Rob McEwen, the near-billionaire nationalist, philanthropist, libertarian, gold-loving, regulation-hating metals magnate, is as steamed as the plate of tagliatelle pasta sitting in front of him.
“It’s the parentalness of government that pisses me off. Get out! We have to take risks on our own,” he says.
The 61-year-old is reacting to the roadblocks encountered in his new mining venture, the latest chapter in a colourful and wildly successful career highlighted by converting a struggling gold mine in Northern Ontario into a global colossus called Goldcorp. The mining tycoon is merging two junior companies to form what he hopes will be his next – perhaps last – big winner. But the regulatory and governance process has taken three months longer than expected, costing $6-million in legal and advisory fees.
“This is an unnecessary tax on shareholders,” he fumes, his usually soft voice rising above the lunchtime clatter at Canoe, a darling of Bay Street expense accounts sitting 54 floors above downtown Toronto. “Wouldn’t we be better served to, say, cut a cheque to our shareholders as a dividend?”
The biggest of all those cheques would go to Mr. McEwen, who is chief executive officer and controls 25 per cent of the new gold, silver and copper company called McEwen Mining Inc. And he is already flirting with billionaire status after his hugely profitable ride with Goldcorp.
Now with that massive gold producer in his rear-view mirror, the Croesus-like track record gives him licence to try to build another heavyweight – this time with his own name on the company.
He will be doing so as his sector rides a wave that is both highly profitable and extremely volatile. Gold prices are soaring as currencies falter, feeding off economic instability in the United States and Europe. But gold is also known to tank disastrously, and some analysts predict the roaring bull will turn silent as investors grow wary of its heart-stopping rises and falls. And this time around, Mr. McEwen is also exposed to silver – a lower-cost complement to gold – and to copper, which is sensitive to industrial activity.
But gold is his game, and his affection strikes deeper than short-term business interests. It speaks to another side of Mr. McEwen – libertarian, student of historical cycles, and scourge of debt-laden governments. He is a prophet of profligacy, who predicts, in this age of over-the-top borrowing, that gold will fly through $2,000 (U.S.) an ounce this year – not too ambitious given its recent surge over $1,700 – and to $5,000 in three to four years.
As always, there is constant noise from so-called gold bugs, that kooky fringe that believes the yellow metal is the only haven as the world heads toward cataclysm. Mr. McEwen’s view is much more nuanced – that gold is a currency like Canadian or U.S. dollars or the beleaguered euro. “And here we are seeing the entire Western world debasing its currencies at a frantic pace,” he says.
In this orgy of public spending and debt, gold will get hotter in the near to medium term. But at some point, he says, it will hit a zenith and it will make sense to buy other currencies again. And rather than play the apocalyptic thunderer, he suggests looking at gold as insurance – the percentage held should depend on the bleakness of the individual’s outlook. As for Mr. McEwen, he is 80-per-cent invested in gold and gold stocks, but, after all, that’s his business.
As he sips his glass of malbec, Mr. McEwen explains why he is trying to build another major mining company when he could be sitting at home counting his bullion.
The business case for the merger of US Gold Corp. and Minera Andes Inc. – completed in late January, six months after being proposed – is that mining players today need scale to grab the interest of institutional investors. The mineral world is polarizing between the giants – note merger talks between titans Xstrata and Glencore – and hordes of juniors. The charm of McEwen Mining, he says, is combining one company sporting cash flow and no project pipeline with another that has stuff in the pipeline but no cash.
And the process gets the competitive juices flowing, as he sees a chance to build another monster miner. “At the most optimistic, we could outrun what Goldcorp has become,” he says.