This commodity has more than 100% upside, will be critical for society - Rob McEwen

Kitco News special coverage of the precious metal Summit is brought to you by Nucor gold [Music] continuing our interviews of the precious metal Summit in Beaver Creek and joining us today is an on is an honorary guest of Kitco a legend in this space Rob McEwen founder and CEO of McEwen mining we'll be talking about human mining its performance and its Outlook of course with Bob but uh welcome back to the show I'm very honored to have you join us today pleasure to be here David Rob is an abductee of the Canadian Hall of Fame in mining and a three-time winner of the Kitco mining CEO of the Year award so definitely a fan favorite uh you were also very appreciate and calling for the Federal Reserve to raise interest rates by 75 basis points last time you're on the show three months ago and uh since you were right last time I'm going to start with the same question what is the BET gonna do next week uh inflation number came out harder than expected yesterday on Tuesday and the expectation for a 100 basis point rise at the next meeting is now higher than it was a week ago what's your take I like the 75 basis point I'll stick with that okay so another 75 basis points do you think that inflation Can Be Tamed by the Federal Reserve not with interest rates as low as they are the last time we had a real run in interest rates was the late 70s and it took 15 18 interest rates to sustain inflation I I think the amount of monetary stimulation that has taken place in the last few years the amount of debt that's been accumulated at all levels ensures that we're going to have higher rates of inflation and it's been compounded by the conflict of Russia and the Ukraine covid came along and disrupted Supply chains there's a lot of factors in there now and uh we're going to be focusing our conversation on mining today so I would just pivot to talk about how mining has performed in Prior periods of high inflationary environments let's take the late 1970s for example um when you first started your career with inflation an issue yes it was yeah it started let me started working somewhere around 73 a long time ago before you were born okay certainly and uh the late 70s so right after your career started in this space hyperinflation well we've been called hyperinflation technically but very high double digit inflation in the 1970s how did the mining industry well the resource industry cope back then well in just a point of reference it was either um 1980 or 81 that can the savings bond rate was over 20 percent you buy a bond can a savings bond and getting better than 20 right for 10 years so inflation went along and then all of a sudden the rates went volcker jacked the rate to way up and uh down came inflation down King gold people are saying that can't happen this time because the amount of debt we have now is not the same as it was back in the late 70s 1980 1981 that debt the GDP ratio was higher the highest has ever been and so the Federal Reserve can't raise interest rates to that point anymore so we can't ever see you know 20 I'd never use the word can't when describing what the government might do okay they they always surprise us um but I I just see I mean you're you're looking at Energy prices going up and that translates to transportation and fertilizers um all sorts of goods and services that require that um I'm not sure how you tame it right away other than the government has to start curtailing um its expenditures and it should be opening the door for all sorts of investment and deregulating to encourage investment to create employment that provides the tax base for the standard living we're enjoying today well you've built your legacy in the gold space so if a generalist investor were to ask you Bob why should I invest in gold today given how badly it's beaten down relative to two years ago you know we're at Seventeen hundred dollars two years ago is at two thousand dollars relative uh if you look at how inflation is performed this year gold hasn't caught up with inflation although it's outperformed the stock market tremendously what would you say to somebody who doesn't understand gold that maybe it's still a good investment today I think you're looking at preserving the purchasing power of your wealth and just today I was out for a walk and we were having a conversation and the the idea came up when the the iPhone came out gold was around 700 yes and today um the iPhone's around 15 13 1500 and that's where gold is and and it has far more iPhone to gold ratio has stayed relatively that's right yeah so you're able to continue to buy and you're actually buying a better product because there's more services on the iPhone of today than when it first came out but gold kept that purchasing power whereas the value of your dollar has gone down significantly right I mean if almost whatever whatever you want to buy is going to cost you more right from your groceries to your car to your dry cleaning to your insurance I don't know if this is something that anyone's ever asked you but for an average investor how much of their wealth should be kept in Gold given that Fiat currencies will inevitably lose value in theory shouldn't you have all your savings in gold and then just transfer back to Fiat when you need it I don't think that would work for most people they'd be uncomfortable with all their money and gold um I'm probably an imprudent individual because I do something close to that other than but I would say you should be looking at a 10 15 in precious metals and hard assets maybe 20 percent you're going to see I think food prices continue to rise yeah and the cost of living is just going up it's it's getting harder for everyone to make their paycheck go all the way around before we pivot to talk about um copper and McEwen Mining and McKew and copper which is another uh subsidiary we'll talk about I want to ask you about the future of wealth preservation a lot of people say that is actually in the crypto industry space now I know what I'm in a gold conference and so I haven't had a chance to ask anybody about cryptocurrencies but you being a a legend in the mining space I just want to get your thoughts on how you think this space is developing whether or not you think it's a competitor to the space whether or not you think it's going to be uh Bitcoin is going to be the next digital gold or whether or not it's just going to be completely irrelevant very interesting question a number of years ago I had Forbes called me up and asked for an opinion on crypto and it was trading at um around 120. and I said well yeah Bitcoin and I I just went if it gains the confidence of the market it could go up like prisoner of war camp cigarettes where the currency or puka shells in the South Pacific were currency never in my wildest dreams did I ever imagined it would reach the heights that it has reached and I've never seen a currency appreciate like that the one thing that crypto offered and was you could buy gold but if you want to take it to another country you have to walk by a customs agent whereas with crypto you didn't have to walk by a customs agent there's digital gold now yes yeah so now digital gold the only question is in this digital world can you hold on to it are there enough safeguards that someone can't come along and take it out of here digital wallet or your digital bank account and I I don't have a sense um I think governments are going to bring out with cryptocurrencies and that'll take some of the enthusiasm out of the marketplace well gold was for thousands of years used as a form of currency uh Bitcoin is just starting to see that in some countries some argue it can never be adopted as a form of currency you know uh for wide Mass adoption given its volatility what do you think needs to have what an asset needs to have the characteristics of an asset that will qualify it to become a medium exchange a widely accepted unit of account well it has to preserve value preserve purchasing power has to be transportable it can't Decay it has to be recognized globally so that you could take it anywhere in the world and get value for it and it served that function Through Time over the thousands of years is digital the next wave is is part of the virtual world becoming the real world um I can't answer that question what if someone convinced you I'm not saying it will be let's hypothetically somebody convinced Rob McEwen that Bitcoin is a next gold Bitcoin will be adopted for the next you know Global Reserve currency would you mind Bitcoin would you take some of your money and allocate it and minds and cryptos it's very energy intensive yes it might be more environmentally damaging than mining um I mean you think of the huge amount of power that goes into creating these currencies right uh they're not green at all yeah I think improvements are being made but you're you're absolutely right that is a concern well I wanted to get your take on uh on on cryptos and I did so that was very enlightening thank you Rob you're welcome David it's not every day we get a mining Legend talk about crypto so there it is uh let's talk about McEwen mining now you you you you gave me a pitch deck of where you think the company is going to go so let's talk about where it's the Journey of McEwen mining up until this point um uh you know uh the share price performance over the last few years has been disappointing for some investors let's walk over uh what happened in the in the last couple of years and uh you have this chart here at that actually shows the price performance of of the company so walk us through the performance um what you think went wrong what do you think went right before we talk about what you'll be doing from this point on sure our performance over the last three four years has one word describes it ugly is we've gone South we've had fires floods write Downs of our resources misguidance we've we've changed our management to correct that and we seem to be turning around now as as a larger shareholder of the company today my personal investment in the company is greater than our market cap and I own 20 million dollars versus 217 million I'm looking at that so uh I I feel the pain okay and but I do see a much brighter future I see a value right now of underlying value of six to twenty five dollars a share and a lot of that is going to be driven by our copper project called Los azulus and we've created a company called McEwen copper that we're going to do an IPO in in the first half of next year we funded it privately this year and we just closed on an 82 million dollar financing at the end of August with and the largest the last money came in from a technology arm of Rio Tinto and then a week later we signed another deal with the exploration arm of Rio Tinto for a property we have in Nevada and they're going to spend or committing spend 18 million dollars to earn a 60 interest in that property so but the copper project is large it's in Argentina if if you were to combine and you shouldn't but if you combined the indicated and inferred resources there'd be um about 3.6 billion tons of ore that would contain 29.5 billion pounds of copper five and a half million ounces gold and 191 million ounces silver if we took that and just converted took the copper price today and the gold price today and used that as a conversion feature it's about 100 480 pounds of copper is equal to one ounce of gold and you divided that into the 29.5 billion pounds you would have a gold equivalent deposit of 60 million ounces and with the preliminary economic assessment we had that would be the annual production would be greater than eighty thousand eight hundred thousand ounces a year gold equivalent at under 600 cost so it's a big project 36 long life 36 year life relatively low cost and I think it that value has not been recognized in McEwen mining because of all the operational challenges we faced at one point people just said I give up I'm not going to look at the stock internet so so just to give some context to the viewers the share of mceum the stock of the human money is currently trading at 4.64 cents a share if you're looking at it in the on the TSX on New York it's about 350. yeah I'm using US Dollars oh this is US Dollars about 350. so you're looking at a 80 upside to uh eight times um growth over over one time period Rob well we're moving this project forward um we just started talking about it in Earnest after we closed this financing I think when people start recognizing the size of this deposit and the fact that it's going to be powered by the sun and it it has the potential so what do you mean powered by the sun it'll be all renewable energy uh solar and wind um okay uh what we're trying to do is build a mind that's very different than what exists today and so I an investor might ask you wouldn't that bump up your capex to I mean they might appreciate what you're doing the renewable site but wouldn't that be more expensive to build there's a the power grid in Argentina it had they have a it's a solar and wind where we would be accessing the power so we they would be coming straight into our operation I want to go over this page here in particular because it does show what your priorities are when you're developing a project so the loss of Zulu's uh project is a closer to the power grid than some other competing projects yes we're in the province of San Juan which is probably the most friendly mining province in Argentina and the Fraser Institute considers it the best jurisdiction in South America right now this is interesting I never considered this it's lower in altitude than some other projects why is this important well I mean here we are in Beaver Creek we're at about 8 000 feet above sea level okay do you feel short of breath ever when I when I jog yeah okay well we're lower than 3 100 meters here right now okay okay um the higher you go the shorter your breath is and that has an impact on Machinery efficiency they don't operate as well and people don't operate as well so we're at 3100 to 3600 meters the other two companies I'm talking about that are in the same Province they're copper projects they're at four thousand and five thousand meters yeah I mean that's way up in the sky and the cost going back to cost you're actually in according to Goldman Sachs the lowest cost quartile how did you manage to achieve that uh wheelbly mining high grade initially 0.9 it'll average over the first 13 years 0.7.6 percent copper we have a low strip ratio and so that contributes to that low cost okay uh before we move on I just want to get it a sense of why McEwen copper is ipoing next year right I mean what what first of all why are you spitting off the subsidiary we're spinning it off because I didn't feel the market was understanding the value of this asset right and investors tend to prefer a pure precious metal play or a pure copper play but we were in a situation where we were a relatively small company with a weak treasury at the time and people looking at it and saying this is a cash hungry copper deposit if you want to advance it are we going to dilute the heck out of our shareholders by continuing to fund it and so you can fund it easier in a separate company and retain a large interest by McEwen Mining and get a market value that people can point to and say okay that's some of the underlying value behind McEwen copper and and do a secondary to raise some funds for McEwen other projects what is your thesis for copper the metal you presumably you could just stick with gold but you have obviously a strong conviction in this metal otherwise you wouldn't be doing this what's the future of copper well it wasn't like we went out and bought the copper recently right when we formed McEwen mining there were two companies minera Andes and its assets were in Argentina yeah it had gold silver production coming out of Southern Argentina and it owned this copper project and and we had uh U.S gold which had properties in Mexico and Nevada so we put them together and I always liked this one because it was so big uh but the copper price wasn't right and we didn't have the money but um it's not really a pivot it's just the world is electrifying or wants to Electrify the energy transition and there's the world wants to preserve its money and we have the best of both worlds now okay that's that's a fair point all right so we've talked about goal let's talk about copper now I was reading a Bloomberg article that predicted that the demand for copper will increase by 50 by 2040 so over the next 18 20 years it will increase by 50 primarily from the Transportation side they're actually predicting that Transportation will outpace or outstrip construction as a number one sector for copper demand uh is that is that a projection or a future or that you that you share certainly when you when you read about all the projections of the auto manufacturers increasing their electric vehicle Manu production lines or going almost exclusively to that there is um there's not enough copper right now to satisfy that demand so what's going to happen uh well you have to build new copper mines but it takes longer to build copper mines today there's more permitting required longer lead times and the capital is going up so we think we have a project that we can advance to feasibility study and then we're looking to get one that we can afford to build ourselves how long does it take to build out a copper mine all the way from the exploration phase to the production phase it depends on the capital and the size of it in this case we're looking at updating our preliminary economic assessment and that'll be out in the first quarter of next year yes it'll take another two years maybe a little bit longer to create a feasibility study and from that you looked you have to get your permits so let's say two plus another year year and a half three and a half years and then you have to construct we're looking and the construction would take a couple of years so you're talking in a decade almost okay well let's just talk about the economics of uh of copper then I just spoke to a geologist before you who worked in this space as a banker in the late 90s back when nobody believed copper would be a dollar a pound in the late 90s was below it was it was below yeah yeah and now it's uh now it's well we know where it's at it's above 450. well it's now it's come back down a little bit 350 uh a pound you know it's grown tremendously over the last 20 years what was the primary cause of that growth over the last 20 years and we'll talk about the future probably it was due to just um production not meeting with demand you had rapid urbanization taking place in Asia China was the largest consumer of All Metals in the last five years six years and so that demand and then the changing Technologies looking at the regenerative Energy Technologies right like a windmill would use 500 pounds of copper right around 1500 pounds of copper a bus would use 500 pounds of copper I mean you you start looking in the number of cars that are made every year and say well rather than putting gas in the tank they're going to put electric electric wire around there's going to be their engines one thing I've learned about copper that's important is that it's not substitutable in many applications including in batteries which means that if the price of copper were to go to a certain level higher much much higher than today's low level you can't really if people can't afford to buy I mean not having enough coppers one thing but if you can't afford to buy copper as an industry we're in deep trouble right you need copper to build the things we need in our computers in our everyday life so what I'm saying rob is that yes copper has upside but it can't be too expensive do you agree with that view well when prices rise people look for substitutions are there substitutions I've been told no so I don't know uh maybe someone's going to come along and come up with a nanotechnology solution to that create something that has the same properties that's a bit of a way off but at the moment I I don't see an abatement of demand yet I do see people starting to look and say well how can we Source copper can we will you see auto manufacturers you're seeing Ford cutting deals with lithium producers you'll probably see manufacturers saying well maybe we can invest in Copper companies like an automobile industry looking at that is there a price of copper in the future that makes sense to you I mean you've come on the show and said that 5000 gold makes sense to you what about for copper have you thought about this well we're um profitable at three dollars or at least in the projections um I could see a six or eight dollar copper price yeah okay that would be uh uh more than double our current price current value yeah we were we were up just short of five dollars yeah um a little over a year ago looking at your capital structure you have uh slightly more debt than cash right now 65 million dollars versus 47.8 million are you planning to add to that Debt Pay It Down uh what do you plan to do with the 48 million dollars cash uh well the 48 million is just going to development of our projects our precious metal projects and it also reflects its consolidation of the cash we have also in McEwen copper because we own 68 we consolidate the financials of McEwen copper so we spent 31 million dollars on exploration in the first half of this year at seven in our gold properties and the rest is on losses of us advancing that we'll be spending about the same amount of money in the second half of this year so we're going to be in a position where Although our minds are producing a cash positive positive cash flow from a county standpoint our earnings will not reflect uh a profit for quite a while as we develop Los azulas I'm curious as to whether or not economic Cycles or changes in interest rates would change your budgeting priorities I'm a big believer in the price of gold as you said earlier on um and I think we're on the cusp of being able to unleash a couple of good stories on our precious metal area so I don't want to give that up and on the copper higher interest rates could that slow the economy down perhaps would it slow the auto manufacturers from producing cars well specifically for you I mean let's suppose interest rates continue to rise would that change your rate of exploration your rate of building out projects would that change how you choose to finance your projects more Equity versus debt or the other way around for example well not much depends it's the price of gold and the price of copper that will be the bigger determinant I understand okay uh final question because we only have a few minutes left Rob uh some people might look you you personally invested 220 million dollars in this company some people might ask you why are you still doing this I mean what's driving you you could just take a 200 millimeter Tire what are you trying to build what's your legacy a lot of the money that I've made in the mining industry goes into education and medical research and I feel that that's an area that can have a benefit to a large number of people so my wife and I set up an Institute to do research and stem cell and regenerative medicine in Toronto and I think that could profoundly improve the lives of many people and I think that's a good use of these funds and I find that the mining industry has been an excellent source for building capital for me right so like in here right now it's not in in this particular situation but it it just seems to be an area that I can uh build some wealth here and then put it into areas that can have a much bigger benefit to uh a wider audience if you were to compare uh the history of McEwen mining up until now and uh compare that to the same period of gold core I'm sure you've even asked about this before what were the differences in the challenges and opportunities a couple of differences um well gold Corp we certainly had challenges yeah we went through uh 46 month long labor strike I got a death threat out of it I haven't had a death threat yet although some shareholders have suggested it um the uh we faced operational issues we had really big big Discovery at Gold Corp and they didn't want to build a bigger minor person I said look we're finding gold that we're increasing our resources 30 percent a year come on tell me why should we build on this basis and it's so there and there were shareholder issues I took five companies over eight years and compressed them into one to create gold Corp so there were some trials the metal prices moved up and down I mean um did advancements in technology made exploration easier second time around the industry is slow to adapt um no okay well there is some satellite uh work uh they came up with hyperspectral analysis where using this tool that came out of the space program to look at our core samples so you get a better sense of the mineralogy and the lithology or structure perhaps in the future robots will be doing the excavation yes um and AI is coming into this space and I think and look make a big difference there is a shortage of uh Manpower yeah labor so I think you're going to see more and more automation coming into this industry and and certainly there's some wonderful examples right now of Minds that have gone that way but what we really need to do is how can we drill faster or maybe can we get away from journaling altogether is there another way of looking into the ground and quantifying what's in the ground and then extracting it fast surgically with with less lingering problems after you close the line it is interesting how uh this industry hasn't had its fracking moment yet in terms of technological Leaps and Bounds perhaps that's due to um to Innovation from the technology side maybe there's not a lot of interest from Engineers to develop for the space what do you think some of the tech guys are starting to come into this area and they started really more excited about mining in space between Mars and Saturn and the asteroid belt and there are a couple of groups up there that no I'm serious yeah yeah yeah there's a real commercial effort going into space and NASA went around and it was able through this hyperspectral analysis to quantify these asteroids well that's a platinum one that's an iron ore one that's so people are the sort of wild west is starting to appear and people going up there and trying to stake claims on these asteroids and saying well if we could find it up there we can start uh refining it up there and using it as a building material to build structures in space rather than bringing it back to Earth building and taking back up just using the raw materials that are floating around in space what would you say to a young person going to college today that maybe mining is the right industry for him to go him or her to go into how would you convince them to join this industry you want to make a lot of money do you want to travel the world do you want to have some little competition okay um I mean do you want to go into high tech and your graduating class the entire class goes into high tech or you want to go into entertainment where everybody thinks they can sing or dance interesting because the uh 20 years ago most of the Harvard Business School class went to Wall Street now most of them are going to Tech startups in Silicon Valley so what if you take a look at who's coming out of school what enrollments are going down mining engineering geology so move that ahead to graduation there's not a lot of people coming out the Royal Bank does a survey of Industries every year and says what are the highest paying Industries in in the country mining is right up at the top that's true yeah so if you figure there's a whole bunch of people with gray hair like me that are going to be leaving the industry at some point and you're coming in there's a void and I think a lot of people if if they're they're motivated can get to the top of an industry much faster in the mining industry and it is a high-paying industry and it is somewhat exciting when you make discoveries and run around and and you can start thinking about innovating how can I alter this it's sort of like Ben and Jerry ice cream and they went well we don't want to be corporate guys and they said but you could maybe change the attitude of people they said really well maybe people could come into the mining industry and say well let's only be a little more gentle on the environment right let's let's just start thinking of other uses and so that's why I'm really excited about this architect Who's involved with our project because I think it it'll make a big big difference finally I want to close on my human mining what is your ultimate vision of this company is it to build the next gold core you've done it once it's taking a little longer here but that would be nice it'd be nice to do that and I I think we have the raw material to do that okay okay well best of luck and uh hope to speak to you again soon thank you so much Rob it's been a real honor thank you David it's been a pleasure as always and thank you for watching Kitco news I'm David Lynn Kitco News special coverage of the precious metal Summit is brought to you by new core gold foreign [Music]

Channel: Kitco NEWS

Views: 88,879

Keywords: gold, silver, finance, news, investing, investing news, finance news, financial news, economy, precious metals, gold price, silver price, gold price today, silver price forecast, gold price forecast, kitco news, copper, mining, david lin, david lin kitco, rob mcewen, goldcorp, gold mining, copper mining, mining stocks, gold stocks, federal reserve, fed, inflation, macroeconomics

Id: hh2V3D8UQNY

Length: 33min 57sec (2037 seconds)

Published: Tue Sep 20 2022