McEwen Mining Inc.
Q1 2016 Earnings Call Transcript

Published: 10 May 2016

[Operator:]

Good afternoon, ladies and gentlemen. And welcome to McEwen Mining First Quarter 2016 Financial Results Conference Call. I would like to now turn the meeting over to Mr. Rob McEwen, Chief Owner. Please go ahead, Mr. McEwen.

[Rob McEwen:]

Thank you, operator. Good morning, ladies and gentlemen. I’m pleased to welcome you to our first quarter 2016 review. With me today presenting are our President, Colin Sutherland, and our CFO, Andrew Elinesky. Before introducing them, letting them give you the details, I just wanted to say that our first quarter results represent a great start for 2016. And I just want to provide you a couple of the highlights. Earnings from operations were $0.07 per share; net cash provided by operations were $0.05 per share. And our cash flow in the fourth quarter amounted to 74% of what we generated in all of the last year. Net income was $0.04 per share. So, all of those numbers are in the positive territory, and we’re very pleased with that. And here, to give you the details, we’ll start with Andrew, and he’ll speak about our financial performance, followed by Colin, who will deal with some of our strategic moves.

[Andrew Elinesky:]

Thank you, Rob. As you mentioned, we had an excellent quarter to start the fiscal 2016. This was primarily driven by the continued strong production in Mexico at low cash and all-in sustaining costs. This allowed us to add to our solid working capital and our treasury balances. The consolidated gold equivalent production for the quarter was up 14% to just under 38,000 ounces compared to the quarter in 2015 and as a result, our earnings from mine operations also increased by 14% to just over $17 million for the quarter. Strong performance for both of our mines is reflected in our improved treasury as we ended the quarter with liquid assets of just over $43 million compared to just over $32 million at the end of 2015. Also, further to quarter-end, this balance has grown additionally into $46 million, as of May 2nd. The consolidated gold equivalent cash cost of $615 per ounce and all-in sustaining cost of $814 per ounce were both significantly lower than our full-year guidance of $780 and $935, respectively. This was due to the strong production levels of Mexico and the increased sales and cost productions in Argentina. We do expect our per ounce cost to increase as the year progresses, particularly in the second half of the year. However, we will continue our work to bring our full year cost in below guidance and our first quarter performance is an excellent start towards achieving this goal. In Mexico, this is the fifth consecutive quarter of strong production and significantly low cost as a result of operating improvements at increased grade combined with cost and input savings as well as a weaker Mexican peso compared to the U.S. dollar. While the grades are expected to decline for the second half of the year, we continue to be aggressive with our work on reducing costs. In Argentina, continued steady operational performance has been helped by the recent export tax eliminations made by the new federal government, as well as the continued foreign exchange savings as a result of the devaluation earlier on this year. Our attributable income from the mine increased dramatically to $5 million compared to only $300,000 in Q1 2015. This increase in profitability, despite a lower silver price in our sales, as a result of the Company receiving a dividend of $2.6 million in the quarter, and we expect to receive further dividends throughout the year. For comparison purposes, the total dividends we received throughout all of 2015 was only $0.5 million. Regarding our financial statements, as Rob previously mentioned, the strong operational performance resulted in earnings from mine operations of $19.5 million or $0.07 per share. We also had a net income of $13 million or $0.04 per share. Our cash flow from operations was $14.7 million or $0.05 per share, which has helped us by the collection of $7 million of Mexican VAT in the quarter and the receipt of the $2.6 million dividend from the San Jose mine. On February 12th, the Company paid a second installment of its return of capital to shareholders. And we would like to remind owners of the exchangeable shares of our publicly traded Canadian subsidiary, McEwen Mining Minera Andes Acquisition Co. or MAQ that the eligible dividend that they receive does not qualify for the same beneficial tax treatment generally afforded for other shareholders. Therefore, we recommend that these holders convert their MAQ shares for this reason, as well as [for] eliminating the administrative cost for the Company and the removal of any market conditions these shares may cause. I will now turn the presentation over to our President, Colin Sutherland.

[Colin Sutherland:]

Thank you, Andrew. And good morning, everyone. First of all, I’d like to say that as President of the Company in my first quarter, I would consider this to be a very exciting quarter for several reasons. We were successful in executing on our strategy of acquiring properties at or near our existing properties and also acquired the royalty at El Gallo at what we consider a very low acquisition cost. These transactions will allow us to capitalize on the potential of extending the mine life at El Gallo and also at Gold Bar. So, moving through the recent events, we acquired the royalty on El Gallo in the El Gallo district for $5.25 million. This is beneficial to us in several ways. One, it eliminates the punitive aspects whereby the agreement included the entire El Gallo concession. This included El Gallo Silver. Therefore, the acquisition immediately improves the economics of that project. And with improving sliver prices, we are now accelerating our internal studies on that project. Secondly, in the previous year, the Royalty contributed $44 an ounce to our cash cost. Therefore, we also see an immediate benefit of lowering our future reported cash cost. And lastly, we have initiated a very aggressive exploration program in the El Gallo district. Therefore the elimination of the Royalty provides savings on all future discoveries. Our second acquisition during the quarter allowed us to consolidate the entire El Gallo district. The El Encuentro acquisition of 10,040 acres is located in an important 7-kilometer trend, where two other of our discoveries exist. With the closing of the acquisition, we have now mobilized drill rigs to the area. And again, we believe this will extend the mine life at El Gallo. Moving to Nevada, we are advancing our permitting on the construction and production of Gold Bar. We are still expecting a record of decision in the first quarter of 2017, which will allow us to commence construction. Production from Gold Bar is expected in 2018. In Nevada, we have also commenced the drill program of 16,000 feet in two areas adjacent to the Gold Bar property. Again, we are optimistic this will add to the mine life at Gold Bar. And moving to Argentina, the group is spending approximately $4.5 million on exploration at San Jose. For those of you who are familiar with the project, the project has been highly prospective and in the past has benefited from the exploration initiatives. We are excited about the program. And again, we believe this will also extend the mine life at San Jose. With that, I’ll now pass it back to Rob McEwen.

[Rob McEwen:]

Thank you, Colin. Thank you, Andrew. I want to take a little bit of time and talk about how we are an asset-rich Company and provide our shareowners with attractive exposure to gold, silver and copper. First of all, we have two sources of production, one in Argentina that produces gold and silver and another one in Mexico that produces gold. We have two development projects, our Gold Bar project we hope to get approved early next year and begin construction and see it in production in 2018. And our production of gold from this year, 144,000 ounces projected, to just under 200,000 ounces in 2018. [For] our silver project, as Colin mentioned in Mexico - we have said that we need an $18 to $20 silver price before we build it; it’s fully permitted, ready to build. But we’re waiting for a better silver price. We said the sliver isn’t going to go away, and we’re quite comfortable that gold and silver prices are going higher. And speaking about silver, I just want to comment on the silver-gold exchange ratio that a number of you have probably seen has been shrinking. It was over 81 to 1, 81 ounces of silver to 1 ounce of gold, two-three weeks ago and it’s down to about 72 to 1 right now. The normalized or the average forward over an extended period of time has been 50-60 to 1, and we’ve seen that in the last run up down as low as 30 to 1. So, let’s do a little bit of math. When at Los Azules our partners Hochschild gave us their forecast for the year for the mine, they used a number of $1,050 per ounce for gold and $14 for silver. Now, gold is $200 higher and our share of production there is 46,000 ounces. And our silver, we’re looking to produce for our share 3.3 million ounces and silver is up over $3 an ounce. So, you can see that there is a lot of leverage in there. And I think silver is going to make the San Jose mine very interesting and also our El Gallo Silver project offers a lot of leverage to price of silver. On the copper, Los Azules offers an intriguing optionality to copper. And if for a moment, just to give you a sense of scale to put it in a context of a gold operation, if you were to convert the copper that we have in all resources, the most of it is inferred, there is 19.7 billion pounds of copper and that would convert into just less than 35 million ounces of gold equivalent. And in our PEA, our preliminary economic assessment, we were forecasting 560 million ounces of copper a year for the first five years of production, which would translate into both 1.1 million ounces of gold a year, for the first five years and thereafter, about 700,000 ounces of gold equivalent over the next 30 years. And I put these numbers out, not to say we’re able to convert it into gold equivalent but just to show the copper project on a gold equivalent. And if you took all of our resources, our gold, and then converted our silver and copper for all of our assets into a gold equivalent, behind every share of McEwen Mining would be 0.15 of an ounce of gold equivalent. Interesting math, far from development but to highlight the richness of our asset base. We don’t have any debt; we haven’t sold any streams, we haven’t sold any royalties and we’re not hedging. We’re leaving all the upside available for our shareholders. And I am sorry to say that a lot of the industry hasn’t done that. And they forsaken their shareholders and given away a good portion of the upside. I think we’re in a great position going forward. Argentina is doing a wonderful thing. It’s sort of a phoenix rising out of the ashes and I hope our exploration delivers us good news there, both out of Argentina, Nevada and Mexico. Thank you very much. Operator, open up session for questions.

[Operator:]

[Operator Instructions] And we do have a question from a participant on the web. Question one, what is the status of the Tonkin deposits?

[Rob McEwen:]

Tonkin deposit is on our Nevada property, we continue to look for a way to process it economically. The ore is encapsulated in a silica. The deposit, which is just under 2 million ounces, I find very interesting. And we’re continuing to do research there. But at the moment we do not have an economic method of producing gold from there. Next question?

[Operator:]

Has any drilling been done directly on the new deposit at El Gallo?

[Rob McEwen:]

There has been no drilling on the new deposit. We just acquired it; there will be drills on there in the next week or two. Next question?

[Operator:]

The new drill program at San Jose is trending towards the Cerro Negro area, is this infill drilling or oriented towards finding a new mineralized area?

[A –Andrew Elinesky:]

Yes, that is the aim of the program that’s being executed, later on this year. And yes, they’re moving towards Cerro Negro but they’re also actually stepping out to the Northwest and also to the Northeast to mineral claims that both Hochschild and ourselves contributed to joint venture last year and in 2014.

[Operator:]

Thank you. Our next web question comes from Robert Schwering [ph]. What is the likely El Gallo 2 start up price of silver and how long would it need to be above that value or in that range before work would commence?

[Rob McEwen:]

We would like to see the price of silver between $18 and $20. At that point, we could see an internal rate of return, meeting our threshold of 20%. We will have a study out in the next two months, looking at the economics. We are quite keen to progress this, we’d like to see some stability in that price. Looking at metal markets right now, I think that’s going to be the case this year. Next question?

[Operator:]

Thank you. Could ore be added to the El Gallo 1 process flow, with the crusher in place at increment rates of stop and go high grading approach?

[Rob McEwen:]

Currently, we have a crusher and a leach pad. One of the benefits of building the El Gallo 2 or El Gallo Silver would mean we have a mill as well and we have the flexibility to treat the ore El Gallo 1 or El Gallo Silver when it’s built. So, it would allow us to bring high grade into that.

[A –Andrew Elinesky:]

Sorry, Rob. If the question is if there is excess capacity or throughput of the crusher at El Gallo, the answer to that is yes, there is.

[Robert McEwen:]

Thank you Andrew. Next question?

[Operator:]

Thank you. Our next question comes from the Carl Barnhart [ph]. What is the remaining life of the mines currently in production? Do you expect ounce output to remain around current levels for the life of those mines?

[Rob McEwen:]

In San Jose, the current resources and reserve have a 7-year life, or based on the current reserve and resources, a 7-year life. And it was done at $1,100 gold. At El Gallo, it’s currently just over three years, and that was the purpose of buying this property close to El Gallo. We believe there and on other parts of our property we’ll be able to extend that life. At Gold Bar we’re looking at six years. The property we purchased nearby, the Afghan property and the Gold Bar property, we think there is exploration potential to expand. At Afghan we bought 120,000 ounces in a 43-101, so we paid about $4 an ounce. We think we should be able to get a year or more of production out of there. We will be drilling I think in Nevada, we have $16 million - 8 million total?

[Andrew Elinesky:]

16,000 feet and less than a $1 million.

[Rob McEwen:]

So, we’ll be drilling there with the hope of extending the life of mine.

[Andrew Elinesky:]

And [the] second half of that question is the production levels. For all those mine lives, production levels are fairly steady and consistent at current levels.

[Operator:]

Thank you. In general, are there risks of significant reductions in quantity of gold and silver mines going forward or can we count on similar levels of production in the intermediate and long-term as well?

[Rob McEwen:]

Well, intermediate term is usually three to five years, long-term being longer than that. Right now Gold Bar and Sand Jose would have fallen to that category of being better than six years, six to seven years. The one that we are working on is to extend the life is El Gallo.

[Operator:]

Thank you. The next question comes from the web, Gary Wilson [ph]. What kind of potential does the new property have in your opinion?

[Rob McEwen:]

Good. I’m not sure how to answer that other than we wouldn’t have bought it if we didn’t think it had good potential. There has been earlier work done on the property - trenching, sampling, a few drills that suggest there is some interesting grades. And that’s what encouraged us to buy it. And we have drills on our property near to the property we purchased that had good values. [Ph] As I said, we’ll be drilling on that very shortly and hopefully have some news for you, Gary.

[Operator:]

Thank you. Our next question is no debt and 46 million cash or 940 million deficit?

[Rob McEwen:]

What is the question? Well, it’s improving; we’re shrinking the deficit.

[Operator:]

The next question, what top variables are affecting the price of metals in your opinion in 2016 that investors can keep attuned to or on top of to know the direction of the price of metals which will affect spot prices for gold?

[Rob McEwen:]

There are several factors, one would be the growing trend by central bankers to create environment for their negative interest rates. The argument often put forward against the owning gold was that it costs you money to hold the gold. Today with negative interest rates in many countries around the world, it is now costing people to hold their cash in the bank. So, paper currencies can be printed, gold and silver take quite a bit to get it out of the ground. And the supply doesn’t increase anywhere near the speed at which your computer can generate paper. So, one is, how do I get a return on my capital. And so that’s one of the movements. Another is exchange rates. If you look to gold from 2001, which was a 20-year low for gold and silver to 2005, gold was going up in dollar terms, but not in other major currencies. Post-2005, gold started going up in other major currencies in addition to going up with gold. And that led to a flood of money by investors to get exposure to the precious metals and to the base metals. I believe we are at another point, call it a point of inflection that occurred just after 2005, but this time, we had gold falling from September of 2011 to summer of last year. And in dollar terms that lost 45% of its value. But something interesting happened in early 2015, that gold started going up in other currencies and we saw gold going up in euros, in Australian dollars, Canadian dollars, South African rands, Russian rubles, Brazilian reals. And so people around the world were looking at gold in their local currency and seeing it going up. But most investors were blinded and I’ll call it by a bright white light that was the price of gold in U.S. dollars, and they just saw it falling. And so, they said this is a bad place to put your money, we can’t make any money here. They also saw the biggest gold mining companies; I’ll use Barrick as an example of the biggest. And they kept falling out of the sky, their share prices, and they fell until October of last year. So, a large part of the investors looking at the market were looking at gold in U.S. dollar terms, looking at the poor performance of the gold equities and saying, I’m not going to put any money in the year because there is no way to make any money. But what happened, the countries where their currencies were depreciating against dollar, mining operations in those countries, their revenue was increasing but their costs were being fixed in local currency. So they have started generating cash flow, and you started to see earnings appear. And so, now, we have gold moving up not only in all major currencies but also in the dollar. And it’s illustrating to people and showing people that you can make money in this sector once again, and that’s attracting the money. And there is greater concern about where you put your money. The reasons for owning gold have never gone away. I think they are more acute today than they’ve ever been. And so I can see higher prices. And that’s going to bring more people into the market. It’s not to say that it’s going to go on the straight line up, [it] never does. There will be corrections and consolidations, but the trend is up and decidedly positive right now. Next question?

[Operator:]

Thank you. Do you foresee a sale of the copper mining Argentina over the next couple of years and that money used for other mining acquisitions or more used to develop current holdings?

[Rob McEwen:]

Regarding the copper project, several years ago, we engaged an investment dealer to see if they could sell it. And that was 2012-13. The timing wasn’t good. There were no takers. So, big capital projects were unattractive. CEOs of major mining companies had been fired. So there wasn’t an appetite amongst board of directors of major copper producers or base metal producers to take on new projects. Copper is showing a little bit of life lately. There have been two sales in Argentina; one sale in August of ‘14 was about 300 miles north of us. [The] project deposit was bigger and up 50%, well it was 28 billion pounds, we were 20, our grade was slightly higher; it sold for $0.015 a pound. There is another deposit that’s 30 kilometers away from us, you actually access it on the same road that goes to our property; it sold in 2011 for $0.04 a pound. If we were shown bids somewhere in that range for our 20 billion pounds of copper, we’d look at it very closely, because it could be used to expand our production. Next question?

[Operator:]

Thank you. And we do have a question from the phone line. Bill Powers, [ph] your line is open.

[Unidentified Analyst:]

Yes. As far as additional acquisitions, either closed to Mexico or in Nevada, do you see any of those on the horizon anytime soon? And the other thing I guess is, do you see the cash costs remaining the same in Mexico, given that in previous years there’s been the rainy season that has slowed production down around middle quarters of the year? If you could just give us some insight into that that would be greatly appreciated.

[Rob McEwen:]

Thank you, Bill. In terms of M&A, we’re constantly reviewing projects, looking for opportunities to build. Our goal is to qualify for an inclusion in the S&P 500 and that will be achieved through exploration success on our property and bringing our development projects on stream, on budget, on time and will also necessitate that we do some M&A to get to the size that would allow us to qualify for the S&P 500. I want to just say that size is not the determinant factor here. When we’re looking at M&A, it’s how do we build value behind every share of McEwen Mining rather than how do we build just a bigger company. To me, as a 25% shareholder, and management shares the view that we are out there to build value behind every share, not just size, size is a byproduct of building that value. So, we are looking at M&A activities. So far, we have paid small amounts of money for ounces in the ground well below the replacement cost and I think that’s a good way to buy. I also think some troubled situations are worth looking at. In terms of production in Mexico, our first two quarters will be stronger than our last two quarters. The cost will trend up as we go in last two quarters. The rainy season does slow down production. We think we’re well-prepared for it, but Mother Nature can often be capricious and surprise you. We’ve been through a number of rainy seasons now; we have lots of pumps and we’ve drained down our ponds. So, if the rain comes in the way it’s come in the past, we think we’re ready for it.

[Operator:]

[Operator Instructions] Our next web question is what is the status of security in your mine El Gallo in Mexico regarding the incident that you had the last year?

[Rob McEwen:]

Thank you. We had a robbery in April of last year and about $7.5 million of gold precipitate was taken. And the robbery I should say came about from some unusual circumstances. We were changing our furnace in the refinery; it was supposed to have taken two weeks, it took three weeks. We were encountering higher grades. And so, we had more gold reporting to our pads. And so, we had twice as much as gold as we normally have on hand. There was a delay. It happened during the Easter weekend, 3 o’clock in the morning and some of our security personnel were apprehended to the way to the mine. So, after that we changed our protocols. We consulted with Brink’s who is the armored car carrier that takes the gold from the property and said how do we build a very strong refinery? In consultation with them, we built a new refinery, strengthened it considerably. We have the Mexican state police on the property regularly as if to discourage any similar event. And we’ve put in a lot of fail-safe net systems to make it much harder to even access the room where we have all the gold. We’re hopeful it won’t happen again and we’ve taken considerable precautions and hardened the target as I said. Thank you.

[Operator:]

Thank you. The next web question is what is the year’s whole exploratory budget for the El Gallo project holdings, its entirety, including the new property acquisition?

[Rob McEwen:]

$5 million for the El Gallo complex. Next question?

[Operator:]

Thank you. What was the final dollar loss from the gold theft [ph] in Mexico, including money recovered from insurance?

[Rob McEwen:]

We recovered about 80% so far, little over $6 million of the $7.5 million. There are two insurers. We collected from one and we have the other one going forward. We feel we are on good grounds there; they should be paying us more. Next question?

[Operator:]

Thank you. What is the main plan with cash on hand?

[Rob McEwen:]

Cash on hand, we’re looking at funding our exploration program. At year end, we should have over $45 million…

[Andrew Elinesky:]

Over 45 million cash and liquid assets.

[Rob McEwen:]

Taking into account all of our exploration, the development work that’s been done at Gold Bar, some of the work that we’re doing at Los Azules and the studies we’re doing at for El Gallo Silver. We’re also looking at opportunities and we might be able to deploy some of that cash in our pursuit of M&A activities. Next question?

[Operator:]

Thank you. Do you have any confidentiality agreements in place with explorers in Nevada?

[Rob McEwen:]

If we did, we wouldn’t mention them. I am sorry, we can’t divulge that. Thank you. Next question?

[Operator:]

Thank you. Do you feel that the present government in Argentina has staying power in your opinion of course?

[Rob McEwen:]

The present government in Argentina is a breath of fresh air. They don’t have an overwhelming majority and they have been pushing hard to make big changes in the country. The changes they made to-date have been very positive. And hopefully their electorate views them that way. Inflation is running quite high at 25% to 30%. So, it’s hard to please everybody as cost of living is going up. They are working hard to attract foreign capital and they have met with some success there. They have been able to access the foreign credit markets after being denied that for the past 15 years. So they can borrow and undertake capital projects, infrastructure projects that should help employment in a number of areas. When I met with the Secretary of Mines, the Federal Minister and then with two state governors, they were all speaking about infrastructure development in Northern Argentina where our copper project is located, talking about extending rail lines, putting in power grids in conjunction with industrial projects such as mining and other industries. They have a tough road ahead with them. They are moving very decisively and positively. Time will tell. But [I’m] certainly applauding everything they are doing right now and hope that they stay the course.

[Operator:]

Thank you. We do have a question from the phone line from Shao Wang with Lotus Capital Partners. Your line is open.

[Shao Wang:]

Interesting assets calculation here. Two questions, one, with respect to Gold Bar, my recollection is that you might do a small external financing to move that project or accelerate that project. Given the fact you are debt free, I’m assuming that there will be some sort of equity kind of offering. If that’s true, I wonder if you can comment on that. Totally separate, with respect to the Afghan property, I just wanted to confirm, you bought that asset for $450,000 U.S. cash and that was the only consideration; is that true?

[Rob McEwen:]

That’s correct on Afghan, 450. Gold Bar, we were unable to accelerate the development of it. That’s all contingent on approvals from the Bureau of Land Management. They have published that they will be making a decision early next year. And we hope it’s a positive decision, after which we build and it would take up to 12 months to build the site. The capital cost is estimated to be $60 million. And you are correct, to fund that we have contemplated financing; we won’t need the money until half way through next year or three quarters away through next year because of our cash balances right now. We were looking at a combination of debt and equity to fund that. But, we certainly wouldn’t need the full 60 million.

[Shao Wang:]

So the other constraint would be whatever you might want to think about on the M&A side or in terms of acquisitions in case that something came.

[Rob McEwen:]

That’s right.

[Operator:]

The next question comes from the web. Any progress on reopening your gold, silver coin and bar store?

[Rob McEwen:]

We haven’t thought about that for a while, but thank you for reminding us. And we’ll look into it again.

[Operator:]

Considering the current improved operations of McEwen, as compared to the previous operations from the share price of around $10, where might the stock go if gold does hit $5,000 an ounce?

[Rob McEwen:]

At $5,000 an ounce, the entire gold mining industry would be on fire. I would have to say, at 5,000 an ounce, we’d be well through our old highs, significantly through our old highs. But, I can’t give you an exact number.

[Operator:]

Thank you. How committed are you to staying out of debt?

[Rob McEwen:]

The use of debt has been a dangerous device for strategy for a lot of the mining industry. I think the industry has been seduced by low interest rates, and they went and filled their balance sheets with debt and didn’t expect the metal prices to drop. And they lost the ability to, in some cases, even service the debt. At some point in time, when we have good, defendable cash flow and possibly the debt might be non-recourse, a certain amount of leverage on the balance sheet would be wise, just to get a better return, but not a lot of debt. When I ran Goldcorp, when I first was putting the company together, one of the companies I bought had a debt equity ratio of 1 to 1. Over the course of several years, we retired that debt and never had debt again. So, I just want to show that I’m not a huge fan of debt and I don’t use debt in my personal life either. It just gives you a lot more flexibility in life and corporately the same way. But a small amount of debt is there. And when I say small, maybe it’s 10%, 20%, but it’s not a heavy loading on the balance sheet.

[Operator:]

As it was discussed earlier, at present gold price [Tonkin] is uneconomical; at what gold price would Tonkin become economical?

[Rob McEwen:]

It’s a very good question. I don’t have an answer to the price. Tonkin is more a question of the metallurgy, so of the composition of the rock and how do you extract the gold from the rock in an economic way. There are several methods we could use, such as an autoclave, which is high temperature pressure cooker or a roaster, which is basically cooking the ore. Both those methods are expensive and we would need a larger deposit size. We have just under 2 million ounces to justify building either of those. And in Nevada they don’t get permits out very easily for roaster. So, you might have to strike that one off the list. The concentrate that we could produce isn’t high enough grade to give it much room to be transported, any rail distance across the state to a facility that could use it. Certainly, as the price of gold goes up, maybe it’s north of $2,000 an ounce, but I’m just guessing right now, I’m sorry, we’ll take another look at that. But we have studies ongoing in Tonkin, looking for the Holy Grail, how to find a way to extract that gold because it is so much of a tease right now, because it’s 2 million ounces that we have. Next question?

[Operator:]

We have no additional questions at this time. [Operator Instructions]

[Rob McEwen:]

While you’re waiting, operator, if there are any further questions, I just wanted to reinforce a statement that Andrew and Colin mentioned that at our upcoming annual meeting, we’ll be asking our shareholders of the Minera Andes Acquisition Corporation to vote on converting their shares or exchanging their shares into common shares. The shares rank equally in all respects, so they are not giving up anything but they may be gaining something. The capital distribution that we make twice a year is treated on a more advantageous term with the common shares than with the MAQ shares. And there is also an administrative cost savings that the Company would realize. And it would take some confusion out of the market in terms of our capital structure. So, we highly recommend that shareholders vote in favor of exchanging it. They’ll get greater share trading liquidity. They should realize a better tax treatment on the distribution and it would save us some money. That’s my closing comment. Are there any further questions?

[Operator:]

There are no questions at this time.

[Rob McEwen:]

Thank you very much, operator. Ladies and gentlemen, thank you very much for your time. Look forward to speaking to you shortly with some exploration results.

[Operator:]

This concludes today’s conference call. You may now disconnect.