Rob McEwen on Donald Trump’s win

Rob McEwen, chairman and chief owner of McEwen Mining (TSX: MUX; NYSE: MUX), shared his thoughts with The Northern Miner about the election of Donald J. Trump as the forty-fifth president of the United States.  McEwen Mining’s principal assets consist of the El Gallo 1 mine and El Gallo 2 development project in Sinaloa, Mexico; the Gold Bar project in Nevada, U.S.; the San Jose mine in Santa Cruz, Argentina (49% interest); and the Los Azules copper project in San Juan, Argentina. McEwen owns 25% of the company’s shares.

The Northern Miner: Where were you on election night? Were you watching the results on television? What were your immediate thoughts when you realized Donald Trump would be the next president of the United States?

Rob McEwen: I watched all of it and enjoyed the suspense. I like the outcome. It became so apparent that there is a big disconnect in America and maybe it’s true all around the world, that the politicians, the pollsters and the media are of one mind, and most of the country is of a totally different mind. Whether it’s Washington, Ottawa or London, or any of the major capital cities, their mandarins and residents are far removed from the drama and the trauma that’s going on all across their countries, and they don’t have a sense of the disappointment, the anger, the frustration and burning desire for change, to throw out the old order. I share the same opinion.

TNM: Many were surprised by the result. Were you?

RM: I welcomed it. The result was such a clear illustration of the disconnect between the people that write the laws that govern us, and the rest of the population. The lawmakers, regulators, politicians and bureaucrats are totally out of touch and there is real desire for change. You could look at it starting with the Arab Spring, and then you saw things happening in Europe and elsewhere. There’s a pushback. We have been led to believe that we are a kinder, softer, more accommodating and more compromising society, but a large part of the population appears to be saying that this course we are on is not the right course, and they don’t want to tolerate it any longer.

Maybe it’s just a sign that the economy of the world is slowing down and that there are fewer resources to be shared. Talk of protectionism and erecting barriers is becoming more commonplace. The world is starting to close rather than open. People don’t feel as free wandering around the world for fear of encountering someone who may do you harm.

TNM: So you were happy with the result?

RM: Yes. When I reflect on the two candidates, Trump made some outrageous statements that offended many people, but he didn’t go around making huge promises. Clinton on the other hand promised whatever people asked her for. She exhibited an unhealthy disregard of how to rebuild the economic base of America.

I saw an interesting comment recently. It spoke of the anti-bribery laws that corporations must observe, then it questioned why politicians buying votes with promises are not also considered using bribery. When 50% of the American population receives some form of government funding, is this not a conflict of interest? Should the anti-bribery laws apply to politicians around the world?

TNM: What do you think the impact of a Trump presidency will be on the Canadian economy? Canada relies on the U.S. market for three quarters of its exports.

RM: If they’re going to rebuild their infrastructure, we’ve got the material they need. We are right next door, and our currency is cheap.

TNM: Many people thought the markets were going to tank if Trump won, and yet the Dow Jones came close to hitting a record intraday high, while the S&P/TSX Composite Index rose 0.7%. Did everyone get it wrong?

RM: Almost everyone! In the days leading up to the election, you saw gold, copper and oil moving all over the place. Just like Brexit. Was it an express bias for a candidate by the media that deliberately worked to fix the election result, or are polling services incompetent and a waste of money?

TNM: What about the longer-term impact of Trump’s win on the gold price?

RM: It doesn’t matter who won the election, the price of gold is going higher. The election has been an enormous smokescreen and focused voters’ attention on personalities rather than economics.

The advent of low and negative interest rates is destroying the future of a large part of the population. In addition, low interest rates are causing large distortions in the economy, which has resulted in dangerous bubbles in the stock and housing markets. History suggests that a collapse of these bubbles will happen, and it will be hard and extensive.

Gold will continue to increase in value because governments around the world have been piling up the debt, the maturity dates are getting shorter and shorter, and when — not if — interest rates move up, the cost of carrying that debt for governments, corporations and individuals is going to squeeze hard.

Trump will push for tax incentives that encourage American multinational companies to repatriate their large foreign earning pools back to America and invest those funds in capital assets that create employment. Another area he is likely to tackle is streamlining regulations and bureaucracy that discourage business investment. And if we are really lucky he will push for tort reform.

TNM: McEwen Mining’s El Gallo I and II mines are in Mexico, of course. What do you think the impact of the election will be on the Mexican currency longer term? As we all know, the peso almost went into free fall after the election results.

RM: I don’t know how long that will go on for. Certainly in the short-term, it should have a positive impact on local production costs. Longer term if the lower exchange rate persists, the benefit will be lost to higher-wage demands.

TNM: Trump is friendlier to fossil fuels and may want to exploit U.S. coal. Do you have a view on that?

RM: I don’t follow coal.

TNM: Do you think Trump’s victory will affect the U.S. Federal Reserve’s decision on interest rates next month?

RM: Good question. Don’t have an opinion.

TNM: With Trump in the Oval Office, and Republicans retaining control of both the House of Representatives and the Senate, there are those who think single party rule will be good for the economy. What do you think?

RM: Legislation should pass faster and much more efficiently.

TNM: What do you think will be the impact of the election on the U.S. dollar?

RM: It’s still early days, but right now the market is saying Trump is good for business and the dollar.

TNM: Canada relies on the U.S. market for three quarters of its exports and it is the world’s largest buyer of goods exported from the United States. Trump has said he will renegotiate NAFTA or even tear it up. What effect do you think that would have on Canada? 

RM: I haven’t had a conversation with him about that.

TNM: Trump has said he will move away from U.S. commitments under the Paris climate accord. This comes at the same time the federal government in Canada is instituting a national carbon tax, which will likely make Canadian energy products more expensive.

RM: Our federal and provincial politicians are going to need to sharpen their pencils and reconsider their stance on our largest dollar export!