McEwen shares rise on new drill results from Los Azules copper project

Shares of McEwen Mining (TSX: MUX; NYSE: MUX) got a big jolt yesterday after its majority-owned copper subsidiary reported encouraging results from earlier drilling performed on its project in Argentina.

McEwen Copper, which is 52% owned by the company, said Wednesday it has received additional copper values over wide intercepts at the Los Azules project. The most significant result was 398 metres grading 0.75% copper (true thickness), and it included a sub-interval of 124 metres at 1.43% copper.

The latest drilling program, which began in October and ended last month, consisted of 15 rigs for some 39,900 metres of drilling in 138 holes. These included some infill holes to test the resource model used in the recently updated preliminary economic assessment (PEA), with actual grades turning out 9% higher than the model prediction.

According to the PEA released last month, Los Azules has an after-tax net present value (at a discount of 8%) of US$2.7 billion, with an internal rate of return of 21.2% and a payback period of 3.2 years. This is assuming a copper price of US$3.75 per lb.

Average annual copper cathode production is estimated at 401 million lb. during the first five years of operation, and 322 million lb. over the 27-year life of the mine. Its initial capital expenditure is calculated at US$2.5 billion, with a project capital intensity of US$7.66 per lb.

Inferred resources at Los Azules total 4.5 billion tonnes grading 0.31% total copper, for 26.7 billion lb. of contained copper. Indicated resources are 1.2 billion tonnes grading 0.4% total copper for 10.9 billion lb. of contained metal. 

Preparations are underway for the next phase of drilling at Los Azules, anticipated to begin in early October. This phase, McEwen says, will continue to increase geologic certainty with drilling needed to delineate a measured resource estimate on the material expected to be mined in the first five years of operation, covering more than the payback period and other technical evaluations.

Located in San Juan province, Los Azules is considered one of the world’s largest undeveloped high-grade open pit copper projects. McEwen anticipates this to be a world top 25 copper producer, in the lowest cost quartile, comparable to some of the best deposits in South America.

McEwen Copper was initially formed in 2021 to hold the company’s 100% interest in Los Azules, along with the Elder Creek exploration property in Nevada. McEwen’s effective interest in the project subsequently diluted to 52% following a series of investments into the copper entity, beginning with its chief owner and chairman Rob McEwen.

Other notable investors include Nuton, a Rio Tinto venture that has developed a propriety copper heap leaching technology, and Netherlands-based automaker Stellantis. Each of Stellantis and Nuton holds 14.2% of McEwen Copper, while Rob McEwen owns 13.8%.

By market close Wednesday, McEwen’s stock jumped 10.8% to trade at $10.65 a share, its highest in a month. It continued to climb to $10.84 on Thursday morning. The company’s market capitalization stood at US$382.3 million in New York.