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Pleasant Surprises On Deck For Gold Miners Outside U.S. On Exchange Swings - Rob McEwen
By Alex Létourneau Kitco NewsMonday January 26, 2015 12:51 PM
(Kitco News) - With the U.S. dollar taking flight and leaving other currencies in the dust, Rob McEwen, chairman and chief owner of McEwen Mining Inc. (TSX:MUX) (NYSE:MUX), expects some pleasant surprises for producers outside the U.S.
As fourth-quarter and full-year financial results begin to pour in from the mining sector in late February and March, McEwen sees some rough results, but potential in early 2015.
“I think for year-end, you’re going to see companies writing down assets,” he told Kitco News. “But, in the first and second quarter, if you’re not producing in the U.S., I think you’re going to see pleasant surprises because of the exchange swing.
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| Rob McEwen, chairman and chief owner of McEwen Mining Inc. |
“Revenues have gone up because of the dollar and your operating costs have gone down, so, I think the market is going to be surprised.”
McEwen Mining has mines and projects located in Argentina, Mexico and Nevada. The company recently released record production figures from its producing operations – El Gallo 1, located in Mexico, and the San José mine (49% interest), located in Argentina.
The company produced 84,363 ounces of gold and 3,195,693 ounces of silver in 2014. Production guidance for 2015 is expected to total 96,500 ounces of gold and 3.12 million ounces of silver.
Gold production is expected to begin to dwindle, on a global basis, in 2015, but sentiment is up in the sector as gold prices have performed well in early 2015.
“People are turning to gold because of global issues. The industry is high-grading, it’s deferring as much exploration as it can and it has gotten rid of a lot of its discretionary expenses,” he says. “I’d say we’re pretty close to the cost of producing gold right now, so you’re not getting new projects coming on and there’s a rotation going on in the market.
“This is a sector that’s been beat up for more than three years, it’s been unloved, and people are seeing a little bit better prices in gold.” He added. “There are some geopolitical events that have happened and people are thinking maybe they should rotate out of some of their other stocks and into gold and buy some insurance.
Adding to the improving market sentiment, the market has seen some ripples of mergers and acquisitions recently, among them were Coeur Mining, Inc.’s (NYSE:CDE) and Paramount Gold and Silver Corp. (NYSE MKT:PZG)(TSX:PZG) deal, as well as Goldcorp Inc. (TSX:G)(NYSE:GG) and Probe Mines Ltd. (TSXV:PRB) deal.
“People are cashing up and they’re getting ready to move before the market moves,” McEwen said. “You are seeing companies saying it makes more sense to go together, its expensive being a public company, so I believe that trend is going to continue.”
While McEwen believes this is a good time for companies with similar synergies to create partnerships, he’s also content to focus on projects on the company’s asset sheet and in the pipeline.
“We do some window shopping,” McEwen said, with a small chuckle. “We wanted to take our own assets and see how we can optimize those first, and, at the same time, look for opportunities where we could either build our resource space, or build on near-term production.
“We’re testing a number of technologies at the mine, seeing if we can move that operation further, and then looking at El Gallo 2 and really pushing that and seeing if we can get the hard numbers down - and, maybe in the second half, make a decision to build.”
By Alex Létourneau of Kitco News aletourneau@kitco.com
Follow Alex Letourneau @alex_letourneau
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