Rob McEwen: “We Seem To Be Near The Bottom Of This Correction”
By Tekoa Da Silva
Monday, 15 July 2013
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.
Tekoa Da Silva: Rob, you and the team there at McEwen Mining recently announced a change of game plan in terms of development and production growth for the company in response to the extremely challenging conditions we’re seeing in the mining sector today.
Can you explain the thrust of that announcement and what it means from a strategic standpoint?
Rob McEwen: Well, we wanted to inform our shareholders and the market that the decline in metal prices did have an impact on us and wanted to keep them informed. So at the beginning of the year, we were projecting production growth going from about 100,000 gold eq. oz. to 130,000 oz. this year, and then 280,000 oz to 290,000 oz. on an annualized basis by the end of 2015.
The bulk of that growth was coming from our second project in Mexico called El Gallo 2, which had a capital cost of about $180 million. At the beginning of the year, we looked at it and thought well, based on the prices of silver and gold at that time and our cash holdings–for that $180 million, we should get about a third of it from our cash and cash flow, a third from capital leases, and the balance we thought we would be able to cover with the proceeds from the sale of our Los Azules copper project.
What we found was that the metal prices dropped, and our projected cash flow shrank considerably. Los Azules we put up for sale at the beginning of the year and had expectations that it would bring in several hundred million dollars—but we found there was no market for mega copper projects and Los Azules is a large copper project in Argentina. We further found there was no appetite for Argentinean assets amongst investors, and so the result was no sale.