Shares of McEwen Mining Inc. (MUX, Financial) soared 8.77% to close at $1.86 on Wednesday after the Toronto-based junior gold and silver producer reported lower second-quarter gold equivalent output and cut its full-year gold production guidance.
Gold equivalent production fell 3% year over year to 45,881 ounces. It was derived from 36,216 ounces of gold, down 2%, and from 850,525 ounces of silver, up 10% from the prior-year quarter.
McEwen lowered its full-year production guidance for the yellow metal by 6% to 152,000 ounces. Silver production guidance was left unchanged at 3,225,000 ounces.
Thus, the company expects to produce approximately 190,000 ounces of gold equivalent in 2019.
Delays in ramping up production at the Gold Bar Mine in Nevada and bad weather conditions hampering operations at the Black Fox Mine in Canada impacted the company's production, forcing McEwen to lower production expectations for the year.
In contrast, the 49% interest in the San José Mine in Argentina and the wholly-owned and operated El Gallo Project in Mexico performed better than expected.
The Fenix Project, which consists of a redevelopment of the El Gallo mineral assets complex in Mexico, is on track. It should release a complete feasibility study in the third quarter.
McEwen Mining represents an opportunity to gain exposure to gold, a commodity whose price may rally in 2019 as the Federal Reserve looks to cut interest rates.
Lower interest rates promote a low-yield environment, which is positive for gold investors.
Wall Street recommends buying shares of McEwen Mining with an average target price of $2.63, reflecting 43% upside from Wednesday’s closing price.
As illustrated in the chart below, the stock is not trading at its cheapest currently. The share price is above the 200-, 100- and 50-day simple moving average lines and is near the midpoint of its 52-week range of $1.23 to $2.52. Therefore, I would wait for any significant weakness before buying shares.
The 14-day relative strength index of 62 indicates the stock is neither overbought nor oversold.
Disclosure: I have no positions in any securities mentioned.
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