McEwen Mining Inc. Q2 FY2026 earnings call

• Acknowledgment of Disappointing Q2 Results

  • Management openly admits Q2 2026 operational performance fell short of internal expectations, with lower production and higher costs than planned
  • The primary operational issue at Gold Bar was encountering more carbonaceous ore than expected in the ore body; carbonaceous material absorbs dissolved gold during leaching (preg robbing), which reduced gold recovery rates below target
  • Management takes accountability for the underperformance, rather than attributing it solely to external factors like inflation or labor shortages
  • Corrective actions implemented include modified mine sequencing, new ore blending strategies, and evaluation of additional processing improvements to reduce the impact of carbonaceous ore on recoveries

• Core Strategic Priorities

  • Improve operational execution and gold recovery rates at Gold Bar
  • Expand the company's resource base through disciplined exploration programs
  • Advance the Los Azules copper project to production, positioning it as a premier global copper asset
  • Maintain disciplined capital allocation, treating shareholder capital as carefully as internal capital, with a focus on long-term intrinsic value over short-term market sentiment

• Asset Portfolio Highlights

  • The Fox Complex is positioned as an emerging mining district, with multiple exploration targets (Gray Fox, Stock, Whiskey Jack) expected to replace depletion and build long-term value through discovery
  • Los Azules is framed as a transformative, world-class copper asset, well-positioned to meet growing global copper demand driven by electrification, AI, data centers, and modern energy infrastructure development
  • Significant progress over the past year has reduced technical risk, advanced engineering work, moved permitting forward, and expanded financing discussions for Los Azules

Segment-level financial performance (absolute revenue values and revenue contribution percentages) was not disclosed in the provided call transcript. The call only referenced that Q2 2026 production at the Gold Bar mine was lower than planned, costs were higher than management's acceptable target, and all-in sustaining costs (AISC) increased primarily due to lower gold ounces produced, with costs expected to decrease in the second half of 2026. No other product or operating segment financial results were shared.

• Full-year Gold Bar production guidance has been revised downward to reflect lower-than-expected recovery from unexpected carbonaceous ore; the multi-year production target of 90,000 to 100,000 ounces of gold per year remains in place
• Permitting for surrounding deposits to support Gold Bar's hub-and-spoke production model is expected to take approximately two years, with tonnage from these satellite deposits not expected to enter production before that timeline
• The Final Investment Decision (FID) work program for Los Azules remains on track for completion in Q4 2026; as of Q2 2026, 27% of the planned FID work had been completed, aligned with the pre-set ramp-up schedule
• All-in sustaining costs are expected to trend downward in the second half of 2026 as gold production and recovery rates improve
• Dividend distributions from the San Jose JV are expected to resume in 2027, with no additional distributions expected for the remainder of 2026

• Operational risk: Ore body geology can deviate from pre-development resource models, as seen in Q2 2026 with unexpected higher volumes of carbonaceous ore at Gold Bar that reduced gold recovery and increased unit costs
• Permitting risk: Development of satellite deposits at Gold Bar requires approximately two additional years of permitting work before production can begin
• Project financing risk: Bringing the large-scale Los Azules copper project into production requires assembling a $4 billion total financing package, which depends on successful negotiations with multiple export credit agencies, development financial institutions, commercial banks, and equity partners
• Mining industry cyclicality: Short-term quarterly results can be disappointing due to geological surprises, even as long-term value creation progresses
• Commodity cost risk: Increases in fuel prices directly raise all-in sustaining costs, with a $10 per barrel change in crude estimated to create a $100 per ounce impact on Gold Bar's AISC

Q: What is the timeline for permitting Gold Bar's satellite deposits for the hub-and-spoke model, and how does McEwen plan to unlock value from the Los Azules NSR royalty over the medium term? / A: Permitting for the surrounding satellite deposits is approximately two years out, with exploration results from the Eureka properties already indicating these deposits will contribute to the 90,000-100,000 ounce annual production target. For the NSR, McEwen will keep it in the portfolio for now to avoid extra spin-out G&A and adverse tax consequences for shareholders. Management plans to build a broader royalty portfolio alongside the Los Azules NSR, and will consider an IPO or spin-out to shareholders once Los Azules enters production to capture a higher valuation for the royalty assets.

Q: What is the current status of the enhanced financing proposal from Finland's export credit agency for Los Azules, why is Finland involved, and what are next steps? / A: The Finnish ECA is involved because key project supplier Metso is headquartered in Finland, and McEwen has engaged with them for several years as part of the broader project financing process. ECA financing offers competitive pricing, long tenors, and additional political risk protection to complement the existing RIGI protection for the project in Argentina. The Finnish ECA proposal is one part of a broader financing strategy that also includes engagements with North American, Japanese, and other European ECAs, with Societe Generale added to the team to help coordinate the full financing package.

Q: What are the remaining major FID work streams for Los Azules, and what milestones will unlock value? / A: After completing geotechnical, condemnation, and hydrology work, remaining priorities include finalizing vendor engineering for major process packages (already awarded to Metso and other firms), updating the pit design, and completing the full integrated engineering plan. Updated geotechnical data has already allowed consolidation of the pit from 8 to 4 sectors, reduced the required flat-angle pit zone by 22%, increased accessible ore, and reduced required stripping. Three high-priority regional exploration targets will be drill tested starting September 2026, which could extend Los Azules' current 22-year mine life to 33+ years.

Q: What is the plan for the Los Azules financing stack, what is McEwen's expected equity obligation, and what is McEwen's dilution tolerance? / A: Total project financing is targeted at approximately $4 billion, including $3.2 billion in base capex plus working capital, pre-production interest, and an overrun buffer. Management targets a 60% debt / 40% equity split, with most debt coming from ECAs, supplemented by support from the IFC, other development financial institutions, and commercial banks. The $1.6 billion equity requirement is expected to come from existing partners, an IPO of McEwen Copper planned for late 2026, and specialized mining funds. Rob McEwen confirmed management aims to keep dilution as small as possible, as the company views Los Azules as a rare high-value asset and wants to retain as large a stake as possible.