Canadian exploration firm McEwen Mining has secured a final environmental permit from the secretariat of Environment and Natural Resources (SEMARNAT) for the State of Sinaloa, Mexico, for its El Gallo two project.

SEMARNAT has approved the change of land-use application, which allows the company to construct and operate a mine at El Gallo two that is expected to produce an average 95,000oz of gold equivalent per year at an approximate cost of $750 per ounce.

With $5m for annual exploration, sustaining costs are anticipated to reach $800 per gold equivalent ounce during the life of the mine.

McEwen and its engineering contractors are currently conducting studies to reduce the estimated capital expenditures associated with the project.

The company plans to reduce $20m of costs by limiting the number of leach tanks, constructing a smaller process plant refinery, utilising modular crushers and reducing the number of transformers.

To date, $10m of the estimated $150m final construction cost has been spent.

McEwen Mining said it had not made a final decision to proceed with the project and its first plan is to complete its cost-savings studies and to review financing alternatives.

The company plans to submit two additional permits associated with El Gallo two in the first quarter of this year. The permits will not prevent construction from proceeding.

One of the permits will allow for the mining of the satellite deposit, Palmarito, in 2016, and the second permit is for a right-of-way for electrical power to connect to the process plant.