Lekker artikel over negatieve look op Mc Ewing.
Waarom zie jij het als potentiele winnaar?
McEwen Mining (MUX)
McEwen Mining stock has been in a steady decline over the past 3-5 years, and I expect that decline to continue throughout 2019-2020. The issue is the miner isn't producing much cash flow and continues to sink much of its capital into the money-pit Black Fox mine and the new Gold Bar mine.
McEwen is investing in Black Fox now in hopes of future returns. In Q1, McEwen reported production delays at Black Fox, leading to a consolidated net loss of $10.1 million and negative cash flow of $10.8 million. Production at Black Fox totaled just 8,943 gold equivalent ounces at $1,454 AISC.
Costs were higher in Q1 due to higher underground development expenses plus temporary operational challenges such as a fire that damages a crushing plant. It has set an aggressive exploration budget of $17 million for Black Fox (underground drilling is quite expensive), so it believes the resource has room to grow further. But whether or not it can profitably produce gold at Black Fox remains a big question mark.
Sandstorm Gold (SAND) also owns an 8% gold stream on the mine, giving it the right to purchase 8% of the gold produced at $551 per ounce, which impacts the mine's profitability.
While the Gold Bar mine in Nevada has reached commercial production, I don't view this as an attractive asset. It required $81 million upfront capex for a mine scheduled to produce just 62,800/oz per year with a $54 million post-tax NPV ($1,250/oz gold), based on the feasibility study. The company is investing $5 million in exploration this year at Gold Bar.
McEwen recently had to resort to shareholder dilution to fund its exploration/development expenses, closing a $25 million registered direct offering in March. Shares were issued at $1.55 per share, with warrants attached.
I also can't get excited about any of McEwen's development projects, especially Los Azules, a copper/gold/silver project that requires $2.4 billion upfront capex, which I think has little chance of getting built anytime soon (perhaps McEwen could explore a sale?). Yet McEwen sunk close to $1 million on development on Los Azules in Q1 on technical and environmental work to advance permitting efforts.
Continuing to sink capital into projects that are providing little (if any) current returns is not a wise strategy in my view. I remain skeptical of McEwen's strategy and I don't view its assets as top tier, so I would avoid shares.