McEwen Mining Inc. (MUX, Financial) announced Aug. 29 it will purchase the Black Fox Complex from Primero Mining Corp. (TSX:P, Financial) for $35 million.
Black Fox is located in the Canadian region of Timmins, one of the most famous gold mining regions in the world.
The deal is expected to close in late September.
McEwen says its shareholders will benefit from an increase in one-year gold production, which is expected to grow by 50,000 ounces in fiscal 2018, as well as future gold production.
Shareholders will also witness a significant increase in the miner’s resources in the Canadian region of Timmins.
Management plans to advance the company's projects at the property and other properties recently acquired from Lexam VG Gold (TSX:LEX, Financial).Â
The Black Fox Complex is in an area with potential for exploration activities given the existence of several superb gold deposits in the region.
In addition, McEwen says the property is already rich in minerals and “has geologic traits that make it prospective to grow the existing deposits and for additional discoveries.”
McEwen Mining is currently trading around $2.58 per share on the New York Stock Exchange with a market capitalization of $805.67 million, a price-book (P/B) ratio of $1.70, a price-sales (P/S) ratio of $14.26 and an EV/Ebitda ratio of -74.60.
McEwen has 621,000 ounces of gold and 13,328,000 ounces of silver in proven and probable reserves, equating to 798,707 ounces of gold equivalent.
The company has an enterprise value of $769.81 million. When dividing that figure by 798,707 ounces of gold equivalent, it yields an EVO of $963.82.
Currently, there is only one price target for the stock, which is $5 per share. This represents a nearly 94% upside in the market value with a recommendation rating of 2 (buy) out of 5.
While the mining industry currently has better buying opportunities than McEwen, the additional gold production gained from the Black Fox Complex may have a positive impact on the market value of this stock.
Disclosure: I have no positions in any stocks mentioned in this article.
