Good Morning,
I've been getting lots of emails about McEwen Mining (MUX) as it has hit a 15 month low this week trading down to close at $2.01 (USD) yesterday. Let's step back and look at our history with MUX. This will only apply to subscribers that were active in the first half of 2015 or before but it all points to the same conclusion regardless of where/when you got involved. But, this is again a perfect example of how psychology and emotion play such a massive role in how we perceive our investments!
In May 2015 I put out my official buy recommendation via this research report on our blog:
https://www.goldinvestmentletter.com/mcewen-mining-basics/
Now, anyone who bought around that $1.09 buy price still has almost a double on the books even if you haven't sold any shares higher since then. But I did make an official alert in July last year that I was selling 1/3 of my shares to remove all principal risk from the investment. I reasoned that I/we averaged up and my cost was closer to $1.60 than $1.09. The day of my alert was within 10 cents of the peak near $5 per share and some folks did follow my lead. Others got angry! I simply saw it had gone too far too fast and the overbought conditions were extreme.
Then, I started recommending investors start buying back pieces late last year around $2.70 and periodically in the low-mid $2's. Now, on that initial 2/3 of my position....those shares are held for free. I've added back on more than the 1/3 I sold, so my position is bigger than ever. I'm down 20-30% on most of those purchases but when the other shares are factored in I'm still up big. I think this helps me see the recent action from an emotionally detached perspective so I'm grateful for that.
I'm sticking with my long term price target of $10 per share which I officially called during my interview with CEO Rob McEwen in May 2016. I will likely be wrong on my timing which was aggressive (end of 2017) so I will extend that time line another 12-18 months. I would encourage interested investors to listen to that webinar which is still completely relevant to where we are today. Here is the link:
https://www.goldinvestmentletter.com/chat-with-rob-mcewen-of-mcewen-mining/
The stock doubled quickly after that interview. I will reach out to Rob again shortly to see if he would like to record an update for GIL subscribers. The recent hit in the stock is due to a bought deal financing that was priced below market but now it is overshooting and we can buy in cheaper than the offering price ($2.25). The financing was done to take care of costs related to the acquisition of the Black Fox mine that they purchased from Primero. I think they "stole" that project for $35MM! It immediately adds 50,000 ounces of gold production in 2018 and the only reason this fire sale was done is due to Primero having serious financial problems. It is a terrific purchase for us.
The bottom line is that this dip down to $2 is exclusively due to the weak gold miner environment that has been prevalent most of 2017 and this financing. There is nothing within the operations or fundamentals that are causing this weakness. In fact, with the big rise in copper prices this year, their massive Los Azules project in Argentina has climbed significantly in value and is not being reflected in the share price....yet. My suggestion is for GIL readers to load up on MUX near $2. If by chance we see further weakness into the mid-high $1's then back up the truck!
I remain very bullish on MUX long term. This is a core holding within my overall portfolio and it's liquid enough for our institutional readers to take down millions of shares if you like it. Yet, there is big leverage to gold prices and I fully expect MUX to outperform GDXJ and GDX during the bull cycle of the next 2-3 years.
In May 2016 I put out a buy on Oban Mining which is now Osisko Mining (OSK) via the report below and the stock has tripled in value during that time. I suggest selling OSK to roll into MUX for those of you that still own it. OSK will probably continue to do well but the rotation timing for boosted alpha this way is solid.
https://www.goldinvestmentletter.com/oban-mining-an-aggressive-gold-growth-story/
Buying MUX here around $2 will easily make us money in time but you have to be the one who buys low and sells high! Adding when weak and people are questioning themselves or have fear is when we get the best deals and that's happening right now. It's not extreme but it is there for sure. Traders may also want to consider adding here to flip for about 20% gains when MUX closes the big gap on the chart at $2.40. My normal course is to boost my position above my ideal portfolio long term weighting as it gets cheaper, then sell a percentage of my shares on the 15-20% bounce. That's to "get paid for my time" so to speak. I often trade core positions but only above and beyond what I have socked away to only sell when I think it's the end of the gold bull market. Or, in the case of MUX in July 2016 when it was exceedingly overbought, I will shave off core positions in those rare conditions as well.
Cobalt
On another note, Castle Silver Resources (CSR/TAKRF) will turn higher in the next one to two weeks. The 2 year chart is a thing of beauty and 19 cents on CSR is strong support (200 day moving average) so I recommend buying now up to .21-.22 on CSR or.17-.18 on TAKRF. Castle should have news anytime with assay results on their recent drilling and on their cobalt separation technology which is being tested. I remain super bullish on cobalt and now is the time to be accumulating the cobalt juniors that have been resting after big moves earlier this year. Act 2 is coming up soon for cobalt stocks...
I'm long MUX/CSR