TORONTO (miningweekly.com) – Prepare for more mergers and acquisitions in the precious metals space as a flood of new entrants leaves some of them suffering from market neglect, Rob McEwen, who merged two miners to form McEwen Mining said this week.

The midtier and senior gold and silver miners are pumping cash at current metals prices, and they will seek to spend some of this on assets that become underappreciated among the market noise, he said in an interview.

“At the junior level, there are an increasing number of companies that are creating a bit of confusion in the minds of investors as to which is the story they should buy, because the choice is so broad,” said McEwen, famous for building Canada’s Goldcorp into one of the biggest gold diggers globally.

“That, I believe, will create pricing anomalies in the market, and there will be some companies that just can’t gain traction in the market.”

McEwen first unveiled plans to marry US Gold and Minera Andes, both of which he heads as chairperson and CEO, into a company bearing his name in June, as part of a grand design to build a precious metals miner that qualifies for inclusion in the S&P 500 in 2015.

The process took longer than he anticipated – he thought it would be complete by November – but the combined entity is now a legal one after shareholders gave it the thumbs up, as did the Canadian court system.

McEwen Mining, set to start trading on the TSX and NYSE on January 27, aims to play a role in the merger and acquisition activity the dealmaker anticipates.

“We’re going to have to look for some opportunities to build the size of the company, and I’m sure between now and 2015, we’ll see opportunities,” McEwen told Mining Weekly Online, saying timing would depend on when opportunities arose, as well as on pricing.

PRECIOUS METALS PRICES

McEwen Mining stands to benefit from gold prices that have climbed for 11 straight years, as well as buoyant silver prices. The company owns 49% of the producing San Jose mine located near Goldcorp's Cerro Negro project in Argentina, the El Gallo project in Mexico and the Gold Bar project in Nevada.

It houses the Los Azules copper deposit and other exploration properties in Argentina.

This year production will come in at 2.6-million ounces of silver and 40 000 oz of gold, reaching a rate of 7.5-million ounces of silver and 130 000 oz/y of gold in 2014.

McEwen, 62, has long said he expects gold to top $5 000/oz and silver $200/oz over the next few years.

“It’s about three years out,” he said.

“More people are looking at gold and wondering ‘should I have some?’. And I think that is going to continue increasing.”

He said talk among some GOP leadership candidates regarding their support for the US returning to the gold standard could only be positive for bullion prices.

“We’ll just have to keep hearing more of that, it’s a positive sign.”

That gold has staged such a strong performance over the last ten years – outperforming almost every other asset – is a sign that “something is amiss” in the global economic system, said McEwen.

“All the actions by governments are temporary – they’re band-aids, but they’re not addressing the cause. They’re pushing it into the future and you can only push it so far, and then it hits,” he said of swelling deficits and government debt.
 

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