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McEwen Mining Completes Purchase of Black Fox Complex

- By Alberto Abaterusso

McEwen Mining Inc. (MUX) (MUX.TO) announced Oct. 6 it has successfully completed the acquisition of the Black Fox Complex, which was formerly owned by Primero Mining Corp. (TSX:P).

The company bought the property for $27.5 million in cash.

The complex is located in the Canadian region of Timmins, one of the most well-known gold mining regions in the world. The complex is also composed of the Black Fox Stock mill, where 2,400 tonnes of mineralized rock can be milled per day, and the Grey Fox and Froome development projects.

The company expects to produce a total volume of 50,000 ounces of gold from underground mining activities at Black Fox in 2018.

The closing of this transaction was possible thanks to $46,575,000 in funds collected through the issuance of new ordinary shares and warrants to a syndicate of underwriters, which was led by Cantor Fitzgerald & Co., on Sept. 22.

The funds will also be used to develop future metallic projects, pay for exploration activities and cover general corporate purposes.

Chairman and CEO Rob McEwen commented on this transaction:

"We view this purchase as an important strategic step towards our goal of entering the S&P 500 Index; #1 It increases our forecast 2018 annual production by 20% to 185,000 gold equivalent ounces; #2 It allows us to accelerate development towards production of the Lexam VG properties we bought earlier this year; #3 It provides us with a base of operations, an experienced workforce, and multiple exploration targets in one of the world's best gold mining districts, Timmins, Canada; #4 The purchase price was very attractive, given the significant investment made by the previous owner; and #5 The purchase includes large tax pools that will be used to shelter future income."

McEwen Mining is currently trading around $2.09 per share with a market capitalization of $695.92 million, a price-book (P/B) ratio of 1.37 and a price-sales (P/S) ratio of 11.57.

The forward price-earnings (P/E) ratio is 16.31.

One analyst has assigned a target price of $5 per share.

The mining stock is downtrending and has lost nearly 29% year to date.

Disclosure: I have no positions in McEwen Mining.

This article first appeared on GuruFocus.