Actions of McEwen mine (NYSE: MUX) zoomed in today, closing Monday up 15.2%. Gold and silver stocks have just advanced as part of an initial public offering they are planning for the coming year.
On July 6, McEwen Mining established a subsidiary called McEwen Mining Copper to create a pure copper company to primarily develop its Los Azules copper mine in Argentina, and announced plans to raise $ 80 million through a private share offering. McEwen Mining ultimately intends to launch an IPO for McEwen Mining Copper within 12 months of closing sales of shares.
On the morning of August 23, McEwen Mining took a concrete first step towards the IPO by raising $ 40 million through a sale of the subsidiary’s shares to CEO Rob McEwen.
McEwen Mining plans to raise the remaining funds from private investors by September 30. Once the entire offer is closed, it will publicly list McEwen Mining Copper within the next 12 months and will hold a 68.6% stake in the subsidiary.
So why has this development excited investors?
Gold and silver miner McEwen Mining believes the market is not giving the company its due for its Los Azules copper deposit, “despite its impressive size and economic strength at current copper prices.” As a prospect, copper prices have sizzled this year, hitting record highs about three months ago before starting to calm down amid concerns from China.
Copper is primarily used in heating and electrical equipment, but demand for the metal has exploded alongside the shift from fossil fuels to clean energy. Copper is widely used in the solar industry and is an essential component for electric car batteries and chargers.
The outlook for copper is undeniably bright, but McEwen Mining is far from monetizing its copper assets as Los Azules has not even entered the pre-feasibility phase. Meanwhile, McEwen Mining is a loss making company with negative free cash flow and significantly high production costs. In short, this is not a copper stock yet, and there are much better, worthy, and cheap gold stocks to buy right now.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Questioning an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.