Rob McEwen: Complacent, Risk-tolerant Investors Should be More Worried

Rob McEwen of McEwen Mining discusses the gold market, as well as his company's acquisition of the Black Fox Complex in Ontario's Timmins Gold Camp.

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McEwen Mining (TSX:MUX,NYSE:MUX) expanded its footprint in Canada’s Timmins Gold Camp last week by acquiring the Black Fox Complex from Primero Mining (TSX:P,NYSE:PPP). 

Speaking via phone the day after the news was made public, Rob McEwen, the company’s chairman and chief owner, said that Black Fox is “quite complementary” to the four properties McEwen Mining gained when it purchased Lexam VG Gold earlier this year.

“We acquired the Lexam assets earlier this year, and there’s about 2.4 million ounces in resource on those properties,” he said. “The Black Fox Complex offers us a mill that we don’t have, and a tailings pond and underground mine, [as well as] some other exploration targets.”

The mine at Black Fox is expected to produce 50,000 to 60,000 ounces of gold this year, meaning the deal will immediately boost McEwen Mining’s gold output. According to McEwen, the company’s immediate focus at Black Fox will be extending the life of the mine at the complex — “it’s been constrained in terms of exploration capital,” he said.

The Lexam properties are all past producers, and when McEwen Mining initially acquired them McEwen said the plan was to put them into production “in a reasonably short period of time.” All have open-pit and underground potential, and McEwen said that currently the company is doing trade-off studies. He added, “right now [we’re] seeing which one we’d like to get going first.”

While the Timmins Gold Camp has been a focus for McEwen Mining this year, the company has also been moving forward at its assets in the US, Mexico and Argentina. The company produced 32,584 gold equivalent ounces in Q2, up from 29,733 in Q1, and McEwen said that the company expects to hit a number of milestones before the end of the year.

“We’re in … the final phases of permitting for our Gold Bar property, [and] working to get a new feasibility study on our silver project in Mexico. Our Los Azules copper project in Argentina we’ll be coming out with a preliminary economic assessment in September,” he said.

No conversation with McEwen would be complete without a discussion of the gold price, and he closed by saying that he thinks the yellow metal will end the year “hundreds of dollars higher.”

In addition to the current tension between the US and North Korea, McEwen said he sees the US economy as a major concern. “[The US government], the central banks have kept interest rates very low for quite some time, and it’s created this illusion of prosperity,” he explained.

“Investors in general have become a little bit complacent and risk tolerant,” McEwen continued. “We’ve seen low interest rates for quite awhile, and it’s easy to borrow and it looks like everything’s going in one direction — but it isn’t.”

When asked if investors should be concerned about a financial collapse in the US, he said, “I’d be worried about it.” He added, “people at some point are going to insist on a greater return if they’re going to put money at risk. It’s created a bubble in the housing market, it’s created a bubble in the stock market. They do come to an end once in awhile.”

McEwen said he believes now is a good time for investors to buy gold, noting that “late August, September, October is often a period of better prices.” He also pointed to recent comments from Ray Dalio, manager of the world’s largest hedge fund.

“Yesterday he was quoted as saying investors should have 5 to 10 percent of their money in gold,” said McEwen. Dalio cited a number of reasons for his advice, including the escalating issues between the US and North Korea and the possibility of US Congress failing to raise the debt ceiling — an event that could lead to a temporary government shutdown.

The gold price was sitting at $1,287.80 per ounce as of 2:00 p.m. EST on Friday (August 11). At that time it was up 13.65 year-to-date.

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Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in contributed article. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.

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