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TABLE OF CONTENTS Jan 6 - 12, 2014 Volume 99 Number 47 - 0 comments

Commentary: Rob McEwen on the outlook for 2014

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By: Trish Saywell

Rob McEwen, chairman and chief owner of McEwen Mining, shared his thoughts with The Northern Miner about the outlook for the mining industry in 2014. McEwen Mining’s principal assets consist of the San Jose mine in Santa Cruz, Argentina (49% interest); the El Gallo 1 mine and El Gallo 2 project in Sinaloa, Mexico; the Gold Bar project in Nevada, U.S.; and the Los Azules copper project in San Juan, Argentina. Rob McEwen owns 25% of the company’s shares.

The Northern Miner: Some would say you are an eternal optimist. Are you optimistic about 2014?

Rob McEwen: Anything can be better than 2013. On a relative-value basis, gold is looking very attractive, compared to the broad market. So I think there might be some rotation into gold and gold shares . . . the producers are going through a lot of rationalization and cost-cutting, and they’ll be putting out some better numbers in the next few quarters. And there are a few exploration companies that have put out fantastic drill results lately that are moving their share prices up — like Reservoir Minerals and Balmoral Resources — and I think you’ll see a little bit more of that with the juniors. For a good part of this year, it didn’t matter if you had a good drill hole or not, your stock usually went down. So from the standpoint of someone entering the market today, there’s good upside. This is good, as there is significant upside with little downside.

TNM: Do you think the gold price is going to move higher in 2014?

RM: I do. A large part of the players, the investors in the market, appear to be complacent, thinking the central bankers of the world, particularly the Fed and the ECB, have figured out how to control the stock markets, and their manipulation will ensure that we don’t suffer another down market . . . you’re seeing this unwavering belief that the Central Bank can control it all. Maybe in the short-term it can, but in the medium- to longer-term I think there will be cracks appearing in the economy that they won’t be able to fix, and that will cause people to look to the precious metals for some protection.

TNM: Do you have a gold price in mind for next year?

RM: It will be higher than this year. I think you’ll have a shot at the old high of US$1,900 per oz. before the year is out.

TNM: Have we reached rock-bottom in terms of valuations?

RM: It’s close to it. We’ve gone through cycles like this before, in fact, I was just reading an article before you called that appeared in The Northern Miner in an issue from June 1–7, 1989, entitled “Now the bad news” by Kerry Knoll. It was talking about watching how one goes “from the triumph of discovery to the misfortune of production gone bad.” It said: “Too many explorationists were in too big a hurry. The money was too easy. Promotional zeal, not technical competence, motivated some would-be mine finders. Some engineers seem to have been too optimistic when estimating costs. There weren’t enough good technical people around.”

We’ve gone through this before and we’ll go through it again, and cycles like these present definite and significant opportunities for upside. It’s not going to happen tomorrow, but for someone with a time horizon of six months, they could see some attractive gains in the market by entering precious-metal stocks now, today.

TNM: Earlier this year you asked shareholders for suggestions on potential M&A opportunities out there, and you received a few responses. Can you talk about that, and where the company stands in terms of acquisition targets?

RM: We had an interesting response. There were shareholders of ours who were making suggestions, and there were some individual companies that came forward saying: “Would you like to look at us?” And we’re still looking. The list of suggestions was extensive.

TNM: Can you be a little more specific about where some of these assets might be located?

RM: Our prime focus is in the Northern Hemisphere and Latin America.

TNM: What is your view on the incoming changes to Mexico’s mining code and proposals to introduce a royalty of up to 7.5% on profits, and a 0.5% royalty on revenue from precious metals? Does this affect your opinion of investing in new projects in Mexico?

RM: I’m not certain it’s been enacted yet, but it’s on course to be, if it hasn’t already been done. It’s unfortunate. It will slow mining investments going to Mexico and it compounds the difficulties of the mining sector right now. It seems Mexico is not alone. Many governments seem to be making policies by looking in their rear-view mirror. They have a memory of prices two years ago, and have this belief that the industry is making tons of money. Their legislation takes a while to push through. And when they get there, the prices have fallen out of the sky . . . these governments base a lot of activity on historic prices rather than what they are right now, and that will be to their detriment, in terms of new capital investment. You need compelling arguments to open a new mine today, and higher taxes are not an encouragement.

TNM: Are there any encouraging signs out of Argentina that it might become more welcoming to foreign mining interests? How difficult is it for companies to repatriate profits?

RM: We haven’t had a lot of difficulty in getting our money out, it’s just that there’s not much money to be made there right now. There has been some encouragement and optimism. Chevron recently went in there and was given some concessions by the government in terms of not having to repatriate all of its profits, and a portion of their profits will not be subject to export taxes. I believe the government is seeing the errors in their ways, and they’re starting to change that. Maybe what they did for Chevron, they will do for the mining industry.

TNM: What is McEwen Mining doing on the cost-cutting front?

RM: We, like everyone else, are looking at ways to conserve cash and reduce costs. One area that I’m not too keen on cutting is exploration. Our exploration budget is smaller, but it’s still there, and we’re still actively exploring on our property. We have two exciting exploration programs in the first and second quarter of this year in Nevada, and we’re constantly exploring around our mine in Mexico. We’re looking at ways of extending the life and growing what we’re mining, and we’re meeting with some success.

TNM: What is your current cash position?

RM: We’ve got a little over $30 million.

TNM: Has the weeding out of some of the juniors been a good thing for the market as a whole?

RM: There was a lot of choice in the market two years ago, and even now — and I think that choice was confusing for investors. I don’t like to see the number of companies drop, but it will make it easier and clearer for investors to pick the companies they want.

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