Gold Bar Project: Preliminary Feasibility Study

The Gold Bar project is a proposed mine development project consisting of an open pit mine and an oxide heap leach gold recovery circuit. It is currently in the permitting phase with construction expected begin in 2014, and gold production expected in 2015. A pre-feasibility study was completed by SRK Consulting and published in November 2011.

Highlights of the Pre-feasibility Study

(All amounts in US dollars)

• Average annual production of approximately 50,000 ounces of gold over an 8-year mine life (total 397,000 ounces), at a cash cost of $700 per ounce (oz).
• Open-pit mine with conventional oxide heap leach processing. Projected gold recovery of 82% after primary crushing to 5 centimeters (2 inches) and a 90-day leach cycle.
• Estimated initial capital expenditures of $53.1 million and sustaining capital of $39.1 million, for total life-of-mine (LoM) capital expenditures of $92.2 million. Pay-back period of 2.1 years at LoM average $1,300 per oz gold, or 1.7 years based on the spot gold price ($1,700 per oz).
• After-tax Net Present Value (NPV) of $45.1 million at $1,300 per oz gold (LoM average) and 8% discount rate, giving an Internal Rate of Return (IRR) of 34.4%. Based on today’s spot gold price ($1,700 per oz) the after-tax NPV and IRR increase to $98.3 million and 53% respectively.

Financial Analysis

The PFS calculates a Base Case (LoM average gold price of $1,300 per ounce) after-tax NPV of $45.1 million, an IRR of 34.4%, and average after-tax cash flow from operations of $19.4 million per year.

The financial metrics for the projects are stated both after-tax and pre-tax. McEwen Mining has included pre-tax metrics for comparability with our peer companies, many of which have published preliminary economic studies on a pre-tax basis prior to recent NI 43-101 changes. Economic sensitivities at different metals prices and discount rates are calculated as follows:

After Income Tax (Federal 35%, State 5%):	Base Case (Avg LoM $1,300 oz gold)	Spot Case ($1,700 oz gold)
IRR (%)	34.4	53.3
NPV 0% Discount ($ millions)	93.2	189.5
NPV 8% Discount ($ millions)	45.1	98.3
Average Annual Cash Flow ($ millions)	19.4	31.2
Average Operating Margin Per Ounce ($)	568	941
Payback Period (years)	2.1	1.7

Before Income Tax:	Base Case (Avg LoM $1,300 oz gold)	Spot Case ($1,700 oz gold)
IRR (%)	40.1	63.7
NPV 0% Discount ($ millions)	130.7	276.3
NPV 8% Discount ($ millions)	64.2	144.6
Average Annual Cash Flow ($ millions)	23.8	41.7
Average Operating Margin Per Ounce ($)	568	941
Payback Period (years)	2.0	1.6

Capital

Capital costs for the PFS include all activities required prior to and during development of the mine. Initial capital is estimated at $53.1 million including $7.2 million (16%) for contingencies. Additional capital expenses such as a heap leach expansion and reclamation and closure obligations bring the total life-of-mine capital required to $92.2 million including $13.5 million (17%) for contingencies. The PFS assumes that a contract miner will be employed to operate the mining fleet, and that new capital equipment will be purchased for the operation. Capital costs are summarized as follows:

	Initial Capital	Heap Expansion (Year 3)	Reclamation and Closure
	($ millions)
Mine
Capitalized Pre-Stripping	16.3
Access Roads	1.2
Contractor Mobilization	0.5
Mine Contingency (15%)	2.7
Process
Crushing & Pad Equipment	4.5
Process Plant	8.7	0.3
Mobile Equipment	0.9
Process Contingency (15%)	2.1
Leach Pads
Mobilization, Administration, EPCM	1.5	1.3
Heap Leach Pads	4.4	5.1
Process Water Ponds	1.1
Diversion Channels	0.1
Miscellaneous	0.2
Leach Pad Contingency (15%)	1.1	1.0
Owner Costs
Communication	0.2
Mobile Equipment	1.1	0.5
Buildings	1.3
Power and Water	2.4
EPCM	0.7
Consumables Inventory	0.1
Pre Production Activities	1.5
Reclamation			25.8
Owner Costs Contingency (20%)	1.3		5.1
Capital Costs (Without Contingency)	45.9	7.4	25.8
Contingency	7.2	1.1	5.2
Total Capital Cost	53.1	8.5	30.9

Operating Costs

Operating costs per ore tonne processed and per payable ounce (after refining) are as follows:

	Cost per ore tonne processed	Cost per payable ounce produced
Mining	$11.20	$425.95
Processing	$6.22	$236.60
G&A	$0.96	$36.48
Total Operating Costs	$18.38	$699.03

Mining and Processing

The PFS evaluates the use of open pit mining and heap leach processing of oxide material at a rate of approximately 5,550 tonnes per day. Processing will consist of primary crushing to a size of 5 centimetres (cm) or 2 inches with agglomeration applied as required. Sodium cyanide and cement consumption are expected to be 0.25 kilograms (kg) per tonne (0.5 pounds (lbs) per ton) and 2.5 kg/tonne (5 lbs/ton) respectively. Over the mine life, production will total 15.1 million tonnes of ore at 1.0 gram per tonne (gpt) gold or 0.03 ounces per ton (opt) gold for total recoverable gold of 397,000 ounces (oz). The proposed production schedule is as follows:

Year	Oxide Heap Leach				Waste Tonnes (millions)	Strip Ratio
	Ore Tonnes (millions)	Gold Grade (gpt)	Contained Gold (oz)	Recovered Gold (oz)
0					8.0 (Pre-strip)
1	2.0	1.02	65,290	42,830	9.7	4.8
2	2.0	0.99	63,520	52,380	9.6	4.8
3	2.0	1.13	72,750	58,140	8.9	4.4
4	2.0	0.94	60,380	51,540	9.3	4.7
5	2.0	0.94	60,440	49,550	9.6	4.8
6	2.0	1.06	67,980	54,510	7.8	3.9
7	2.0	0.91	58,600	49,590	5.9	3.0
8	1.1	1.02	35,420	32,850	0.8	0.7
9				5,810
LoM	15.1	1.00	484,380	397,190	61.7	4.7

Permitting

The Gold Bar Project, in Eureka County, Nevada, is located on public lands managed by the Bureau of Land Management (BLM) Battle Mountain Field Office, and on patented lands. The BLM and the Nevada Division of Environmental Protection (NDEP) will be the primary regulatory agencies responsible for ensuring environmental protection as the Gold Bar Project progresses through permitting and approval processes. McEwen Mining believes that both permitting processes (Federal and State) can be accelerated by completing certain activities concurrently when appropriate. The Gold Bar Project will also require environmental review pursuant to the National Environmental Policy Act (NEPA).

McEwen Mining believes that the level of detail in the PFS is sufficient to make a positive production decision without a full feasibility study being completed. The intention is therefore to proceed directly to the permitting phase and move towards productions as quickly as possible.

Resource Estimate

The updated NI 43-101 compliant resource estimate included in the PFS was developed by SRK and is comprised only of gold resources that fall within the boundaries of a conceptual pit. In this case the conceptual pit was designed at the then one-year trailing average gold price of $1,500/oz. This approach differs from previously published resource estimates on the project, which were unconstrained resources. As a result of this difference in approach, the stated resource estimate by SRK is lower. The updated resource is as follows:

Gold Bar Project Resources*	Tonnage (million tonnes)	Avg. Grade (gpt)	Avg. Grade (opt)	Gold Ounces	Cut-off Grade (gpt)
Measured	0.7	1.19	0.035	25,844	0.3
Indicated	18.8	0.94	0.027	567,084	0.3
Measured + Indicated	19.5	0.95	0.028	592,928	0.3
Inferred	7.0	0.94	0.027	212,168	0.3

*Notes:

• Mineral Resources are not Mineral Reserves and do not have demonstrated economic viability.  There is no certainty that all or any part of the Mineral Resources estimated will be converted into Mineral Reserves;

• Resources stated are contained within a potentially economically minable open pit stated above a 0.30 gpt Au cut-off grade;

• Variable density was applied to tonnage estimates as determined during metallurgical test work;

• Pit optimization is based on an assumed gold price of $1,500/oz, metallurgical recovery of 82% and a processing and G&A cost of $7.99/tonne;

• A NI 43-101 compliant technical report containing the “Mineral Resource Estimate” is filed SEDAR. The resource estimate was completed using Datamine© mining software by Frank Davies (SRK Consulting Associate) a “Qualified Person” and “Independent” of McEwen Mining within the meaning of NI 43-101;

• Mineral resource tonnage and contained metal have been rounded to reflect the accuracy of the estimate, and numbers may not add due to rounding.

Reserves

The PFS establishes reserves under NI 43-101 for the Gold Bar Project. Under NI 43-101 regulations only resources in the measured or indicated category can be included as proven or probable reserves. The reserves estimate is further constrained by the design pits included in the PFS, which demonstrate economic and engineering feasibility in the current mining environment. In this case the reserve pit was designed at the three-year trailing average gold price at the time the reserves were established of $1,100/oz. The underlying assumptions supporting the reserves estimate are as follows:

Assumptions for Reserves Calculation		Units	Values
Gold Price		$/oz	1,100
Mining Cost	Gold Pick	$/tonne	2.48
	Gold Ridge	$/tonne	2.76
	Cabin Creek	$/tonne	2.34
	Waste	$/tonne	2.20
Processing and G&A		$/tonne	7.99
Recovery*		%	82*
Cut-off Grade		gpt	0.285
Inter-ramp Pit Slope Angle	Gold Pick	degrees	54
	Gold Ridge	degrees	42
	Cabin Creek	degrees	54
	Dumps	degrees	32

*Notes: Metallurgical tests to support this assumption conducted by Kappes, Casidday and Associates of Reno, Nevada. Tables detailing the metallurgical test results are attached at the end of this release.

The PFS reserves estimate is as follows:

Metallurgical Testing

The Gold Pick, Gold Ridge and Cabin Creek deposits are well oxidized and occur at elevations above the local water table. Test work indicates that the ore leaches quickly with normal cyanide application, and is enhanced by primary crushing. While determining that 82% gold recovery was reasonable during commercial production, SRK considered three sources of technical information. First, a large volume of cyanide soluble assay data is available for comparison with fire assay results, this ratio of cyanide leach recovery to fire assay recovery is useful in determining which mineralized zones are amenable to heap leach. Second, bottle roll and column testing conducted be Kappes, Casidday and Associates (KCA) between 1984 and 1994 was available for composite samples collected by the projects previous owner. Third, in late 2010 and 2011 McEwen Mining conducted a core-drilling (PQ size) program to collect metallurgical samples from all the main mineral zones, and bulk samples were collected from the existing Gold Pick pit. KCA analysed these samples with supervision and guidance from SKR. Recent test work consisted of bottle roll tests on 74 samples, column tests on 4 core composites and 4 bulk composites. A summary of the 2011 column test results at a 5 cm (2 inch) crush size is as follows:

Property Location

The Gold Bar Project is located within the Battle Mountain-Eureka-Cortez gold trend in Eureka County, Central Nevada. The property was previously mined from 1990 to 1994 by Atlas Precious Metals Inc. The nearest operating mines are Barrick Gold’s Ruby Hill (approximately 25 miles to the Southeast) and its Cortez Mine (approximately 35 miles to the Northwest).

Gold Bar technical information was derived from the report titled “NI 43-101 Technical Report on Resources and Reserves Gold Bar Project Eureka County, Nevada” with an effective date of November 28, 2011. The report has been prepared by SKR Consulting, an independent geological consulting firm with a local office in Reno, Nevada. To access the report click here.