Both the founder and the present CEO of Goldcorp Inc., now commissioning the big Éléonore mine in Northern Quebec, predict investors will soon start returning to the unloved gold mining sector.
“In the past two years, as bullion dropped from a record of almost US$2,000 an ounce, gold miners have dumped old management, slashed exploration spending, lowered operating costs and shifted to high-grade ore to focus fully on restoring cash flow,” said Rob McEwen, chairman of McEwen Mining Inc.
“You’ve got a serious gap developing between declining global output and steadily mounting demand from Asia where millions of new middle-class consumers are emerging,” he said in a recent telephone interview. “That gap could last several years.”
McEwen created Goldcorp via a string of mergers in the 1990s and left in 2005 after a disagreement over strategy. Goldcorp is now the world’s largest gold producer by market value.
He then formed McEwen Mining which plans to dig 96,500 ounces of gold and 3.12 million ounces of silver from mines in Mexico and Argentina in 2015 and aims at intermediate status with annual output of one million ounces of gold.
He owns 25 per cent of McEwen Mining, which is debt-free and trades in Canada and the U.S. In turn McEwen Mining has invested in two exploration firms in Northern Quebec and Ontario besides working on an advanced gold project in Nevada.
“Investors won’t return to the gold sector until they can see a profit,” McEwen said. “Bullion fetched US$250 back in 2009 and since November prices have stabilized just below US$1,300 an ounce at current exchange rates after the steep fall from US$1,900.”
He sees other encouraging signs. About US$800 million of new equity has been raised recently for gold miners and several mergers and consolidations have gone through. Goldcorp is bidding $526 million for Probe Mines Ltd. and its Borden gold project near Timmins, Ont.
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