Gold bug Rob McEwen sees silver lining in proposed mining merger – by Lisa Wright (Toronto Star – June 15, 2011)

Lisa Wright is a business reporter with the Toronto Star, which has the largest circulation in Canada. The paper has an enormous impact on Canada’s federal and provincial politics as well as shaping public opinion.

Gold investment maverick Rob McEwen sees a sterling future for silver with the proposed merger of his firms US Gold Corp. and Minera Andes Inc. that would form a mid-sized player amid a red hot metals market. The combination “would be transformative, creating a dynamic, new precious metal company,” said McEwen, who is chief executive of both companies.

The deal is valued at $608 million. His personal investment in the combined firm, which will be called McEwen Mining Inc., would be about $345 million and catapult his junior explorers to mid-tier status with a market cap of $1.4 billion.

The announcement comes amid a soaring price environment for precious metals. Gold broke a new record last month of $1,541 (U.S.) an ounce and silver climbed to 30-year highs of $48.70 (U.S.) in April before a recent correction that shaved 20 per cent off the silver price.

But McEwen, the founder of giant Goldcorp Inc., remains very bullish on both, saying he sees bullion reaching $5,000 an ounce and silver soaring to $200 in the next few years.

“I think silver is going up with gold and has room to outperform gold,” McEwen said in an interview Tuesday.

Under the terms of the all-stock proposal, Minera Andes shareholders would receive 0.4 of a US Gold common share for each Minera share currently held.

McEwen Mining “would be low-cost and possess a significant pipeline of production growth in addition to owning an exciting portfolio of exploration properties,” he said.

The combination also moves McEwen’s businesses “one step closer to our goal of qualifying for inclusion in the S&P 500 Index by 2015,” he said.

Industry watchers say the move puts the outspoken gold bug back on the market radar after several years running junior mining interests out of his George St. offices in Toronto.

“It’s about increasing visibility and market profile,” says analyst Barry Allan of Mackie Research Capital Corp. in Toronto.

“The market is getting tired of the junior guys, and if you can’t grow through the drill bit, you do it through mergers,” Allan added.

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