INTERVIEW: McEwen on Goldcorp’s hostile bid, M&A opportunity and market bottoms – by Kip Keen ( – January 23, 2014)

Rob McEwen sees a market bottom forming and speaks about not missing it, among other matters.

VANCOUVER BC (MINEWEB) – Last Friday Mineweb’s Kip Keen spoke with Rob McEwen the chief owner of McEwen Mining. In a wide-ranging interview, McEwen weighs in on the impact of Goldcorp’s hostile bid for Osisko on the mining sector, growth through M&A at McEwen mining, assessment of junior companies and market bottoms. And not missing them.

Kip Keen: The Goldcorp takeover bid for Osisko has generated a lot of excitement. What are your thoughts on it?

Rob McEwen: The takeover in general is a symptom or an illustration of the consolidation that’s been happening in the industry. And I think it will pick up pace as we move into this year. It’s showing to investors that you can make money in this market; that it’s been overlooked with people thinking there’s no opportunity here. I think the biggest risk to investors is missing the run we’re going to have in these stocks.

KK: Do you think it’s fair to say that management teams and shareholders are more willing to accept M&A now after the long, tough couple of years we’ve had?

RM: The question of M&A growth – it’s been painful for a lot of the majors and intermediates. They’ve diluted their shareholders. They were moving on a growth-for-growth-sake basis.

I think there’ll be more discretion for a while, looking at growth on a per share basis. And I don’t see the seniors being very active. Most of them have had their CEOs replaced. Their marching orders are, open up the margins by getting the costs down, defer major capital projects and finish those projects that are still outstanding. So they won’t be big players in the space. It will to be the intermediates and maybe some of the juniors.

KK: In other words, some of the intermediates and larger juniors in a strong share position are saying, ‘Look we can grab that nice deposit for less than 10 percent dilution in our shares and that’s worth it.’ But otherwise not a whole lot of activity.

RM: Right.

KK: You’re projecting about 140,000 ounces gold-equivalent this year and 170,000 ounces AuEq next year in production at McEwen Mining. I was curious, are you keen to grow McEwen through M&A? Or is the focus squarely on organic growth?

RM: No, in order to achieve our goals we’re going to have to take on some M&A. The ideal M&A is where you have a significant impact in production, a reduction in operating cost and a project that is in a stiuation that is adding to our cash flow that would allow us to build our El Gallo II project. Because right now we’re looking at it and saying at current metal prices the IRR on El Gallo II is not attractive.

If you take the stance that the price of metals are going up, then you want to be in a position to profit from that. But for us at the moment to go out and think of financing either some combination of debt and equity or possibly an asset sale, it’s just not on the table because the cost is too expensive and the return is too small.

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