TORONTO (miningweekly.com) – Faced with lower gold and silver prices and challenging capital markets, miners are being forced to look closer at low-cost alternatives to grow profitability, prompting metals producer McEwen Mining to expand its existing El Gallo 1 mine, in Mexico.

McEwen on Thursday announced output from its fully owned mine would be increased from 3 000 t/d to 4 500 t/d. This, along with improvements in the grade, were expected to lift gold production from an estimated 27 300 oz this year, to about 37 500 oz in 2014 and 75 000 oz in 2015.

By focusing on expanding its existing operation, McEwen said the capital cost of about $5-million was significantly reduced and would be funded internally, with no need for debt or equity financing.

The expansion would focus on installing additional carbon columns, pumps, enlarging the spare parts inventory, expanding the heap leach pad and upgrading the process plant. The mining rate could also be increased as required by using the current mining contractor.

The expansion plan was expected to take nine months to implement and the heap leach pad expansion was expected to be complete in 12 months, while the existing capacity on the current heap-leach pad could potentially accelerate the ramp-up.

McEwen said the main driver behind the expansion was the new central zone discovery. Highlights from recent drilling in the zone included 5.7 g/t gold over 23 m and 3.9 g/t gold over 21 m, which had expanded the mineralisation at the mine and increased management's confidence.

With the planned expansion at El Gallo 1, McEwen said it would review the potential to process ore from El Gallo 2 at the current heap-leach facilities. The two sites are located about 5 km apart.

The review would focus on silver recoveries (early column tests returned between 45% to 62% silver), transportation, crushing and processing costs. Although this would reduce recoverable silver, it would eliminate about $170-million in capital expenditure.

"One of the most attractive features of a heap leach mine in Mexico is that it can be expanded fairly quickly, with modest capital. Even without El Gallo 2 or Gold Bar, production from our existing operations is set to ramp-up from 130 000 oz of gold-equivalent ounces this year to 175 000 gold-equivalent ounces by 2015," chief owner Rob McEwen said.

The move is, however, a risky one, because the company had not completed a feasibility or prefeasibility study. The proposed El Gallo 1 production expansion had not been explored, developed or analysed in sufficient detail to complete independent feasibility or prefeasibility studies and it might ultimately be determined that it lacks one or more geological, engineering, legal, operating, economic, social, environmental, or other relevant factors reasonably required to serve as the basis for a final decision to complete developing all or part of the El Gallo 1 expansion.

Meanwhile, McEwen on Wednesday announced it had increased the National Instrument 43-101-compliant resource at its Los Azules copper project, in San Juan province, Argentina.

The company had completed a total of 15 800 m of drilling, which resulted, since the June 2012 estimate of mineral resources, in a 17% increase in contained copper in the indicated resource category to 5.4-billion pounds of copper, and a 32% increase in contained copper in the inferred resource category to 14.3-billion pounds of copper.

This updated resource estimate would form the basis of a new preliminary economic assessment (PEA), which is expected to be complete in the third quarter. The PEA would evaluate the possibility of increasing the daily throughput, producing copper cathode instead of a concentrate and processing low-grade material not previously considered, through a heap leach.

The company’s stock traded 2.42% higher on Thursday at C$2.12 apiece.