Executive Summary / Key Takeaways

• Los Azules represents a potential company-transforming asset: The feasibility study shows a $2.9 billion after-tax NPV at $4.35/lb copper, with 21 years of production averaging 451 million pounds annually, yet McEwen's 46.4% stake is currently valued at just $8.47 per share based on the last financing—suggesting significant potential upside if development proceeds.

• Operational execution failures are eroding credibility: Q3 2025 production fell 40% at Gold Bar and 19% at Fox Complex due to grade reconciliation issues and mine sequencing problems, pushing all-in sustaining costs above $2,500/ounce and forcing a guidance cut to 112,000-123,000 GEOs for 2025.

• The company sits at a critical inflection point: While existing gold and silver mines struggle to generate consistent cash flow, McEwen is attempting to finance a $3.2 billion copper project through a 40% equity/60% debt structure, targeting construction in late 2026 and production by 2029.

• Valuation appears stretched on current metrics but could be justified by copper optionality: Trading at 6.5x EV/Revenue and 63.7x EV/EBITDA with negative margins, MUX carries a premium to traditional miners, yet this multiple could compress rapidly if Los Azules advances toward production and the company achieves its 2030 target of 250,000-300,000 GEOs.

• Key risks center on financing and execution: The company must secure project financing for Los Azules while simultaneously fixing operational issues at its producing mines, all while managing geopolitical exposure in Argentina and Mexico where regulatory timelines remain unpredictable.

Setting the Scene: A Gold Miner with a Copper Problem

McEwen Inc., originally incorporated as US Gold Corporation in Colorado on July 24, 1979, has evolved from a pure-play gold explorer into a geographically diversified mining company with operations spanning Nevada, Ontario, Mexico, and Argentina. The company generates revenue through gold and silver production while simultaneously developing the Los Azules copper project in San Juan, Argentina—a strategic pivot that management likens to creating a "mini Freeport-McMoRan " with exposure to precious metals and copper.

This positioning matters because it places MUX at the intersection of two divergent mining narratives. On one side, the company operates three producing gold and silver complexes that have consistently underperformed expectations. On the other, it holds a 46.4% stake in what could become one of the world's largest copper mines, located in a jurisdiction that recently approved Argentina's Large Investment Incentive Regime (RIGI). The tension between these two realities—struggling production assets versus a world-class development project—defines the investment thesis.

The industry structure reveals why this matters. Gold mining is experiencing margin pressure from inflationary costs and declining grades, while copper faces a structural deficit driven by electrification and renewable energy demand. MUX's competitors like Pan American Silver (PAAS) and Coeur Mining (CDE) focus primarily on precious metals with established production profiles, while major copper players like Freeport-McMoRan (FCX) operate at vastly larger scales. MUX attempts to bridge this gap, but its $1.02 billion market capitalization and 112,000-123,000 ounce production guidance place it firmly in the mid-tier category, where operational efficiency determines survival.

Technology, Products, and Strategic Differentiation

The Los Azules copper project represents MUX's primary differentiator and potential moat. The feasibility study published on October 7, 2025, outlines a 21-year open-pit mine producing 451 million pounds of copper cathode annually through leach and SX-EW processing. This cathode production matters because it eliminates the capital intensity and smelting discounts associated with concentrate production, potentially yielding higher netbacks than traditional copper mines.

RIGI approval on September 26, 2025, fundamentally alters the project's economics. The regime provides 30 years of legal, fiscal, and customs stability, access to foreign exchange, and a significantly lower tax rate—benefits that McEwen Copper is the only copper project to have secured so far. Additionally, Argentina's Decree 563 eliminated copper export duties, removing a potential 4.5%-8% cost drag. These policy wins transform Los Azules from a high-risk Argentine project into a politically endorsed, bankable asset.

The company's 31% investment in Paragon Geochemical Laboratories introduces a technological edge through PhotonAssay™ technology. This method reduces assay turnaround from weeks to days while providing more comprehensive data at lower cost. For a company struggling with mine-to-model variances at Gold Bar, faster and more accurate geological data could materially improve operational efficiency and reduce the risk of future production shortfalls.

Financial Performance & Segment Dynamics: A Tale of Two Halves

Production Assets Under Pressure

The USA segment (Gold Bar Mine Complex) illustrates MUX's execution challenges. Q3 2025 revenue declined 11.5% year-over-year to $29.4 million despite a 39% increase in realized gold prices to $3,477 per ounce. Production fell 40% to 8,191 GEOs as mining encountered lower-grade material and geological model discrepancies. Cash costs surged to $2,540/ounce with AISC hitting $2,852—well above the $2,400-$2,500 guidance range and materially higher than competitors like Alamos Gold (AGI) with AISC around $1,375/ounce.

Management attributes these issues to sequencing rather than resource risk, but the financial impact is severe. Gross profit collapsed from $33.3 million in Q3 2024 to $5.5 million in Q3 2025, while capital expenditures of $10.5 million in the first nine months consumed most operating cash flow. The company is accelerating stripping at Pick III, spending approximately $7.5 million to access higher-grade zones, but this creates a near-term cash drain that strains the already modest $51 million cash position.

The Canada segment (Fox Complex) shows similar stress. Revenue grew 9.4% to $20.8 million in Q3 2025, but production declined 19% to 6,386 GEOs as mining reached lower-grade zones at the bottom of the Froome deposit. AISC rose to $2,352/ounce, nearly double AGI's Island Gold operation. The discovery of higher-grade mineralization at Froome West extends mine life into Q3 2026, bridging production until the Stock project reaches commercial production in 2026, but this transition period creates execution risk.

The Bright Spots: San José and Copper

The Minera Santa Cruz (MSC) segment provides crucial cash flow support. MUX's 49% interest generated $3.5 million in Q3 2025 income, up 182.5% year-over-year, as production increased 10% to 30,583 GEOs following a mill expansion. MSC's working capital position strengthened to $105.7 million, enabling $2.2 million in dividends to MUX during the first nine months. This joint venture with Hochschild Mining (HOC.L) provides geographic diversification and partially offsets operational weakness in North America.

The McEwen Copper segment remains in development phase, with losses of $4.3 million in Q3 2025 and $19.8 million year-to-date. However, effective September 3, 2025, Los Azules advanced to development stage, meaning eligible expenditures will be capitalized rather than expensed. This accounting change will improve reported net income going forward—management estimates Q1 2025 would have shown positive net income of $2.3 million instead of a $6.3 million loss under the new treatment.

Outlook, Management Guidance, and Execution Risk

Management's 2030 target of 250,000-300,000 GEOs represents a doubling of current production, contingent on successfully bringing Stock, Fenix Phase 1, and Grey Fox online while maintaining existing operations. The 2025 guidance revision to 112,000-123,000 GEOs (from 120,000-140,000) reflects the operational setbacks at Gold Bar and Fox, creating a credibility gap that management must address through execution.

The Los Azules timeline appears aggressive but achievable. Construction is targeted for late 2026/early 2027, with production by late 2029, assuming project financing closes in 2026. The company aims for a 40% equity/60% debt financing mix, focusing on export credit agency and development finance institution support. An IPO for McEwen Copper is being considered for 2026, with expectations for a higher valuation than the last financing at $30 per share.

Competitor comparisons highlight the execution challenge. Pan American Silver trades at 5.8x EV/Revenue with 47% gross margins and 19% profit margins, while MUX trades at 6.5x EV/Revenue with 32% gross margins and negative profit margins. Coeur Mining's recent M&A activity has created a 900,000 ounce equivalent producer with $189 million in free cash flow, while MUX generated negative $13.6 million in free cash flow over the trailing twelve months. This performance gap suggests MUX must deliver Los Azules to justify its valuation premium.

Risks and Asymmetries

The primary risk is financing failure for Los Azules. With McEwen Copper's treasury below $10 million in early 2025 and MUX's own cash position at $51 million against $130 million in debt, the company lacks internal resources to fund the $3.2 billion capital requirement. If equity markets weaken or export credit agencies demand more onerous terms, construction could be delayed, pushing first production beyond 2029 and compressing the project's NPV.

Operational execution remains a critical vulnerability. The geological model issues at Gold Bar and grade reconciliation problems at Fox demonstrate that MUX's technical teams are stretched thin across multiple jurisdictions. If these problems persist or worsen at the Stock project during its ramp-up in 2026, the company could face further guidance cuts and cash flow shortfalls, potentially requiring dilutive equity raises at unfavorable prices.

Geopolitical exposure creates additional uncertainty. In Mexico, management is proceeding cautiously with Fenix Phase 1 due to "tariffs and things with cartels," while awaiting environmental permit extensions that remain "somewhat unknown." In Argentina, while RIGI provides stability, sustained inflationary pressures have already increased San José's costs by 25% in Q3 2025, and any political reversal of the Macri-era mining reforms could impact Los Azules.

The valuation asymmetry is stark. If Los Azules achieves production, MUX's 46.4% stake could generate attributable copper production of approximately 209 million pounds annually, transforming the company into a copper-gold producer with substantially different valuation metrics. Conversely, if the project fails or is significantly delayed, MUX's premium valuation relative to cash-flow positive peers like Alamos Gold (trading at 9.4x EV/Revenue with positive free cash flow) appears unsustainable.

Valuation Context

At $18.77 per share, McEwen Inc. trades at a $1.02 billion market capitalization and $1.07 billion enterprise value. The EV/Revenue multiple of 6.5x sits above most precious metals peers—Pan American Silver trades at 5.8x, Coeur Mining at 6.1x, and Hecla Mining at 9.4x—reflecting the market's option value for Los Azules.

Given negative profit margins (-7.16%) and operating margins (-15.09%), traditional earnings-based multiples are not meaningful. The EV/EBITDA ratio of 63.7x appears elevated but reflects the company's transition phase, with Los Azules costs previously expensed rather than capitalized. Going forward, EBITDA should improve as development expenditures are capitalized, potentially compressing this multiple.

The balance sheet provides limited cushion. With $51 million in cash, $24 million in marketable securities, and $130 million in debt, net debt stands at approximately $55 million. Working capital of $62.6 million represents a substantial improvement from negative $6.5 million at year-end 2024, but remains modest relative to the capital intensity of mining. The company's price-to-operating cash flow ratio of 401x compares unfavorably to peers in the 18-28x range, highlighting the market's expectation of future growth rather than current cash generation.

The implied value of McEwen Copper at $30 per share suggests MUX's 46.4% stake is worth approximately $456 million, representing nearly 45% of MUX's current market capitalization. This valuation appears conservative relative to the $2.9 billion NPV outlined in the feasibility study, suggesting potential upside if the project reaches production.

Conclusion

McEwen Inc. represents a high-risk, high-reward proposition centered on the Los Azules copper project's potential to transform a struggling mid-tier gold producer into a diversified copper-gold company. The feasibility study's robust economics and RIGI approval provide a credible path to value creation, but execution risks at existing operations and financing challenges for Los Azules create a narrow path to success.

The investment thesis hinges on two critical variables: management's ability to stabilize production at Gold Bar and Fox Complex while controlling costs, and the successful financing and development of Los Azules on the projected timeline. If both execute, MUX's valuation could re-rate toward copper producer multiples, offering substantial upside. If either falters, the company's premium valuation relative to cash-generative peers appears vulnerable.

For investors, the key monitoring points will be Q4 2025 production results at Gold Bar, the closing of the Canadian Gold Corp acquisition in January 2026, and progress on Los Azules project financing. The next twelve months will determine whether MUX can bridge the gap between its current operational reality and its copper-fueled aspirations.