An early exposure to financial markets, a strong desire to build on his father’s legacy, and an innovative approach to an archaic industry helped turn Robert McEwen into one of the most successful mining executives.
After completing a round of financing for an advance-stage copper project in Argentina, McEwen spoke to Benzinga about his beginnings, Goldcorp‘s transformation, and plans for his current venture, McEwen Mining MUX.
Veteran’s Apprentice
After contracting polio in WW2, Robert's father, Donald McEwen, turned to business, becoming a stockbroker and a fund manager.
"Our dining room table was always a discussion about gold, and he had me charting stocks when I was around 10 years old," Robert noted, stating that he bought his first stock when he was 12.
"Father took a keen interest in gold, looking at the IMF numbers and fund flows, and I guess by osmosis, I picked up that gold bug. That is how hard assets became a mantra of my life," he added. After getting an MBA, Robert spent time at Merril Lynch before returning to work in the family business.
From MBA To Mining
McEwen's father structured Goldcorp as a closed-end investment company, allowing institutions to circumvent the prohibition against having exposure to foreign shares and gold bullion.
"It was an exciting time. This approach went viral. It was an innovation in the marketplace, and by the end of the 1970s, gold ran up to $850 an ounce."
Following his father’s death, McEwen took over and began making radical changes, taking advantage of marketplace dislocations caused by holding companies falling out of favor.
"We had mining companies trading at two to three times NAV, and I thought – we are trading at a 50% discount, I could make a mining company stronger if I merged with it. So I jumped in and bought control of two mining companies and then rolled the holding company into a mining company," McEwen said.
A Digital Contrarian
McEwen's experience of navigating of turbulent markets, hostile takeover attempts, and personal threats gave him the tools to recognize and take advantage of burgeoning opportunities like the Internet and make mining a more exciting industry.
"We were exploring the mine at Red Lake and found quite a bit of gold, but our head of operations didn’t know how big the deposit would be nor how long it would take to find out. Meanwhile, I enrolled in a course at MIT through a Young Presidents organization. On the second day, they started talking about Linux and open-source code, and all of a sudden, a light bulb went off, and I realized that’s how I’m going to reach the world."
Contrary to other mining firms that guarded their geological data, McEwen uploaded it all to the Internet, offering a prize of half a million dollars to the person with the best idea.
"We were looking for people to tell us where to find the next six million ounces of gold. It was the number I derived from the neighboring mine, the Campbell Mine, that produced that gold, and we were basically in the same ore body."
Over 1,500 contestants looked at the data, and the results redefined the geological interpretation of the deposit.
"We found over $3 billion worth of gold," he said, chuckling that nuggets don’t fall far from the ore body; the creativity gene runs in the McEwen clan.
Among The Giants
Owing to successful exploration and a thorough restructuring of the Red Lake asset, by 2004, Goldcorp produced 628,000 ounces of gold for $115 per ounce, ending that year with 5.2 million ounces in reserves. The firm was among the lowest-cost large-scale miners globally when McEwen decided to step down as CEO.
"We had gone from $50 million to $8 billion in a market cap, and I thought about whether we could drive that type of growth. That was going to get harder and harder, and I was getting tired of corporate governance," he said before clarifying that having corporate governance is necessary but cumbersome.
"We had a ton of money in the bank, no debt, and were one of the lowest-cost gold producers in the world. It was a good time to step away," he added.
Toward A Fresh Challenge
During the Goldcorp days, McEwen invested heavily in the junior mining sector.
"It was a listening post to what was happening in the industry. I thought we could bring them in, but some of these companies grew quite quickly, so I instead sold the positions to pay for the development of the new Red Lake Mine," he noted.
Accordingly, after stepping down as CEO, he constructed new roles for his involvement, setting the stage for a new venture.
"I wanted anywhere between 10% and 30%, not to serve on board, first right of refusal on future financing, veto on major acquisitions, divestitures, and M&A. I wanted a safeguard against them doing something that I thought was foolish."
Eventually, the consolidation of these stakes created McEwen Mining.
“I put two of the companies together where I had 25 and 27 percent, with interesting projects in the United States, Mexico and Argentina.”
Searching For New Oil
McEwen Mining has four mines in production, two in development, and one advanced exploration project. Currently, the market focuses on copper, with numerous institutions like Bank of America predicting a supply shortfall of 5 million tons by 2030.
McEwen plans to mine copper at the Los Azules project near San Juan, Argentina, through a subsidiary, McEwen Copper.
"I haven’t heard that copper is new gold, but I have heard it is new oil. I like to compare the prices and calculate the gold equivalent. The size of the gold equivalent resource at Los Azules changes daily with the price fluctuations. Still, right now, it would equal around 64 million gold ounces of deposits – which is a very big deposit, and our all-in-sustaining just around $925, and it is for a 27-year mine life, and that’s only mining 40% of the resource we know."
Various manufacturers are following McEwen, rushing to acquire copper before anticipated shortages hit the market.
"The second-largest shareholder in our copper project is Stellantis STLA, the fourth-largest car manufacturer in the world. Some metals are essential to modern technologies, and if we’re sourcing them from countries we don’t have good relationships with, we have to find new sources," McEwen said, clarifying that President Javier Milei‘s new policies would add up to over a billion of dollars in net present value to the project.
Skin In The Game
Junior miners often look the same, and hundreds, if not thousands are out there. Still, McEwen has advice on how to look for nuggets.
"Investors should be aware that there is cyclicality and seasonality. They can come together, as there is a seasonal pattern in commodity prices. You might want to buy during the tax-selling period at the end of the year, or you might want to buy in the summer. In the fall, precious metals usually do better," he said. "I try to avoid companies that sell royalties. I just feel that it’s like the siren on the rocks that beckons the sailors. That’s happening to some producers – they give much of their future margin."
As a prominent figure in the mining community, McEwen said he often gets pitched ideas.
"The first thing I ask is, how much have you committed personally? Have you loaded up with options or mortgaged your house?" McEwen thinks it is important to have skin in the game.
Carrying the title of Chief Owner Officer, McEwen is proud of putting his capital behind his ideas.
"Between McEwen Mining and McEwen Copper, I have personally invested $225 million. That’s my cost, and I take a dollar a year in salary. I’m committed to seeing this grow."
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Photo courtesy of McEwen Mining.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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