Executive Summary / Key Takeaways

• McEwen Mining is strategically positioning itself for significant growth by advancing its large-scale Los Azules copper project while simultaneously expanding production and extending mine life at its core gold and silver operations.
• The Los Azules copper project, now nearing feasibility study completion and environmental permitting, represents a potential Tier 1 asset with an implied value significantly exceeding McEwen Mining's current market capitalization, offering substantial upside potential through a planned IPO.
• Recent financial performance shows improving trends, with higher commodity prices driving increased gross profit and Adjusted EBITDA, supported by a strengthened balance sheet and liquidity following a $110 million convertible notes issuance aimed at funding growth initiatives.
• Organic growth initiatives at the Fox Complex in Canada and the Gold Bar mine in the US, including ramp development, exploration success, and integration of new properties, are expected to drive a substantial increase in gold equivalent production over the next 3-5 years.
• While operational consistency and permitting timelines remain key challenges, the company's focus on cost control, strategic investments in exploration and development, and leveraging favorable market conditions underpin its path towards increased profitability and shareholder value.

A Foundation For Growth: History, Strategy, and Competitive Landscape

McEwen Mining Inc., rooted in a history stretching back to 1979, has evolved from its origins as US Gold Corporation into a diversified metals company with a strategic focus on gold, silver, and copper assets across the Americas. The company's journey has been marked by key acquisitions, including the Fox Complex in Canada in 2017, and strategic decisions aimed at unlocking value, notably the separation and independent financing of its potentially transformative Los Azules copper project in Argentina starting in 2022. This separation was a deliberate move to fund the capital-intensive copper development without diluting shareholders of the core precious metals business, a strategy that has seen over $470 million raised privately for Los Azules to date.

McEwen Mining operates within a competitive global mining landscape dominated by much larger players like Barrick Gold (GOLD), Newmont Corporation (NEM), and Agnico Eagle Mines (AEM), alongside mid-tier producers such as Kinross Gold (KGC). Compared to these giants, McEwen Mining is a smaller-scale producer, which historically has meant higher operational costs per ounce and greater sensitivity to commodity price volatility. For instance, while Barrick and Newmont benefit from scale and advanced technology leading to lower operating costs (often $900-$1,000 per ounce) and higher margins (Barrick's gross margins around 45-50%), McEwen Mining's unit costs have been more variable, as seen in Q1 2025 where Gold Bar's cash costs were $1,146/GEO and Fox Complex's were $2,061/GEO.

However, McEwen Mining's strategy is not to compete directly on scale with the majors in existing markets but to leverage its exploration expertise and regional presence to build value through organic growth and the development of high-potential assets like Los Azules. Its portfolio mix, including significant copper exposure, differentiates it from many gold-focused peers. While majors like Newmont invest heavily in broad technological innovation (AI, automation), McEwen Mining's technological focus is more targeted, particularly at Los Azules, aiming for lower capital intensity and environmental sustainability through the planned heap leach process and exploration of renewable energy and electric fleets. This approach, while different from the scale efficiencies of larger competitors, is designed to enhance the economic viability and market appeal of its key development project. The company's competitive positioning is thus characterized by a blend of established, albeit sometimes challenging, production assets and high-potential growth projects, underpinned by a strategic financing approach for its major copper venture.

Operational Performance and Near-Term Growth Drivers

McEwen Mining's operational performance in Q1 2025 reflected a mix of planned development activities and temporary challenges, alongside the impact of higher metal prices. Consolidated production from 100%-owned operations (Gold Bar and Fox Complex) was 13,208 gold equivalent ounces (GEOs), a decrease from 20,104 GEOs in Q1 2024. Attributable production from the San José joint venture also decreased, from 12,934 GEOs to 10,924 GEOs. Despite lower volumes, revenue from 100%-owned operations decreased by a more modest 13% to $35.7 million, primarily due to a significant 31% increase in the average realized gold price ($2,803/GEO in Q1 2025 vs. $2,131/GEO in Q1 2024). This price strength was a major factor in the 68% increase in gross profit to $10.1 million.

Performance at the individual operations highlighted specific dynamics:

• Gold Bar (USA): Produced 7,688 GEOs in Q1 2025. While cash costs were favorable at $1,146/GEO, the All-in Sustaining Cost (AISC) was notably higher at $2,197/GEO. This elevated AISC was a direct result of a strategic decision to accelerate pre-stripping activities at the Pick III deposit, capitalizing $7.5 million in costs during the quarter. This investment is aimed at accessing higher-grade ore and is expected to lead to increased production and lower unit costs in the latter half of 2025. The mine remains on track for its annual guidance of 40,000-45,000 GEOs. Exploration continues at nearby Timberline properties, acquired in 2024, with drilling planned to support future development and extend mine life.
• Fox Complex (Canada): Produced 5,520 GEOs in Q1 2025, below expectations due to adverse winter weather and labor challenges. This lower production volume contributed to higher unit costs, with cash costs at $2,061/GEO and AISC at $2,504/GEO. Management has implemented mitigating actions, including accelerated hiring and engaging contractors, and expects production and costs to improve through the year. The Fox Complex is targeting its annual guidance of 30,000-35,000 GEOs. Crucially, development work is advancing, including the recently permitted ramp access to the Stock underground mine, with initial mining expected by 2026. Exploration at Grey Fox continues to yield positive results, increasing resources and supporting plans for significant future production increases (targeting 60,000 oz by 2027 and potentially 100,000-150,000 oz with Grey Fox).
• San José (Argentina): The 49%-owned joint venture produced 10,924 attributable GEOs in Q1 2025. Production was impacted by lower processed grades and recovery rates, partly due to elevated clay content. Unit costs were higher ($2,575/GEO cash costs, $3,047/GEO AISC) driven by inflation outpacing the Argentine peso's devaluation and lower volumes. However, recent mill improvements completed in late 2024 are expected to support increased throughput starting in Q2 2025, which, combined with higher planned production, should decrease unit costs over the year. The mine maintains its guidance of 50,000-60,000 attributable GEOs. The mine's strong working capital position ($83.7 million at March 31, 2025) and the resumption of dividend payments ($2.2 million attributable to MUX in Q1 2025) reflect the benefit of higher commodity prices despite operational fluctuations.

These operational details underscore the company's strategy: maintaining production at existing mines while investing in development and exploration to unlock future growth. The challenges faced in Q1 2025, while impacting short-term unit costs, are largely tied to strategic investments (Gold Bar stripping) or temporary issues (Fox weather/labor) that management expects to resolve, positioning the operations for improved performance and cost efficiency later in the year.

The Copper Catalyst: Los Azules and Value Unlocking

The most significant potential value driver for McEwen Mining lies in its 46.4% interest in McEwen Copper Inc., owner of the Los Azules copper project in San Juan, Argentina. Los Azules is recognized as one of the world's largest undeveloped copper deposits, and its advancement is a central theme in the company's strategy. Over $400 million has been invested in exploring and developing Los Azules over time, culminating in the current push towards completing a definitive feasibility study, expected in Summer 2025.

McEwen Copper's strategic decision to pursue independent private financing for Los Azules has been successful, raising over $470 million. This approach has allowed McEwen Mining to fund the copper project's significant expenditures without diluting its own shareholders, while retaining a substantial equity stake and a 1.25% NSR royalty on the project. Management highlights that the implied value of McEwen Copper, based on its recent $30/share financing, reached $984 million, making McEwen Mining's interest worth approximately $457 million, a figure greater than McEwen Mining's entire market capitalization at the time of the Q2 2024 earnings call. This disparity underscores the potential for significant value realization as Los Azules progresses.

The project is advancing on multiple fronts. The Environmental Impact Statement for construction and operation was issued in December 2024, a key permitting milestone. Drilling campaigns have been completed to support the feasibility study, focusing on geotechnical, hydrological, and exploration data. Exploration has also identified a new porphyry system, Tango, near the main deposit, offering future upside potential outside the current feasibility scope.

A major catalyst for Los Azules is Argentina's Large Investment Incentive Regime (RIGI), for which McEwen Copper applied in February 2025. If approved, RIGI is expected to provide substantial benefits, including a reduction in the corporate income tax rate from 35% to 25%, exemption from sales tax during construction, elimination of export duties, and a 30-year tax stability guarantee. Management estimates these benefits could result in over $960 million in after-tax changes (conservatively), significantly enhancing the project's economics and bringing Argentina's tax burden for large projects closer to that of mining-friendly jurisdictions like Chile.

The competitive landscape for large copper projects in Argentina was recently highlighted by BHP's $4.4 billion transaction with Lundin Mining (LUN) for the Filo del Sol and Josemaria deposits in the same province. Management views this deal as a positive benchmark, demonstrating confidence in Argentina and setting a high value for large copper assets. They assert that Los Azules compares favorably, citing its larger resource and higher copper grade (based on current published data), lower altitude, closer proximity to infrastructure, and the planned heap leach process which is expected to require significantly less capital than conventional milling operations like Josemaria. Furthermore, the heap leach process produces a copper cathode directly, which can be used immediately by industry, unlike the concentrate produced by conventional mills that requires further smelting. Los Azules also aims to be one of the world's first regenerative copper mines, committed to carbon neutrality by 2038, leveraging planned renewable energy sources and electric/autonomous fleets – a technological and sustainability differentiator.

The path forward involves completing the feasibility study (Summer 2025), securing RIGI approval, and then pursuing an IPO for McEwen Copper. While the estimated construction cost is around $2.5 billion, management anticipates financing through a mix of equity (potentially from the IPO) and debt (targeting export credit agencies and development finance institutions), not solely through equity, to manage dilution. The potential start of construction is as early as 2026, with production targeted for late 2029, over a projected 27-year mine life. The publication of the feasibility study is also expected to improve McEwen Mining's reported net income, as Los Azules expenditures will be capitalized rather than expensed, potentially leading to positive quarterly results.

Financial Health and Strategic Financing

McEwen Mining's financial position saw a significant improvement in Q1 2025, largely driven by strategic financing activities. Cash, cash equivalents, and restricted cash increased by $55.0 million, from $17.5 million at December 31, 2024, to $72.5 million at March 31, 2025.

This surge in liquidity stemmed primarily from the issuance of $110.0 million in aggregate principal amount of 5.25% Convertible Senior Unsecured Notes due 2030 in February 2025. The net proceeds from this offering were approximately $90.7 million after deducting offering costs and the $15.1 million cost of related capped call transactions.

The Convertible Notes bear a fixed annual interest rate of 5.25% and mature in August 2030. The initial conversion price is approximately $11.25 per share, subject to adjustment. The capped call transactions are designed to reduce potential share dilution upon conversion, effectively raising the conversion price threshold. This financing structure provides the company with capital at a lower interest rate (5.25%) compared to its existing term loan (9.75%), while mitigating potential equity dilution unless the stock price rises significantly above the conversion price and capped call threshold.

Concurrently, the company amended its Term Loan Facility, extending the maturity date by 24 months to August 31, 2028, and delaying the start of principal repayments to January 31, 2027. Following the Convertible Notes issuance, McEwen Mining voluntarily repaid $20.0 million of the term loan principal, reducing the outstanding balance and overall debt service requirements. As of March 31, 2025, total long-term debt stood at $125.5 million, including the net carrying amount of the Convertible Notes ($105.9 million) and the remaining term loan balance.

This influx of capital significantly strengthened the balance sheet, increasing working capital from a negative $6.5 million at the end of 2024 to a positive $61.1 million at March 31, 2025. Management stated that the company has sufficient liquidity and expected cash flow from operations to fund its anticipated cash requirements for operations, capital expenditures, and working capital for the next 12 months. The proceeds from the Convertible Notes are earmarked primarily for advancing the Fox Complex expansion and other growth initiatives at the gold and silver operations.

From an income statement perspective, the net loss improved from $20.4 million in Q1 2024 to $6.3 million in Q1 2025. This improvement was largely driven by the higher gross profit from mining operations and a reduced loss from the investment in McEwen Copper ($8.6 million in Q1 2025 vs. $18.0 million in Q1 2024), partially offset by increased interest expense related to the new Convertible Notes. Adjusted EBITDA, which excludes the impact of McEwen Copper's results, increased by 38% to $8.7 million in Q1 2025, reflecting the improved profitability of the operating precious metals assets, including the contribution from San José.

The strategic financing and improved liquidity provide McEwen Mining with the financial flexibility needed to execute its growth plans at both its gold/silver mines and advance the Los Azules project towards a potential IPO and construction financing.

Outlook and Key Risks

McEwen Mining's outlook is centered on delivering its 2025 production guidance and advancing its key growth projects to significantly increase future output. The company maintains its consolidated production guidance for 2025 at 120,000 to 140,000 GEOs, with expectations for production to increase through the remainder of the year across its operations. Unit costs are also anticipated to decrease from Q1 levels as production ramps up and strategic investments like the Gold Bar stripping yield results.

Looking further ahead, the organic growth potential at the Fox Complex is significant, with plans to double production to 60,000 ounces by 2027 and potentially reach 100,000-150,000 ounces with the development of Grey Fox, contributing to a potential consolidated production target of 225,000-255,000 GEOs by 2030. This growth is contingent on successful development and permitting efforts.

The Los Azules project remains the most substantial long-term value driver. The completion of the feasibility study (Summer 2025) and securing RIGI approval are critical near-term milestones. A successful IPO of McEwen Copper post-feasibility would provide significant funding for the project's estimated $2.5 billion construction cost, with potential construction starting as early as 2026 and production targeted for late 2029.

However, this outlook is subject to several key risks. Operational consistency remains a challenge, as highlighted by the Q1 2025 performance at Fox Complex and San José. Factors like weather, labor availability, and unexpected ground conditions can impact production volumes and unit costs. Permitting timelines for development projects, particularly the Fenix Project in Mexico and aspects of the Fox Complex and Timberline properties, can be unpredictable and cause delays. Commodity price volatility for gold, silver, and copper directly impacts revenue, profitability, and the economic viability of projects. Foreign currency risk, particularly the Argentine peso's fluctuations against the U.S. dollar, affects costs at San José and the value of investments in Argentina. Geopolitical and economic conditions in the regions of operation, including Argentina's macroeconomic stability and potential issues in Mexico, pose risks. Funding the substantial construction cost of Los Azules is a major undertaking, dependent on successful capital markets access (IPO) and debt financing. Finally, risks related to indigenous claims (as seen at Fox Complex) and counterparty risk with joint venture partners and surety providers also exist.

Conclusion

McEwen Mining stands at a pivotal juncture, aiming to leverage its strengthened financial position and the potential of its Los Azules copper project to drive substantial future growth. While its core gold and silver operations continue to navigate operational challenges and execute near-term growth plans, the potential value unlock from Los Azules, underpinned by its scale, favorable competitive positioning against peers like Filo del Sol and Josemaria, and the anticipated benefits of Argentina's RIGI, represents a compelling long-term narrative. The company's strategic financing, including the recent convertible notes issuance, provides the necessary liquidity to advance these initiatives. Investors should monitor the progress of the Los Azules feasibility study and RIGI approval, operational execution at the Fox Complex and Gold Bar, and the trajectory of commodity prices as key indicators of the company's ability to translate its strategic vision into sustained value creation.