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Exploration Boom Needed To Bring Investors Back To Gold Sector – Rob McEwen

Exploration Boom Needed To Bring Investors Back To Gold Sector – Rob McEwen

Tue Apr 23 2019



After a busy first quarter of merger and acquisition activity within the mining sector, companies need to get back to the basics and start finding new sources of gold, according to one mining executive.


n a recent interview with Kitco News, Rob McEwen, chairman and CEO of McEwen Mining (NYSE: MUX, TSX: MUX), said that the M&A activity at the start of the year helped generate some much-needed investor interest in the precious metals mining sector; however, good exploration news and a significant discovery is needed to keep the attention of those investors.


“The market needs something special to happen, something out of the ordinary to generate new excitement,” he said. “The M&A news showed investors that there is money to be made in the sector and now companies need to follow that up and show how they are creating shareholder value.”


McEwen’s comments come as gold prices have fallen to their lowest level in four months, dragging the mining sector down with it. June gold futures last traded at $1,273.50 an ounce, down 0.32% on the day; at the same time, VanEck Vectors Gold Miners ETF (NYSE: GDX), last traded at $20.92 per share, down 0.29% on the day.


McEwen added that companies like Kirkland Lake Gold, with its record production, and Great Bear Resources, with its active exploration program, are weathering the current environment of lackluster investor interest.


The need for positive exploration results is one of the reasons McEwen Mining is embarking on an aggressive drill program this year, focusing on its North American projects. The company recently said that it will invest $17 million in an exploration program at its Black Fox property in Northern Ontario. At the same time, the company will invest $5 million to explore is Gold Bar Mine in Nevada.


“We think there is a lot of potential to build out these resources and build world-class mines,” he said.


The exploration programs come after the company saw poor production in these two mines in the first quarter. McEwen described the first quarter as the “ugliest he has presided over,” as heavy snowfall in Nevada impact production at Gold Bar. Black Fox had issues as its primary contractor-operated crushing plant was closed down for six weeks in February.


Despite the setback McEwen said that the company is still on target to reach its 2019 production target of 205,000 gold equivalent ounces. For the first quarter of 2019, McEwen Mining announced production of 36,166 gold equivalent ounces, down more than 18% compared to production in the first quarter of 2018.


As for the gold price and investor interest, McEwen said that he thinks it’s only a matter of time before the current downtrends reverse.


He added that because investor sentiment in the mining sector is so low it wouldn’t take much to create a sustainable rally.


For gold prices the fact that central banks continue to build their gold reserves is a sign that the yellow metal remains an essential asset for general investors who want to protect themselves.


“Central bank buying is once again legitimizing gold as a global currency,” he said.