Rob McEwen: $5,000 Gold Still in the Cards

Rob McEwen has many claims to fame in the mining industry. He’s perhaps best known as the founder and former CEO of Goldcorp (TSX:G,NYSE:GG), but he’s also well known for his current post as chief owner and chairman of McEwen Mining (TSX:MUX,NYSE:MUX). And of course, some may know him for his oft-repeated prediction that gold will eventually hit $5,000 per ounce.
McEwen reaffirmed that forecast in a recent interview with the Investing News Network, asserting that his positivity regarding gold hasn’t been swayed by the metal’s recent poor price performance.
“The governments are telling us there’s no inflation, but everything, every part of your life … is costing more. So we’re not getting the right statements from the government. And money supply has been expanded dramatically. And government debt levels have gone through the roof, and actually consumer and corporate have gone up quite high as a result of zero interest rates. So … people would rather consume than save. All of those forces, at least historically, lead to much higher gold prices,” he explained.
That said, he did admit the gold market has faced challenges this year. “[The gold price] kept falling … you had your mine plan and you had to keep adjusting it to reflect the lower metal prices,” he said, adding that it’s difficult to make changes likes that quickly. “It’s not like turning on and off a light,” he quipped.
For investors, his advice is as follows: “you have to be patient.” More specifically, “you should look to diversify your portfolio. The prices are heavily discounted, and [gold] could in the future be worth a lot more.”
Watch the interview above to learn more of McEwen’s thoughts on the gold market, as well as what’s in store for McEwen Mining in 2016. In particular, he touches on how the company’s Argentina-based projects could be impacted by the country’s recent election, and on McEwen Mining’s NYSE listing.

---

No time to watch the interview? Read the transcript below! 
INN: I’m Charlotte McLeod with the Investing News Network, and here today with me is Rob McEwen. He’s the founder and former CEO of Goldcorp, and currently he’s chairman and chief owner of McEwen Mining. Thank you so much for joining me today.
RM: Glad to be here, Charlotte.
INN: I want to start off by talking to you about 2015. The year is almost over — this time last year, what did you expect the year to bring? And did you end up being correct?
RM: Let me think. There were some that were correct, some that surprised me. I thought that the gold price would’ve bottomed, and it didn’t; [it] kept going down. I thought that we would be improving our operations in Mexico, which [we] did. So that was good. And I didn’t expect the broad market to be as strong as it has been.
INN: What was the most challenging aspect of the gold market in 2015? For you, I was thinking maybe the robbery you had?
RM: You heard about that?
INN: I did, yes. It sounds like it turned out relatively okay though.
RM: Yes. The robbery definitely wasn’t expected. When it occurred, we had more gold than we normally have for longer. But we have a new refinery now that Brinks says is state of the art from Mexico. So that’s positive. We got 80 percent of our money back from our first insurer. We have our second insurer, and we’ll probably have to go to court, but we’re on pretty good grounds. So we should get about 100 percent of our money back.
And so, yes, the robbery would have been the challenge. I did an interview on a competing channel, and that was picked up by the Mexican press and … I said we had a good relationship with the cartel, and they took that as being we have a really good relationship with the cartel — it was over 300 press releases or media exposures about that, and they took it quite out of context.
INN: For the gold market as a whole, what were some challenges that the year has brought?
RM: A lot of it comes from — [gold] kept falling. So you had your mine plan and you had to keep adjusting it to reflect the lower metal prices. And I guess for a lot of people you had to keep pushing them into areas of discomfort … we have to keep getting the costs down, and then maybe getting focused on increasing the recovery, so getting more of the gold out of the rock than we normally have. And we’ve been quite successful doing that, but it’s not a space that people naturally gravitate to.

INN: It must be hard to make those changes quickly.
RM: You can’t, it’s not like turning on and off a light on the wall.
INN: So those are some challenges. What were some milestones for your company this year?
RM: This year? We’ve got several. We’ve been able to improve the recovery in Mexico. We’ve had three quarters of positive cash flow, which is a little odd in this industry — odd, but desired. We declared a dividend in August and it’s a capital distribution. We have a yield of just over 1 percent, and it’s tax free. We initiated a buyback. We paid our dividend, and I am reinvesting all my money that I get from the dividend — and I’m the largest shareholder — back into the company.
INN: So you’re the largest shareholder. Are your other shareholders reacting well to all things you’re doing? 
RM: The price is showing some stability. I’d like to get it about US$1.
One other thing that was challenging — the New York Stock Exchange in July told us that because our share price was below US$1, we were in jeopardy of being delisted, and they gave us six months to settle that. But since we’re a Colorado-incorporated company, you could do a share consolidation, but you can only do that with shareholder approval at an annual meeting. So we basically can go out to June to cure that. But I don’t want to see a share consolidation, so that would be challenging item.
INN: Moving on to 2016, what are your thoughts on the gold market? I know you’ve talked in the past about $5,000 gold and I wondered if that’s still in your mind.
RM: Absolutely. I think … the governments are telling us there’s no inflation. But everything, every part of your life — whether you’re buying car insurance or you’re buying a house, you’re buying food, you’re going to the dry cleaner — is costing more. So we’re not getting the right statements from the government.
And money supply has been expanded dramatically, and government debt levels have gone through the roof. And actually, consumer and corporate have gone up quite high as a result of zero interest rates. So consumption is coming, people would rather consume than save.
And all of those forces, at least historically, lead to much higher gold prices as the value of the dollars that we hold in our wallets buy less. So I see a higher gold price.
In the cycle that went from 1970 to 1980, gold went from $400 to $800, so that’s a factor of 20. And the low in this cycle was $250. So if you apply that factor 20 times, you’re up to $5,000 pretty quickly. So I still like that $5,000.
INN: So you’re very confident in the gold market. Is there anything particular that you tell to investors or just people in general who are concerned about the gold price?
RM: You have to be patient. I think … in some people’s portfolio … whether it’s real estate or certain stocks, they’ve gone up. If you were walking by a store, let’s say a really nice clothing store, and you saw 90 percent off, would you be tempted to walk into the store?
INN: Of course!

RM: Of course. Well that’s what we have right now. It’s 90 percent off on gold shares. Gold is cheap, gold shares are even cheaper. And there is a fellow, I don’t know if you’ve ever seen it, Mark Dice, he’s a market commentator. And he did an experiment. He went out on the streets in California, and he had a handful of chocolate bars, Hershey chocolate bars, big ones, and a silver bar in his hand, 10 ounces. And he walked up to everybody and he just said, “it’s your lucky day. What would you rather have? A chocolate bar or this silver bar?” And he’s standing right in front of a coin shop, and you could go in and just take the silver bar and cash it in. And everybody [who] went by took the chocolate bar.
INN: Oh my goodness. 
RM: And yet they could’ve probably bought 100 chocolate bars by cashing in the silver. And people just don’t understand why you would want to own gold or silver, and what its value is. And so I’d say to people right now, you should look to diversifying your portfolio. The prices are heavily discounted, and it could in the future be worth a lot more.
INN: Finally, catalysts for your company in 2016. What should people be looking forward to? 
RM: Well, there are a couple of things. One, I was very excited on Sunday when I read in the news that there was an election in Argentina, and there’s a new president. We have assets in Argentina — a gold-silver mine and a large copper deposit. And Argentina has been … a no-go zone for quite a while for investors.
This new president is saying he is going to be friendly to foreign investors, he’s going to be friendly to the mining industry, he’s going to change the exchange rate. Our operation there right now is a breakeven, and if you lower the — if they improve the exchange rate by lowering it relative to the dollar, our costs are going to fall because they’re going to be in local currency and our revenue is going to go up. So that’s very good.
We have a copper project we are trying to monetize that’s also in Argentina. So I think there’d be more people looking at it and more value … but that’s out of our control.
In our control, we have a feasibility study coming out on our El Gallo 2 property in the first half. We’re looking at improving the numbers on our gold property in Nevada, and that’s coming. We’re doing exploration. We’re going to pay our dividend … we have a share buyback — and those are all good starters. We have very little debt — $5 million debt, $36 million in cash, positive cash flow, pay a dividend, have a share buyback and most people in the industry don’t do that.

INN: That’s very good.
RM: Thank you.
INN: All right. Those are all my questions. Thank you so much for joining me today.
RM: Thank you, Charlotte.
INN: I’m Charlotte McLeod with the Investing News Network, and McEwen Mining trades on the TSX and the NYSE under the symbol MUX. 
 
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 the interviews it conducts. 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.
Related reading: 
McEwen Chief Owner Retains Good Humor in Tough Market
Rob McEwen on Why Gold Stocks Remain a Good Bet
Rob McEwen: $5,000 Gold a Possibility?