McEwen has Mexico environmental OK for El Gallo mine

[Ben Graham]

McEwen’s (NYSE, TSX: MUX) El Gallo project in Sinaloa, Mexico, has passed a key permitting milestone after the federal government approved an extension to the mine’s environmental impact assessment.

This approval is “a critical step” that will allow the company to begin Phase 1 mill construction, McEwen said in a press release on Tuesday. Start of construction is targeted for mid-2026, with first gold pour to follow a year after, the Canadian miner added.

Once in commercial production, Phase 1 is expected to deliver approximately 20,000 oz. in gold-equivalent production annually over 10 years. The company is also contemplating a Phase 2 expansion, which will involve the project’s in-situ silver deposits and could extend operating life.

Mine under redevelopment

Acquired by McEwen 2007, El Gallo represents a large gold-silver-producing complex situated along the foothills of the Sierra Madres Occidental mountain range. It comprises multiple deposits located within a 13-km radius, part of a broader land package of 1,700 sq. km.

El Gallo previously entered production as an open pit mine in September 2012 and operated until mid-2018, when mining activities ceased due to its transition into deeper sulfide mineralization, as it was not amenable to heap leaching. Since then, production has been limited to residual leaching activities.

While in operations, the mine produced 279,000 oz. of gold and 134,000 oz. of silver for 281,000 gold-equivalent oz. at an average cash cost of $655 per oz.

In recent years, McEwen has been looking to redevelop the El Gallo complex through what it calls the “Fenix project”. This has two main phases: the first involves reprocessing material from the existing historical leach pad using a new mill and leach circuit; and the second involves incorporating the project’s in-situ silver deposits.

A feasibility study filed in 2021, which used $1,500/oz. gold and $17/oz. silver as the base case, estimated an initial capital cost of $42 million for Phase 1 of the Fenix project. In Phase 2, the incremental capex is estimated at $24 million.