Miners Holding Steady In Face Of Lower Gold Prices -- McEwen
(Kitco News)- Although gold prices have droppeddramatically in the last three months, one mining chief executive officer saidthat he sees some underlying strength in the marketplace as shares of gold minershave held relatively steady.
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| Rob McEwen, CEO of McEwen Mining |
In a telephone interview withKitco News, Rob McEwen, chairman and CEO of McEwen Mining (NYSE: MUX, TSX: MUX), saidthat while the gold price isn’t helping sentiment in the marketplace, he isencouraged by the price action in the VanEck Vectors Junior Gold Miners ETF(NYSE: GDXJ).
Since early April, gold futureshave lost 8.5% in value; however, the junior mining ETF has lost around 1%. August gold futures are currently hovering around a 12-month low at $1,223.10an ounce, while GDXJ last traded at $31.92 a share.
“Gold investors are frustratedwith the market, but I think generalists are starting to see value in miningstocks,” McEwen said. “At some point, investors are going to start askingthemselves where the earnings growth will come from and that will be fromcommodities. Now is the time to buy because there is real value in the market.”
McEwen said that it is unlikelythe S&P 500 stock index will double in price from current levels. At thesame time, it’s also unlikely that gold prices and the mining sector will see asignificant decline from current prices, he added.
McEwen said that theindustry-wide profitability is the one missing component that is keepinggeneralist investors from jumping into the precious-metals market en masse. Heexplained that many companies are not profitable and are sucking investmentcapital away from companies that make money.
“I think there needs to be someconsolidation within the mining sector,” he said. “A company with one project isgoing to struggle to be profitable. Strategically grouping two or threeprojects together makes sense and will create a lot more value for investors.”
With that in mind, McEwen saidthat he is looking to put his company’s money to work. Currently, McEwen Miningis sitting on reserves of $30 million.
McEwen explained that because ofcurrent market conditions and extremely low valuations, his company is activelylooking for projects to buy and expand its production pipeline.
As for other options, McEwen dismissedthe idea of increasing the company’s dividend to attract investors. He saidthat a dividend would never be able to compete with rising interest rates.
“I think the best way to createvalue is to build out our production,” he said. “If I’m looking at buyingprojects, then investors should be doing the same thing.”
McEwen’s comments come after hiscompany saw a nearly 66% increase in gold production in the second quarter,compared to the same period last year.
On Monday, McEwen Mining saidthat the company produced 36,959 ounces of gold in the second quarter, up from22,191 ounces produced in the second quarter of 2017. At the same time, thecompany produced 772,432 ounces of silver, down slightly from 779,487 ounces inthe same period last year. Finally, the company produced 47,258 gold-equivalentounces, up from 32,584 in the second quarter of 2017.
McEwen said that the increase in gold productionwas because of its Canadian Black Fox Mine, which was purchased last year.
For Kitco News
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