One of Canada’s best known gold bugs is looking at ways to develop a project in Argentina that is thought to host the world’s sixth largest undeveloped copper resource.
Predicting that the price of silver could go to US$200 an ounce, Robert McEwen’s new company McEwen Mining Inc. (TSX: T.MUX, Stock Forum) (NYSE: MUX, Stock Forum) is developing a portfolio of precious metals projects in the United States, Mexico and Argentina.
But the Toronto-based gold bug says revenue from all of those projects could eventually be dwarfed by copper output from the potentially large Los Azules project in northern Argentina.
It is currently ranked as the world’s sixth largest undeveloped copper deposit, and is estimated to host 12.5 billion pounds of copper resources, with an average grade of 0.55% copper.
"It’s the wild card, I’ll call it,’’ McEwen said during a speech to the Prospectors and Developers Association of Canada convention in Vancouver Tuesday.
He said Los Azules could cost as much as $2.6 billion to put into production and has the potential to produce at a rate of 100,000 tonnes per day, churning out half a billion pounds of copper in the first five years of a projected 25-year mine life.
“It is an intriguing project to me because it is an order of magnitude bigger than anything that I have ever been involved with,’’ said McEwen.
Bringing Los Azules on stream would be a departure for the Goldcorp Inc. (TSX: T.G, Stock Forum) (NYSE: GG, Stock Forum) founder, who is so certain about the price of gold that he holds over $100 million worth of bullion in his personal account.
He predicted yesterday that silver would soon hit $200 an ounce.
However, McEwen said initial production at Los Azules is still at least six years away. He also indicated that there is a lot of work to be done before the company decides to proceed with such a large scale mine.
“At the moment we are looking at various alternatives, including what financing is available, who might be the best joint venture partner, and who we might sell to,’’ he said. Any development may also be subject to the resolution of litigation, launched by TNR Gold Corp. (TSX: V.TNR, Stock Forum), which is seeking the return of part of the property.
Current development plans envisage producing copper in concentrates and transporting that material via a pipeline to the coast through Chile. McEwen said the company is looking at various cost-saving alternatives, including copper cathode instead of in concentrates.
Meanwhile, as it trades at $4.80 this week, McEwen Mining currently has a market cap of $658 million, based on 137 million shares outstanding. The 52-week range for the stock is $9.44 and $3.05.
The product of the recent merger of U.S. Gold Corp., and Minera Andes Inc., it will be a precious metals play for the forseeable future, one that is aiming for a listing on the S&P 500, McEwen said.
McEwen Mining’s asset portfolio includes the 49%-owned San Jose silver mine in Argentina, which is expected to produce 5.9 million ounces silver and 81,000 ounces of gold this year. This year, McEwen said $40 million will be spent on exploration, with $12 million earmarked for San Jose, $10 million for Los Azules, and $8 million for the El Gallo project in Mexico. The balance is designated for projects in Nevada and Alaska.
Within the next three years, the company hopes to raise its silver production to 7.8 million ounces, from 2.8 million ounces. Within the same time frame, it also plans to raise its gold production to 130,000 ounces from 50,000 ounces this year.
McEwen currently owns 25% of the outstanding shares of McEwen Mining and takes no salary. “I am going to make money the same way as my shareholders, through a higher share price,’’ he said.