(Reuters) - Gold and silver producer McEwen Mining Inc (MUX.TO) is looking for a merger or acquisition as a step toward its goal of inclusion in the Standard & Poor’s 500 index by 2015, its chief executive said on Thursday.
“We think our growth will take us a good part of the way, but we’ll have to look to an M&A transaction to get the critical mass,” CEO and majority shareholder Rob McEwen told the Reuters Global Mining and Metals Summit in New York.
Asked how such a deal might be financed, he said it would likely be through equity rather than debt.
McEwen, who founded giant Canadian gold mining company Goldcorp (G.TO), left it several years ago to start U.S. Gold, which recently acquired Minera Andes to form his eponymous company.
“Our overriding goal is to qualify for inclusion in the S&P 500 within 2015,” McEwen said, noting the company had already met five of the S&P’s seven requirements.
“The merger we did in January to create McEwen Mining moves us on to the sixth, which is four consecutive quarters of earnings. Right now, we have a positive cash flow, but the earnings will come in the next few years.”
The final requirement, he said, is market capitalization of more than $5 billion. McEwen Mining is at $1.1 billion now.
“We think our growth will take us a good part of the way, but we’ll have to look to an M&A transaction to get the critical mass,” he told Reuters journalists.
“We’re in an environment that looks very interesting because we’ve seen the price of metals go up and there’s been a proliferation of companies in the space.”
The gold price, which reached a record high of $1,920 last September, has fallen back since then and was trading around $1,655 on Thursday.
McEwen said that price slide has brought pressure to the market. ”We’re looking at it and thinking: ‘There’s a number of companies that are going to be denied access to capital.’ And it’s a highly fragmented space and it’s going to be consolidated.
“So there will be opportunities,” he said, without hinting at possible targets, except that the company would be happy to remain in the Americas. It has operations in Nevada, Mexico and Argentina.
“So we’re trying to look in this market place for something that has a stronger balance sheet and a solid growth path and a strategy to go out there and get presence in the market without diluting the shareholders.”
Asked about financing, he said: ”Likely shares; I wouldn’t say debt at this point.
”I would like to have a larger production base, (but) we still have capital to spend.
”It would likely be equity because most of the participants have watched the prices come down and if they want to stay in the sector they want the upside.
“It will be hard not to issue shares,” McEwen said.
McEwen Mining stock was down 15 cents at C$3.99 in afternoon trading in Toronto.
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Reporting by Steve James; Editing by Gerald E. McCormick