Mid-cap mining company, McEwen Mining (NYSE: MUX) (TSX: MUX) recently reported its first quarter results for 2024. (https://ibn.fm/ZDZ5U). It wasn’t a stellar quarter for the company’s gold/silver/copper operations.
However, in pricing in this news it appears that the market and institutional investors, in particular, took their eye off the ball here – and lost track of the Big Picture.
The Big Picture right now for McEwen Mining is McEwen Copper.
McEwen Copper is a private company, with ownership roughly split between McEwen Mining (47.7%), institutional investors (33.9%), and other major investors including Rob McEwen himself (12.9%). For those not already aware, it’s also worth noting that McEwen Mining has previously telegraphed its plans for an IPO for McEwen Copper.
Some number-crunching is necessary here.
Based on its last financing, McEwen Copper has an implied valuation of $800 million. That means that MUX’s own stake has an implied value of $381.6 million. McEwen Mining views McEwen Copper as a potential “copper unicorn” when it commences public trading – for obvious reasons.
Premier investors like Stanley Druckenmiller see a bull market for copper for at least the next six years (https://ibn.fm/4j6vv). Goldman Sachs is predicting “peak mine supply” in 2025 (https://ibn.fm/EBqxj) and warns that Western copper warehouses could effectively run out of inventory by Q4 of this year (https://ibn.fm/hFcZW).
McEwen Copper’s prized asset is the Los Azules Copper Project (https://ibn.fm/cegnt). In a world suddenly starved for copper, this is the world’s 8th largest undeveloped copper project, with very robust economics.
McEwen Copper not only looks like a probable unicorn, but an attractive take-out target with estimated production of 321 pounds of copper per year (based on the June 2023 PEA) and total resources of 37.6 billion pounds of copper.
This means that once McEwen Copper goes public, McEwen Mining’s stake could quickly rise to a value of $500 million or more.
Yet, following MUX’s Q1 results, the McEwen Mining’s total market cap slid as low as ~$500 million. Depending on how McEwen Mining is valued, McEwen Copper represents somewhere from one-half (50%) to two-thirds (67%) of MUX’s market cap.
Translation: MUX shares could easily be viewed as a very cost-effective means of acquiring a position in McEwen Copper. And that’s without factoring in McEwen Mining’s 1.5% Net Smelter Royalty (“NSR”) on Los Azules.
In speaking with IBN recently, Chairman Rob McEwen did a back-of-the-envelope calculation on the potential value of the NSR: $460 million.
MUX’s share price is already bouncing back, and institutional investors may be missing one of their last pre-IPO buying opportunities for McEwen Copper.
McEwen Mining is a publicly traded gold/silver/copper mining and exploration company. It operates the Gold Bar Mine in Nevada and the Fox Mine Complex in Timmins, Ontario; plus holds a 49% interest in the San Jose Mine in Argentina. Chairman and Chief Owner, Rob McEwen, is globally renowned as the founder of Goldcorp, building it into an $8+ billion company (https://ibn.fm/kwkoY). And, again, MUX’s 47.7%-owned Los Azules Project is the world’s 8th largest undeveloped copper project.
For more information, visit the company’s website at www.McEwenMining.com.
NOTE TO INVESTORS: The latest news and updates relating to MUX are available in the company’s newsroom at http://ibn.fm/MUX
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