Yesterday's Top Story: Rob McEwen: gold should be in your portfolio and it's going to $5,000

Rob McEwen of McEwen Mining, forecasts that gold is going to reach $5,000 an ounce. McEwen believes currency purchasing power is eroding through out of control debt accumulation by virtually all governments. With the election coming near, he believes gold stocks will be due for a revaluation upwards.

Author: Lawrence Williams
Posted: Tuesday , 11 Sep 2012

This year's Denver Gold Forum kicked off yesterday morning and one of the early speakers was Rob McEwen of McEwen Mining. He has a great name in the industry due to his long term stewardship of Goldcorp, which was largely responsible for building the gold mining major to the strong position it holds today. Nowadays he runs McEwen Mining - a U.S. headquartered and quoted developing gold producer for which he has the avowed intent of bringing into the S&P 500 by 2015 - and with one gold/silver mine in production, a second just starting up with its first gold pour expected in a matter of weeks, a third in permitting and a very significant copper/gold/silver project at the exploration stage he may be well on his way to achieving this aim.

But it is perhaps as an avowed believer in gold that McEwen attracts a strong following at a conference of this type, perhaps the most significant annual gold event in the calendar- and he opened his presentation with a strong statement of his beliefs in this respect.

"Understand This! Gold is Money" was his opening statement with a strong recommendation that investors should have gold in their portfolios now, before then showing a slide giving his assessment of the loss of purchasing power of all major currencies against gold over the past 11 years of the gold bull market. According to the slide the best performing currency against gold was the Australian dollar which had only lost 68% of its purchasing power vs gold over the period - while the joint worst performers were the U.S. dollar and the South African Rand, both of which had lost 85% against gold. This is one interpretation that can be drawn from the dramatic rise in the gold price over the period But regardless it did serve to make the point that an investment in gold would have served investors well in virtually any currency.

In McEwen's view, currency purchasing power will continue to erode through out of control debt accumulation by virtually all major governments - indeed he showed another chart showing the virtually identical growth performance of gold .against that of the rise in U.S. national debt with government continuing to debase their currencies through their current economic policies.

He also pointed to an interesting correlation between the performance of gold stocks in U.S. Presidential election years and the XAU index invariably falling vis-a-vis gold itself in these years. And, with the actual election date drawing nearer he felt that gold stocks will be due for a revaluation upwards once the political posturing by the two main candidates is over and a recovery into what he sees as a great purchasing opportunity in gold stocks. "Now is the time to commit" says McEwen. "gold is going higher - to $5,000".

McEwen does have a pretty good track record in this respect. One remembers that when gold was sitting at around $700 only a few short years ago, he was adamant that it would soon hit $1,000 when to non gold believers this seemed unlikely, yet only a few short months later the gold price did indeed rise above that level.

On McEwen Mining, which was formed from the merger of Minera Andes - which he described as a gold producer with no growth pipeline - and U.S. Gold - which had a growth pipeline but no production, making an ideal fit, he outlined the path forwards with a planned production growth from its first three mines of almost 3x by 2015 from a current 105,000 oz to 290,000 oz gold equivalent.

All the company's main properties are located in the Americas - one each in the U.S, Argentina, Mexico and Chile, which he felt were all good environments, although he did have some doubts about the prospects for getting profits out of Argentina, the location of the current flagship San Jose silver/gold mine - a jv between McEwen Mining and Hochschild with the latter as operator. But the major growth prospects are the El Gallo silver/gold complex in Mexico - for which the main expansion feasibility study has just been completed - and then Gold Bar in Nevada - a past producer which is moving through permitting with first production as a low cost heap-leach operation due on stream in 2015. Meanwhile, waiting in the wings is the potentially enormous Los Azules copper project in Chile which McEwen claims to be the highest grade major undeveloped copper project in the world and with the 7th largest resource. There may be some creative statistical selection to come up with that particular assessment, but it is, nonetheless a potentially very significant copper project indeed.

But again it is gold that is McEwen's main focus - nowadays tempered with silver which is perhaps something of a change in his viewpoint from his Goldcorp days. He also points out that McEwen Mining has no debt, a young, talented management team, a development strategy that is unfolding as planned and a good production growth profile. And, with a huge personal investment in it, he is putting his money where his mouth is - a sign of real belief in the future of the company which bears his name.

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