VANCOUVER (miningweekly.com) – Addressing delegates at the Vancouver Resource Investment Conference, chief owner, chairperson and CEO of McEwen Mining, Rob McEwen, encouraged struggling gold miners to exercise more discipline in the downcycle, assuring  investors and mining executives attending the conference that the current tide would turn. 

He added that, should gold producers sell royalties in the current environment, it would constitute "a crime".

“You are stealing from the investors. It’s like a payday loan – you pay a very big price. You are fixing revenue in the future and it comes right off the top line, while you can’t fix costs over that period, which are likely to rise,” he said during a question and answer session conducted by Marin Katusa of Katusa Research.

McEwen suggested that if a development project did not have a current net present value of 20% or higher, companies should not try to finance it right now but should rather wait and work harder to improve project costs.

He further noted that the market valuation gap between the precious metals streaming firms and producers demonstrated the value that had been given away in the blind pursuit of cash.

According to McEwen, a case study illustrating what not to do could be made of project developer Romarco Minerals. He explained that, while the company’s flagship Haile gold project, in South Carolina, got its permitting in place at the bottom of the cycle, the company should have waited for the inevitable upturn before agreeing on a takeover deal, to ensure that bigger gains were realised. OceanaGold last year bought Romarco in a C$856-million all-scrip deal.

McEwen, who is also the founder and former chief executive of the world’s largest gold miner by market capitalisation, Goldcorp, noted that the major miners had, at this stage of the downcycle, already jettisoned their exploration departments, creating demand for new projects down the line. He criticised the majors, saying they had to work hard in the current environment to be successful as they had become addicted to debt. McEwan added that miners were getting rid of discretionary spending at the expense of future growth, which would lead to a changed gold-mining landscape in a few years’ time.

McEwen Mining’s NYSE-listed stock gained nearly 80% in value in the last six months of 2015, prompting McEwen to remind attendees that there was still money to be made in a bear market. “Everyone is focusing too much on the US dollar, failing to realise that gold priced in other currencies such as the Canadian dollar, the Australian dollar, or the South African rand were gaining, providing lots of upside.

“Bears become bulls, and bulls become raging bulls,” he quipped. “You can do very well.”