He still believes the gold price could reach $2,000 by the end of the year.
McEwen Mining (TSX:MUX,NYSE:MUX) has operated for years in the US, Mexico and Argentina, but its acquisition of Lexam VG Gold earlier this month marks the company’s first foray into Canada.
The deal brings four past-producing gold mines in the Ontario-based Timmins gold camp into McEwen Mining’s stable, and according to Chief Owner Rob McEwen, one or more of them could soon be producing again. “We think there’s an opportunity to put some of these properties into production in a reasonably short period of time,” he said.
The properties are called Buffalo Ankerite, Fuller, Davidson Tisdale and Paymaster, and McEwen now wholly owns all of them except Paymaster, in which it has a 61-percent stake; Goldcorp (TSX:G,NYSE:GG) owns the remaining 39-percent interest. All told, the former mines will increase McEwen Mining’s measured and indicated gold resources by 1,468,500 ounces, and will bump its inferred gold resources up by 954,000 ounces.
While production may not be far off, McEwen said some exploration will take place first in order to determine how best to prioritize the sites. “We’ve defined a good number of [our exploration targets],” he said, “and there are a number of permits in hand that we’re going to study.” Another thing the company will have to consider is whether it will pursue open-pit or underground mining at the properties.
In terms of exploration, the first priority will likely be following up on historic drilling. “Davidson Tisdale [has] assaying as high as 341 grams over 3.4 meters, and the Fuller deposit has 18 grams over just under 8 meters,” said McEwen. Additionally, “Buffalo Ankerite has 13 grams over 9 meters, [and] Paymaster has almost 19 grams over 9 meters.”
“Those are at the high end,” McEwen noted. “But certainly those numbers caught my attention, and there seem to be areas where there are definite holes in terms of exploration drilling that we want to follow up on.” He added that because the properties are past producers, they already have some infrastructure in place, including mine shafts and ramps.
As work at the Lexam properties develops, McEwen Mining will continue to push forward at its other projects. The Nevada-based Gold Bar project has been a key focus for the company in recent months, and McEwen said that it continues to advance to production. “We’ve been engaging people to do all of the planning, all the engineering,” he said. “That’s on track.”
The company’s three other operations are the El Gallo complex, the Los Azules copper project and the San Jose gold-silver mine, held in partnership with Hochschild Mining (LSE:HOC). The El Gallo complex is in Mexico, and holds the El Gallo gold-silver mine as well as the El Gallo silver project — speaking about the latter, McEwen said, “we’ve been working on it and we feel we’ve been able to reduce both the capital and the opex. The impact is that around current prices we think we have an economic project.”
At Argentina-based Los Azules, the focus has been on exploration. “That’s where we’ve spent the most of our exploration budget this past quarter,” said McEwen. “We’re spending it on exploration, but we’re also looking at the infrastructure that’s required to build and operate in that area.”
The company plans to release more details about its 2017 plans at its annual general meeting, which is scheduled for May 25. In closing, McEwen offered his thoughts on investor sentiment and where the gold price may be by the end of the year.
“The market seems to be saying right now that all the problems in the world have been solved, so you don’t need any insurance in the form of gold,” said McEwen. “Everybody’s quite comfortable with the stock market and not so happy with precious metals, which I think is just being extremely cavalier about risk. But that’s where we’re at right now.”
When asked what could bring about a change in the market, McEwen was clear that investors should be watching the US. “There may be some disappointments in America — that all of the promises aren’t able to be kept because of the divided political situation,” he said
He added, “and I’d have to say … debt. It’s all well and good when interest rates are low, or you have easy credit. [But] if the credit were to disappear or interest rates go up, you then have to think about liquidity and gold. It’s one of the best forms of liquidity of any asset group. You can convert your gold into cash in two days. You can’t do that with real estate. You can’t do it with a whole lot of other investments.”
McEwen still sees the gold price reaching $2,000 per ounce by the end of the year, a call he also made at PDAC.
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Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.
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