gold mining

McEwen Mining Guns for S&P 500

October 31st, 2016 by

McEwen Mining (MUX) is one of the more prominent firms in the junior miners sphere. The company has operations mining for precious metals and (to a lesser extent) other base metals in Mexico, the U.S., and Argentina. It boasts a market capitalization of about $1 billion, making it more of a “small cap” company. Stocks of these kinds of companies tend to trade for only a few dollars—or less.

miningAll the same, McEwen is now looking to aggressively grow its business in order to eventually reach the market cap threshold for companies listed on the leading S&P 500 stock index.

The requirement for companies to join the prestigious S&P 500 is a minimum market capitalization of $4 billion. How does McEwen Mining CEO and founder Rob McEwen believe his company will get to this size?

Gunning for S&P 500

Mr. McEwen gave reporters two crucial factors that he believes will help boost his industry’s (and his company’s) prospects in the near future. First, rising gold prices are certainly a boon for miners like McEwen. The impressive rally for spot gold may have suffered a setback during the third quarter, but the yellow metal is still up better than 20% year-to-date.

Second, there has been a rash of mergers and acquisitions across the markets of late. In the wide open junior miner space, McEwen sees potential opportunities for his firm to absorb some of its smaller competitors who have a greater upside for “multiples of growth” that the established senior miners simply can’t offer. (Exhibit A: the MUX share price is up over 230% so far this year alone, and continues to log strong performances.) McEwen would know: he turned a $1 million bet into a billion-dollar mining enterprise over a quarter-century of hard work and business savvy.

gold miningFor instance, McEwen bucked the industry convention of closely guarding “trade secrets” by holding a public contest in 2000 that challenged contestants (mostly geological and 3D-imaging firms) to use the company’s data to uncover untapped gold reserves and their location at McEwen Mining sites. This early form of “crowdsourcing” turned out to be immensely successful, and the winning submissions garnered a $575,000 reward. Including the prize money payout, the contest cost McEwen about $1 million—but the gamble paid off handsomely, revealing $3 billion worth of gold deposits that the company was unaware of!

During the third quarter, McEwen posted solid results at its various mines, keeping on pace with its year-end output targets of gold and silver equivalent ounces. The company’s annual guidance calls for 144,000 equivalent ounces of gold produced in addition to over 3.3 million silver ounces. This slightly exceeds the company’s average annual production if the current pace holds.

While joining the S&P 500 (SPX) is the vision of McEwen’s chief executive, he also maintains a sound philosophical view on the mineral his company mines. “Gold’s . . . the ultimate currency, real money,” McEwen has been quoted as saying. “You’re mining real money.”

 

The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.