Update Goldcorp (GG)
A work stoppage here. Higher taxes there. And soon you’re talking about an earnings miss for the first quarter.
That’s what’s behind the 22 cents a share that Goldcorp (GG) reported for the first quarter. The results were 3 cents a share below Wall Street projections.
Nothing significant happened to the downside in the quarter that I can find.
There was a temporary work stoppage at a port that the company uses to ship ore concentrates from its Alumbrera mine in Argentina and a buildup of inventory at its Red Lake mine in Canada. That resulted in the company producing 625,000 ounces of gold in the quarter but selling just 569,100.
Revenue climbed 20% from the first quarter of 2009 but costs climbed because of higher taxes at Alumbrera, higher costs from some consumable goods used in mining, and a lower U.S. dollar versus the Canadian dollar and the Mexican peso.
Cash costs (in which the value of by-products (in this case copper and silver) are deducted from the costs of producing the gold climbed to $325 a ounce from $295 an ounce for all of 2009. Despite the increase in costs in the first quarter Goldcorp remained the low cost producer in the industry.
The big story for Goldcorp in 2010 and 2011 is the production ramp at the company’s Penasquito mine in Mexico.
The mine produced 30,700 ounces of gold in the first quarter and Goldcorp says the mine, which has required a large capital expenditure of $1.6 billion to develop, is on schedule to reach full capacity by the fourth quarter of 2010.
For the year Goldcorp expects total company production to accelerate to a total of 2.6 million ounces of gold.
I still think that 2010 will prove to be a year of rising inflation, especially in the developing economies. And in that environment I’d like to hold some gold in Jubak’s Picks. (For more on emerging market inflation see my post, http://jubakpicks.com/2010/04/29/brazil-raises-interest-rates-as-emerging-economies-step-up-their-fight-against-inflation/ )As of May 3, I’m tweaking my price target to $51 a share by December up from $50 a share by that month.
Full disclosure: I own shares of Goldcorp in my personal portfolio.
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Jim:
Off GG topic but related to updates – what’s with the downward trajectory of Thompson Creek Metals (TC)? Any update planned?
@Mainboy -
In the last year, it seems to me that TC has traded between $10-15 a share – it gets real close or breaks the $15 mark, and then slides back down close to $10, and when it hits that, it begins its rise again. I sold out at the $15 level a while back, and should have been buying in at the low end – watch it and see if it repeats as I have noted….
My only problem with gold miners is that one of the “fixes” I have heard for many countries budget shortfalls is to tax gold much higher than necessary commodities like food, oil, gas, etc. I remember reading a story in the winter about how some members of congress were tyring to repeal all the tax breaks for gold bullion and gold miners.
BTW Jim, any ideas on how much longer the natural gas glut will go on? Your article last fall was spot on, so I was hoping to get your insight. As soon as investors start to sniff a higher trend in natural gas prices, it may be too late to join the party.
Chapmane – if nat gas prices really are driven by supply at this point, then there’s no reason whatsoever that they will start creeping up in the near-medium term. For demand to start driving price again, I’d expect to see pretty unquestionable evidence in the form of new gas-powered plants popping up – not exactly the sort of draws that will happen by surprise.
Short of another Katrina-like hurricane, nat gas prices will be under pressure until next winter. There is so much freaking nat gas out there right now.
Phys Gold, or at least the ETF might be the way to go for now (instead of miners)…until this crazy 40% tax nonsense in Austrailia is over with.
Jim: I was curious about TC as well. Will you be updating it after the upcoming conference call?
Jim and other savvy investors out there:
I also would love to hear your thoughts on TC. NOW I can say I wish I had sold off more to lock in the gains. But since that did not happen and it has gone down quite a bit now, would it be a smart move (considering other possibilities out there) to use part of my cash “on the sidelines” to buy more TC at this low?