Update Goldcorp (GG)
On January 13, Goldcorp (GG) announced production and cost guidance for 2011.
Let’s just say that my investment thesis for Goldcorp—that this is a low-cost producer of gold with rising production—remains intact.
In 2010, the company said, gold production grew to a record 2.52 million ounces. For 2011 Goldcorp forecast production of 2.7 million ounces. Over the net five years, the company projected that gold production will increase by 60%.
The company hasn’t finished final accounting for 2010 operating costs (Goldcorp reports year-end results on February 24), but Goldcorp expects that total cash costs will be about $285 an ounce (including revenue from by-products such as copper from mining gold) or less than $450 an ounce on a co-product basis (which allocates cost on a metal by metal basis.) Cash-costs, the company projects, will continue a downward trend over the next five years.
After a cash payment of $765 million as part of its acquisition of Andean Resources, Goldcorp finished the year with $530 million in cash. Cash flow for 2011 will be approximately $2.5 billion. Goldcorp projects capital expenditures for 2011 at $1.8 billion with plans for the construction of six new mines over the next five years.
I think Goldcorp should be a core part of any inflation-hedge, gold portfolio. Read more
Update Goldcorp (GG)
What you think of Goldcorp’s (GG) $3.4 billion bid for Andean Resources will depend on how impressed you are with Goldcorp’s track record valuing potential acquisition candidates.
There’s no doubt that Andean Resources’ (ANDPF) Cerro Negro project in Argentina is an attractive gold asset. The project isn’t scheduled to go into production until late 2012, but indicated reserves now come to 2.1 million ounces of gold and 20.6 million ounces of silver. Production costs project out as relatively low, a key criterion for any Goldcorp acquisition, at $60 an ounce after silver revenue. Capital spending to get the mine up to production targets are a reasonable $275 million to $300 million, according to Goldcorp.
But, and it’s a huge BUT, the price that Goldcorp is paying is high—unless there’s a lot more gold in the ground here than the current indicated reserves show. Read more
Update Goldcorp (GG)
After the market close yesterday, March 11, Goldcorp (GG) reported fourth quarter 2009 earnings of 25 cents a share (excluding one-time items). That was in line with the Wall Street consensus. Revenue climbed by 27.8% to $778 million. That was substantially above the $732 million Wall Street estimate.
For the quarter Goldcorp reported production of 601,300 ounces of gold.
The news was good enough so that investors can pardon CEO Chuck Jeannes if he sounded like he was crowing. “Achieving record gold production at the lowest cash costs of any major gold mining company while increasing gold reserves for a sixth consecutive year made 2009 a very successful year for Goldcorp,” he said in his company’s press release. “In addition, we brought one of our cornerstone mines, Penasquito, into operational production on time and on budget and repositioned another, the prolific Red Lake mine, for long term success. With Pueblo Viejo advancing on time toward first gold production in late 2011, the three major drivers of our five-year, 57% growth profile remain well on track. We also enhanced our outstanding project pipeline with the recent closing of two acquisitions that brought us the Camino Rojo project near Penasquito and the El Morro project in Chile.
Even the cost story was positive. Read more
Update Goldcorp (GG)
What you want in a gold stock is a company with rising reserves and falling costs. Goldcorp’s (GG) end of 2009 report on reserves shows that it’s still delivering rising reserves. We’ll see how the company is doing on costs when it reports after the market closes on March 11.
In 2009, the company said in February reserves grew by 5.3% to 48.8 million ounces from 46.3 million ounces at the end of 2008.
But that’s not all that Goldcorp mines. Read more
Sell Kinross Gold (KGC)
A rising tide lifts all ships, true. But not all to the same extent.
The huge rally in gold to new historic highs day after day has largely left Kinross Gold (KGC) behind. True, the stock is up 9% as of the close on November 11 from its recent low at $18. But in that same period shares of Goldcorp (GG), a Jubak’s Pick on November 5, is up 22%. (For my buy on Goldcorp see my post http://jubakpicks.com/2009/11/05/buy-goldcorp-gg-2/ )
Unfortunately, I don’t think the problems at Kinross Gold that have led to this under performance are easily fixed. So I’m going to take the gain from the rising tide, sell Kinross at an overall loss with this column, and look for a ship that’s better able to float with the tide.
What’s the problem at Kinross Gold? Read more
