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Goldcorp: Fast Growth, Low Costs
11/05/2013 8:00 am EST
Gold seems to be stabilizing. Demand for gold remains high, especially in Asia, notes Mark Skousen. In his Hedge Fund Trader Alert, the advisor highlights a fast-growing, low-cost gold producer.
Recently, it was announced that the United States and Switzerland exported the largest amounts ever of gold to Hong Kong. Chinese mainland buyers purchased 53.5 tonnes last year, which means that gold purchases more than doubled.
With Janet Yellen set to head the Federal Reserve in late January, the Fed will probably focus more on reducing unemployment than containing inflation—and that path is bullish for precious metals.
I'd also note that Adrian Day, a successful money manager who specializes in foreign stocks and mining companies, said that gold stocks are selling at their lowest levels in the sector's entire cycle, with major companies down 40-50% from their highs.
Goldcorp (GG) is a fast-growing, lowest-cost senior gold producer, with operations and development projects in politically stable jurisdictions throughout the Americas.
Although Goldcorp is currently losing money, it enjoys a healthy balance sheet with less than $3 billion in debt. It also is acquiring new mines that it considers attractive. The company's management expects to push costs below $1,000 per ounce in 2014.
Goldcorp also pays a monthly dividend of 5 cents a share, amounting to a 2.5% annual yield.
The stock rallied after beating analysts' estimates by 15%. It announced a gold production of 637,000 ounces and sold 652,000 ounces in the third quarter at an average price of $1,339 an ounce.
As the company managed to keep its All-In Sustainable Costs (AISC) at $992 an ounce, Goldcorp still has a healthy operating margin.
Mining stocks tend to do well into November. Right now, Goldcorp is relatively cheap, selling for book value and 20 times expected earnings in 2014.
Let's buy Goldcorp at market and set a protective stop of $21 a share. For those wildcatters out there, consider buying the January $29 call options.
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