SiliconInvestor
     Advanced Search   [ sign in ]

register
Register

 Gold/Mining/Energy : McEwen Mining

 Public Reply | Prvt Reply | Mark as Last Read | FilePrevious 10 | Next 10 | Previous | Next  
To: JW@KSC who wrote (289)3/29/2012 8:27:51 PM
From: huntforvalue2 Recommendations  Read Replies (1) of 3856
 
Thanks for posting the article JW.

I am concerned that he will go for Lexam VG and perhaps squander this opportunity to pick up some no-name junior that have an extremely discounted share price. In my way of thinking, the market already expects LEX to be the next acquisition for McEwen and it is not as discounted as many of the other juniors out there lesser name recognition.

At this point in its development, LEX will be another "mouth-to-feed" and they are many years away from production and positive cash-flow. However, if Mr. McEwen is going to acquire LEX in the near future, based on his method of valuing these things, he will probably offer 0.085 MUX share for each LEX share. That gives them a 15% premium to today's price and LEX shareholders will own 6.7% of the combined entity. Here is the chart of the share ratio since the forming of McEwen Mining with a RED line at the share ratio of 0.085.


Source: Stockcharts

At this time, Lexam VG really has not found much gold and what it has found is rather low grade (1.6g to 5g/t) for an underground mine and not very profitable to mine. A lot more exploration work needs to go into its properties before production is even in sight.

Personally, I will be disappointed if Mr. McEwen announces LEX as the next acquisition. There are many other juniors out there with a discounted market valuation that are ready to go into production right now and are prime for picking. Such opportunities where the entire sector is beaten-up are few and far between and this may very well be the last one before the 2015 deadline arrives. McEwen Mining needs to pick these up while they are 'on-sale' and time is running out. Both gold and silver are at the very end of their head-and-shoulders pattern and primed for a breakout as are many of the equities.

On such junior that I would prefer to that of LEX would be Esperanza Silver (EPZ) which has the following going for it:
  • market cap about the same as LEX (~$70m)
  • large cash holding on balance sheet
  • large stake in Global Minerals,
  • ready to go into production at Cerro Jumil
  • Has royalty on San Luis (Silver Standard)
By the way, I do not own shares in EPZ but have in the past which is why I am familiar with them. There are probably many others out there and Mr. McEwen is in a better position to know which of these is the best value. I just hope he does not let his 25% ownership of LEX box him into thinking that Lexam VG is the only 'logical' next acquisition.
Report TOU ViolationShare This Post
 Public Reply | Prvt Reply | Mark as Last Read | FilePrevious 10 | Next 10 | Previous | Next  

HomeMailHotSubjectMarksPeopleMarksKeepersSettings
Terms Of UseContact UsCopyright/IP PolicyPrivacy PolicyAbout UsFAQ
Copyright © 1995-2013 Knight Sac Media. All rights reserved.