Image source: Getty Images. 

What: Shares of McEwen Mining (NYSE:MUX), a miner and producer of precious metals and base metals, rocketed by as much as 12% higher on the heels of stronger gold and silver prices. As of 3 p.m. EDT, gold prices were higher by $7 an ounce to $1,292, and silver was up $0.12 per ounce to $17.47. Much of this move is the result of the Federal Open Market Committee's decision on the federal funds rate earlier this afternoon.

So what: Janet Yellen and the FOMC chose to keep the federal funds target rate, which helps guide prime lending rates and ultimately interest rates, unchanged at 0.5%. The weak May jobs report, which saw just 38,000 jobs created -- the lowest monthly total in nearly six years -- was mostly to blame, while the potential for a British exit from the EU continues to weigh on the minds of the Fed governors. As noted by CNBC, in April only one of the 10 voting members of the FOMC suggested just one hike was on the table for 2016, whereas now six of the 10 are suggesting one hike may be sufficient.

Image source: McEwen Mining.

Additionally, Fed officials lowered their expectations for the federal funds rate in future years, though the governing body stuck with its 0.9% interest rate projection for 2016. In 2017, the FOMC now sees the federal funds target at 1.6% as opposed to a previous forecast of 1.9%, and in 2018 it now projects a federal funds target of 2.4% compared to a prior estimate of 3%. 

An even longer period of low lending rates is great news for physical gold and silver, as well as the miners, like McEwen Mining, which produce these metals. Low lending rates mean little lost opportunity cost for investors looking to buy gold or silver, as opposed to placing their money in a CD or money market account. Also, the FOMC's lack of confidence in the U.S. and global economy could portend bad news for the U.S. dollar. The dollar and gold tend to move in opposite directions, which would imply higher gold prices are in the offing. Since silver tends to follow gold's lead, we should expect silver prices to rise, too.

Now what: Of course, there's more to McEwen's recent move than just a surge in the underlying metals it produces. In early May, McEwen reported that it had produced 40,578 gold equivalent ounces (GEO), a 7.7% increase from the prior-year period, which the company attributed solely to improvements in its San Jose Mine in Argentina.

Image source: McEwen Mining.

But here's what's important: all-in sustaining costs (AISC), or the all-inclusive costs of running and maintaining a mine, fell in both its San Jose Mine and El Gallo Mine, which is located in Mexico. At San Jose, gold equivalent co-product AISC dropped to $936 an ounce from $1,127 an ounce a year earlier, while at El Gallo, gold equivalent co-product AISC fell all the way to $532 an ounce from $611 per ounce in the prior-year quarter. Combined, gold equivalent AISC was just $903 an ounce, compared to $1,044 an ounce in the year prior.

Rising metal prices and lessening expenses should allow McEwen to turn a healthy profit, as it did in the first quarter when it reported $13 million in net income, as compared to $6 million in the prior-year period. However, at 44 times forward earnings -- even with momentum in its sails -- I'd suggest waiting on the sidelines for a substantial bottom-line improvement, or a share price pullback, before considering wading in the water.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.