Mining exec also predicts significant rise in gold price
By Ellsworth Dickson
Rob McEwen is not your typical mining executive. Yes, he runs McEwen Mining Inc. [MUX-TSX, NYSE] which has two mines in Mexico – El Gallo Gold and San JosÃ©, two others in permitting – Gold Bar and El Gallo Silver – and an advanced-stage exploration project – Los Azules. However, unlike most of his peers, his salary is $1 per year and he has a 25% ownership in the company.
But that’s not all – McEwen is also a vocal advocate for shareholders rights. I was fortunate to sit down with him while he outlined his views for Resource World that covered a number of topics.
RESOURCE WORLD: What prompted you to take a $1 per year salary?
ROB McEWEN: Actually, I just a got a raise to $1 per year. For the last ten years I have taken no compensation whatsoever. I receive no bonuses and have no stock options. The reasons for that are that when I built Goldcorp over 19 years I was the largest individual shareholder. I wanted to get even closer to my fellow shareowners and it takes out the conflict that is there. If you are not earning any salary, you are only going to make money the way all the other shareowners do – and that’s through a higher share price. It really focuses your vision as to what needs to be done to improve the value of the company. When you put the shareowners first and take care of them, you will take care of yourself.
RW: Most shareowners like to think that management has â€˜skin in the game’. Is that why you own 25% of McEwen Mining?
RM: Yes, that’s right. My investment in the company cost me $127 million. The more I can do to build the value in McEwen Mining for each share, the better I improve everybody’s interest.
RW: In addition to being the president of a gold mining company, you are also an advocate for shareholders. Why did you take on this lonely and frustrating task?
RM: I like to call shareholders shareowners. When I see the documentation that goes out, I am astounded that when you look at security laws they want full, plain and clear disclosure; however, viewing the documents that go out from our company and every other one, there is no way they are coming close to achieving that objective. These massive tomes cause the reader to think: â€˜what is management trying to hide from us by giving me a document that I can’t understand?’
“I think everyone should be able to read and quickly comprehend what is being presented to them and our accountants and security lawyers are frustrating that. For example, you see financial statements that constantly change due to changing accounting rules. Then you have notes to financial statements that go on for 25 to 50 pages. These go into waste baskets.
RW: Even with your senior status in the mining community, do you think it’s possible to improve this situation?
RM: Yes, I do. But we need many investors to come forward and say: â€˜We have had enough of this. I want clarity. I want simplicity. I want to feel that I am literate rather than illiterate when I read these corporate documents.’
RW: So this is a call to arms for other shareowners to come forward?
RM: Yes – for both shareowners and company management as well.
RW: What is your view on the future price of gold and why?
RM: That’s easy – it’s going higher. And why? There are numerous reasons; the most fundamental is that governments of the developed world are pursuing a dangerous course of debasing their currencies and burdening their countries and their citizens with enormous levels of debt. The way that they have tried to solve the problem is to try to stimulate the consumer to spend money. I am finding that it is not happening. In the US, a proxy for the developing world, they have increased the money supply by over $4 trillion since 2008, doubled the national debt up to $19 trillion. Then look at the student loans; since 1990, they have grown to over a trillion dollars.
“When you push this money into the system you create inflation. Governments are telling you there is no inflation but when you want to insure your car, pay your rent, buy food or a house, you will find that most of these costs have gone up. The government has put in all this so-called â€˜stimulus’ yet home ownership is going down, the velocity of money is slowing to the point that it is at a 65-year low and family incomes are down. Couple that with negative interest rates and there is a great deal of anxiety out there as to where to put your money to make it grow.
“If it doesn’t grow, for a lot of people on fixed incomes, they will have to curtail their lifestyle. Low interest rates also have a huge impact on insurance companies and pension plans. So the government is going to continue to print money. If you look at economic history, every time governments do this they debase the currency and drive people to hard assets.
“When gold was released from central bank control in the 1970s, it went from US $40/oz to $800 – better than 20 times. The low in this most recent cycle was US $250/oz. Twenty times that and you are up to US $5,000/oz. I think that this year gold may test US $2,000/oz and in three or four years may test US $5,000/oz.
For Q2 2016, McEwen Mining reported net income of $8.4 million when it produced 875,006 oz silver and 27,888 oz gold.