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McEwen Mining Inc (NYSE:MUX)
Q4 2019 Earnings Call
Mar 17, 2020, 2:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Hello, ladies and gentlemen, welcome to McEwen Mining's Q4 and Full Year 2019 Operating and Financial Results Conference Call. Present today from the company are Rob McEwen, Chairman and Chief Owner; Chris Stewart, President and Chief Operating Officer; Meri Verli, Chief Financial Officer; and Sylvain Guerard, Senior Vice President of Exploration. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] I will now turn the call over to Mr. Rob McEwen, Chief Owner.

Robert McEwen -- Executive Chairman & Chief Owner

Thank you, operator. Good afternoon. For our shareholders past and present, our management, and myself, last year was a terrible year. We all know our share price fell out of the sky and I want to start this call with a very sincere apology to everyone. We gave you guidance throughout the year for our operational performance and we failed miserably. We did not deliver. By the end of the year, it was impossible to believe any forecast we provided for operations. This was very unfortunate because considerable success was made on the exploration front at Black Fox. This success was completely overshadowed by the bad news from operations. I know it's going to take many quarters of delivering on guidance before we gain you're confidence and I can say that last year was the worst year I have ever experienced in business and I'm sure the experience was very unpleasant for you and I want to assure you that we're working hard not to repeat it. Today, we are going to provide our perspectives on our 2019 operating, financial, and exploration results and talk about what 2020 looks like. I will now turn the call over to Meri who will start by providing a high level overview of our financial results.

Meri Verli -- Chief Financial Officer

Thank you, Rob. Good afternoon everyone. During 2019, our consolidated production was 174,400 gold equivalent ounces, approximately equal to our production last year and total sales were 175,500 ounces. Our total sales were comprised of 85,100 gold equivalent ounces from our 100% owned mines: Black Fox, Gold Bar, and El Gallo and 90,300 ounces was attributable to our 49% interest in the San Jose mine. 2019 revenue from our 100% owned mines totaled $117 million, approximately 9% lower than in 2018. If we included the revenue attributable to our 49% interest in San Jose, that would have added $129 million, but revenue from San Jose is not included in our income statements because we use the equity method of accounting for this asset. We have created a new metric that is designed to help you evaluate our operations ability to generate cash flow. It is a non-GAAP measure disclosed in our Form 10-K called cash gross profit. Cash gross profit is calculated by adding back depletion and depreciation to gross profit. For 2019, cash gross profit from our 100% owned operation was $33.7 million compared to GAAP gross profit of $9 million. Cash gross profit attributable to our 49% interest in San Jose was $51 million, compared to GAAP gross profit of $16.6 million. However, we do not consolidate San Jose as mentioned earlier. During 2019, we received $8.9 million in dividends from our interest in San Jose.

I'll now discuss the main components contributing to our net loss in 2019. During the year, we invested $37.7 million in exploration with 90% spent at the Black Fox complex and the balance at the Gold Bar in Nevada. Depreciation and depletion expenses were $24.8 million. We spend $9.5 million on growth projects Including spending for advancing the Froome project in Timmins Ontario; Fenix Project in Mexico; engineering and permit work at the Gold Bar South property in Nevada; and pre-production expenditures at the Gold Bar mine. We included a loss of $8.8 million on our 49% investment in the San Jose joint venture company, bringing the book value of our investment in the joint venture to $110 million. We incurred interest expense of $6.8 million related primarily to our debt and G&A expenses of $12.8 million. We also realized a gain on the sale of marketable securities of $5.3 million, a gain on the recovery of taxes of $3.8 million and $2 [Phonetic] million in other income. In total, our consolidated net loss for 2019 was $59.7 million or $0.17 per share. Financing activities during 2019 included the issuance of 54.9 million common shares and 29.8 million warrants for gross proceeds of $77 million for an average of $1.4 per share. Share issuances for cash during 2019 resulted in equity dilution of 16% based on shares outstanding at the end of 2018. At December 31st, 2019 liquid assets increased to $49.7 million from $37.8 million at the end of 2018. Working capital increased to $43.2 million from $23.4 million at the end of '18. Debt outstanding remained at $50 million.

Looking ahead to 2020, we expect a significant reduction in our exploration expenses to under $10 million, spending on growth projects of approximately $14 million primarily at the Black Fox complex. Debt repayment and interest expense will increase to $14.7 million. We are currently making adjustments to our budget given the expected lower than planned production from Gold Bar mine in 2020, but we do not have details yet of these changes. I'll now turn the call over to Chris Stewart for a discussion on mining operations.

Chris Stewart -- President & Chief Operating Officer

Thank you, Meri. I will start by going over the operational highlights for each operation starting with San Jose. Our San Jose joint venture mine in Argentina had a good year in 2019 meeting our guidance for gold and silver production. For 2020, our share of production from San Jose is expected to be 45,700 ounces of gold and 3.2 million ounces of silver for a total of 82,000 gold equivalent ounces and an average gold-silver ratio of 88:1. Midpoint cash costs and all-in sustaining costs are $975 and $1,225 per gold equivalent ounce respectively. Moving to Mexico, our El Gallo heap leach is still residual leaching. During 2019, we produced 16,333 gold equivalent ounces at an attractive residual leaching cost of $688 per gold equivalent ounce sold. In 2020, our guidance is 12,000 gold equivalent ounces. Moving to the Timmons area, our Black Fox mine encountered several one-off events at the beginning of 2019 that we have discussed in detail in prior quarters. Due to these challenges, production was delayed and mining flexibility was restricted during 2019. As a result, we reduced our production guidance during the year. Total production was 35,700 gold equivalent ounces in 2019 compared to 48,900 gold equivalent ounces in 2018. Of note is that despite the reduction in ounces, our team was able to decrease our cash to $825 per GEO from $845 in 2018 and to contain the increase in our all-in sustaining cost to $1,225 per gold equivalent ounce from $1,137 per gold equivalent ounce in 2018. Looking ahead to 2020 at Black Fox, our production guidance is 35,000 gold ounces to 40,000 gold ounces and midpoint cash costs and all-in sustaining costs are $1,075 per gold equivalent ounce and $1,200 per gold equivalent ounce respectively. This guidance was given with the benefit over two years of operating expertise since the acquisition and a revised forecasting approach, which includes risk factors assigned to each mining area planned during the year.

With respect to capital spending at Black Fox, we are actively developing the access ramp from the Black Fox open pit to the nearby Froome ore body. Froome is expected to have associated development expenses of $21 million over approximately the next 15 months and to provide ore production for approximately 2 years beginning in Q4 of 2020. The mineralization at Froome is different from Black Box in that it is much thicker and more homogeneous thus enabling more productive transverse mining methods, which should reduce our costs. The schematic on the slide illustrates the difference between the longitudinal mining methods, which is used at Black Box and the transverse mining method, which we will be employing at Froome. Using the transverse mining method, our internal studies and schedules call for Froome to produce 65,000 gold equivalent ounces in 2022 and 45,000 gold ounces in 2023. Froome cash costs are estimated to be approximately $850 and all-in sustaining costs $926 per ounce. With Froome, the life of the Black Fox complex will extend into 2023. Moreover, our objective is to expand production by drawing ore from multiple sources, to fill our mill, and extend the mine life substantially. Today, we are going to introduce a conceptual plan, which is at various stages of engineering. Key to our plan is the exploration success that Sylvain and his team have delivered over the last two years. I'm going to turn it over to Sylvain to discuss the exploration and resource definition at Black Fox, Grey Fox and Stock properties.

Sylvain Guerard -- Senior Vice President-Exploration

Thank you, Chris. Key highlights from our 2019 exploration program in Timmins include discovery of Stock West, an important new zone of mineralization; a significant increase in indicated resource at Grey Fox and highly positive drill intersection at several targets in the area; and positive drill results near existing active mining areas at Black Fox. A bit more detail about Stock West. Our drilling last year led to the discovery and early definition of an impressive new zone of mineralization. We have a total of 31 drill holes into this area. Mineralized intersection averaged around 5 gram per tonne gold over average widths ranging from 15 meters to 20 meters. These strong drill results occur in an area measuring 265 meters along strike and 200 meters vertically. The new mineralized zone is located less than 350 meters from existing underground development and less than 1 kilometer from our mill. The Stock West zone remains open in all directions and our 2020 exploration program is designed to produce an initial mineral resource estimate and also to test the extension of the mineralization in order to assess the potential size of the discovery. Additionally at Stock, the historical Stock mine is an opportunity to explore below the existing working. Review and interpretation of the historical data and drill program planning are currently under way.

Moving to Grey Fox, drilling generated a high rate of success, leading to an increase of 33% or 155,000 ounces to the indicated resource estimate for a total of 620,000 ounces at an average grade of 7.2 gram per tonne gold. Our approach was to focus on drilling mineralized structures that were previously not well understood or drill tested, which led us to multiple exciting intersection over a 1.5 square kilometer area, Outside of the resource areas at the Whiskey Jack target, drill results including a recent intersection of 53 gram per tonne gold over 6.7 meter indicate a strongly mineralized system with very good potential to define a new zone of mineralization. We [Technical Issues] resource at Grey Fox.

At the Black Fox mine now, we have underground drill platforms to explore the West and depth extension of the mine. High-grade results were intersected on the upper western extension of the mine such as 79 gram per tonne over 2.6 meter, 41 gram per tonne over 3.3 meter, and 78 gram per tonne over 1.8 meter. These positive drill results indicate the potential to extend mining in this area. Mineralization contains high-grade drill intersection extending as far as 120 meter to the west of the nearest mining phase. A high-grade intersection of 105 gram per tonne over 1.5 meter was also recently intersected, close to mining development on the depth extension of the mine. The intersection is halfway down launch [Phonetic] toward the deepest 55 gram per tonne exploration it at the mine's 1,050 [Phonetic] meter level suggesting continuity of the high-grade mineralization on the depth extension of the mine. On this back to Chris.

Chris Stewart -- President & Chief Operating Officer

Thanks, Sylvain. As you have heard, our rate of exploration success suggests that the Black Fox mine has the potential to produce for several more years. Our vision is to use the window we have during the next 12 months to 24 months to begin putting in place the development needed to produce from two to three deposits concurrently. By stacking multiple sources of production, we could reach a 100,000 ounce to 125,000 ounce production level in five years. Grey Fox has grown since the acquisition. We are commencing the feasibility study on the project looking initially on an open pit mining that would eventually transition to an underground operation, similar to our current Black Fox mine. This schematic illustrates potential open pits on the contact in 147 zones, which is the extent of what we have studied so far. The 147 Northeast zone also comes to surface and it maybe included in the open pit plan. Preliminary analysis shows that the two high grade pits around 3 grams per tonne would provide significant ore feed for our mill over a five to seven year life. We anticipate having the feasibility study completed in Q4 of this year. Currently, permitting is being carried out simultaneously with the feasibility study work.

This schematic shows the development involved with gaining access to the old Stock Mine and additional development to access the Stock West zone. We envision a portal and a new ramp from surface to access the old mine workings as the existing shaft is no longer usable for personnel transport. Fuel drifts would be developed to connect the Stock West zone to the existing mine. The great benefit we have at Stock is that this is a permitted site. Therefore, we can quickly develop an underground mining plan. At the moment, it seems that this plan could be implemented relatively soon after access to Froome is established. The exploration program of 2019 defined a mineral inventory at Stock West and we are planning to continue the exploration at this zone and to complete a compliant resource estimate in 2020.

Moving to Gold Bar, we produced 30,700 gold equivalent ounces in 2019 compared to our original guidance of 55,000 ounces. Cash costs and all-in sustaining costs were $1,101 and $1,282 per gold equivalent ounce respectively. It is important to understand the various factors that contributed to the shortfall of 24,300 ounces versus our original plan and the higher costs we incurred. There were five principal reasons. First was the delays. Commercial production was planned to begin in March 2019, but was not achieved until May. This resulted in fewer ounces on the heap leach pad and less time to recover them. Second was gold grade. We moved approximately the number of tonnes we planned in 2019, but in order to achieve that, we needed to mine some lower grade stockpiles and the pre-stripping in the pick pit contained lower grade tonnes than predicted in our model. Third was recovery. Experts in the field of heap leach believe we will achieve the expected ultimate recovery on crushed and agglomerated material, but we expect it to take much longer to reach that number. Also as a factor was our decision to selectively stack run of mine material, which by definition will not recover as well as crushed material. Fourth was our decision to exploit the Cabin Creek ore body ahead of our original schedule to improve cash flows. This decision caused several complications with the ore handling system because of the higher clay content and wet winter weather. And fifth were deficiencies to overcome with the engineering and construction of the mine infrastructure. For example, an amount of preg-robbing carbon containing [Phonetic] material was used in the heap leach pad construction. Piping errors in the process plant resulted in carbon attrition, but also caused preg-robbing on the heap leach pad.

Recently, we have encountered another significant hurdle at Gold Bar. Our initial experience mining from the two Cabin Creek pits was positive in the sense that they contained about 8% more gold than was predicted by our reserve model. This is not unusual and it was a pleasant result for us. Recently, we have transitioned to mining almost exclusively from the Pick deposit specifically, the Pick West pit. There's quite a bit of waste stripping associated with Pick West and we have been working our way closer to the ore zones advancing about 120 foot bench per month. Our experience mining from Pick West has been that the reconciliation to the reserve model has been very poor for ore times as well as gold grades. The pit has now advanced to a point where we are mining some better material and what we see is that actual tonnes are still down relative to the model and grade is up although we don't have enough data yet to reliably predict the differences. This triggered a reevaluation of the resource reserve modeling, which we have been advancing at the maximum pace possible. We have an initial draft resource interpretation completed and while our geological team does not think of it is optimized, we know enough to understand that the resource reserve estimates will likely decrease and the mine plan will change. There are several mitigating circumstances that may partially offset the reduction in containing the ounces, which I will mention so people are aware. First, fewer ore tonnes to process and higher gold grades potentially gives us a higher margin on each tonne of ore placed on the heap leach. Higher grades also tend to recover better. And secondly, certain capital costs such as an expansion of the heap leach pad may not need to take place. Some of you will appreciate a geologic explanation of what we see in the pit that has caused us to refine our modeling criteria for Gold Pick. I'm going to hand over the discussion to Sylvain to present you with some details.

Sylvain Guerard -- Senior Vice President-Exploration

Thank you, Chris. We've been using new information from pit mapping and in-pit drilling to revise and refine our resource model for Gold Bar. Previous modeling rely mainly on bedding control, which means the gold mineralization was mostly distributed and confined to specific favorable beds of the Gold Bar deposit. Recently, a better understanding of the structural controls to locate and control mineralization was developed as a key component to the bedding control resulting in what we believe is a more robust model, The updated structural control optimization led to the identification of several near-mine targets that were not incorporated in previous or current resource models due to lower drill density. McEwen geological and resource teams are working with SRK Consulting to incorporate the revised structural and mineralization control in addition to the bedding control and update the mineral resource at the Gold Pick deposit. The preliminary model has been completed and McEwen and SRK are continuing work to adjust and optimize the model. The revised model is expected to be completed in Q2. We are also working to incorporate the Gold Bar South satellite deposit into mine plan. Gold Bar South provides an attractive opportunity to add a new ore source to the Gold Bar mine. It is a near surface deposit located to the southeast of the leach pad. During 2019, Gold Bar South was drilled and the resource was upgraded to measure an indicated category totaling now 63,000 ounces gold at an average grade of 1.1 gram per tonne. There is upside potential to grow the resource and additional drilling is planned over the South extension, which remain open than over the North portion of the deposit, which has recently become fully accessible for drilling. Over to Rob.

Robert McEwen -- Executive Chairman & Chief Owner

Thank you, Sylvain. Let me leave you with four thoughts. Gold Bar is still facing challenges and as a result we are reworking gold reserves and resources along with the mine plan. This will take us some time and we are moving as quickly as possible to resolve this issue. Second, San Jose is forecast to deliver another solid year. However, the very recent big change in the silver-gold ratio, if it were to persist, the mine will be generating fewer dividends. Three, exploration at Black Fox complex has grown our existing resources and discovered a new resource. We are optimistic that our investment in exploration has provided us with the opportunity to increase production and extend the mine life on the Black Fox property. And four, the massive injection of capital now being deployed to combat the spread and deal with the adverse economic damage being caused by the coronavirus will over time be extremely inflationary. I believe that in an environment with zero interest rates and this new worldwide quantitative easing will over this year accelerate the flow of investment dollars into gold. Now I'd like to open the session for questions.

Questions and Answers:

Operator

[Operator Instructions] Our first question comes from Jake Sekelsky with Roth Capital Partners. Your line is open.

Jake Sekelsky -- Roth Capital Partners -- Analyst

Hey, Rob and team. Thanks for taking my questions and I appreciate you guys hosting the call today in light of what's going on in the world.

Robert McEwen -- Executive Chairman & Chief Owner

You're welcome, Jake.

Jake Sekelsky -- Roth Capital Partners -- Analyst

Just a few quick questions on my end starting at Gold Bar. I know details here are still work-in-process, but I'm just wondering, should we expect 2020 guidance to be issued at Gold Bar once the updated reserve and mine plan are out. I'm just trying to get a handle on what things might look like going forward.

Robert McEwen -- Executive Chairman & Chief Owner

Absolutely, but that won't be for a month or more.

Jake Sekelsky -- Roth Capital Partners -- Analyst

Okay, that's helpful. In looking at Gold Bar South. I know you guys were talking about potentially bringing that into the mine plan. How quickly would you say that can be brought online, if that's the decision that's made over the next couple of quarters.

Robert McEwen -- Executive Chairman & Chief Owner

We're moving forward with the permitting and that's supposed to be about a year, maybe a little bit longer. Once we get the permit, then we'd open it up. The nice thing about Gold Bar shows, it's located at a lower altitude and we've had issues processing the ore during the winter and mining up on the hill just due to snow in that. So its lower altitude, it's a slight uphill drive from to the pad, about the same distance, but you don't have the weather impacting it as much,

Jake Sekelsky -- Roth Capital Partners -- Analyst

Okay, that's helpful and then just at Black Fox, it looks like exploration is still the focus here and Froome is starting to look like the next leg of growth. I'm just wondering are there any remaining permits you guys need there to move forward with that conceptual mine plan that was spoken about earlier?

Robert McEwen -- Executive Chairman & Chief Owner

Over at Stock the mine is permitted. It's currently -- the status is temporarily suspended. It's a shallow mine now it goes down to about 330 meters. It has been dewatered in the past and we heard the last time they dewatered it, it took about four months to do that. We don't know the state of the underground and that's why Chris was talking about driving a ramp up to it and then linking up with the underground system to provide ventilation and other access. So in terms of timing, we'd like to get a better handle on the Stock West zone, put some more drilling in there so we could come forward with a more comprehensive plan, but what we've already seen so far is wide widths, consistent grades both in close proximity to the existing workings of the old mine. We're also seeing values at depth below the old workings and in fact we have a drill hole down there that's about 600 meters below the past workings. So it was quite an attractive grade suggesting that the ore body continues below. We're also looking at areas around the existing workings that appear to have resources that weren't mined.

Jake Sekelsky -- Roth Capital Partners -- Analyst

So it sounds it can be advanced fairly quickly. Okay, that's all I had on my end. Thanks again for hosting the call and taking my questions.

Robert McEwen -- Executive Chairman & Chief Owner

Thank you, Jake.

Operator

And your next question is from Heiko Ihle with H.C. Wainright. Your line is open.

Heiko F. Ihle -- H.C. Wainright & Co -- Analyst

Hey, guys. I'm going to build a little bit on the question that Jake asked. So I went through your MD&A on SEDAR this morning and on Page 44, you state and this is a quote. With respect to the Gold Bar mine, if a significant reduction in cash flow results from changes to the reserve estimate and mine plan, as discussed on Page 45, it may be necessary to curtail, defer or suspend operational expenditures, and/or raise capital through various financing methods. I guess sort of the question here is this the risk mitigation or are there real contingency plans you guys are already looking at and if you are looking at certain scenarios, I mean, can you just sort of give us an idea at least of like a base negative and hopeful case scenario and what kind of gold prices you use in those scenarios please?

Robert McEwen -- Executive Chairman & Chief Owner

Sure, Thank you. Heiko. You were reading from the risk factors we set out in the 10-K.

Heiko F. Ihle -- H.C. Wainright & Co -- Analyst

Correct, it was the MD&A on SEDAR.

Robert McEwen -- Executive Chairman & Chief Owner

Yes. Its repeated in the 10-K, but in there, there is concern that we could be losing ounces and tonnage. The tonnage initially seems to be -- it's very preliminary, but we think there'll be a reduction in tonnage announced. We don't know the extent.

Heiko F. Ihle -- H.C. Wainright & Co -- Analyst

Okay. Fair enough and I assume you don't have an answer to this one yet either. You don't know the spend on exploration activities at Gold Bar for 2020, right. I mean you quoted 2018 and 2019 in the release, but 2020 is sort of work-in-progress because nobody knows?

Robert McEwen -- Executive Chairman & Chief Owner

We had some numbers, but a lot of things being thrown up in the air. We don't know what I think the entire industry and for that matter all industries are being disrupted by coronavirus. So, it's becoming a little difficult to predict what is the impact if the site was infected and shut down for a while.

Heiko F. Ihle -- H.C. Wainright & Co -- Analyst

Fair enough. You've actually -- just did a very lead through to my next question because I was going to ask more or less exactly that. What precaution and/or changes for the organization have happened thus far. Is everybody working from home, is the office about to shut down? I mean, travel, international travel especially is extremely curtailed. Frankly, it should be. What changes have been made and should we expect to see anything out of you guys in the next couple of weeks in regards to that? Thank you for taking my questions.

Robert McEwen -- Executive Chairman & Chief Owner

We haven't had any reported incidences of coronavirus in the firm. I thought I might have been exposed to it during the PDAC, but my 14 days has passed and no symptoms. Our office is operating on a skeleton staff right now. Chris has plans in place at our operations to deal with anything occurring there. As you mentioned international travel has been stopped. Most travel has been stopped at the moment and we're taking it very seriously. Chris, would you like to add anything to that?

Chris Stewart -- President & Chief Operating Officer

Thanks, Rob. Heiko, yeah, we're more or less following along as other mining companies are ensuring that our mine sites and operations are protected. We're checking temperatures of people coming to site. We've restricted visitors. No unnecessary visitors are allowed on site and yeah, we've put a lot of information to our people as well, links to sort of keep track of this and we are providing updates to our people on site on a daily basis and we've educated them on self-monitoring. If they have traveled, we're putting them home for 14 days to self quarantine and monitor themselves, but we're taking all the proper precautions to ensure that we can hopefully avoid having those crop up at our operations level.

Heiko F. Ihle -- H.C. Wainright & Co -- Analyst

Thank you, guys and stay safe.

Robert McEwen -- Executive Chairman & Chief Owner

You too, Heiko, thank you.

Operator

Your next question is from Adam Graf with B. Riley. Your line is open.

Adam Graf -- B. Riley FBR, Inc. -- Analyst

Hey guys, just a quick question, following up on corona preparedness. Have you guys taken account of supplies, grinding media, cyanide, other spare parts in case supply chains get cut off that you can continue operations without running out of a key supply.

Robert McEwen -- Executive Chairman & Chief Owner

Throw it over to you, Chris.

Chris Stewart -- President & Chief Operating Officer

Yeah, thanks and we've been in contact and we continue to be in regular contract contact with our suppliers and as of now again taking similar precautions as to what we are and they are open for business. With respect to stockpiling or cyanide, we don't have containment to have additional cyanide on site, a lot of these chemicals, you have your containments and that's what you have and you can't get permits overnight to essentially store more. So we are relying on our supplier network to continue and as the virus spreads, pretty hard to determine what the overall impact will be to our business but we're certainly maintaining regular contact with our suppliers and ensuring that we're getting -- stockpiling what we can on site within reason and we'll have to sort of keep monitoring this and make adjustments as we go here.

Adam Graf -- B. Riley FBR, Inc. -- Analyst

Thank you.

Robert McEwen -- Executive Chairman & Chief Owner

You're welcome.

Operator

Your next question comes from Bhakti Pavani with Alliance Global Partners. Your line is open.

Bhakti Pavani -- Alliance Global Partners -- Analyst

Good morning, guys. Just a quick one, you know, last year you had some very high-grade drill intercepts at Black Fox mine. I'm curious, are you guys planning to go back and explore more this year in your exploration budget for 2020.

Sylvain Guerard -- Senior Vice President-Exploration

Yes, Bhakti. That's a good question. And yes, we have the recently good success on the West flank at the Black Fox mine. As you know we've been developing on the ground to provide better access to drill the West and depth extension of the mine. So we've been drilling there and we've got positive intersection [Technical Issues] 1050 [Phonetic] meter and level and we have a new hit high-grade intersection of 105-gram per tonne in between where we are mining right now and the deepest intersection. Again, typical Black Fox high grade mineralization. We will strongly demonstrate that the system remain open and mining can extend both on the West potentially on the West Flank and also on the depth extension of the mine and we keep drilling on the ground. So we have four rigs drilling on the ground.

Bhakti Pavani -- Alliance Global Partners -- Analyst

Got it. And in the past you have kind of talked about Froome being an additional deposit where the production would be coming from in addition to Black Fox mine, do you still seeing that exploration results that you have in place or do you think once -- in 2022, you would be exclusively mining from Froome deposit at this point?

Sylvain Guerard -- Senior Vice President-Exploration

Your question back to you, if I understand well it's about the mining of Froome or exploration around Froome.

Bhakti Pavani -- Alliance Global Partners -- Analyst

It's combined with both, I mean with Black Fox, the mineral reserve update that you published yesterday, it has about less than two years of mine life at Black Fox and Froome is expected to come online in fourth quarter of 2020. So I'm wondering given the exploration results at the Black Fox mine itself, do you see the mine life extending beyond the end of next year or do you think you would be exclusively mining from Froome starting 2022?

Robert McEwen -- Executive Chairman & Chief Owner

Chris, do you want -- that's part of our conceptual plans, could you at least go over that again.

Chris Stewart -- President & Chief Operating Officer

Yeah, sure. So yeah, I mean we've had a lot of exploration success looking at on the Western flank, we've got a lot of really good holes, 150 meters away from current development. So we're pretty excited about what we're seeing on the western flanks, but we do need to continue to drill that, build that into a new resource and a reserve and what we view with Stock, we think we can sort of keep Black Fox moving along until Froome comes into play and then Froome gives us a couple of years of production and then at that point in time right now, our current plan, barring any -- barring a whole bunch of more success in growing the resource significantly, our plan is to essentially slow down or stop at Black Box and give the drills an opportunity to really drill and build that resource. We believe there's -- we're pretty bullish on Black Fox and believe there is a lot more gold there, but we need the time to allow the drills to get there instead of drilling on top of development on top of mining, which is not efficient as everyone knows when you're trying to run of mine. So Froome is planned to do 1,500 tonnes per day, it does have a bit of a harder work indexed than Black Fox and our mills capacity is around 2,400 tonnes of tons per day. So we do have some flexibility when we're in Froome if we can pick up some additional ore at Black Fox, we would certainly look to put that through the mill, but our main focus at Black Fox once we get Froome started would be to build out that resource into what we think it can actually be.

Bhakti Pavani -- Alliance Global Partners -- Analyst

Got it. That's very helpful. Thank you. And with regards to development of Froome. Could you maybe walk us through how long would it take for the development to complete and what else needs to be done before you bring Froome into production in the fourth quarter of 2020 -- 2021, I'm sorry.

Chris Stewart -- President & Chief Operating Officer

Sure, yes, so Froome, we're basically driving twin drifts. We call it the portals in the fall and we just got started driving the drifts here in March. We are -- we have slowed the contractor down slightly right off the start because we've got about 5,000 ounces on the Western edge of the Black Fox pit which is in our mine plan for 2020 for the underground. So we've actually got them to collar the drifts and where we're going to drive the ramp to access those ounces because we can't get there from the current underground workings. So we've got that done and now there'll be heading down the hill over to Froome and that we expect will take us till the end of -- we should be down there late Q1 of 2021 and of course, we have the mine to develop and get the stoping set up and we'd be looking at moving into production in Q4 2021. With respect to -- there is no permits required, everything's permitted. We're ready to go. It is basically just get down there, get ourselves set up and then we can start mining. We already have our ventilation circuit set up. That's why we're driving twin ramps so that we'll have fresh air and return air and escape ways and everything. We will be all set and we're driving -- we've positioned the ramps so it will come right in to sort of the bottom third of the mine so that we can basically hit the high-grade zone and the thicker zones right off the bat to ramp up our production quickly.

Bhakti Pavani -- Alliance Global Partners -- Analyst

And just one more follow-up. If I correctly understand, you previously mentioned the production from Froome is going to be 65,000 ounces the first year and 45,000 ounces in the second year? Correct?

Chris Stewart -- President & Chief Operating Officer

Correct.

Bhakti Pavani -- Alliance Global Partners -- Analyst

Okay. Moving to Gold Bar. I know you said that you are reevaluating and remodeling the reserve for the Gold Pick deposit. The Gold Ridge is kind of small what are your thoughts on reevaluating or redetermining the resource there?

Sylvain Guerard -- Senior Vice President-Exploration

Yeah, what we are focusing right now, Bhakti, is as a priority is the Pick model, but right after that we keep doing the same type of exercise with the information we have at Gold Ridge. The big advantage if you want that we have right now at Gold Pick is having access to new exposure in the pit. We also have, of course, the mining going on and grade control information. So a lot more details than what we had in the past and we are using this information to be incorporated to the model to really update and refine the understanding of what we have there regarding style of mineralization and controls.

Bhakti Pavani -- Alliance Global Partners -- Analyst

Got it. And just one follow-up. Did you guys mine at Gold Pick East at all during this time?

Sylvain Guerard -- Senior Vice President-Exploration

No, not yet. The mining is at Gold Pick West currently.

Bhakti Pavani -- Alliance Global Partners -- Analyst

Okay, thank you very much. That's it from my side.

Robert McEwen -- Executive Chairman & Chief Owner

Thank you.

Operator

Your next question comes from John Tumazos with John Tumazos Very Independent Research. Your line is open.

John Tumazos -- John Tumazos Very Independent Research -- Analyst

Thank you. Does the stock indicated resource of 121,000 ounces include the benefit of the good drill results in the past year or how much of it does it include?

Sylvain Guerard -- Senior Vice President-Exploration

Hi John, this is Sylvain speaking. Yes, this is Stock East only and this is an upgrade of the resource there. There is still scenario for open pit and on the ground that we'll be looking at. We have a lot better density of drilling over this east deposit or targets, if you want. As you know, our focus at Stock have been over a three kilometer strike length that include the old Stock mine. We see good potential right below the old mining there compiling the information, historical formation. You know, this might have been shut down in low gold price and there is a bunch of good intersections just below the mine. So that's probably the first place we'll be looking at in the short-term when we advance Stock and going to the West, as you know this Stock West is a significant new discovery. We don't know still the real size or potential of this zone. We want to go back in it to two main objectives: one is to infill the Stock West to bring it to a resource estimate and also drill the extension of this new discovery to assess size potential. So there is three kilometer strike length with the mine in the middle and good potential right below the mines and going to the West side, we believe we have this is the big price with Stock West and we still have Stock East, this new upgraded resource that we have that includes some high-grade mineralization and two, a lower grade larger envelope of mineralization.

John Tumazos -- John Tumazos Very Independent Research -- Analyst

Directing this question to Rob if I may. Given that you don't have a production forecast for the moment from Gold Bar and the Black Fox Complex is going to be a transition from the old mine to Froome and the evaluation of Grey Fox, do you think you should significantly cut the exploration spending and put a project on ice just in case the Nevada or Ontario output isn't as good as you wished it was. A fewer balls in the air given the uncertainty?

Robert McEwen -- Executive Chairman & Chief Owner

Absolutely, John. We've been looking to rationalize our portfolio of properties and focusing, it seems that Black Fox, which was considered not to have a lot of future by many, we've had good exploration results there and we most likely could build production and Gold Bar which was going to be the star is a little handicapped at the moment and hobbling along. So we're just looking to reign in some of our expenditures on exploration in other areas and focusing that we have the funds to develop these other sources of production.

John Tumazos -- John Tumazos Very Independent Research -- Analyst

Do you think that the dewatering and further evaluation of stock should continue or be put on hold pending the subsequent performance in Nevada and at Black Fox?

Robert McEwen -- Executive Chairman & Chief Owner

We're thinking about those matters. We'll have a better way of evaluating that once we get the Gold Bar numbers in hand.

John Tumazos -- John Tumazos Very Independent Research -- Analyst

Sure, I apologize for posing the question while you're in the evaluation phase.

Robert McEwen -- Executive Chairman & Chief Owner

No, no, no, it's a very rational question to ask.

John Tumazos -- John Tumazos Very Independent Research -- Analyst

Thank you.

Robert McEwen -- Executive Chairman & Chief Owner

Where the focus needs to be. So Sylvain did you want to add something there?

Sylvain Guerard -- Senior Vice President-Exploration

Yeah, maybe, John, I can add a few points to this questions and you know I agree the investment in exploration over the last two years actually have been quite important, but really quickly this allow us to focus our efforts in exploration only in the few areas where we've been quite successful. As you know, there is the Black Fox mine itself that we keep drilling on the ground and we see a potential to extend mineralization and hopefully mining. Then we focus on the Grey Fox area where we've been quite successful increasing significant resource of significant grade with mineralization coming to surface on our mine property. So that gives us a pretty interesting opportunity for open pit mining to start with at Grey Fox and Stock has been moving up, if you want as a project faster than expected especially with the Stock West discovery. So right now, our focus is only at the Black Fox mine, Stock West as a discovery and we don't really see a need to any additional significant exploration right now at Grey Fox because we have critical mass that allow us to keep advancing studies toward development. At Stock West, we would like to bring it to a resource stage and based on it, we can really support additional studies and potential dewatering or development of the Stock project. And Gold Bar, all of the exploration that we are planning at Gold Bar this year will be mine ex or near mine exploration to keep drilling into the pits or around the pits to get ounces back into it or increase and Gold Bar South because Gold Bar South, its a quality satellite deposit, silica-rich, very limited play alteration there, sub cropping and decent grade are not far from our operation and at lower elevation. So we see that as quite attractive and Gold Bar South is open to the South. The last section to the south is in mineralization and the northern area is only partially drilled. So we see growth potential there.

John Tumazos -- John Tumazos Very Independent Research -- Analyst

Thank you.

Sylvain Guerard -- Senior Vice President-Exploration

You're welcome.

Operator

Your next question is from Adam Graf with B. Riley. Your line is open.

Adam Graf -- B. Riley FBR, Inc. -- Analyst

Hey guys, just a quick follow-up question regarding this slide here, number seven with your conceptual plans for Timmins. You guys talked about it a little bit before. Can you guys clarify that Froome is permitted and Stock because it was never officially closed is permitted. Does that include all of Stock the potential for the open pit, the Stock West etc and then obviously in between in this conceptual plan between Stock and Froome is Grey Fox and what if any permitting is necessary there?

Robert McEwen -- Executive Chairman & Chief Owner

Froome is permitted. Stock, the mine is permitted. If we were to go underground to Stock West, that's permitted going underground. Stock East, we don't know if that's open pit or underground. If you were underground, you'll be connecting with the existing mine, so that permit wouldn't be an issue, but if you want an open pit, it would be an issue only in that it would take time and then Grey Fox is on our property and no permit.

Adam Graf -- B. Riley FBR, Inc. -- Analyst

No permit. Okay, so it sounds to me it's really just about planning, engineering, drill density versus any type of regulatory hurdles per se.

Robert McEwen -- Executive Chairman & Chief Owner

Well, on Grey Fox you'd have to deal with water containment just where it -- and run off, it has to satisfy the regulators about that.

Adam Graf -- B. Riley FBR, Inc. -- Analyst

What kind of a process is that Rob and could that delay Grey Fox or swap around some of your conceptual plan here?

Robert McEwen -- Executive Chairman & Chief Owner

It could take -- I don't know, you need to have some studies done in that -- it might take the better part of three quarters of a year. It's just water and archeological issues to satisfy.

Adam Graf -- B. Riley FBR, Inc. -- Analyst

Would you guys -- do you guys expect to sort of give us periodic revisions on this conceptual plan as your knowledge and plans evolve?

Robert McEwen -- Executive Chairman & Chief Owner

Absolutely, we see this as a bit of light at the end of the tunnel.

Adam Graf -- B. Riley FBR, Inc. -- Analyst

Yeah, I think it would be very helpful to analysts and the market to stay up to date on how the potential here can be unlocked?

Robert McEwen -- Executive Chairman & Chief Owner

Yes, change the story significantly. We will be doing that. We'll be doing it eagerly, Adam.

Adam Graf -- B. Riley FBR, Inc. -- Analyst

Thank you.

Robert McEwen -- Executive Chairman & Chief Owner

You're welcome.

Operator

Your next question comes from Bill Powers [Phonetic], Private Investor. Bill, your line is open.

Bill Powers

Thank you. Thank you for hosting this call, Rob, and I appreciate your candor at the beginning of the call most certainly, but I guess I have a few questions and I guess I'll start with kind of an easy one. For Grey Fox, when you did the call in December, I believe it was Ken who had mentioned that the he had found up to 12 significant or potentially strikes along Grey Fox I guess would be or right around by Whiskey Jack and he also had mentioned that the and from what I can read from the most recent press releases is that the width seems to be wider than what you had been finding previously. I guess on this topic, one, I guess, is that something that you've seen continue and was this incorporated into the most recent resource update?

Sylvain Guerard -- Senior Vice President-Exploration

Yes, for the question, Bill, thank you. And you're right about Grey Fox. We've been successful intersecting mineralization. We have a very good geological understanding and model there and you know our focus has been testing Northeast, Southwest trending structure that are quite high grade and we've been adding a new zone 147 Northeast, it's on the slide there. It's a new discovery that we made in 2018 that we've been advancing and there is about 100,000 ounces of new ounces found right in the middle of this Grey Fox area. In addition to that, we've been also advancing on many trends or structures and the main ones are again shown on the slide there and we have a high rate of drill success. So we know that more drilling will certainly bring more success and we will keep increasing the resource assuming additional investment. Currently, we stand at 620,000 ounces of gold and this is only an indicated category and I'm not including any infer here and the grade is 7.2 gram per tonne, which is pretty good. As I mentioned, some of the mineralization come to surface. So we have started points where we could potentially drive and go for bulk sample or potential eventually open pit mining there. So we see Grey Fox quite a key asset in addition to what we have on the rest of the property at Black Fox and Froome, but currently this is highly exciting, but there is already a significant resource defined there and as I mentioned, probably good enough to advance with permitting and studies to see what's the best way forward and in parallel with that we are quite excited by Stock using the old mine to quickly fast track and reactivate and really trying to define what we are dealing with the Stock West discovery. This is a zone that was never ever touched or drilled in the past that was first drill in the middle of this summer. The grade is good, thickness is good, it's a good style of mineralization that include high grade as part of those wide zone of 5 grams averaging intersection. So we see this as probably the most exciting new discovery we have in our Timmins complex right now.

Bill Powers

Yes and as far as -- so as far as cost-wise, that would be I guess on par with Froome as far as bringing that or would you estimate that would be a far lower cost than something like Grey Fox as far as remediating the Stock property. Is that the initial estimate as far as the way you could see it?

Sylvain Guerard -- Senior Vice President-Exploration

Maybe I turn to Chris or Rob on this.

Robert McEwen -- Executive Chairman & Chief Owner

Bill, it's still early. We don't have a good fix on the numbers yet.

Bill Powers

Okay. The other question I had was regarding Black Fox. According to your press release from yesterday or this morning, it appears that you had some areas that came out of the resource or reserve estimate because they were inaccessible and could you -- and it looks like I was a little surprised given the drill intercepts that you had along the West that you didn't have a little bit bigger of a growth, but could you give a little color on how much came out and how much was added. I'm guessing it's probably in your reserve report, but I wasn't able to locate it quickly.

Sylvain Guerard -- Senior Vice President-Exploration

Yes, we will look at the number. Chris, maybe you want to talk about those ounces that are not minable and regarding increase in growth of the resource, the issue we were facing is access to drill more to the West side of the mine. So we didn't have proper drilling platforms. Now we do and we are adding holes to the West and the depth extension and this will contribute to hopefully adding and increasing the resource.

Chris Stewart -- President & Chief Operating Officer

Yeah, with respect to --

Bill Powers

I'm sorry, go ahead.

Chris Stewart -- President & Chief Operating Officer

No, go ahead.

Bill Powers

Certainly you say you would think so, I would say that you would estimate that it was a, how many -- approximately how many ounces became unminable is just what really the question was at Black Fox I guess going into the most recent reserve update?

Chris Stewart -- President & Chief Operating Officer

So what we did was an evaluation in 2019 of the reserves at Black Fox and about 16,000 ounces came out of the reserve as no longer minable. So we had areas -- essentially when you sort of went and redid the math and looked at the cost of rehabilitating. Right now at Black Fox, we're down to mining, for lack of a better word I used sort of kibbles and bits around the mine. We have a couple of main areas with some decent strike length and new stopes but a lot of it is, we're sort of running around picking up little stopes here and there to gather the remaining ounces that were sort of left behind. Given the increase in gold price, we're able to make some of these stopes economic, but at the same time, there is a number of stopes in there that were in the old workings of the mine via cave-ins, ground failures and stuff there. Essentially, it doesn't make it worthwhile going to get that. A stope that's got 500 ounces and it doesn't pay to go get it. We have to do all this work. So we reevaluated all that and removed those ounces and then -- so the growth -- so you're actually seeing probably a bit more growth than what it sort of looks like on first plus when you're just looking at the numbers given we removed ounces. We added them back in and when you consider we mined 35,000 ounces at the end of the day, our reserve is down to, I think it's 66,000 [Phonetic], they are about 65,000 [Phonetic]. So we lost a bit but we add it back in. So the Western flank, we've had a lot of drilling success as Sylvain mentioned but we need to increase the density, get the proper drill platforms to drill it properly, which we now have in place. We worked hard on that in the latter half of 2019. So the exploration group has actually got proper drill stations to be drilling out -- to drill sort of perpendicular to the ore body so that we can get good results. So that's what we're working on now is basically trying to build that out and we'll an update coming out of 2020. And given the success so far, we're optimistic that we can add some more ounces back in even when we're mining you know, 30,000 ounces, 40,000 ounces this year.

Bill Powers

Okay and would you consider doing a -- like a mid-year reserve update on -- given the importance of Black Fox to the operations at this point.

Chris Stewart -- President & Chief Operating Officer

I would say there's a lot of factors around that. Again with coronavirus and do we need to shut our operations down at some point here and well, it's pretty hard to sort of give you any color on that. We'll certainly as things progress, if we get the drill performance out of the bit and get the footage and everything is coming together, we'll certainly try and keep people apprised of our progress on Black Fox for sure because, yes, it is right now it's our single source of production coming out of the Timmins camp.

Bill Powers

Yes. And one last quick question. I know, there has been the Fenix project, there has been getting that the study out the door. I know there has been some difficulty with that as far as that goes, is that still on track for I guess first quarter or the first half of this year?

Chris Stewart -- President & Chief Operating Officer

Yes. So the feasibility studies is complete and you know, the outcomes are not significantly different than that of the PDA. Right now is if we're not going to construct it, then there is not a lot of benefits to publishing it right now.

Bill Powers

Okay. That's fine -- I was just and I would just wanted to say thanks again for holding this call. I would also recommend that, you know, just as a quick side note, as far as potentially since you're not going to be going to any conferences, or there are probably no conferences. I think everyone learned a lot from the December drilling update and I don't know whether doing one of those once a quarter would be greatly appreciated until -- because I'm guessing that the public communication is going to be reduced given the availability, but I certainly would like to see more updates rather than fewer. If you could possibly manage that, that would be greatly appreciated, but thank you very much.

Robert McEwen -- Executive Chairman & Chief Owner

Thank you for that suggestion, Bill. Thank you for your questions.

Operator

And our last question comes from Gary Mitsa [Phonetic], a shareholder. Your line is open.

Gary Mitsa

Thank you for taking this call. I've listened to all this stuff for years since I first bought when you took over the company Mr. McEwen, I appreciate your effort. So my questions don't have to do with all the mining stuff because I don't really understand that as much as I probably should. My main questions have to do with where the stock price is sitting right now. New York Stock Exchange has a $1 limit as to when you stay on exchange, is that correct?

Robert McEwen -- Executive Chairman & Chief Owner

That's correct.

Gary Mitsa

How long does that last for?

Robert McEwen -- Executive Chairman & Chief Owner

Oh, it may change with what's happened recently, but they usually notify you after a certain period with your stock -- if your stock [Speech Overlap].

Gary Mitsa

Okay, my question is if that point is reached, do you have any idea as to whether or not you would do a reverse split on the stock because I know what's happened with reverse split stocks in the past with companies that have done that? Is that anywhere in your plans, are you considering that or are you not at liberty to say what you're planning to do on that because --

Robert McEwen -- Executive Chairman & Chief Owner

We're recently below $1 and hope not to stay down there, but if there were 30 consecutive days below $1, then the New York Stock Exchange will advise you that they don't want you on the stock exchange, but you have six months to remedy that situation.

Gary Mitsa

Okay. I understand that now. We have six months to remedy the situation. The question is how do you go about remedying it because it does not appear the way the economy is and with this virus thing and everything that's going on -- to be honest with you, I do not expect the McEwen stock to be over $1 in the near future, sitting probably around $0.75 and that's been where it's been hanging for a while. People just are not investing and this is no reflection on you or the company, but it's just a situation the way it is, people are just cashing out or running for the hills. That's why my estimate on it is that the stock is probably not going to reach that dollar threshold in the near-term, even though hopefully it will in the longer-term. My question again comes back to have you taken that into consideration as to what you may have planned to either stay on the New York Stock exchange or whatever else is option available at that point?

Robert McEwen -- Executive Chairman & Chief Owner

Well, it's always our intention to stay on the New York Stock Exchange. We've only recently gone below $1 this year. We haven't been notified by the New York Stock Exchange and a share consolidation would be a last resort. And just by way of a bit of history, you're a long-term shareholder, you might remember we got -- when the gold share market just absolutely died back in 2015, hit its bottom, we were below $1 and didn't stay there and satisfied the New York requirements to remain listed on the exchange and I don't share your belief at the moment we'll stay below $1.

Gary Mitsa

Well, I hope you're right on that, but I just don't see people buying anything right now and I don't see them buying anything in the near-term future?

Robert McEwen -- Executive Chairman & Chief Owner

I would agree with you that in the very near future, all eyes are focused on coronavirus and trying to stay avoiding it and the economic repercussions of it, but governments around the world are making very large commitments to pump large amounts of money into the system, drop interest rates. They're working hard to ensure that this damage that's being sustained right now can be mitigated and that to me is making their balance sheets look increasingly problematic.

Gary Mitsa

Yeah,I understand how pumping money into the system works. I'm not too keen on understanding everything with all the gold reports that I see in here every time I listen to this report, but I am very familiar with how money going into the system works. I just have one other question because I didn't hear anything at all mentioned today about Los Azules, which to me is, as I looked at everything is -- I still think it's a very significant holding, but I haven't heard a word about it today, anything new on that?

Robert McEwen -- Executive Chairman & Chief Owner

No, price of copper is down to $2.40. We're looking to put a road in to the site, an alternative road that would give us 12 months access rather than the current four months, five months access. There'll be some work done this year on the road to give the access. I think that's a critical component of moving that forward. Argentina is still trying to figure out what it wants to do. It is experiencing high inflation, just recently put a new government in. They would like to promote mining. Just unfortunate right now that base metals are under a lot of pressure and the actions that they have taken have discouraged a lot of foreign capital investment in their country.

Gary Mitsa

Hey. Thank you very much for taking my question. Appreciate it. Thanks again.

Robert McEwen -- Executive Chairman & Chief Owner

You're welcome Gary. Thank you for being a shareholder.

Operator

And there are no further questions at this time. Mr. Rob McEwen, I turn the call back over to you.

Robert McEwen -- Executive Chairman & Chief Owner

Thank you, operator. Just want to leave you a message, we wish that everyone stays healthy right now.

Gary Mitsa

[Operator Closing Remarks]

Duration: 72 minutes

Call participants:

Robert McEwen -- Executive Chairman & Chief Owner

Meri Verli -- Chief Financial Officer

Chris Stewart -- President & Chief Operating Officer

Sylvain Guerard -- Senior Vice President-Exploration

Jake Sekelsky -- Roth Capital Partners -- Analyst

Heiko F. Ihle -- H.C. Wainright & Co -- Analyst

Adam Graf -- B. Riley FBR, Inc. -- Analyst

Bhakti Pavani -- Alliance Global Partners -- Analyst

John Tumazos -- John Tumazos Very Independent Research -- Analyst

Bill Powers

Gary Mitsa

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