I had the great opportunity yesterday to reconnect with legendary founder and former CEO of GoldCorp, Rob McEwen. He is now the CEO, Chairman, and largest shareholder of McEwen Mining.
It was a fascinating conversation, as Rob explained that the financing markets are “effectively closed” for mining company concerns, with the fundamentals strengthening for gold—creating an environment for mining stocks in which 50% moves coming out of this bottom will be quite normal.
When asked how challenging this market has been for gold mining operators Rob said:
From Tekoa Da Silva, Bull Market Thinking:
“The access to equity and debt markets…became effectively closed to near-term producers and exploration companies, and for that matter, for most of the market [including] producers it’s closed. This isn’t the place investors [have indicated they] want to be, they’d rather be in the broad market [while] gold prices are still falling.”
In comparing today’s market to previous resource bear markets, Rob recounted that, “There have been a number of corrections that I’ve experienced in my career. They all come very suddenly, and they vary in severity. [But with] this one, you start to remember that government-induced ‘hurdles’ get thrown into the mix every once in a while, [and] you tend to forget about those while you’re running along.”
Rob also noted that the volatility in gold has been exacerbated by the advent of gold ETFs, as, “In the hands of the very few you have large holdings of bullion, and large holdings of shares, much larger than we’ve seen before, and when the market swings, there’s a lot more pressure on those holdings, and those funds have to sell. [So] I think they’ve had a big impact.”
Despite the heavy selling in gold, Rob added that it doesn’t disguise the fact that, “Debt levels around the world by governments are continuing to increase, [with] the trillions of dollars that have been pumped into the system, having a small impact on reducing unemployment levels.”
Moving on to the gold shares, when asked if this is a good time be buying, Rob said, “This is a time to be looking at opportunities…the senior gold stocks, they’ve been beaten up badly, [so] it’s not a bad time to enter…[When] you look to the intermediate and junior producers, and then the exploration companies—[they] are crawling along the ground right now in terms of price.”
Such an environment will offer selective investors, “A 50% move in some stocks going from $.10 cents to $.15 cents,” in the initial rebound Rob indicated, “So [there’s] a low cost of entry, good relative value, [and] we seem to be near the bottom of this correction.”
As a final comment to investors Rob noted that, “I think there’s more to be made on the upside than lost on the downside right now…it feels like we’re entering the second half of this [gold] cycle.”
This was another outstanding interview with one of the greatest wealth-builders of our time. It is an absolute “must-listen” for serious investors and market students.
To listen to the interview, left click the following link and/or right click and “save target as” or “save link as” to your desktop: