What happened 

Shares of McEwen Mining Inc (NYSE:MUX) fell as much as 10.3% on Thursday after reporting fourth-quarter earnings. Shares settled down slightly, to an 8.6% gain, at 3:30 p.m. EST. 

So what

Gold equivalent-ounces produced fell 18.2% in the quarter, to 31,521, and cash costs weren't trending positively, either. El Gallo mine gold-equivalent cash costs rose 41% from a year ago, to $699, while San Jose mine costs fell 5%, to $729, although 2017 guidance is for costs to be $780 per gold ounce equivalent.

Gold nuggets sitting on a table.

Image source: Getty Images.

Net income for 2016 rose slightly, to $21.1 million, or $0.07 per share, but in the fourth quarter, the company lost 0.01 per share. 

Now what

The cost trend is really what investors have to worry about in both the quarter and going forward. Management said that El Gallo cash costs are expected to rise from $524 per gold equivalent ounce in 2016 to $760 in 2017. And at the San Jose mine, the same cost will rise $20, to $780 per gold equivalent ounce. 

With costs rising, investors are seeing less upside from the rise in gold and silver prices in the past few months, and the company could be ready to spend even more if a new Nevada mine is approved. If you want to play gold and silver prices, then it may be better to do so directly, because rising costs for McEwen is offsetting the commodity leverage in the business, making it a stock I would stay away from today. 

Travis Hoium has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.