Please ensure Javascript is enabled for purposes of website accessibility

Why McEwen Mining Inc. Shares Fell Nearly 13% in March

By Reuben Gregg Brewer - Updated Apr 6, 2017 at 11:43AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Gold and silver miner McEwen Mining posted earnings on March 1. It seems Wall Street wasn't impressed.

What Happened?

McEwen Mining Inc. (MUX -6.45%), a debt-free precious-metals miner, watched its stock price decline by just under 13% in March.

So What?

The volatile price of precious metals has a big impact on McEwen's stock price, as with any gold and silver miner. Gold started the year off on an up note, peaked in late February, fell through mid-March, and then started to head higher through the end of last month. Add to this the company's mid-February agreement to acquire Lexam VG Gold Inc in an all-stock transaction, and there's been a lot going on lately. It's not surprising that McEwen shares might be under some pressure.

Employees at a McEwen Mine.

Image source: McEwen Mining Inc.

The company also happened to report earnings on March 1. McEwen reported net income of $0.07 a share for 2016, up from a $0.07 a share loss in 2015. That was great news, of course, but gold-equivalent production was down nearly 6% year over year, and all-in sustaining costs were up roughly 5%. Neither of those numbers are heading in the right direction.

To make things worse, the company's guidance for 2017 suggested that the trend isn't going to change in the near term. For example, gold-equivalent production is expected to decline as much as 7% this year. And costs are projected to increase again, this time, by nearly 50%! To be fair, that number is skewed higher by spending on growth projects.

As with any mining investment, the benefit of the spending isn't going to show up for awhile. In other words, there's a reason for investors to be a little less positive about McEwen's near-term outlook now that they've seen what the miner has to say about 2017.

Now What?

The upshot is that McEwen, a relatively small miner, probably isn't looking at a great year in 2017. But it's financially strong and appears more than capable of being able to afford the spending it has planned to ensure it grows in the future. Investors who are willing to wait a little for the company's investments to bear fruit might want to take a deep dive..

Reuben Brewer has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

McEwen Mining Inc. Stock Quote
McEwen Mining Inc.
MUX
$2.90 (-6.45%) $0.20

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
397%
 
S&P 500 Returns
128%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/19/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.