Interview with Rob McEwen, Chief Owner of McEwen Mining (TSX: MUX) at the Sprott Natural Resource Symposium in Vancouver.
Recorded on August 2nd, 2019 with the support of The Prospector News @prospectornews
- McEwen M&A strategy, getting into the S&P500
- Reaching out to milleanials and other investors
- Convincing the market that you can make money with mining stocks
Kai Hoffmann: Hi, I'm Kai Hoffmann with Oreninc and I'm joined by Rob McEwen. We are here at the Sprott Resource Conference in Vancouver. It is lovely outside, we're inside, it's a bit dark.
Rob McEwen: It's rather foolish, isn't it?
Kai Hoffmann: It is, yeah. We should have moved the interview outside, but, great for making the time, appreciate it.
Rob McEwen: Thank you, Kai.
Kai Hoffmann: You're definitely one of the higher profile speakers here at the conference, and I'm glad you're making the time for it.
Kai Hoffmann: Obviously, we've seen a couple developments in the industry for the last six, seven weeks. It's been quite exciting. In certain circles you've called Rob 5000, right? Because of your bullish gold calls, and finally we're seeing gold move higher and especially today. I think gold touched 1,455, really bullish before the weekend. Really good, right? We are moving the right direction, but one thing that concerned me a bit was the producers went down. At least on my watch list, some of them. Maybe we can talk about that for a minute.
Rob McEwen: Well, when you look at the performance, gold, relative to the senior producers, if you use the GDX or the GDXJ those ETFs as a proxy for the seniors. They have outperformed gold by a factor of three. On the 29th of July, I looked at it. Gold was up 35 and the GDX was up 105. So I think there's probably some catch up to be done. The stocks are running ahead.
Kai Hoffmann: Okay, so the stocks are just correcting while gaining steam will
Rob McEwen: They're letting gold catch up, and with the higher price of gold is good for the revenue lines and the bottom lines.
Kai Hoffmann: It's good for you as well, because we want to talk about your Q2 a little bit as well.
Rob McEwen: Yes. It's good for everybody in the industry.
Kai Hoffmann: Margins will increase and that's what you need especially in Canada from what I've seen in the recent press release.
Rob McEwen: Well, yes, and I think one of the fears I have is in the Canadian dollar, which is essentially a commodity currency. If it ever went back to par, it would render a lot of the Canadian operations, and the Australian if it went to par, not as economic as they are today.
Kai Hoffmann: One thing you mentioned as well, you're planning to move the company. I think that was one of your goals you phrased when we met in November in San Francisco. You planned to move the stock to a S&P 500 level, you want to grow it, right? Sort of like you did with Goldcorp, and I -
Rob McEwen: I might grow it, not for the sake of just size, but growth that increases the share price and many people in the industry in the last cycle we were in wanted to grow and they did grow, and they did grow, but they didn't really help their share holders at all.
Kai Hoffmann: Growing market cap is not always...
Rob McEwen: No, you don't want them, because I get a dollar a year and I have about 80 million shares, my interest is the same as all my shareholders who want a higher share price.
Kai Hoffmann: Exactly. Coming back to M&A, you want to grow McEwen Mining. In November you advertised, "We want to grow, we have to grow through M&A", but you haven't done anything yet. What are the plans moving forward?
Rob McEwen: We bought property, not companies, we've expanded around our assets in Nevada. We've added to our asset in Timmins, and...
Kai Hoffmann: Because there are some opportunities out there.
Rob McEwen: There are, there's a lot. There's mispricing going on in the market, and there's certain stocks that have been ignored by the run, because a large part of the public isn't even engaged in the gold market.
Kai Hoffmann: No. I've been saying here at the conference. There's, say, 10 thousand professional investors, professionals like us in this space. We've gone bullish, but nobody else has.
Rob McEwen: Nobody else has.
Kai Hoffmann: It's just us. Want to talk about as well, your counterpart in Toronto as well. Eric Sprott is spreading the wealth a little bit and he's really active investing in junior mining, keeping this treat alive by paying fees to the banks. You're investing as well, Great Bear is a big position you have. You want to talk about any other investments you have?
Rob McEwen: I own five percent post, Eric came in recently and bought into Pure Gold. I owned more before, but I own five percent of Pure Gold. There are a number of other juniors that I keep investing in. There's some great stories out there right now, and some of these stories are tucked in the corner, not being noticed and I like doing private placements when I do my purchases.
Kai Hoffmann: Just want to quick circle back to M&A, because the question just came back to mind. Red Lake there is obviously a lot of activity. You're there with Great Bear and yourself as well. Are you waiting for any fallout from the Goldcorp/Newmont merger? No assets have hit the market just yet, I know they've been advertised, but no transactions have been made yet.
Rob McEwen: The dealers went around before this year, late last year, saying we suspect that properties such as the Red Lake mine owned by Goldcorp will be sold, because it's one of the smaller ones in the new Newmont Goldcorp. As you said, we haven't seen anything come to the market. I believe that with the rising gold price, maybe some of the new owners are looking at it and saying, "Well, let's not rush at it." We didn't think gold was going to move, but now it's moving and we should take our time because maybe it is the run that we were waiting for.
Kai Hoffmann: Tide lifts all boats, right?
Rob McEwen: Yes.
Kai Hoffmann: No, that's fantastic. I have a couple other questions prepared. One thing you've really engaged, trying to activate the millennial investors in this space. In tracking them, you're marketing through WeWork. You're giving presentations there, attracting a different crowd. What other ideas do you have in that regard, because I personally love the lithium run from the aspect that the marketing dollars were spent somewhat wisely attracting a younger crowd going for the EV trend, but unfortunately the lithium boom has died rather quickly and we lost those millennial investors again.
Rob McEwen: Lithium is very common in the world.
Kai Hoffmann: Of course, but I like their marketing aspect of it, the graphics that came out and ideas. It was appealing, because it went all through social media and all the other channels. You're going the WeWork road and other routes in that regard. What else are you doing, or what else can we do to attract millennials?
Rob McEwen: Well, not...
Kai Hoffmann: Or new generations?
Rob McEwen: It's looking at broadening the audience, and I can talk about when I was at Goldcorp all the brokers used to say, "Well, we'll take you around marketing," and I said, "Well, who are you going to take me to see?" and they went, "We're going to take you to see gold investors," and I said, "Well, I don't want to talk to them".
Rob McEwen: We're already in the gold market, we have a profile. At that point only about one percent of the market invested in gold stocks, so everybody in the gold industry was fighting for a piece of one percent. In Goldcorp at the time, we had 67% gross margins, 37% net profit margins. I said "By definition, we are a growth stock," and a growth stock as a percentage of the market, is about 34%. Why don't I go talk to people in the growth stock sector, and say "Here's the reasons why you should be thinking about gold, and should you be inclined to buy gold after that, here's the company you should buy." If I got a small sliver of the 34, I reasoned that it would be much bigger than a small sliver of the one.
Kai Hoffmann: Got to expand out of the ten thousand investor circle.
Rob McEwen: Exactly, and so we need to be doing that today, encouraging the media that doesn't just service this sector, but goes after the broad sector in saying, "I want to show you something that might surprise you." Do you know that the DOW over the last three years is up in the high 50%? Did you know that the senior gold stocks are up over 100%? The senior gold by the GDX have outperformed the S&P by more than 100%, and people go, "Well how could that be?" I said, "you focus on the price of gold in dollar terms" -
Kai Hoffmann: But not...
Rob McEwen: "In the other currencies", and there's profits being made here. Like Great Bear, you mentioned earlier, was 50 cents a year ago, it's over five dollars today. I can count on both hands juniors that are up two, three, four, five, ten times in that period, and when those stories start sort of seeping out into the broad media, I think you'll start seeing people come back and say, "Well maybe I should put some money in there."
Kai Hoffmann: Are investors waiting for DOW and S&P to sort of collapse, or at least correct before they start moving money? Because if you look at the conference here, for example, lot of older investors because, a), they have the time here but they are also heavily engaged in the gold and precious metals space. Do they need to be scared to come back, because it's easy to make 10%, 15% in the DOW Jones or S&P 500 every year?
Rob McEwen: There comes a time when that stops. If you want to talk about the millennials, they've only known up markets. There was a little interruption in '08 and '09, but it's been generally like this. Whether its tech, biotech, cannabis, crypto. I think there's a lack of appreciation of the longer term business cycles that impact the market. This time is different, but if you look at history there are these cycles and they're very pronounced. Will it happen again? In 1929, when the market crashed, the DOW Jones fell to such a point that it didn't get back to the 1929 levels until 1956.
Kai Hoffmann: That's a long run.
Rob McEwen: That is a long run, and part of it is just saying, get them to appreciate the economic cycles that there's a possibility that this could exist and what are you doing to protect what you've made to date? It's a form of insurance.
Kai Hoffmann: It's true, it's a nice hedge. Thanks for joining us, this was great.
Rob McEwen: Thank you, Kai.
Kai Hoffmann: Just a couple last words. Gold price by the end of the year? You're always good on predictions.
Rob McEwen: 1700.
Kai Hoffmann: 1700? That's great. Thanks for joining us, and have a good weekend.
Rob McEwen: Thank you, Kai.
Kai Hoffmann: Thanks.