In a recent review of the mining stocks in his model portfolio, resource sector expert Adrian Day, editor of Global Analyst, considers this gold play the best current buy among the majors.
Goldcorp (GG) has had a tough year. After reporting a year-end loss of $4.1 billion due to writing off and down various projects—a supposed clearing of the decks for the new CEO David Garofalo—the recent results were not so positive.
Production was down year-on-year, due to shortfalls and problems at its two largest mines, Penasquito and Cerro Negro.
There are some positives, however. Eleonore, which had had some early production setbacks, improved performance.
And the pipeline remains strong, with numerous studies expected over the next 12 months; Goldcorp recently acquired Kaminak and its high-grade Coffee project.
The company is forecasting flat production for the next three years, so the hurdle it has set itself is not so high, and we are likely to see the company focus on its existing projects rather than new acquisitions.
Costs have been cut, including major cuts at the head office. With $360 million in cash, and $2.8 billion in debt, a priority is to de-lever, another reason not to expect new acquisitions.
Overall, despite some recent mine problems, Goldcorp has good assets in good countries. It trades at a 4% premium to its peers on an NAV basis, though is inexpensive on other metrics.
If it can get all its main operations to run smoothly for a few quarters, we could see Goldcorp recover nicely. Goldcorp is a buy at this level, the best buy among the major miners.
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By Adrian Day, Editor of Global Analyst
