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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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Commission file number 001-33190

(866) 441-0690

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of June 28, 2019 (the last business day of the registrant’s second fiscal quarter), the aggregate market value of the registrant’s voting and non-voting common equity held by non-affiliates of the registrant was $489,362,153 based on the closing price of $1.75 per share as reported on the NYSE. There were 400,398,425 shares of common stock outstanding on March 13, 2020.

DOCUMENTS INCORPORATED BY REFERENCE: Portions of the registrant’s Proxy Statement for the 2020 Annual Meeting of Shareholders are incorporated into Part III, Items 10 through 14 of this report.

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ADDITIONAL INFORMATION

Descriptions of agreements or other documents in this report are intended as summaries and are not necessarily complete. Please refer to the agreements or other documents filed or incorporated herein by reference as exhibits. Please see Item 15, Exhibits, and Financial Statement Schedules in this report for a complete list of those exhibits.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Please see the note under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” for a description of special factors potentially affecting forward-looking statements included in this report.

CAUTIONARY NOTE TO UNITED STATES INVESTORS—INFORMATION CONCERNING

PREPARATION OF RESOURCE AND RESERVE ESTIMATES

McEwen Mining Inc. (“McEwen Mining,” “we”, “our”, “us” or the “Company”) is required to prepare reports under the Securities Exchange Act of 1934 and the Canadian Securities Administrators’ National Instrument 43-101 “Standards of Disclosure for Mineral Projects” (“NI 43-101”), under the Canadian securities laws because we are listed on the Toronto Stock Exchange (“TSX”) and subject to Canadian securities laws. Standards under NI 43-101 are materially different than the standards generally permitted in reports filed with the United States (“U.S.”) Securities and Exchange Commission (“SEC”).

Definitions of terms under NI 43-101 differ materially from the definitions of those and related terms in Industry Guide 7 (“Guide 7”) promulgated by the SEC. Under U.S. standards, mineralization may not be classified as a “reserve” unless a determination has been made that the mineralization could be economically and legally produced or extracted at the time the reserve determination is made. Under Guide 7 standards, a “final” or “bankable” feasibility study or other report is required to report reserves, the three-year historical average precious metals prices are used in any reserve or cash flow analysis to designate reserves and the primary environmental analysis or report must be filed with the appropriate government authority.

One consequence of these differences is that “reserves” calculated in accordance with Canadian standards may not be “reserves” under Guide 7 standards. U.S. investors should be aware that the McEwen Mining properties with reserves as defined by Guide 7 are the Black Fox mine, the Gold Bar mine and the San José mine. All other properties do not have “reserves” as defined by Guide 7 and Investors are cautioned not to assume that any part or all of the disclosed mineralized material will be confirmed or converted into Guide 7 compliant “reserves”.

Further, since we have no reserves on some of our properties as defined in Guide 7, we have in the past and will continue to expense substantially all design, construction and development costs with regard to those properties, even though these expenditures are expected to have a future economic benefit in excess of one year. Only certain types of property and equipment which have alternative uses or significant salvage value may be capitalized without proven and probable reserves. We also expense our asset retirement obligations on those properties. Companies that have reserves under Guide 7 typically capitalize these costs, and subsequently depreciate or amortize them on a units-of-production basis as reserves are mined. Unlike these other companies, on properties that have no reserves we depreciate or amortize any capitalized costs based on the most appropriate amortization method, which includes straight-line or units-of-production method over the estimated life of the mine, as determined by our internal mine plans. Because of these and other differences, our financial statements may not be comparable to the financial statements of mining companies that have established reserves on all of their properties.

Under NI 43-101, we report measured, indicated and inferred resources, which are measurements that are generally not permitted under Guide 7. The estimation of measured resources and indicated resources involve greater uncertainty as to their existence and economic feasibility than the estimation of proven and probable reserves under Guide 7. U.S. investors are cautioned not to assume that any part of measured or indicated resources will ever be converted into economically mineable reserves. The estimation of inferred resources involves far greater uncertainty as to their existence and economic viability than the estimation of other categories of resources. Inferred mineral resources could be upgraded to indicated mineral resources with continued exploration. Therefore, U.S. investors are also cautioned not to assume that all or any part of inferred resources exist, or that they can be legally or economically mined.

Canadian regulations permit the disclosure of resources in terms of “contained ounces” provided that the tonnes and grade for each resource are also disclosed; however, Guide 7 only permits issuers to report “mineralized material” in tonnage and average grade without reference to contained ounces. Under U.S. regulations, the tonnage and average grade described herein or disseminated by us would be characterized as mineralized material. We provide such disclosure about our properties to allow a means of comparing our projects to those of other companies in the mining industry, many of which are Canadian and report pursuant to NI 43-101, and to comply with applicable disclosure requirements.

We also note that drill results are not indicative of mineralized material in other areas where we have mining interests. Furthermore, mineralized material identified on our properties does not and may never have demonstrated economic or legal viability.

RELIABILITY OF INFORMATION

Minera Santa Cruz S.A. (“MSC”), the owner of the San José mine, is responsible for and has supplied to us all reported results from the San José mine. The technical information contained herein with regard to the San José mine is, with few exceptions as noted, based entirely on information provided to us by MSC. Our joint venture partner, a subsidiary of Hochschild Mining plc, and its affiliates other than MSC do not accept responsibility for the use of project data or the adequacy or accuracy of this information.

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During 2019, production from the Gold Bar mine consisted of 100% doré, the production at the Black Fox mine was 99% doré and 1% slag and fine carbon and from the El Gallo Project consisted of approximately 97% doré and 3% slag and fine carbon. Production from the San José mine consisted of approximately 44% doré and 56% concentrate.  

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During 2019, we reported the following consolidated production attributable to us:

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Gold and silver bullion obtained from the doré produced in USA, Canada, Mexico and the San José mine is sold at the prevailing spot market price. Concentrates produced by the San José mine are provisionally priced, whereby the selling price is subject to final adjustments at the end of a period ranging from 30 to 90 days after delivery to the customer. The final price is based on the market price at the relevant quotation point stipulated in the contract. Due to the time elapsed between shipment and the final settlement with the buyer, MSC must estimate the prices at which sales of metals will be settled. At the end of each financial reporting period, previously recorded provisional sales are adjusted to estimated settlement metals prices based on relevant forward market prices until final settlement with the buyer.

During 2019, revenues from gold and silver sales were $43.8 million for the Gold Bar mine, $50.1 million for the Black Fox mine, $23.1 million for the El Gallo Project, and $129.3 million for the San José mine on a 49% basis. Revenue from the San José mine is not included in our Consolidated Statements of Operations and Comprehensive (Loss) as we use the equity method of accounting for MSC. See Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations for additional information regarding production and operating results for our properties, and Item 8. Financial Statements and Supplementary Data, Note 2, Summary of Significant Accounting Policies—Investments, for additional information regarding the equity method of accounting.

Like all metal producers, our operations are affected by fluctuations in metal prices. The following table presents the annual high, low and average daily London P.M. Fix prices per ounce for gold and London Fix prices per ounce for silver over the past three years and 2020 to the most recent practical date on the London Bullion Market:

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On March 13, 2020, the London P.M. Fix for gold was $1,563, per ounce and the London Fix for silver was $15.77 per ounce.

Mineralized Material Processing Methods

Gold and silver are extracted from mineralized material by either milling or heap leaching depending on, among other things, the amount of gold and silver contained in the material, whether the material is naturally oxidized or not, and the amenability of the material to treatment. At the Gold Bar mine and the El Gallo Project, the mineralized material is processed using heap leaching methods. Heap leaching consists of stacking crushed, oxidized material on impermeable pads, where a weak cyanide solution is applied to the surface of the heap to dissolve and leach the gold and silver. The gold and silver-bearing solution is then collected and processed into doré bars.

At Black Fox, mineralized material is transported to the mill site and fed to the mill’s crushing circuit. Following additional processing and refining, the mill produces doré bars.

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At San José, mineralized material is processed at a mill site with half of the concentrate material processed into doré, and the balance of the concentrate material filtered and shipped as concentrate.

Hedging Activities

Our strategy is to provide shareholders with exposure to gold and silver prices by selling our gold and silver ounces at spot market prices and consequently, we do not hedge our gold or silver sales. We may, however, from time to time, manage certain risks associated with fluctuations in foreign currencies using the derivatives market.

Gold and Silver Reserves

We have established gold and/or silver reserves at three of our properties, including Gold Bar, Black Fox and San José. We initially established reserves at Gold Bar as of December 31, 2017, and such estimate was updated as of December 31, 2018. As of the date of filing this report, the updated reserve estimate for the Gold Bar mine is being evaluated in light of recent developments potentially affecting our resource model and mine plan. To date, mining at Gold Bar has been from three pits, two at Cabin Creek and one at Gold Pick West. The recent transition from the Cabin Creek pits to Gold Pick West has resulted in lower ore tonnes, gold grades and contained ounces from the upper benches of the pit as compared to our block model. This observed disparity may be the result of greater structural control of the mineralization than was previously expected but is now visible in the newly-developed pit. With this recent information in mind, we are evaluating the model and the related mine plan with the third-party engineers retained by us to prepare the reserve estimate. Preliminary iterations of a revised model suggest that a material reduction in contained ounces may result, although at this time we are unable to quantify any reduction with any degree of confidence. We will update the Gold Bar mine reserve estimate as of December 31, 2019 as soon as the information is available, by amendment to this report or other suitable means.

The following table summarizes the estimated portion of proven and probable gold and silver reserves attributable to us for Black Fox mine and San José mine as of December 31, 2019:

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Competitive Business Conditions

We compete with many companies in the mining and mineral exploration and production industry, including large, established mining companies with substantial capabilities, personnel, and financial resources. There is a limited supply of desirable mineral lands available for claim-staking, lease, or acquisition in the United States, Canada, Mexico, or Argentina, and other areas where we may conduct our mining or exploration activities. We may be at a competitive

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disadvantage in acquiring mineral properties, since we compete with these individuals and companies, many of which have significantly greater financial resources and larger technical staffs than we do. From time to time, specific properties or areas which would otherwise be attractive to us for exploration or acquisition may be unavailable due to their previous acquisition by other companies or our lack of financial resources.

Competition in the industry is not limited to the acquisition of mineral properties, but also extends to the technical expertise to find, advance, and operate such properties; the labor to operate the properties; and the capital for the purpose of funding such exploration and development. Many competitors not only explore for and mine precious and base metals, but conduct refining and marketing operations on a world-wide basis. Such competition may result in not only our company being unable to acquire desired properties, but to recruit or retain qualified employees or to acquire the capital necessary to fund our operation and advance our properties. Our inability to compete with other companies for these resources would have a material adverse effect on our results of operation, financial condition and cash flows.

General Government Regulations

In the United States, Canada, Mexico and Argentina, we are subject to various governmental laws and regulations, including environmental regulations. Other than operating licenses for our mining and processing facilities and concessions granted under contracts with the host government, there are no third party patents, licenses or franchises material to our business.  The applicable laws and regulations applicable to us include:

We believe that all of our properties are operated in compliance with all applicable governmental laws and regulations.

Reclamation Obligations

Under applicable laws in the jurisdictions where our properties are located, we are required to reclaim disturbances caused by our mining activities.  Accordingly, we have recorded estimates in our financial statements for our reclamation obligations, in accordance with United States Generally Accepted Accounting Principles (“US GAAP” or “GAAP”) the most significant of which are related to our properties in the U.S., Canada and Mexico.  

Estimated future reclamation costs are based primarily on legal and regulatory requirements. At December 31, 2019, we accrued $32.2 million for reclamation costs relating to currently developed and producing properties. These amounts are included in Asset Retirement Obligation on the Consolidated Balance Sheets.

U.S. Environmental Laws

We are subject to extensive environmental regulation under the laws of the U.S. and Nevada, the state where our U.S. operations are conducted.  For example, certain mining wastes from the extraction and processing of ores would be considered hazardous waste under the Resource Conservation and Recovery Act (“RCRA”) and state law equivalents, but are currently exempt from the extensive set of Environmental Protection Agency (“EPA”) regulations governing hazardous waste. If our mine wastes were treated as hazardous waste under RCRA or such wastes resulted in operations being designated as “Superfund” sites under the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”) or state law equivalents for cleanup, significant expenditures could be required for the construction of additional waste disposal facilities, for other remediation expenditures, or for natural resource damages. Under CERCLA, any present or past owners or operators of a Superfund site generally may be held liable and may be forced to undertake remedial cleanup action or to pay for the government’s cleanup efforts. Such owners or operators may also be liable to governmental entities for the cost of damages to natural resources, which may be substantial. Additional regulations or requirements may also be imposed upon our operations, tailings, and waste disposal areas, as well as upon mine closure under federal and state environmental laws and regulations, including, without limitation, CERCLA, the Clean Water Act, Clean Air Act, the Endangered Species Act and state law equivalents.

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We have reviewed and considered current federal legislation relating to climate change and do not believe it to have a material effect on our operations. Future changes in U.S. federal or state laws or regulations could have a material adverse effect upon us and our results of operations.

Foreign Government Regulations

Canada, where the Black Fox mine, Stock mill and other exploration projects are located, and Mexico, where the El Gallo Project and Fenix Project are located, have both adopted laws and guidelines for environmental permitting that are similar to those in effect in the U.S. The permitting process requires a thorough study to determine the baseline condition of the mining site and surrounding area, an environmental impact analysis, and proposed mitigation measures to minimize and offset the environmental impact of mining operations. We have received all permits required to operate our current activities in Canada and Mexico and have received all permits necessary for the exploration activities being conducted at our other non-U.S. properties.

Customers

Production from Gold Bar, Black Fox, and the El Gallo Project is sold as refined metal on the spot market or doré under the terms set out in doré purchase agreements.

We have doré purchase agreements with the Bank of Nova Scotia (“Scotia”), a Canadian financial institution, our refineries, and with metals trading companies.  Under the terms of our doré purchase agreement with Scotia, we have the option to sell approximately 90% of the gold and silver contained in doré bars produced at Gold Bar, Black Fox and the El Gallo Project prior to the completion of refining by the third party refiner.  During the year ended December 31, 2019, 89% of our consolidated sales were made to Scotia, with 30% of the sales made through the doré purchase agreement.

During the year ended December 31, 2019, 79% of total sales from the San José mine were made to three companies: Trafigura, a Singapore corporation, accounted for 13% of that amount, Argo-Heraeus, a Swiss company, accounted for 54% of such amount and LS Nikko Copper Inc., a South Korean company, accounted for 33% of that amount. MSC has sales agreements with each of these purchasers.

In the event that our customer relationships or MSC’s customer relationships were interrupted for any reason, we believe that we or MSC could locate other purchasers for our products. However, any interruption may temporarily disrupt the sale of our products and could adversely affect our operating results.

Employees

As of December 31, 2019, we had 448 employees including 94 in the United States, 23 in Toronto, Ontario, Canada, 212 in Timmins, Ontario, Canada, 113 employees based in Mexico, and 6 in Argentina. All of our employees based in Toronto work in an executive, technical or administrative position, while our employees in the United States, Timmins, Mexico, and Argentina include laborers, craftsmen, mining, geology and environmental specialists, information technologists, and various other support roles. As of December 31, 2019, MSC had 1,404 employees in Argentina.

A portion of our employees in Mexico are covered by union labor contracts with whom we believe we have good relations. We also frequently engage independent contractors in connection with certain administrative matters and the exploration of our properties, such as drillers, geophysicists, geologists, and other specialty technical disciplines.

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For Canada and United States, we engage independent contractors for extractive and exploration activities such as drilling, geophysics, hauling and crushing.

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Risks Relating to Our Company

Our results of operations, cash flows and the value of our properties are highly dependent on the market prices of gold, silver, and copper and these prices can be volatile.

The profitability of our gold and silver mining operations and the value of our mining properties are directly related to the market price of gold, silver and copper. The price of gold, silver and copper may also have a significant influence on the market price of our common stock. Historically, the market price of gold and silver has fluctuated significantly and is affected by numerous factors beyond our control. These factors include supply and demand fundamentals, global or national political or economic conditions, expectations with respect to the rate of inflation, the relative strength of the U.S. dollar and other currencies, interest rates, gold and silver sales and loans by central banks, forward sales by metal producers, accumulation and divestiture by exchange traded funds, and a number of other factors such as industrial and commercial demand. The volatility of mineral prices represents a substantial risk which no amount of planning or technical expertise can fully eliminate.

We derive all of our revenue from the sale of gold and silver and our results of operations will fluctuate as the prices of these metals change.  A period of significant and sustained lower gold and silver prices would materially and adversely affect our results of operations and cash flows. In the event mineral prices decline or remain low for prolonged periods of time, our existing producing properties may become uneconomic and we might be unable to develop our undeveloped properties, which may further adversely affect our results of operations, financial performance and cash flows. An asset impairment charge may also result from the occurrence of unexpected adverse events that impact our estimates of expected cash flows generated from our producing properties or the market value of our non-producing properties, including a material diminution in the price of gold and/or silver.  

Our results of operations have been and could in the future be materially and adversely affected by the impairment of assets.

During 2019, the price of gold, as measured by the London PM fix, fluctuated between $1,270 and $1,546 per ounce, while the price of silver fluctuated between $14.38 and $19.31 per ounce.  As at March 13, 2020, gold, silver and copper prices were $1,563 per ounce, $15.77 per ounce, and $2.46 per pound, respectively.

Our estimates of proven and probable reserves and mineralized material are based on interpretation and assumptions and may yield less mineral production under actual conditions than is currently estimated.

Unless otherwise indicated, proven and probable reserves and mineralization figures presented in our filings with securities regulatory authorities, including the SEC, news releases and other public statements that may be made from time to time, are based upon estimates made by both independent and our own internal professionals. Estimates of proven and probable reserves and mineralized material are subject to considerable uncertainty and are based, to a large extent, on the prices of gold and silver and interpretations of geologic data obtained from drill holes and other exploration techniques. These prices and interpretations are subject to change. If we determine that certain of our estimated reserves or mineralized material have become uneconomic, we may be forced to reduce our estimates.  Actual production may be significantly less than we expect.

When making determinations about whether to advance any of our projects to development, we rely upon such estimated calculations as to the mineralized material and grades of mineralization on our properties. Until ore is mined and processed, mineralized material and grades of mineralization must be considered as estimates only.  We cannot ensure that these estimates will be accurate, or this mineralization can be mined or processed profitably.

Any material changes in mineral estimates and grades of mineralization may affect the economic viability of placing a property into production and such property’s return on capital. There can be no assurance that minerals recovered in small scale tests will be recovered in large-scale tests under on-site conditions or in production scale. Extended declines in market prices for gold and/or silver may render portions of our mineralization estimates uneconomic and result in reduced reported mineralization or adversely affect the commercial viability of one or more of our properties. Any material reductions in estimates of mineralization, or of our ability to extract this mineralization, could have a material adverse effect on our results of operations or financial condition.

Investors should also be aware that calculations of “reserves” differ under SEC reporting standards and those under other international standards, such as Canada.  Investors should also be aware that mineralized material may never be converted

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into reserves.  See, CAUTIONARY NOTE TO UNITED STATES INVESTORS-INFORMATION CONCERNING PREPARATION OF RESOURCE AND RESERVE ESTIMATES.

A material reduction in cash flow that might result from the revision of our mine plan and reserve estimate at the Gold Bar mine in Nevada may require reductions in our operating expeditures to preserve working capital.

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We initially established reserves at Gold Bar as of December 31, 2017, and such estimate was updated as of December 31, 2018. As of the date of filing this report, the updated reserve estimate for the Gold Bar mine is being evaluated in light of recent developments potentially affecting our resource model and mine plan. Recent mining at our Gold Bar has resulted in lower ore tonnes, gold grades and contained ounces as compared to our block model. With this recent information in mind, we are evaluating the model and the related mine plan with the third-party engineers retained by us to prepare the reserve estimate. Preliminary iterations of a revised model suggest that a material reduction in contained ounces may result, although at this time we are unable to quantify any reduction with any degree of confidence. If the revised plan and reserve estimate results in material changes to our production and related cash flow from Gold Bar in 2020, we may be forced to curtail, defer or suspend operating expenditures and/or raise capital through outside financing such as additional debt or equity. Any reductions in operating expenditures may further reduce cash flow and adversely affect our operations.

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We have incurred substantial losses in recent years and may never return to profitability.

During the three years ended December 31, 2019, we have incurred pre-tax losses of $63.6 million, $47.6 million and $26.0 million. As of December 31, 2019, our accumulated deficit, which includes non-cash impairment charges, was $1.0 billion. In the future, our ability to become profitable will depend on the profitability of the Gold Bar, Black Fox and San José mines, our ability to bring the Froome project into production and generate revenue sufficient to cover our costs and expenses, and our ability to advance, sell or otherwise monetize our other properties, including the Los Azules copper project. In pursuit of that objective, we will seek to identify additional mineralization that can be extracted economically at operating and exploration properties. For our non-operating properties that we believe demonstrate economic potential, we need to either develop our properties, locate and enter into agreements with third party operators, or sell the properties. We may suffer significant additional losses in the future and may not be profitable again. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis.

We may be unable to replace gold and silver reserves as they become depleted.

Like all metal producers, we must continually replace reserves depleted by production to maintain production levels over the long term and provide a return on invested capital. Depleted reserves can be replaced in several ways, including expanding known ore bodies, by locating new deposits or acquiring interests in reserves from third parties. Exploration is highly speculative in nature, involves many risks and uncertainties and is frequently unsuccessful in discovering significant mineralization. Accordingly, our current or future exploration programs may not result in new mineral producing operations. Even if significant mineralization is discovered, it will likely take many years from the initial phases of exploration until commencement of production, during which time the economic feasibility of production may change.

From time to time, we may acquire ore reserves from other parties, as we did in 2017. Such acquisitions are based on an analysis of a variety of factors including historical operating results, estimates of and assumptions regarding the extent of ore reserves, the timing of production from such reserves and cash and other operating costs. In addition, we may rely on data and reports prepared by third parties (including the ability to permit and comply with existing regulations) and which may contain information or data that we are unable to independently verify or confirm in advance. Other than historical operating results, all of these factors are uncertain and may have an impact on our revenue, our cash flow and other operating issues, as well as contributing to the uncertainties related to the process used to estimate ore reserves.

As a result of these uncertainties, our exploration programs and acquisitions may not result in the expansion or replacement of our current production with new ore reserves or operations, which could have a material adverse effect on our business, prospects, results of operations and financial position.

Our 2017 Canadian acquisitions and any future acquisitions may not achieve their intended results.

The acquisition completed in 2017 and any future acquisitions subject us to many risks. The Black Fox Complex acquired in 2017 is a distressed asset which has struggled to produce positive cash flows during its years of operation.  We are working to improve the operations but with a small reserve base, the success of this operation is dependent upon finding more resources through exploration and there is no guarantee that we will be able to convert these resources into mineable

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reserves. We may discover title defects or adverse environmental or other conditions relating to the properties acquired in the transactions of which we are currently unaware. Environmental, title, and other problems could reduce the value of the properties to us, and, depending on the circumstances, we could have limited or no recourse to the sellers with respect to those problems. We have assumed substantially all of the liabilities associated with acquired properties and would be entitled to indemnification in connection with those liabilities in only limited circumstances, for limited periods and in limited amounts. Potential remedies may not be adequate to cover any liabilities we incur, and such liabilities could be significant.

Our business requires substantial capital investment and we may be unable to raise additional funding on favorable terms to develop additional mining operations.

We have in the past and will likely in the future require significant capital to develop our exploration projects. We continue to evaluate capital and development expenditure requirements to advance Los Azules, Grey Fox, Stock and the Fenix Project. If we make a positive decision to develop one or more of these initiatives, the expenditures incurred may significantly exceed our working capital. Our ability to obtain necessary funding, in turn, depends upon a number of factors, including the state of the economy, our operating results and applicable commodity prices. We may not be successful in obtaining the required financing to advance our projects or other purposes, on terms that are favorable to us or at all, in which case, our ability to replace reserves and continue operating would be adversely affected. Failure to obtain such additional financing could result in delay or indefinite postponement of further exploration or potential development and the possible partial or total loss of our interest in certain properties. Even if we are successful in obtaining additional equity capital, it will result in dilution to existing shareholders.

Our indebtedness adversely affects our cash flow and may adversely affect our ability to operate our business.

As of December 31, 2019, we had an outstanding long term, secured debt of $50 million. Repayment of the loan is secured by a lien on certain of our and our subsidiaries’ assets. This debt requires us to make monthly interest payments and, beginning in August 2020, to begin making monthly principal payments of $2 million for 12 months and a final $26 million payment on August 10, 2021.We cannot be certain that our cash flow from operations will be sufficient to allow us to pay the principal and interest on our debt and meet our other obligations. Even if we have sufficient cash flow to retire the debt, those payments will affect the amount of cash we have available to invest in capital investment, exploration, ongoing operations and other purposes. Payments on our debt may also inhibit our ability to react to changing business conditions.

Any failure to meet our debt obligations could harm our business and financial condition and may require us to sell assets or take other steps to satisfy the debt.

Our ability to make payments on and/or to refinance our indebtedness and to fund planned capital expenditures will depend on our ability to generate sufficient cash flow from operations in the future. We cannot assure that our business will generate sufficient cash flow from operations or that future borrowings will be available to us in an amount sufficient to enable us to pay principal and interest on our indebtedness or to fund our other liquidity needs. Decreases in precious metal prices, in addition to execution of our mine plans at existing operations, may adversely affect our ability to generate cash flow from operations. If our cash flow and existing capital resources are insufficient to fund our debt obligations, we may be forced to reduce our planned capital expenditures, sell assets, seek additional equity or debt capital, or restructure our debt, and any of these actions, if completed, could adversely affect our business and/or the holders of our securities. We cannot assure you that any of these remedies could, if necessary, be completed on commercially reasonable terms, in a timely manner or at all. In addition, any failure to make scheduled payments of interest and principal on our outstanding indebtedness could result in the immediate acceleration of the debt and foreclosure of our assets.

Restrictive debt covenants could limit our growth and our ability to finance our operations, fund our capital needs, respond to changing conditions, and engage in other business activities that may be in our best interests.

Our credit facility contains covenants that restrict or limit our ability to:

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As part of our facility, the debt can be called in certain circumstances, including on demand in the event of a material adverse change in our business or our inability to satisfy certain financial tests on an ongoing basis. Our ability to comply with these requirements may be affected by events beyond our control, and we cannot assure you that we will satisfy them in the future. In addition, these requirements could limit our ability to obtain future financings, make needed capital expenditures, withstand a future downturn in our business or the economy in general, or otherwise conduct necessary corporate activities. We may also be prevented from taking advantage of business opportunities that arise because of the restrictive covenants under our debt agreement. A breach of any of the covenants in our debt agreements could result in a default under the agreement.

Increased operating and capital costs could affect our results of operations.

Costs at any particular mining location are subject to variation due to a number of factors, such as variable ore grade, changing metallurgy and revisions to mine plans in response to the physical shape and location of the ore body, as well as the age and utilization rates for the mining and processing- related facilities and equipment. In addition, costs are affected by the price and availability of input commodities, such as fuel, electricity, labor, chemical reagents, explosives, steel, concrete and mining and processing related equipment and facilities. Commodity costs are, at times, subject to volatile price movements, including increases that could make production at certain operations less profitable. Further, changes in laws and regulations can affect commodity prices, uses and transport. Reported costs may also be affected by changes in accounting standards. A material increase in costs at any significant location could have a significant effect on our results of operation and operating cash flow.

We could have significant increases in capital and operating costs over the next several years in connection with the development of new projects in challenging jurisdictions and in the sustaining and/or expansion of existing mining and processing operations. Costs associated with capital expenditures may increase in the future as a result of factors beyond our control. Increased capital expenditures may have an adverse effect on the results of operation and cash flow generated from existing operations, as well as the economic returns anticipated from new projects.

If we do not hedge our exposure to reductions in gold and silver prices, we may be subject to significant reductions in price.

We do not use hedging transactions with respect to any of our gold and silver production and we do not expect to do so in the future.  Accordingly, we may be exposed to more significant price fluctuations if gold and/or silver prices decline. While the use of hedging transactions limits the downside risk of price declines, their use also may limit future revenues from price increases. Hedging transactions also involve the risk that the counterparty may be unable to satisfy its obligations.

We own our 49% interest in the San José mine under the terms of an option and joint venture agreement (“OJVA”), and therefore we are unable to control all aspects of the exploration and development of, and production from, this property.

Our interest in the San José mine is subject to the risks normally associated with the conduct of joint ventures. A disagreement between joint venture partners on strategic decisions or how to conduct business efficiently, the inability of joint venture partners to meet their obligations to the joint venture or third parties, or litigation arising between joint venture partners regarding joint venture matters could have a material adverse effect on the viability of our interests held through the joint venture. Since all day-to-day decisions are made by the majority owner of the venture, we are unable to participate in those decisions, including whether and when to pay dividends to the venture partners.

We conduct operations in a number of foreign countries and are exposed to legal, political and social risks associated with those operations.

A significant portion of our revenue in 2019 was generated by operations outside the United States.  Exploration, development, production and closure activities in many countries are potentially subject to heightened political and social risks that are beyond our control and could result in increased costs, capacity constraints and potential disruptions to our business. These risks include the possible unilateral cancellation or forced renegotiation of contracts in which we may,

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directly or indirectly, have an interest, unfavorable changes in foreign laws and regulations, royalty and tax increases (including taxes associated with the import or export of goods), risks associated with consumption taxes in Mexico, Argentina, and Canada, income tax refund recovery and collection processes in Mexico and Argentina, changes in US legislation as applicable to foreign operations, claims by governmental entities or indigenous communities, expropriation or nationalization of property and other risks arising out of foreign sovereignty over areas in which our operations are conducted. The right to import and export gold and silver may depend on obtaining certain licenses and quotas, which could be delayed or denied at the discretion of the relevant regulatory authorities, or could become subject to new taxes or duties imposed by U.S. or foreign jurisdictions, which could have a material adverse effect on our business, financial condition, or future prospects. In addition, our rights under local law may be less secure in countries where the rule of law is less robust and judicial systems may be susceptible to manipulation or influence from government agencies, non-governmental organizations or civic groups.

Any of these developments could require us to curtail or terminate operations at our mines, incur significant costs to renegotiate contracts, meet newly-imposed environmental or other standards, pay greater royalties or higher prices for labor or services and recognize higher taxes, or experience significant delays or obstacles in the recovery of consumption taxes or income tax refunds owed, which could materially and adversely affect our financial condition, results of operations and cash flows.

Our ongoing and future success depends on developing and maintaining productive relationships with the communities, including indigenous peoples, and other stakeholders in our operating locations. Notwithstanding our ongoing efforts, local communities and stakeholders can become dissatisfied with our activities or the level of benefits provided, which may result in civil unrest, protests, direct action or campaigns against us. Any such occurrences could materially and adversely affect our financial condition, results of operations and cash flows.

Our operations in Argentina and Mexico are subject to political and social risks.

With respect to our affiliated company, Minera Santa Cruz S.A (“MSC”) which owns the San José mine, there are risks relating to an uncertain or unpredictable political and economic environment in Argentina, illustrated by the following:

With respect to the El Gallo Project in Mexico, there has been an ongoing level of violence and crime relating to drug cartels and gangs in Sinaloa State where we operate, and in other regions of Mexico. Our facility at the El Gallo Project

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was robbed in 2015.  On December 17, 2019, the US State Department issued a Level 2 (“increased caution”) warning with respect to five Mexican states, including Sinaloa State, due to violent crime.  These events may disrupt our ability to carry out exploration and mining activities and affect the safety and security of our employees and contractors.

Estimates relating to new development projects and mine plans of existing operations are uncertain and we may incur higher costs and lower economic returns than estimated.

Our decision to develop a project is typically based on the results of feasibility studies, which estimate the anticipated economic returns of a project. The actual project profitability or economic feasibility may differ from such estimates as a result of any of the following factors, among others:

Our recent development activities, including Gold Bar and Black Fox, may not result in the expansion or replacement of past production with new production, or one or more of these new production sites or facilities may be less profitable than currently anticipated or may not be profitable at all, any of which could have a material adverse effect on our results of operations and financial position.

For our existing operations, we base our mine plans on geological, metallurgical and engineering assumptions, financial projections and commodity price estimates. These estimates are periodically updated to reflect changes in our operations, including modifications to our proven and probable reserves and mineralized material, revisions to environmental obligations, changes in legislation and/or our political or economic environment, and other significant events associated with mining operations. There are numerous uncertainties inherent in estimating quantities and qualities of gold, silver and copper and costs to mine recoverable reserves, including many factors beyond our control, that could cause actual results to differ materially from expected financial and operating results or result in future impairment charges.

Our operations and properties in Canada expose us to additional political risks.

Our properties in Canada may be of particular interest or sensitivity to one or more interest groups, including aboriginal groups (which are generally referred to as "First Nations" and “Metis” groups). We have mineral projects in Ontario that are in areas with an aboriginal presence. It is our practice to work closely with and consult with First Nations in areas in which our projects are located or which could be impacted by our activities. However, there is no assurance that relationships with such groups will be positive. Accordingly, it is possible that our production, exploration or development activities on these properties could be interrupted or otherwise adversely affected in the future by political uncertainty, native land claims entitlements, expropriations of property, changes in applicable law, governmental policies and policies of relevant interest groups, including those of First Nations. Any changes in law or relations or shifts in political conditions may be beyond our control, or we may enter into agreements with First Nations, all of which may adversely affect our business and operations and if significant, may result in the impairment or loss of mineral concessions or other mineral rights, or may make it impossible to continue our mineral production, exploration or development activities in the applicable area, any of which could have an adverse effect on our financial conditions and results of operations.

Reform of the General Mining Law in the United States could adversely affect our results of operations.

Periodically, members of the U.S. Congress have introduced bills which would supplant or alter the provisions of the General Mining Law of 1872, which governs the unpatented claims that we control with respect to our U.S. properties. One such amendment has become law and has imposed a moratorium on the patenting of mining claims, which reduced the security of title provided by unpatented claims such as those on our U.S. properties. If additional legislation is enacted, it could substantially increase the cost of holding unpatented mining claims by requiring payment of royalties, and could

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significantly impair our ability to develop mineral estimates on unpatented mining claims. Such bills have proposed, among other things, to make permanent the patent moratorium, to impose a federal royalty on production from unpatented mining claims and to declare certain lands as unsuitable for mining. Although it is impossible to predict at this time what royalties may be imposed in the future, the imposition of such royalties could adversely affect the potential for development of such mining claims, and the economics of existing operating mines on federal unpatented mining claims. Passage of such legislation could adversely affect our business.

Our business is subject to the U.S. Foreign Corrupt Practices Act and similar worldwide anti-bribery laws, a breach or violation of which could lead to civil and criminal fines and penalties, loss of licenses or permits and reputational harm.

We operate in certain jurisdictions that have experienced governmental and private sector corruption to some degree. The U.S. Foreign Corrupt Practices Act and anti-bribery laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments for the purpose of obtaining or retaining business or other commercial advantage. Violations of these laws, or allegations of such violations, could lead to civil and criminal fines and penalties, litigation, and loss of operating licenses or permits, and may damage our reputation, which could have a material adverse effect on our business, financial position and results of operations. There can be no assurance that our internal control policies and procedures always will protect us from recklessness, fraudulent behavior, dishonesty or other inappropriate acts committed by our affiliates, employees or agents. As such, our corporate policies and processes may not prevent all potential breaches of law or other governance practices.

We are subject to foreign currency risks which may increase our costs and affect our results of operation.

While we transact most of our business in U.S. dollars, certain expenses, such as labor, operating supplies, and property and equipment, may be denominated in Canadian dollars, Mexican pesos or Argentine pesos. As a result, currency exchange fluctuations may impact our operating costs. The appreciation of non-U.S. dollar currencies against the U.S. dollar increases costs and the cost of purchasing property and equipment in U.S. dollar terms in Canada, Mexico and Argentina, which can adversely impact our operating results and cash flows.

The value of cash and cash equivalents denominated in foreign currencies also fluctuates with changes in currency exchange rates. Appreciation of non-U.S. dollar currencies results in a foreign currency gain on such investments and a depreciation in non-U.S. dollar currencies results in a loss. We have not utilized market risk sensitive instruments to manage our exposure to foreign currency exchange rates but may in the future actively manage our exposure to foreign currency exchange rate risk. We also hold portions of our cash reserves in Canadian, Mexican and Argentine currency.

Development at Los Azules presents development challenges that may negatively affect, if not completely negate, the feasibility of development of the property.

The Los Azules property is located in a remote location that is currently accessed by 75 miles of dirt road with eight river crossings and two mountain passes above 13,451 feet. Even assuming that technical difficulties associated with this remote location can be overcome, the significant capital costs required to develop the project may make the project uneconomical.  If the long term price of copper were to remain low or decrease significantly below the current price or capital cost estimates increase significantly, Los Azules may not be feasible for development, and we may have to write-off the remaining carrying value of the asset. Furthermore, the project’s economic feasibility has not yet been demonstrated through a full feasibility study. The Preliminary Economic Assessment (“PEA”) is preliminary in nature, includes NI 43-101 mineral resources that are considered too speculative geologically to have economic considerations applied to them that would allow them to be categorized as mineral reserves either under Guide 7 or NI 43-101, and there is no certainty that the PEA will be realized.

We may acquire additional exploration-stage properties on which reserves may never be discovered.

We have in the past and may in the future acquire additional exploration-stage properties. There can be no assurance that we have or will be able to complete the acquisition of such properties at reasonable prices or on favorable terms and that reserves will be identified on any properties that we acquire. We may also experience negative reactions from the financial markets if we are unable to successfully complete acquisitions of additional properties or if reserves are not located on acquired properties. These factors may adversely affect the trading price of our common stock or our financial condition or results of operations.

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The nature of mineral exploration and production activities involves a high degree of risk and the possibility of uninsured losses that could materially and adversely affect our operations.

Exploration for and production of minerals is highly speculative and involves greater risk than many other businesses. Many exploration programs do not result in the discovery of mineralization, and any mineralization discovered may not be of sufficient quantity or quality to be profitably mined. Few properties that are explored are ultimately advanced to production. Our current exploration efforts are, and future development and mining operations we conduct will be, subject to all of the operating hazards and risks normally incident to exploring for and developing mineral properties, such as, but not limited to:

Any of these risks can materially and adversely affect, among other things, the development of properties, production quantities and rates, costs and expenditures, potential revenues and production dates. We currently have no insurance to guard against any of these risks, except in very limited circumstances. If we determine that capitalized costs associated with any of our mineral interests are not likely to be recovered, we would incur a write-down of our investment in these interests. All of these factors may result in losses in relation to amounts spent which are not recoverable.

We do not insure against all risks to which we may be subject in our operations.

While we currently maintain insurance policies to insure against general commercial liability claims and physical assets at our properties in the United States, Canada, Mexico and Argentina, we do not maintain insurance to cover all of the potential risks associated with our operations. We may also be unable to obtain insurance to cover other risks at economically feasible premiums or at all. Insurance coverage may not continue to be available, or may not be adequate to cover liabilities. We might also become subject to liability for environmental, pollution or other hazards associated with mineral exploration and production including bankruptcy of our refiners or other third party contractors which may not be insured against, which may exceed the limits of our insurance coverage or which we may elect not to insure against because of premium costs or other reasons. Losses from these events may cause us to incur significant costs that could materially adversely affect our financial condition and our ability to fund activities on our property. A significant loss could force us to reduce or terminate our operations.

Our operations are subject to permitting requirements which could require us to delay, suspend or terminate our operations on our mining properties.

Our mining operations, including ongoing exploration drilling programs and development efforts, require permits from various state and federal governments, including permits for the use of water and for drilling wells for water. We may be unable to obtain these permits in a timely manner, on reasonable terms or on terms that provide us sufficient resources to develop our properties, or at all. Even if we are able to obtain such permits, the time required by the permitting process can be significant. If we cannot obtain or maintain the necessary permits, or if there is a delay in receiving these permits, our timetable and business plan for exploration of our properties will be adversely affected, which may in turn adversely affect our results of operations, financial condition, cash flows and market price of our securities.

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Due to an increased level of non-governmental organization and aboriginal and local group activity targeting the mining industry, the potential for the government or process instituted by non-governmental organizations, aboriginal and local, to delay the issuance of permits or impose new requirements or conditions upon mining operations may be increased. Any changes in government policies may be costly to comply with and may delay mining operations. Future changes in such laws and regulations, if any, may adversely affect our operations, make our operations prohibitively expensive, or prohibit them altogether. If our interests are materially adversely affected as a result of a violation of applicable laws, regulations, or permitting requirements or a change in applicable law or regulations, it would have a significant negative impact on the value of our company and could have a significant impact on our stock price.

Title to mineral properties can be uncertain, and we may be at risk of loss of ownership of one or more of our properties.

Our ability to explore and operate our properties depends on the validity of our title to that property. Our U.S. mineral properties include leases of unpatented mining claims, as well as unpatented mining and mill site claims, which we control directly. Unpatented mining claims provide only possessory title and their validity is often subject to contest by third parties or the federal government, which makes the validity of unpatented mining claims uncertain and generally riskier.  Similarly, Canadian mineral properties consist of patented and unpatented claims which each have their respective risks and uncertainties.  Further, there may be title defects or additional rights which are not recorded on the title. Our concessions in Mexico are subject to continuing government regulation and failure to adhere to such regulations will result in termination of the concession. Similarly, under Argentine Law, failure to comply with applicable conditions may result in the termination of the concession. Uncertainties inherent in mineral properties relate to such things as the sufficiency of mineral discovery, proper posting and marking of boundaries, assessment work and possible conflicts with other claims not determinable from public record. We have not obtained title opinions covering our entire property, with the attendant risk that title to some claims, particularly title to undeveloped property, may be defective. There may be valid challenges to the title to our property which, if successful, could impair development and/or operations.

We cannot ensure that we will have an adequate supply of water to complete desired exploration or development of our mining properties.

Our mining operations require significant quantities of water for mining, ore processing and related support facilities. Our operations in the United States, Mexico and Argentina are in areas where water is scarce and competition among users for continuing access to water is significant. Continuous production at our mines is dependent on our ability to maintain our water rights and claims and to defeat claims adverse to our current water uses in legal proceedings. Although each of our operations currently has sufficient water rights and claims to cover its operational demands, we cannot predict the potential outcome of pending or future legal proceedings relating to our water rights, claims and uses. Water shortages may also result from weather or environmental and climate impacts out of the Company’s control.

Our continuing reclamation obligations at Tonkin, Gold Bar, Black Fox and other Timmins properties, El Gallo, and other properties could require significant additional expenditures.

We are responsible for the reclamation obligations related to disturbances on all our properties. In Canada and the United States, we are required to post bonds to ensure performance of our reclamation obligations. As of December 31, 2019, we have accrued $32.2 million in estimated reclamation costs for our properties, including $31.6 million covered by surety bonds for projects in the United States and Canada. We have not posted a bond in Mexico as none is required by the current legislation; however, we have recorded a liability based on the estimated amount of our reclamation obligations in that jurisdiction.

There is a risk that any surety bond or recorded liability, even if increased based on the analysis and work performed to update the reclamation obligations, could be inadequate to cover the actual costs of reclamation when actually carried out. The satisfaction of bonding requirements and continuing reclamation obligations will require a significant amount of capital. Further, it is possible that the United States Bureau of Land Management (“BLM”) may request that we provide additional long-term financing supported by a long-term trust for an amount that cannot be determined at present. There is a risk that we will be unable to fund any additional bonding requirements or that the surety bonds may no longer be accepted by the governmental agencies as satisfactory reclamation coverage, in which case we would be required to replace the surety bonding with cash, and further, that the regulatory authorities may increase reclamation and bonding requirements to such a degree that it would not be commercially reasonable to continue exploration activities, which may adversely affect our results of operations, financial performance and cash flows.

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We depend on certain key personnel, and our success will depend on our continued ability to retain and attract such qualified personnel.

Our success is dependent on the efforts, abilities and continued service of certain senior officers and key employees and consultants. A number of our key employees and consultants have significant experience in the precious metals industry. A loss of service from any one of these individuals may adversely affect our operations, and we may have difficulty or may not be able to locate and hire a suitable replacement.

Our ongoing operations and past mining activities are subject to environmental risks, which could expose us to significant liability and delay, suspension or termination of our operations.

All aspects of our operations are subject to American, Canadian, Mexican and Argentine federal, state and local environmental regulation. These regulations mandate, among other things, the maintenance of air and water quality standards and land reclamation. They also set forth limitations on the generation, transportation, storage and disposal of solid and hazardous waste, including cyanide. Environmental legislation is evolving in a manner which will require stricter standards and enforcement, increased fines and penalties for non-compliance, more stringent environmental assessments of proposed projects, and a heightened degree of responsibility for us and our officers, directors and employees. Future changes in environmental regulation, if any, may adversely affect our operations, make our operations prohibitively expensive, or prohibit them altogether. Environmental hazards may exist on our properties that are unknown to us at the present and that have been caused by us, or previous owners or operators, or that may have occurred naturally. We utilize explosives in our business, which could cause injury to our personnel, and damage to our equipment or assets. Mining properties from the companies we have acquired may cause us to be liable for remediating any damage that those companies may have caused. The liability could include response costs for removing or remediating the release and damage to natural resources, including ground water, as well as the payment of fines and penalties. Failure to comply with applicable environmental laws, regulations and permitting requirements may also result in enforcement actions thereunder, including orders issued by regulatory or judicial authorities, causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment, or remedial actions.

Our industry is highly competitive, attractive mineral lands are scarce, and we may not be able to obtain quality properties.

We compete with many companies in the mining industry, including large, established mining companies with substantial capabilities, personnel and financial resources. There is a limited supply of desirable mineral lands available for claim staking, lease or acquisition in the United States, Canada, Mexico and Argentina, and other areas where we may conduct exploration activities. We may be at a competitive disadvantage in acquiring mineral properties, since we compete with these individuals and companies, many of which have greater financial resources and larger technical staffs than we do. From time to time, specific properties or areas which would otherwise be attractive to us for exploration or acquisition may be unavailable to us due to their previous acquisition by other companies or our lack of financial resources. Competition in the industry is not limited to the acquisition of mineral properties but also extends to the technical expertise to find, advance, and operate such properties; the labor to operate the properties; and the capital for the purpose of funding such properties. Many competitors not only explore for and mine precious metals, but conduct refining and marketing operations on a world-wide basis. Such competition may result in our Company being unable not only to acquire desired properties, but to recruit or retain qualified employees or to acquire the capital necessary to fund our operation and advance our properties. Our inability to compete with other companies for these resources would have a material adverse effect on our results of operation, financial condition and cash flows.

We rely on contractors to conduct a significant portion of our operations and construction projects.

A portion of our operations and construction projects are currently conducted in whole or in part by contractors, including specifically our operations at the Gold Bar and Black Fox mines. As a result, our operations are subject to a number of risks, some of which are outside our control, including:

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In addition, we may incur liability to third parties as a result of the actions of our contractors. The occurrence of one or more of these risks could adversely affect our results of operations and financial position.

If our employees or contractors engage in a strike, work stoppage or other slowdown, we could experience business disruptions or increased costs.

As of December 31, 2019, a number of our employees were represented by different trade unions and work councils which subject us to employment arrangements very similar to collective bargaining agreements. Further, most of our employees are based in foreign locations. The laws of certain foreign countries may place restrictions on our ability to take certain employee-related actions or require that we conduct additional negotiations with trade unions, works councils or other governmental authorities before we can take such actions.

If the employees or contractors at the Gold Bar, Mexico, or San José mines were to engage in a strike, work stoppage, or other slowdown in the future, we could experience a significant disruption of our operations. Such disruption could interfere with our business operations and could lead to decreased productivity, increased labor costs, and lost revenue.

We may not be successful in negotiating new collective bargaining agreements or other employment arrangements when the current ones expire. Furthermore, future labor negotiations could result in significant increases in our labor costs. The occurrence of any of the foregoing could have a material adverse effect on our business, financial condition, and results of operations.

Coronavirus pandemic could result in adverse operating results due to workforce reductions, supply and/or demand interruptions and travel restrictions.

Our employees, contractors and suppliers could be affected by contagious diseases, including the coronavirus (“COVID-19”), that could result in a reduction in our workforce due to illness or quarantine, critical supply disruptions, transportation and travel restrictions, and other factors beyond our control. These and other factors could negatively affect our business in complex ways, which are difficult or impossible for us to predict.

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Our business could be negatively impacted by security threats, including cybersecurity threats, and other disruptions.

We face various security threats, including attempts by third parties to gain unauthorized access to sensitive information or to render data or systems unusable; threats to the safety of our employees; threats to the security of our infrastructure; and threats from terrorist acts. There can be no assurance that the procedures and controls we use to monitor these threats and mitigate our exposure to them will be sufficient in preventing them from materializing. If any of these events were to materialize, they could lead to losses of sensitive information, critical infrastructure, personnel or capabilities essential to our operations and could have a material adverse effect on our reputation, financial condition, results of operations, or cash flows.

Our technologies, systems and networks, and those of our business partners, may become the target of cyber-attacks or information security breaches that could result in the unauthorized release, gathering, monitoring, misuse, loss or destruction of proprietary and other information, theft of property or other disruption of our business operations. In addition, certain cyber incidents, such as surveillance, may remain undetected for an extended period. A cyber incident involving our information systems and related infrastructure, or that of our business partners, could disrupt our business plans and negatively impact our operations. Although to date we have not experienced any significant cyber-attacks, there can be no assurance that we will not be the target of such attacks in the future. As cyber threats continue to evolve, we may be required to expend significant additional resources to continue to modify or enhance our protective measures or to investigate and remediate any security vulnerabilities.

Regulations and pending legislation governing issues involving climate change could result in increased operating and capital costs which could have a material adverse effect on our business.

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Producing gold is an energy-intensive business, resulting in a significant carbon footprint. We utilize electricity, diesel fuel, gasoline, and natural gas to produce metal.

A number of governments or governmental bodies have introduced or are contemplating regulatory changes in response to the potential impacts of climate change that are viewed as the result of emissions from the combustion of carbon-based fuels. At the 21^st Conference of the Parties of the United Nations Framework Convention on Climate Change (“UNFCC”) held in Paris in 2015, the Paris Agreement was adopted which was intended to govern emission reductions beyond 2020. The Paris Agreement went into effect in November 2016 when countries that produce at least 55% of the world's greenhouse gas emissions ratified the agreement. While there are no immediate impacts to business from the Paris Agreement, the goal of limiting global warming to “well below 2o C” will be taken up at national levels.

Some of the countries in which we operate have implemented, and are developing, laws and regulations related to climate change and greenhouse gas emissions. In December 2009, the United States Environmental Protection Agency (“EPA”) issued an endangerment finding under the U.S. Clean Air Act that current and projected concentrations of certain mixed greenhouse gases, including carbon dioxide, in the atmosphere threaten the public health and welfare. Additionally, the United States and China signed a bilateral agreement in November 2014 that committed the United States to reduce greenhouse gas emissions by an additional 26% to 28% below 2005 levels by the year 2025. The EPA in August 2015 issued final rules for the Clean Power Plan under Section 111 (d) of the Clean Air Act designed to reduce greenhouse gas emissions at electric utilities in line with reductions planned for the compliance with the Paris Agreement. On June 19, 2019, the EPA as part of a regulatory review repealed the Clean Power Plan and replaced it with the Affordable Clean Energy rule which eliminates most of the emission reduction standards included in the Clean Power Plan. That rule is now the subject of challenges in the courts.

Legislation and increased regulation and requirements regarding climate change could impose increased costs on us, our venture partners and our suppliers, including increased energy, capital equipment, environmental monitoring and reporting and other costs to comply with such regulations.

Several of our directors and officers are residents outside of the United States, and it may be difficult for shareholders to enforce within the United States any judgments obtained against such directors or officers.

Several of our directors and officers are nationals and/or residents of countries other than the United States, and all or a substantial portion of such persons’ assets are located outside of the United States. As a result, it may be difficult for investors to effect service of process on such directors and officers, or enforce within the United States any judgments obtained against such directors and officers, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state thereof. Consequently, shareholders may be effectively prevented from pursuing remedies against such directors and officers under United States federal securities laws. In addition, shareholders may not be able to commence an action in a Canadian court predicated upon the civil liability provisions under United States federal securities laws. The foregoing risks also apply to those experts identified in this report that are not residents of the United States.

The laws of the State of Colorado, our Articles of Incorporation and agreements with certain officers and directors may protect our directors from certain types of lawsuits.

The laws of the State of Colorado provide that our directors will not be liable to us or our shareholders for monetary damages for all but certain types of conduct as directors of the Company. Our Articles of Incorporation permit us to indemnify our directors and officers against all damages incurred in connection with our business to the fullest extent provided or allowed by law, including through stand-alone indemnity agreements. We have also entered into indemnification agreements with our executive officers and directors which require that we indemnify them against certain liabilities incurred by them in their capacity as such. The exculpation provisions may have the effect of preventing shareholders from recovering damages against our directors caused by their negligence, poor judgment or other circumstances. The indemnification provisions may require us to use our limited assets to defend our directors and officers against claims, including claims arising out of their negligence, poor judgment, or other circumstances.

Risks Relating to Our Common Stock

A small number of existing shareholders own a significant portion of McEwen Mining common stock, which could limit your ability to influence the outcome of any shareholder vote.

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As of March 13, 2020, Mr. McEwen beneficially owned approximately 20% of the 400.4 million shares of McEwen Mining common stock outstanding.  Under our Articles of Incorporation and the laws of the State of Colorado, the vote of the holders of a majority of the shares voting at a meeting at which a quorum is present is generally required to approve most shareholder action. As a result, Mr. McEwen will be able to significantly influence the outcome of shareholder votes for the foreseeable future, including votes concerning the election of directors, amendments to our Articles of Incorporation or proposed mergers, acquisitions or other significant corporate transactions.

Our stock price may be volatile, and as a result you could lose all or part of your investment.

In addition to other risk factors identified herein and to volatility associated with equity securities in general, the value of your investment could decline due to the impact of any of the following factors upon the market price of our common stock:

Stock markets in general have in the past and may in the future experience extreme price and volume fluctuations. These fluctuations are often unrelated to operating performance and may adversely affect the market price of our common stock. Adverse price fluctuations may lead to threatened or actual delisting of our common stock from the NYSE. As a result, you may be unable to resell your shares at a desired price.

There is no guarantee that we will declare distributions to shareholders.

From June 2015 to September 2018, we paid a distribution to holders of our common stock on a semi-annual basis. Those distributions were suspended in March 2019. Any determination to reinstate this distribution on our common stock will be based primarily upon our financial condition, results of operations and capital requirements, including for capital expenditures and acquisitions, and our Board of Directors’ determination that the distribution to shareholders is in the best interest of our shareholders and in compliance with all laws and agreements applicable to the Company.  

The future issuances of our common stock will dilute current shareholders and may reduce the market price of our common stock.

Under certain circumstances, our board of directors has the authority to authorize the offer and sale of additional securities without the vote of or notice to existing shareholders. We may issue equity in the future in connection with capital formation, acquisitions, strategic transactions or for other purposes. Based on the need for additional capital to fund expected growth, it is likely that we will issue additional securities to provide such capital and that such additional issuances may involve a significant number of shares of our common stock. Issuance of additional securities in the future will dilute the percentage interest of existing shareholders and may reduce the market price of our common stock and any other outstanding securities. Furthermore, the sale of a significant amount of our common stock by any selling security holders, including Mr. McEwen, may depress the price of our common stock. As a result, you may lose all or a portion of your investment.

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SEGMENT: USA

The following map depicts the location of our major properties in the USA segment, including the Gold Bar mine and exploration properties which are fully owned by us or subject to joint venture agreements. The Gold Bar mine is located in the southern Roberts Mountains along the prolific Battle Mountain-Eureka-Cortez gold trend. Approximately 25 miles northwest of the Gold Bar property is the Cortez gold mine owned by Nevada Gold Mines (Barrick and Newmont joint venture), and 25 miles southeast is the past producing Ruby Hill mine:

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The following table summarizes the land position of our properties in Nevada as of December 31, 2019:

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Production Properties

Gold Bar mine, Nevada (100% owned)

For detailed information on the Gold Bar mine production statistics and financial results, refer to Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Overview and History

The Gold Bar mine is an open pit oxide gold mine with a heap leach pad and gold recovery plant. The mine is located primarily on public lands managed by the BLM. Project construction commenced by us in November 2017 following receipt of the signed Record of Decision from the U.S. Environmental Protection Agency. The Gold Bar mine achieved commercial production on May 23, 2019.

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The property is located within the Battle Mountain-Eureka-Cortez gold trend in Eureka County, Nevada. The property was previously mined from 1987 to 1994 by Atlas Precious Metals Inc.

Location and Access

The Gold Bar mine is located in the Southern Roberts Creek Mountains, in Eureka County, Nevada, approximately 30 miles northwest of the town of Eureka, Nevada, primarily in Township 22 North, Range 50 East (N39°48’16.5”; W116°21’09.65”).  The mine site is accessed from US Highway 50 by travelling north on Robert’s Creek Road, an unimproved dirt road maintained by the Company. The mine area is approximately 15 miles from U.S. Highway 50.

Geology and Mineralization

The mine is located in the Battle Mountain-Eureka mineral belt in a large window of lower-plate carbonate rocks surrounded by upper-plate rocks. The lower-plate carbonates consist of an east-dipping section of Silurian Lone Mountain Dolomite, Devonian McColley Canyon Formation, Devonian Denay Formation, and Devonian Devils Gate Limestone (from oldest to youngest). Gold mineralization is hosted primarily in the Bartine Member of the McColley Canyon Formation, which consists of carbonate wackestones and packstones which are approximately 250 to 380 feet thick. Minor amounts of mineralization are found in the underlying dolomitic limestone Kobeh Member of the McColley Canyon Formation where it is adjacent to apparent feeder structures. The area where the project is located has “Carlin-Type” sediment-hosted gold mineralization characteristics with typical associated alteration (decalcification, silicification).

At Pot Canyon, extensive alteration (silicification) and brecciation occurs at surface and several historic holes returned significant mineralization. In addition, a deep core hole drilled through multiple target zones returned near-surface gold mineralization and Carlin-type alteration and pathfinder elements at several stratigraphic horizons at depth. This mineralization occurs near the Wall Fault, a regional structure interpreted to play an important role in the control of gold mineralization at Gold Bar.

Facilities and Infrastructure

Gold Bar mine construction began in November 2017 with key site facilities and infrastructure completed by the end of 2018 and commercial production declared in May 23, 2019. The Gold Bar mine has well developed infrastructure including on-site power generation and transmission lines, water, natural gas and related supply utilities as well as buildings which support the operations and administration. The water supply for the Gold Bar mine and processing facilities comes from production wells located approximately two miles southeast from the site and powered by a diesel generator. The mining of the open pits is being carried out by a contractor and the work progressed as planned during 2019. Ore from the mine is transported to the crusher and conveyor system with the crushed and agglomerated material transported to the heap leach pad via an overland conveyor.

The ore is stacked onto the heap using a radial stacker and then leached with a weak cyanide solution to extract the precious metal values. The gold is then recovered from the pregnant solution in the carbon plant by adsorbing the dissolved gold onto activated carbon followed by desorption, electrowinning, retorting and smelting to recover the gold as a final doré product.

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Exploration Activities

Exploration activities in 2019 focused on targets around the Gold Bar mine including drilling at the Gold Bar South target to support resource estimation and potential conversion to reserves and drilling at Pot Canyon to test certain near-surface and deep targets. Gold Bar South, acquired by McEwen Mining in 2016, consists of 109 mining claims located approximately 3.5 miles southeast from our Gold Bar mine. Gold Bar South hosts a near surface oxide gold deposit which, based on several historic higher-grade drill intersections, shows exploration potential laterally and at depth. In addition, we completed a deep core hole through multiple targets at Pot Canyon. See Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations for more details. We expect to continue similar drilling at Gold Bar in 2020.

Exploration Properties

Tonkin property (100% owned)

The Tonkin property represents our second largest holding within the Battle Mountain-Eureka Trend in Eureka County, Nevada with approximately 45 sq. miles of claims. The Tonkin property consists of the Tonkin deposit and the previously operating Tonkin mine.

From 1985 through 1989, the Tonkin mine produced approximately 30,000 ounces of gold utilizing an oxide heap leach and a separate ball mill involving bio oxidation to treat refractory sulphide mineralized material. Due to cost escalation and recovery issues, the operation was shut down. The mine site is currently on care-and-maintenance and we continue to advance the reclamation program. We also continue evaluation work with respect to the Tonkin deposit.

Other exploration properties

We hold other exploration stage properties close to the Gold Bar mine which are not considered material at this time.

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SEGMENT: CANADA

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The following map depicts the location of our major properties forming the Canada segment of our operations. The properties within the Canada segment are located in the well-established Timmins Gold Mining district in Northern Ontario, Canada. The segment consists of the Black Fox and Stock properties and various exploration and advanced stage properties (the “Black Fox Complex”), comprising 5,100 hectares of land packages intersecting 9 miles of the Destor-Porcupine Fault, which is known as the ‘Golden Highway.’ The Destor-Porcupine Fault has a total strike length of approximately 124 miles and hosts many of Ontario and Quebec’s prolific gold mines.

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The Black Fox property includes the Black Fox mine and surrounding properties, including the Grey Fox and Froome advanced-stage properties. Stock property, the site of former Stock mine, is located approximately 17 miles from the Black Fox mine. Stock property includes the Stock mill where mineralized material from Black Fox mine is transported to and processed and the Stock exploration property. In addition, Canada segment includes other exploration properties such as Fuller, Davidson-Tisdale, Buffalo Ankerite and Paymaster.

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The location of the various properties is shown below:

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The following table summarizes the Canada land position of our company as of December 31, 2019:

Production Properties

Black Fox mine and Stock mill, Canada (100% owned)

For detailed information on the Black Fox mine and Stock mill production statistics and financial results, refer to Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Overview and History

We acquired the Black Fox Complex in October 2017. It is located in the well-established Timmins Gold Mining district in Northern Ontario, Canada. Its main properties, Stock and Black Fox, are positioned along the Provincial Highway 101, with the Stock property 22 miles east of the city of Timmins and the Black Fox property 6 miles east of the town of Matheson. Given the proximity to communities in a region with primary industries of mining and forestry, local supplies and services are easily available and can be delivered in a timely manner to our operations.

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The Black Fox mine refers to the current mining operation and is an underground gold mine and a key component of the complex, which also includes the Froome and Grey Fox deposits. The Black Fox mine initially produced from 1997 to 2001, operated by Exall Resources Limited. Re-commissioned by Brigus Gold Corporation, the mine restarted in early 2009. Primero Mining Corp. (“Primero”) acquired Brigus on March 5, 2014 and continued to operate the mine. We acquired the property on October 3, 2017 and continued the commercial operations.

Also part of the Black Fox Complex, the Stock property hosts the Stock mill and is the site of the former Stock mine. Exploration initiated by us in 2018 and continuing in 2019 has defined two new mineralized zones at Stock East and Stock West, within a 2-mile mineralized trend along the Destor-Porcupine Fault.

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The land packages of the Black Fox Complex continue to hold exploration potential to depth and along trends. In 2019, we invested $25.5 million in exploration at the Black Fox Complex. A property-wide exploration program was completed in 2019 and included 489,000 ft. (149,000 meters) of surface-staged exploration drilling and 128,000 ft. (39,000 meters) of underground-based exploration drilling. The program delivered very encouraging results, with new targets identified and an expansion of gold resources across the properties.

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The Black Fox mine contains 32 mining right parcels and 50 unpatented claims totaling 10 sq. miles of mining land. The complex also includes 6 sq. miles of surface land. All land parcels are located within Beatty and Hislop townships in the municipality of Black-River Matheson.

Location and Access

The Black Fox mine is located 6 miles east of Matheson, Ontario, and accessed directly from Highway 101 East. Matheson, in turn, is located approximately 45 miles from Timmins, which has a commercial airport. Timmins is approximately 342 miles by air north of Toronto.

The Stock mill is located approximately 17 miles from the Black Fox mine. Mineralized material is shipped to the mill from the Black Fox mine by truck.

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Geology and Mineralization

The Black Fox mine is located within the Abitibi greenstone belt. Gold mineralization at the Black Fox mine occurs in several different geological environments within the main ankerite alteration zone, and generally occurs as: (1) free gold associated with shallow dipping quartz veins and stockworks in green carbonate and ankerite-altered ultramafic rocks; (2) gold-bearing pyrite; (3) gold associated with fine-grained pyrite and (4) free gold in steeply dipping sigmoidal quartz veins.

Facilities and Infrastructure

The Black Fox mine property has well developed infrastructure including electricity, roads, water supply and high-speed internet access. There are seven fully serviced modular buildings which support various functions of the underground mine. There is also a maintenance shop, warehouse, compressed air plant, backfill plant and water management facilities. Mineralized material from the Black Fox mine is transported to, and processed at, the Stock mill, which has a nominal processing capacity of 2,500 tpd.

The primary water supply for the Black Fox mine comes from an on-site fresh water well and water produced from dewatering activities. Current water supplies are adequate to sustain current and planned future operations.

The Stock property, the site of our Stock mill, has well developed infrastructure including electricity, roads, water supply and high-speed internet access. There are also two buildings that support security and administration of the mill. There is an assay lab and several other buildings to support operations and milling, including a hoist house, warehouse and maintenance shop, mine dry building, crusher and conveyor systems and the mill building itself. The site also houses various support structures including storage and generator buildings.

Metal Streaming Agreement

We are obligated to sell 8% of current and future gold production from the Black Fox mine and Froome deposit to Sandstorm Gold Limited (“Sandstorm”) at the lesser of market price or $551 per oz (with inflation adjustments of up to 2% per year) until 2090. We assumed this obligation in connection with our acquisition of the Black Fox mine in 2017.

Advanced-Stage Properties

Grey Fox, Canada (100% owned)

The Grey Fox project is located 2.2 miles southeast of Black Fox mine, and is adjacent to Kirkland Lake Gold’s former Hislop mine. Access is either by paved or well maintained, two-way, dirt roads.

An internal feasibility-level study was completed on the Grey Fox project in early 2015 by Primero, which recommended further development of the deposit. Further advanced project work continued until 2016, when Primero ceased all non-essential expenditures.

In 2019, we completed an exploration program which focused on increasing and further defining the Grey Fox resource. Drilling was also performed to test multiple targets in the Grey Fox area. Exploration activities are expected to continue in 2020 including follow-up (step out) and infill drilling to support resource growth and confirmation of a new zone of mineralization.

Froome, Canada (100% Owned)

The Froome deposit is located 0.5 miles west of the Black Fox mine, accessible by paved and dirt roads.

An internal study was completed in 2019, the results of which suggested positive economics to advance the project. We expect to continue to advance the development of the Froome underground deposit in 2020 and to be mining and producing gold from the deposit in late 2021.

Exploration Properties

The Stock property is the site of the former Stock mine, which produced 137,000 ounces of gold from an underground operation between 1989 and 2005.

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Exploration at Stock property started in 2018 and continued in 2019. The drilling program has been successful returning multiple intersections of high grade gold mineralization at Stock East and Stock West along a 2 mile long segment of the Destor-Porcupine Fault. Stock East and Stock West are located, respectively 0.4 miles and 0.2 miles away from the former Stock mine workings.

Results from our first phase of drilling at Stock West suggest the potential to define a significant new zone of mineralization, with economic importance enhanced by its proximity to the former Stock mine workings.

Other exploration properties acquired in connection with our acquisition of Lexam VG Gold Inc. in 2017 include Davidson-Tisdale, Fuller, Paymaster and Buffalo Ankerite.

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SEGMENT: MEXICO

The following map depicts the location of our property forming the Mexico segment, of which the El Gallo Project (formerly “El Gallo 1” or “El Gallo Mine”) and the advanced-stage Fenix Project are described in the sections below:

The following table summarizes the Company’s land position in Mexico as of December 31, 2019:

Production Properties

El Gallo Project (formerly “El Gallo 1” or “El Gallo Mine”), Mexico (100% owned)

For detailed information on the El Gallo Project production statistics and financial results, refer to Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Overview and History

We own 100% of the El Gallo Project. The El Gallo Project was the open-pit gold mine and heap leach operation originally known as the Magistral mine. We operated the mine from September 2012 to June 2018, when we ceased active mining. Present activities are limited to residual leaching production that will continue until the end of 2021, as well as closure and reclamation activities.

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The El Gallo Project consists of 8 sq miles of concessions. Concession titles are granted under Mexican mining law. Mining concessions are subject to annual work requirements and payment of annual surface taxes which are assessed and levied on a semi-annual basis in accordance with Mexican law. An annual lease agreement for surface access to the El Gallo Project is currently in place.

Location and Access

The El Gallo Project and the surrounding properties are in northwestern Mexico in the western foothills of the Sierra Madre Occidental mountain range, within the State of Sinaloa in the Mocorito Municipality, approximately 60 miles by air northwest of Culiacan, the Sinaloa State capital city. The concessions are located approximately 2.5 miles by road from the town of Mocorito. Access is by paved and well maintained, two-way dirt roads.

Facilities and Infrastructure

The El Gallo Project property has well-developed infrastructure including electricity, roads, water supply and high-speed internet access. There is a truck shop, a warehouse, a fuel depot, core logging facilities, an explosives magazine, heap leach pads, process ponds, an assay laboratory, a three stage crushing plant, an ADR process plant with a sulfidation-acidification recovery (“SAR”) circuit added in the first quarter of 2018 and an administrative office. The laboratory is equipped to process all assay samples from the mine, core, chips and soil. The metallurgical lab is capable of determining cyanide leaching amenability and gold and silver recoveries of mineralized material amenable to cyanide leaching.

Advanced-Stage Properties

Fenix Project, Mexico (100% owned)

Overview and History

Three areas of mineralized material located inside of our property are currently considered for the Fenix Project and are the basis of the resource estimate included in the ongoing Feasibility Study (“FS”).

The Fenix Project contemplates a two-phase development process. Phase 1 includes the reprocessing of material on the gold heap leach pad at the existing El Gallo Project and open pit mining at the El Encuentro area. Phase 2 includes the processing of open pit silver mineralization from El Gallo Silver.

The process plant is expected to use conventional and proven mineral processing and precious metals recovery technologies. Phase 1 would have a throughput rate of 5,510 tons per day (5,000 tonnes per day (tpd)). During Phase 2, mineralized material from the El Gallo Silver would only be processed at a maximum of 3,580 tons per day (3,250 tpd).

Tailings produced during the operation would be stored in a mined-out open pit at the El Gallo Project. As part of this process, tailings deposition would include a delivery system designed to maximize tailings consolidation and water recovery. Utilizing the in pit tailings storage technology is expected to be cost effective and environmentally friendly as it would reduce the disturbance footprint and construction material, eliminate the construction of a tailings dam, recycle process water, and reduce closure obligations by removing the leach pad.

During the second half of 2019, we received the environmental permit approval for in-pit tailings storage in the Samaniego pit and the additional approval for the process plant for Phase 1, which entails the construction of the Carbon-In-Leach (CIL) mill circuit. A decision to pursue the project has not yet been made.

Access and Location

The Fenix Project is located adjacent to the El Gallo Project and is similarly accessible.

Facilities and Infrastructure

The El Gallo Project infrastructure is used to support current work on the Fenix Project.

In addition, the local power grid is situated approximately 9 miles from the Fenix Project, and a new overhead power line would need to be installed to supply grid power to the Fenix Project.

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SEGMENT: LOS AZULES, ARGENTINA

Exploration Properties

The following map depicts the location of the Los Azules project in the province of San Juan in Argentina. Los Azules is located in the Andean Copper Belt, which hosts many of the world’s largest copper deposits.

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The following table summarizes the land position related to Los Azules segment as of December 31, 2019:

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Los Azules Copper Project, Argentina (100% owned)

Overview and History

The Los Azules copper project is an advanced-stage porphyry copper exploration project located in the cordilleran region in the province of San Juan, Argentina near the border with Chile. In 1994, Minera Andes acquired lands in the southern portion of the Los Azules area. Over the years there was additional exploration done by Minera Andes and other companies who owned adjacent properties around Los Azules. We acquired Minera Andes in January 2012.

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During 2019, work continued on preliminary engineering and cost estimates to advance the proposed low altitude all year access route (northern access route). We also advanced the Los Azules water management plan to evaluate the project operating as a zero discharge development.

The environmental baseline monitoring work continued as well as other works, which were identified as necessary to develop a conforming Environmental Impact Assessment (“EIA”) submission. The environmental work included the geological mapping of the tailings dam design.

In 2020, we expect to complete the environmental studies to gather the requested information to prepare the Environmental Impact Assessment for the next development phase.

Location and Access

The project is located at approximately 31^o 13’30” South latitude and 70^o 13’50” West longitude and abuts the Chile-Argentina border. It is accessible by unimproved dirt roads with seasonal closures in winter. The elevation at the site ranges between 11,500 feet to 14,750 feet above sea level.

Geology and Mineralization

The deposit is located within a copper porphyry belt that is host to some of the world’s largest copper mines. The upper part of the system consists of a barren leached cap, which is underlain by a high-grade secondary enrichment blanket. Primary mineralization below the secondary enrichment zone has been intersected in drilling up to a depth of more than 3,280 feet below surface.

Exploration Activities

Drilling conditions in the area are difficult, especially due to the presence of highly faulted zones and areas of loose surface scree or talus. Due to snow conditions on two mountain passes on the access road to the site, seasonal exploration typically commences in December and extends into late April. Drilling programs have been undertaken at Los Azules between 1998 and 2014 and in 2017 by four different mineral exploration companies: Battle Mountain Gold (now Newmont Corporation), Mount Isa Mines S.A. (now Glencore Plc.), Minera Andes and McEwen Mining. Drilling, including early reverse circulation programs, focused initially on gold exploration and subsequently on diamond drilling for porphyry style copper mineralization. Since 2013, we have focused on baseline studies regarding flora, fauna, water quality and other environmental compliance matters.

Facilities and Infrastructure

There are currently limited facilities or infrastructure located at the project site which mainly includes portable camp structures and drill platforms.

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SEGMENT: MINERA SANTA CRUZ (“MSC”), ARGENTINA

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The following map depicts the location of the San José mine land package, which forms the Minera Santa Cruz segment. San José is located approximately 12 miles north of Newmont’s Cerro Negro mine, in the northwest corner of the Deseado Massif region:

Production Properties

San José mine, Argentina (49% owned)

For detailed information on the San José mine production statistics and financial results, refer to Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Overview and History

The San José mine is an underground gold and silver mining operation. We acquired our interest in the San José mine in connection with our acquisition of Minera Andes in January 2012. The property is owned and operated under an option and joint venture agreement (“OJVA”) between Minera Andes (49%) and Hochschild (51%) in the name of MSC. The property was acquired by Minera Andes in 1997, followed by an extensive exploration program from 1997 to 2001, leading to the discovery of the Huevos Verdes and Saavedra West Zones. A feasibility study was completed in October 2005 under the direction of MSC and, following construction, commercial production was declared on January 1, 2008.

The mine is part of a larger property which covers a total area of approximately 1,074 sq. miles and consists of 135 mining concessions.

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Location and Access

The San José property is in the province of Santa Cruz, Argentina, lying approximately between latitude 46°41’S and 46°47’S and longitude 70°17’W and 70°00’W. The mine is 1,087 miles south-southwest of the city of Buenos Aires and 217 miles southwest of the Atlantic port city of Comodoro Rivadavia. The principal access route to the San José property is a paved highway from Comodoro Rivadavia followed by a 20 mile two-lane dirt road to the mine. Comodoro Rivadavia has regularly-scheduled air services to Buenos Aires. The nearest town is Perito Moreno, which is approximately 19 miles west of the San José property.

Geology and Mineralization

The San José property is in the Deseado Massif, which consists of Paleozoic metamorphic basement rocks unconformably overlain by Middle to Upper Jurassic bimodal andesitic and rhyolitic volcanics and volcaniclastics. Cretaceous sediments and Tertiary to Quaternary basalts overlie the Jurassic volcanics. The Jurassic Bajo Pobre Formation is the main host of gold and silver vein mineralization at the mine. The formation is comprised of a lower andesite volcaniclastic unit and an upper andesite lava flow and has a maximum thickness of 394 ft. Mineralization in the San José area occurs as low sulfidation epithermal quartz veins, breccias and stockwork systems accompanying normal sinistral faults.

Facilities and Infrastructure

Infrastructure at the property consists of camp facilities that can accommodate up to approximately 1,100 personnel, a medical clinic, a security building, a maintenance shop, a laboratory, processing facilities, a mine and process facility warehouse, a surface tailings impoundment, support buildings and mine portals, a change house, a core warehouse, an administration building and offices. The laboratory is equipped to process all assays (core, chips and soil). MSC has installed a satellite based telephone/data/internet communication system.

Electricity is provided by an 81 mile 132 kV electric transmission line, which connects the San José mine processing facility to the national power grid.

The San José mine is a ramp access underground mining operation.  

Exploration Activities‌

MSC has purchased the land and corresponding occupation rights that are necessary to conduct its operations.

During 2019, exploration was mainly focused on San José and other targets in the proximity of the mine. In 2020, MSC will continue its exploration efforts to increase knowledge of the new veins and develop other new veins in the district.

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Reliability of Information: MSC, the owner of the San José mine, is responsible for and has supplied to us all reported results from the San José mine. The technical information regarding the San José mine contained herein is, with few exceptions as noted, based entirely on information provided to us by MSC. Our joint venture partner, a subsidiary of Hochschild Mining plc, and its affiliates other than MSC do not accept responsibility for the use of project data or the adequacy or accuracy of this document.

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Index to Management’s Discussion and Analysis:

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2019 AND Q4/19 OPERATING AND FINANCIAL HIGHLIGHTS

Highlights for the year and quarter ended December 31, 2019 are summarized below and discussed further in the Consolidated Financial Performance:

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Performance

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Cash Flow and Results of Operations

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Exploration and Reserves

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SELECTED CONSOLIDATED FINANCIAL AND OPERATING RESULTS

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The following tables present select financial and operating results of our company for the three months ended December 31, 2019 and 2018 and for the years ended December 31, 2019, 2018, and 2017:  

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CONSOLIDATED PERFORMANCE

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For the year ended December 31, 2019, we reported a net loss of $59.7 million (or $0.17 per share) compared to $44.9 million in 2018 (or $0.13 per share), with the increase in 2019 reflecting: (i) lower revenues due to fewer gold equivalent ounces sold in 2019 partly offset by a higher average realized gold price in 2019, (ii) higher depreciation and depletion expenses, primarily reflecting the start up of commercial operations at the Gold Bar mine in May 2019 and (iii) higher interest expenses in 2019 related to the interest expense on the long-term debt facility finalized on August 2018. The increase to net loss was partially offset by a gain on sale of investments, a decrease in advanced projects expenses and a decrease in loss from investment in Minera Santa Cruz S.A (“MSC”).

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Starting in Q2/19, we adopted a variable silver:gold ratio for reporting gold equivalent ounces produced and sold, which approximates the average market ratio during the period; previously we used a fixed 75:1 silver:gold ratio. The change in

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the silver:gold ratio primarily impacts gold equivalent ounces produced and sold as well as cash cost and all-in sustaining cost per gold equivalent ounce for the San José mine.

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Production for 2019 of 174,420 gold equivalent ounces compared to 175,640 gold equivalent ounces in 2018; using 2018 silver:gold ratio of 75:1, production in 2019 would have been 179,193 or 3,553 gold equivalent ounces higher than in 2018, including our attributable share of production from the San José mine.

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Production from our 100% owned mines of 82,766 gold equivalent ounces in 2019 decreased by 5,267 gold equivalent ounces compared to 2018, reflecting lower production at the El Gallo Project and Black Fox mine, partially offset by 30,712 gold equivalent ounces produced at the Gold Bar mine. Production at the El Gallo Project decreased by 22,772 gold equivalent ounces compared to 2018, reflecting the transition to residual leaching during the second quarter of 2018. The decrease in production at the Black Fox mine by 13,207 gold equivalent ounces from 2018 reflects certain temporary operational challenges during the first half of the year, which also impacted access to some high grade stopes expected to be mined in the second half of the year. Our share of the San José mine production of 91,654 gold equivalent ounces in 2019 was 4,047 ounces higher than in 2018; excluding the impact of the change in the silver:gold ratio, the attributable production from the San José mine would have been 8,803 gold equivalent ounces higher than 2018.

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Cash gross profit (a non-GAAP measure) of $33.7 million for 2019 decreased by $13.5 million compared to 2018, mainly as the result of the decrease in production and revenue, coupled with higher production costs applicable to sales due to higher costs per ounce. The higher cost per ounce in 2019 reflects the partial replacement of lower cost ounces from the El Gallo Project with ounces from the Gold Bar mine which entered commercial production in late May 2019. See “Non-GAAP Financial Performance Measures” for a reconciliation to gross profit, the nearest GAAP measure.

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The Black Fox mine was acquired in October 2017 and contributed $11.6 million and $1.7 million of revenue and gross profit, respectively, in 2017.

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CONSOLIDATED FINANCIAL REVIEW

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Year ended December 31, 2019 compared to 2018

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Revenue from gold and silver sales in 2019 of $117.0 million decreased by 9% compared to 2018. The decrease reflects 17,599 fewer gold equivalent ounces sold from our 100% owned mines in 2019 compared to 2018, partially offset by a higher average realized price ($1,403/oz or $126/oz higher compared to 2018).

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The decrease in gold equivalent ounces sold includes 34,846 fewer gold equivalent ounces sold from the El Gallo Project as the operation transitioned to residual leaching in mid 2018, 13,276 fewer gold equivalent ounces sold from the Black Fox mine due to operational issues in 2019, both partially offset by 30,523  gold equivalent ounces sold from the Gold Bar mine (none in 2018).

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Production Costs applicable to sales in 2019 increased by 3% to $83.3 million compared to 2018; gold equivalent ounces sold in 2019 were 17% fewer than in 2018 but at a higher cash cost per ounce sold as explained in the “Consolidated Performance” section above.

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Depreciation and depletion in 2019 increased by $9.7 million to $24.8, compared to 2018, primarily reflecting the higher depreciation and depletion per ounce sold from the Gold Bar mine which more than offset the impact of fewer ounces sold from the El Gallo Project, which were at a much lower depreciation and depletion per ounce. As the El Gallo Project did not have reserves, there were no mine development expenditures capitalized throughout the life of the mine, which contributed to a much lower carrying value subject to depletion.

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Advanced projects of $9.5 million for 2019 decreased by $5.6 million compared to 2018, reflecting the commencement of production activities at the Gold Bar mine in mid February 2019. Advanced projects in 2019 included pre-production spending at the Gold Bar mine up to February 16, 2019, spending on the Fenix project in Mexico, advancing the Froome project in Timmins Ontario and engineering and permit work at the Gold Bar South property in Nevada.

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Exploration costs of $37.7 million for 2019 increased by $1.1 million compared to 2018. Exploration significantly ramped up during the second half of 2019 as we increased our efforts in Timmins and Nevada. 2019 spending includes $14.9 million of flow-through qualifying exploration expenditures.

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General and administrative expenses of $12.8 million for 2019 increased by $1.7 million, compared to 2018, mainly due to an increase in corporate finance activities.

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Loss from investment in MSC of $8.8 million in 2019, decreased by $3.1 million from 2018, reflecting a higher gross profit of $12.1 million due to higher revenues, partially offset by higher exploration expenditures and income and mining tax expense. The increase in revenue primarily reflects a 16% and 11% higher gold and silver price realized, respectively, and 3% higher gold equivalent ounces sold in 2019 compared to 2018.

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Revision of estimates and accretion of asset retirement obligations of $3.5 million in 2019 was comparable to 2018, reflecting a slight increase in accretion expense, offset by a decrease in revision of estimates. The increase in accretion is consistent with the overall increase in our asset retirement obligations with the Gold Bar mine now in operations. The decrease in revision of estimates pertains to updated settlement cost and timing assumptions in our closure plans for non-operating assets.

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Interest and other finance expense of $6.8 million in 2019 compares to $1.6 million expense in 2018. The change is due primarily to the interest expense on the long-term debt facility finalized on August 10, 2018 ($4.6 million interest expense in 2019 compared to $1.2 million in 2018). Included in interest and other finance expense are interest and other charges associated with the final ruling against the Company in relation to our lawsuit filed in respect of the constitutional validity of the Mexican Tax Reform, which included a 0.5% precious metals royalty applicable to mining companies such as ours.

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Other income of $7.1 million for 2019 compares to $1.2 million for 2018. Other income in 2019 includes gains on marketable securities of $5.3 million (2018 – loss of $3.3 million).

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Income and mining tax recovery of $3.8 million for 2019 increased by $1.0 million from 2018. The tax recovery for both years resulted from the devaluation of the Argentine peso against the U.S. dollar on the Company’s peso-denominated deferred tax liability and the amortization of the flow-through premium as we incur eligible flow through Canadian exploration expenditures.

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During 2019, we spent $29.7 million on mineral property and plant and equipment, with the spending mainly related to construction and pre-stripping prior to first production at the Gold Bar mine and underground development at the Black Fox mine. We also received $8.9 million in dividends from MSC and net proceeds of $6.8 million from the sale of marketable securities in 2019.

Financing activities provided $70.0 million in cash in 2019 compared to $60.4 million in 2018, including $71.4 million from share issuances, slightly offset by $1.9 million lease obligations payments. In 2018, we completed a debt issuance for $50.0 million and a flow through financing for net proceeds of $14.1 million (gross proceeds of C$20.0 million or $15.0 million). As at December 31, 2019, we spent the proceeds of the 2018 flow through financing in Canadian eligible exploration expenses.

On October 28, 2019, we amended the terms of the three year term loan facility. The amendment reduces the minimum working capital covenant to $nil at December 31, 2019 and September 30, 2020. The remainder of the agreement remains in full force and effect.

Management believes that our working capital at December 31, 2019, combined with forecasted cash to be generated over the next 12 months, will be sufficient to satisfy our non-discretionary obligations related to our existing mining operations and corporate activities due in the next 12 months. For details of our consolidated contractual obligations as of December 31, 2019, see “Commitments and Contingencies” on page 53.

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, which may include incurring debt, issuing equity, and other forms of financing.

Management continues to evaluate exploration, capital and development expenditure requirements to advance Los Azules, Black Fox, Froome and other Timmins projects, Gold Bar and the Fenix Project in Mexico. If the working capital is not sufficient to continue advancing these projects, we may defer these initiatives and other discretionary expenditures and will consider raising capital through various financing methods which may include incurring debt, issuing equity, and other forms of financing.

Furthermore, if we make a positive decision to develop one or more of these initiatives, we will require additional financing.

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OPERATIONS REVIEW

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U.S.A. Segment

The U.S.A. segment is comprised of the Gold Bar mine (“Gold Bar”) and certain exploration properties. We poured our first gold ingot from Gold Bar on February 16, 2019 and achieved commercial production on May 23, 2019.

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Gold Bar mine

The following table sets out operating results for the Gold Bar mine for the three months and year ended December 31, 2019; as the first ingot was poured on February 16, 2019 there are no comparatives for 2018 or 2017:

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Due to long process cycles, actual recoveries from the heap are difficult to measure and may fluctuate significantly based on the timing, quantity and metallurgical attributes of the mineralized material placed on the leach pads, among other variables. The expected life of mine recovery rate at the Gold Bar mine is estimated at 82% as per Gold Bar’s Feasibility Study.

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We produced 30,712 gold equivalent ounces at the Gold Bar mine in 2019. The ramp-up to full production saw delays, which adversely impacted our gold production in the first half of 2019. Less ore was placed onto the heap leach pad than planned, which in turn delayed the application of solution to the ore, and the recovery of gold as a result. Gold Bar saw improvements during Q3/19, achieving several key performance benchmarks for ore production, crushing throughput, and gold production. Gold production in Q4/19 was negatively impacted by lower tonnes mined and lower grades of the mined mineralized material as we transitioned to a new open pit.

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With respect to our operational experience at Gold Bar, the majority of material mined during 2019 was from the Cabin Creek pits, which has reconciled positively to our block model for both gold grade (+18%) and contained gold ounces (+8%), but negatively for ore tonnes (-8%). However, the recent transition to mining from the Gold Pick West pit has returned lower ore tonnes, gold grade and contained ounces from the upper benches as compared to the block model. This appears to be due to greater structural control of the mineralization than was previously expected, but which is now exposed in the newly developed pit. In light of the significant differences recently observed between the modeled (expected) and mined (actual) ore tonnage and gold grade from the Gold Pick West pit, the reserve estimate as at December 31, 2018 and the future mine plan is being evaluated. Remodeling of the Gold Pick deposit is underway by third-party engineers and preliminary iterations suggest that a significant reduction in tonnage, an increase in gold grade, and a resulting significant reduction in contained ounces from the 2018 reserve estimate is likely.

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The impact on our operations for 2020 is that we expect to place fewer gold ounces than originally planned on the heap leach pad and this will negatively impact our planned production for the year.

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Table of Contents

We will publish the revised mineral reserve estimate as soon as it is completed, and a new mine plan, if necessary, will be implemented as soon as possible thereafter. At this time, we do not have sufficient information to provide accurate production or cost guidance for 2020.

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Production costs applicable to sales was $33.6 million for 2019. Production costs mainly include contractor mining costs, processing costs related to tonnes placed on the heap leach, and site general and administrative costs. Cash cost and AISC per gold equivalent ounce in Q4/19 was negatively impacted by the lower grade of the mineralized material mined.

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Exploration Activities – Nevada

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In 2019, we spent $7.2 million on target-generating exploration activities in and around the Gold Bar mine. This is compared to the $5.2 million spent on drilling, field mapping and other geochemical reconnaissance work in 2018.

Exploration activities in 2019 focused on targets around the Gold Bar mine, including drilling at the Gold Bar South target to support resource estimation and potential conversion to reserves, and drilling at Pot Canyon to test near surface and deep targets. In addition, we completed a deep core drill hole at Cabin Creek.

Drilling at Gold Bar South has successfully increased confidence in existing resource expected to contribute to Gold Bar mine’s future production. An updated resource estimate will be released in early 2020. Subject to permitting advancing as planned, the mining of Gold Bar South could begin in 2021.

The deep core hole at Pot Canyon was drilled through multiple target zones and returned near-surface gold mineralization and Carlin-type alteration and pathfinder elements at several stratigraphic horizons at depth.

We expect to incur similar drilling expenses at Gold Bar in 2020 as we did in 2019.

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Canada Segment

The Canada segment is comprised of the Black Fox Complex, which includes the Black Fox gold mine and the Grey Fox, Stock and Froome advanced-stage exploration projects, the Stock mill, and other gold exploration properties located in Timmins, Ontario, Canada.

Black Fox mine

The Black Fox mine currently has approximately one year of reserves in its mine life. We will continue our near mine exploration efforts with the goal of increasing resources, converting resources to reserves and extending the mine life. Furthermore we expect to continue to advance the development of the Froome underground deposit in 2020 and to be mining and producing from the deposit in 2021.

The following table sets out operating results for the Black Fox mine for the three months ended December 31, 2019 and 2018, and the years ended December 31, 2019, 2018, and 2017. Since the mine was acquired in October 2017, the year ended December 31, 2017 includes only fourth quarter results: