Expectations for gold prices are not as rosy as they were a few weeks ago. There are analysts who see the precious metal remaining near $1,200 an ounce until the end of 2018, reflecting the persistence of a strong U.S. dollar.
This is the time I believe it is best to unload some publicly traded gold mining stocks. One of these stocks is McEwen Mining Inc. (MUX, Financial). The share price of $2.16 at market close on Friday, Oct. 12, suggests it is time to pocket some profit. It is above the 200-, 100- and 50-day simple moving average lines. Also, it is in the middle of a 52-week range of $1.82 to $2.55. For the 52 weeks through Oct. 12 the share price has climbed 5% to a total market capitalization of approximately $725.14 million.
The EV-to-EBITDA of 9.17 versus an industry median of 9.3 and a 14-day Relative Strength Index (RSI) of 66.4 compared to a historical range of 30 to 70 are suggesting the stock could start experiencing some significant losses soon.
McEwen is a gold and silver small producer that is focusing in the Americas. The main mineral interests of the company are located at the San José mine in Argentina, at the Black Fox mine in Canada, at the El Gallo Fenix metallic project in Mexico, at the Gold Bar mine in Nevada and at the Los Azules copper project in Argentina.
The San José mine is 49% owned, the Gold Bar mine is under construction and the Los Azules is advancing towards a development stage’s project.
The company is targeting 128,000 ounces of gold and 3,225,000 ounces of silver, or 171,000 ounces of equivalent gold for full fiscal 2018.
For the first nine months of 2018, the company has already made 135,344 ounces of gold equivalent, reflecting a 48% increase compared to the prior-year quarter. This means that 35,656 ounces of silver equivalent for the last three months of 2018 is not chasing a chimera as a production target, but shareholders cannot have high expectations on their company exceeding the guidance’s upper limit on total production. Black Fox and San José mines should continue performing in line with expectations. But a significant abatement in the residual leaching will determine a production decline at the El Gallo Project in the last quarter of 2018.
A low commodity together with declining El Gallo mine sustain a selling approach.
(Disclosure: I have no positions in any security mentioned in this article.)
