14 million in gold revenue for better than $34 million increase. Now, that’s assuming that you ran a full year at those prices. But, it’s just to illustrate the type of leverage. The San Jose mine is one of the richest mines in the Americas; it’s 446 grams sliver, 6.4 grams gold, put on gold equivalent is right up there with the highest grade mines in North, South and Central America.

Operator

Another question from the web asks what are the economics of the copper project in Argentina?

Rob McEwen

The economics of the project - we’re working on right now is hope to have better feel for that in September and putting out some numbers based on that. We think it’ll be significantly improved. In the original PEA and that’s a preliminary economic assessment; and you have to treat it with great caution, because it’s very preliminary and is not that precise. But that was envisioning an autoclave of oxygen plant, a very expensive plant, total cost $3.9 billion in 2013 numbers, but it was going to be producing copper at $0.98 a pound. The concentrate tax that plant was trying to avoid, if you took that off, and we’re producing at the 10% tax -- you’ll be able to reduce the number below $0.98. So, let’s say if you drop it by another $0.10 down to $0.88 now. But that’s on a study that has a different process than the number coming forward with. We do think the numbers will be lower as a result of the process we’d be using.

Operator

Bob Polis asks what is your cost basis for your copper mine in Argentina?

Andrew Elinesky

Approximately $200 million for the balance sheet carrying value. But if the question is about the annual holding costs, we spend $2 to $3 million there in maintaining the sites and continuing to do baseline monitoring and environmental monitoring and applications.

Operator

Your next web question asks how would McEwen Mining be impacted if silver hit $200 and gold hit $5,000 per ounce?

Rob McEwen

Can I have that question again, please?

Operator

Yes. How would be McEwen Mining be impacted if sliver hits $200 per ounce and gold hits $5,000 per ounce?

Rob McEwen

As long as the cost of production and follow rapidly, we’d have a bigger dividend, we’d have largest miles, and we’d be on fire. I have to say, I haven’t done the math.

Operator

Your next question asks, do you have any plans to buy back any of your stocks in the future?

Rob McEwen

We have a buyback in place. We exercised it in last November and December and part of January. We bought back approximately 1% of the Company. At current prices, we have no plans to buy back shares. We have some development projects we want to move ahead. But we’re ready in the event that the situation drops to our price point.

Operator

Your next question asks, under production costs, the Q2 report mentions property holding costs, what are the property holding costs?

Andrew Elinesky

Property holding costs generally consist of claim fees; depends on the country and state or province that you’re in, depending on the amounts. There [are] also surface rights that need to be based for access to the properties, as well as any other taxes related to mineral claims and/or property owners, but they from a brunt of your property holding costs.

Operator

Your next question asks is the government of Argentina willing to invest in the development of the copper project?

Rob McEwen

Government of Argentina has been making lots of positive statements about trying to assist the development of the large industrial complex that includes mining. They’ve talked to linking the north and south by rail, which would have a positive impact because of becoming closer proximity to where we are. They’ve talked about power grids. And the President of Argentina is having a mid-September large meeting for several days in Argentina, inviting industry players, including ourselves, to be down there to discuss what could be done to build their economy, and what they could do to help expedite the investment, foreign investment in the country.

Operator

Your next question asks for Azules, would we be looking at to add a partner or would McEwen Mining prefer to develop the project as a sole operator?

Rob McEwen

At this time, we’d like to get our numbers first, look at them, see what’s available out there, either an industry partner that’s experienced building and running big mines will be very useful. I suppose if we, over time, built a team like that, we’d look at it as well. But at the moment, our focus is determining what it’ll cost to build it and optimizing the value and moving it ahead from its current level to feasibility level several years out, more than several, probably four years out.

Operator

Your next question asks does McEwen Mining utilize a formula regarding how much gold production will be withheld instead of sold of these ounces right away?

Rob McEwen

We use no formula. It’s more a measure of where the gold price is, how we feel it’s moving, and what we’re producing at the time. We generally believe that it’s been a good idea to hold back some of our production just based on our view of the price of gold and silver.

Operator

Your next question asks what is the Company’s strategy for investing?

Rob McEwen

We look for opportunities that are mispriced in the market or what feel are mispriced that have good upside opportunity. Some of it is looking at if we can assist those companies in the future through development of their properties. That’s one element of it. The other aspect is just looking at market and saying with sitting on a lot of cash on your balance sheet is not a particularly good idea right now and there are some opportunities, as we said that were mispriced in the market and show good potential and so you can build your portfolio that way. When I was running Goldcorp, we made about $80 million investing in junior companies, which reduced our financing requirement.

Operator

Your next question asks what is Rob McEwen’s plan to stay as Chief Owner or retire?

Rob McEwen

Well, I plan to live to 120, so retirement is few years off. I like the space, love the industry. I think the reason for having an investment in gold is even stronger today than it’s ever been before and that we are going to see higher prices and that’s a good place to put money. And you can create a lot of value for a lot of people by building mines, then you can contribute back to society in many ways when you’ve built that asset there. So, maybe I’ll push to 130.

Operator

Your next question asks, as the Chief Owner and having a 25% interest in the Company, is there a point that you will sell any stock?

Rob McEwen

You can never do absolutes. When I was running Goldcorp, there was an event that I didn’t expect. And, I think it was 2002, early in the year one of my sisters died and four months later my mother died, and I wasn’t expecting either of those events to occur. And suddenly, your priority -- at least my priority shifted. And it was as though there was another person sitting at the table who was called mortality. And in my family -- I grew up in a family of six. I had three younger sisters, and upon my mother’s death, it was only my youngest sister and I standing. Everybody else had died. And I thought wow, how did that happen so quickly. So, my mind switched very quickly to what’s most precious in my life and that was my wife and my two sons. And I wanted to ensure that if I was next, and because I was the eldest, that logically it seemed there was the chance I was next. And my father had died when he was 61 and my grandfather on side had died when he was 58. So, as I was still in my 50s, I was closing in on 60 and I am thinking maybe there is a deadline in expiry date for me, so I should take care of my family, so they don’t have a worry if I should suddenly disappear. So, I sold about 20% of my stock in Goldcorp. The market didn’t like it, but I felt a lot better. I still was largest individual shareholder of Goldcorp. Right now, most of people have died that were going to die, so, mortality is not going to scare me anymore. I think I got my plan to get to 120. I don’t have any pressing financial requirements; I don’t believe in using debt in my life. So, I don’t have any needs to sell stock prices or in the foreseeable future.

Operator

Your next question asks could you please tell us what the overall cost is to recover an ounce of gold out of the ground and could you please tell us the same for silver?

Rob McEwen

I’m assuming you’re asking about what it costs for us to mine because the cost of getting it out of the ground varies from mine-to-mine, company-to-company. So, I’ll let Andrew, he keeps our books, talk about our cost.

Andrew Elinesky

So, the guidance that we’re using for this year as an all-in sustaining cost, which is including all the costs of mining and extraction and processing and selling as well as the investment that’s required at each of the mine sites including exploration, specifically at those mine sites, and that’s coming in at $935 an ounce for our guidance. We also provide an all-in cost per ounce, which we don’t provide guidance for but it gives you an idea of -- it takes into account other things like investments and other exploration at non-producing sites, as well as other admin costs such as corporate costs. So, year-to-date, our cost is a $1,046 and that’s a little bit higher than we were expecting because in Q2 that went over $1,200 per ounce because we made investments of $5.5 million in royalty and some property acquisitions. So, you would expect unless we continue to make those acquisitions and investments, you would expect that number to trail back down to under $1,000 per ounce. But that’s what we are looking at for the year. So, you are looking at roughly a $300 plus margin when using a 1,300 price of gold.

Operator

There are no further questions at this time. I’ll turn the call back to the presenters for closing remarks.

Rob McEwen

Thank you, Operator. I would like to thank everyone for joining us today, and very best wishes for higher metal prices and much success in your future investing, and as a shareholder, owner of McEwen Mining. Thanks very much.

Operator

Ladies and gentlemen, this concludes today’s conference call. You may now disconnect.

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