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McEwen Mining (MUX) rethinking Capex / Dow-Gold Ratio


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McEwen Mining (MUX) rethinking Capex / Dow-Gold Ratio

 

Rob McEwen: "We Seem To Be Near The Bottom Of This Correction"

 

Monday July 15, 2013

 

MUX / McEwen Mining ... update

 

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During a time in which the mining sector is struggling to survive a darwinian period, legendary mine developer Rob McEwen was kind enough to share perspective on the state of the market. Rob is the founder and former Chairman and CEO of Goldcorp Inc., which is by market capitalization, the largest gold producer in the world.

He is currently the Founder, Chairman, and Chief Owner of McEwen Mining Inc.

= = =

 

STEPS Being taken

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+ Expected production to rise from 100-130K oz in 2013, to 280-290k oz rate by end of 2015

+ Bulk of that jump was to come from El Gallo-2 with capex of $180 mn, and expected to get that: 1/3- from cash and CF, 1/3- from capital leases, 1/3- from sale of Los Azules copper project, but there were not buyers for mega copper projects, and CF has been lower than expected,

+ MUX decided to delay or modify the project, and focus instead on lower Capex opportunities

+ By expanding leach pads for $5 million, they could double productiom at El Gallo-1

+ The switched EG-2 to a lower Capex Heap leach, losing some production (going from 90% recoveries to 60% recovery), but reducing Capex from $180mn to $20mn

+ Overall, they should be able to get 280K of Gold equiv., but more of that will now be in Silver

 

TD: Rob, as the readers probably know, you own 25% of McEwen Mining. Are you adding to your position here?

RM: I haven’t yet because we keep putting out news. But I’m thinking this is a time to be looking at opportunities, and it may be opportunities that we can put into McEwen Mining by acquiring another asset. I would be inclined to do that.

In terms of my investment, I own 25%, and my cost basis in McEwen Mining is $125 million, so I have a keen investment interest in the company.

 

(Note: at $1.83, the MktCap is $478 Mn, so his 25% stake is now worth $119.5 Mn, and his cost basis was $1.91 per share.)

 

TD: On the Dow to gold ratio as of late--do you have any thoughts there?

RM: We’re at twelve ounces to buy the Dow and not too long ago, we were as low as seven ounces to buy the Dow. It looks something akin to what happened in the ‘74 through ‘78 period where gold went from $200 an ounce, down to the mid-$90s per ounce, then back up to $200 before it moved on to $850 an ounce.

So it feels like we’re entering the second half of this cycle, and that ratio number maybe will go to thirteen, but then it’s going to go back down towards seven and ultimately below that considerably.

 

TD: Rob, in winding down are there any items that we may have missed about any aspect of the conversation so far?

RM: Well, from a McEwen Mining perspective, we have cash in the bank about $40 million right now. We don’t have any debt so we don’t have to service or repay it. We have projects we can fund without accessing the outside markets, and to me that’s a much better position than a company that is halfway through a build and finds it’s having to raise more money,

 

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/source : http://www.kitco.com...Correction.html

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TD: On the Dow to gold ratio...

RM: We’re at twelve ounces to buy the Dow and not too long ago, we were as low as seven ounces to buy the Dow. It looks something akin to what happened in the ‘74 through ‘78 period where gold went from $200 an ounce, down to the mid-$90s per ounce, then back up to $200 before it moved on to $850 an ounce.

So it feels like we’re entering the second half of this cycle, and that ratio number maybe will go to thirteen, but then it’s going to go back down towards seven and ultimately below that considerably.

 

Latest:

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History: w/o trendlines : more trendlines

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Long Term:

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The 100 wk (480 day?) MA was important for the Ratio

 

We have already begun wrapping up with the summary above, but let's check the DGR, with Dow testing resistance and a gap in gold terms by daily chart. This could be viewed as an emotional retrace of the panic from the 'Flash Crash' of last spring.

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Now let's get to a critical point of the analysis that has been carried forward for much of Hope '09. Please take a moment and reflect upon the weekly DGR chart above, then come back and we'll discuss.

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/more: http://www.safehaven...ts-implications

 

Latest Chart : with Lines

 

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