Alkermes (ALKS) recently announced positive top line results from ENLIGHTEN-2, a pivotal Phase III s...
Day Shines a Light on Gold
11/07/2016 8:00 am EST
Adrian Day is a leading money manager and resource sector expert; here, the editor of Global Analyst looks at recent developments at two of his long-term, buy-rated gold holdings.
Goldcorp (GG) said that the Eleonore deposit, acquired from Virginia, is now outperforming expectations, following its start-up issues.
After several acquisitions, of which Eleonore was just one, Goldcorp is now “in harvest mode”, according to new CEO David Garofalo in a recent meeting I had with him.
His goal is to maximize the value of operations and increase profitability, and is less concerned with production growth. The company no longer has a grassroots exploration team, with a focus on its operations and around existing operations.
He believes the company has an adequate pipeline for now and aims to improve the balance sheet, “though we would also be looking to populate the pipeline.”
In the past, Goldcorp — because of its strong assets and politically secure profile, traded at a premium to its peers.
The stock has underperformed over the past year — partly, I believe, on uncertainty about the new CEO’s direction—but could well regain some of its previous luster in the next leg-up in the gold market.
Yamana Gold (AUY) has announced a new plan for its non-core Brazilian assets in the Brio unit. Almost exactly a year ago, Yamana said it would spin-off the assets in an IPO, but abandoned that plan for lack of interest.
Now it intends selling the unit to its shareholders, though the issuance of “purchase rights”. Yamana will raise cash from the sale, which it plans to use to pay down debt, and will retain an interest in Brio.
Shareholders, however, will have to pay for something they already own. We suspect many shareholders will forego the opportunity. This is one more example unfortunately of Yamana getting it wrong.
Otherwise, things are looking up for the company. With an improved balance sheet, the growth profile is quite strong, with 22% increase in production through 2019 from four projects already underway. More projects are in the pipeline.
Yamana was one of the very top performers in the first half of the year, though it fell back in recent months. It has strong leverage to the price of gold, and. at the current price, is a buy.
By Adrian Day, Editor of Global Analyst
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