This gold stock could be worth your attention
Neha Chemaria (McEwen Mining): Gold prices have rallied 13% so far this year, but investors in McEwen Mining haven't had any luck with their investments. Decelerating production and a just-concluded dilutive equity offering to purchase the Black Fox mine has robbed the stock of sheen, pulling it down almost 31% year to date as of this writing. If you're a risk taker, consider this drop in McEwen stock an opportunity.
The problem with McEwen is that its primary mine, El Gallo 1, is nearing the end of its life at a time when the company has just turned profitable. Now, that isn't an issue you can ignore, but it's not that McEwen isn't doing anything to fill the potential production gaps, either. The miner's move to buy the Black Fox complex from Primero Mining, for instance, is projected to boost its gold equivalent ounces production by roughly 16% next year.
Even if we discount Black Fox and other Timmins' camp investment that McEwen recently made from its production forecasts, the miner could still see its gold production shoot up by nearly 70% by 2019 as its Gold Bar mine in Nevada and El Gallo 2 in Mexico come on line. That's not a bad deal at all, and the sharp drop in McEwen's shares suggests that the projected decline in its 2018 production may have already been factored into its stock price.
Of course, McEwen may have a tough time sustaining profitability in the near term, but its growth plans look encouraging. That's where bold investors with a strong risk appetite and a long-term view can find value in McEwen today
