Debt-Free McEwen Mining Rises Again
- By Alberto Abaterusso
McEwen Mining Inc. (MUX) rebounded in early trading after a 1.9% loss on the heels of Friday's earnings report, which showed a loss of 3 cents per diluted share or a loss of $10.6 million on a consolidated basis for full year 2017.
The stock gained more than 1% to $2.12 a share in early trading.
Warning! GuruFocus has detected 2 Warning Sign with MUX. Click here to check it out.
The intrinsic value of MUX
The earnings loss was mainly due to a series of cost increases on a year over year basis: production costs rose 61% to $45.18 million, exploration costs increased 122.6% to $17.71 million; general and administrative costs rose by 48.2% to $18.8 million.
McEwen also charged the yearly income statement $2.06 million, a 246% increase year over year, for estimates revision and for asset reclamation obligations.
Concerning revenue for full fiscal 2017, McEwen invoiced customers who bought gold and silver from the company for $67.72 million. This was a 12.1% growth on a year over year basis. This growth has been attributed by McEwen Mining to the addition of the Black Fox mine (Ontario, Canada) to the company's portfolio of productive assets. The mine was purchased by McEwen last year in October and contributed to the miner's total revenue of 2017 with $11.6 million coming from the sale of ounces of gold.
Compared to a year ago, the company sold a lower volume of the yellow metal at El Gallo 1 mine (Mexico) sparking a $4.5 million decrease on a year over year basis. The decline affect scratch revenues too much.
For 2017, the company reported a cash outflow of $15.4 million from operations. This was due - as McEwen explained - to the sustainment of "higher exploration, development and operating expenses". These payments were related to the company's plans for long-term growth.
In addition, as of Feb. 21, McEwen had total means of $60 million in cash on hand, securities and precious metals.
McEwen Mining is a debt-free precious metal mining company.
For the 52-weeks through Feb. 23 McEwen lost 38.35% and outperformed the Van Eck Vectors Gold Miners ETF (GDX) by 34.54%. The stock is trading below the 200, 100 and 50-SMA lines as you can see in the below chart sourced from Yahoo Finance:
Source: Yahoo Finance
The stock is trading only 31 cents above the 52-weeks low of $1.82 per share. The 52-week high is $3.82 per share.
McEwen is trading its book value per share at 1.35 times versus an industry average of 2.05 times.
The recommendation rating is 2 out of a total of 5. With an average target price of $3.67 per share, analysts predict a 75.6% growth from the current market value. An updated pre-feasibility study for the Mexican El Gallo Silver Project (100%), which should be finalized in the second quarter of the current year, should play in favour to the stock appreciation in 2018.
At El Gallo, the company is studying options to start the project minimizing as much as possible the required investment and the impact of guessed operating costs on the production of the grey metal that can be potentially milked from silver reserves.
(Disclosure:I have no positions in any security mentioned in this article.)
This article first appeared on GuruFocus.
Warning! GuruFocus has detected 2 Warning Sign with MUX. Click here to check it out.
The intrinsic value of MUX
