McEwen Mining Closes C$12.5M Flow-Through Financing

McEwen Mining on Dec. 31 announced the closing of its previously announced non-brokered private placement, for the issuance of 7,669,900 common shares for total gross proceeds of C$12.5 million on a flow-through (FT) basis, or a price per share of C$1.63.

FT financings enable investors to subtract up to the entire purchase cost of the equity acquired from issuers from investors’ income for tax purposes provided the issuer spends the financing proceeds on certain prescribed exploration and development expenses for Canadian projects.

Previously on Dec. 18, McEwen Mining (MUX), a gold and silver producer and explorer, disclosed that it had increased its Dec. 17 non-brokered private placement from 6,136,000 common shares worth C$10 million to 7,056,400 common shares worth C$11.5 million.

“These funds will be used for exploration to facilitate the rapid expansion of our discoveries at Stock and Grey Fox, which are key elements in our plans for growing the Fox Complex annual gold production to 100,000-150,000 oz over a 10-year mine life,” said McEwen Mining CEO Rob McEwen.

The proceeds from the sale of FT shares will be used for expenses qualifying as Canadian Exploration Expenses (CEE) within the meaning of the Income Tax Act (Canada). The company will relinquish the CEE expenses by the effective date of Dec. 31, 2020. The issued shares will be subject to a four-month holding period in Canada.

H.C. Wainwright analyst Heiko Ihle reiterated a Buy rating on the stock on Nov. 2 following the company’s 3Q20 financial results, and citing the PEA [Preliminary Economic Assessment] expected from Fox Complex and ongoing drilling success at the Whiskey Jack project.

However, Ihle lowered the price target to $1.75 (almost 78% upside potential) from $2.50 due to adjusted financials, along with various cost revisions across McEwen’s asset base.

“McEwen ultimately hopes to develop a plan for the Fox Complex and to reach an annual production rate of 100,000 – 150,000oz of gold at a cash cost of $800/oz, over a ten-year period,” the analyst wrote in a note to investors. “McEwen commenced a new drill program at the Whiskey Jack target within Grey Fox. In short, the campaign continues to see success as visible gold occurred in eight of the 15 shallow holes drilled to-date.”