On Sep 25, we issued an updated research report on Goldcorp (GG). While the gold mining giant’s cost-saving initiatives and progress of its project pipeline are encouraging, it remains exposed to volatility in gold prices.
Goldcorp swung to a profit in the second quarter of 2014, reported on Jul 31, on lower costs. Both revenues and adjusted earnings beat Zacks Consensus Estimates. The company backed its gold production guidance for 2014.
Goldcorp has the highest leverage to spot gold prices due to its completely unhedged position. It should benefit from its cost containment and productivity improvement measures. The company remains actively focused on reducing costs, manifested by a roughly 31% year-over-year decline in all-in sustaining costs in the second quarter. Its cost management actions should continue to support results moving ahead.
Goldcorp is also progressing well with its development projects and remains on track to attain its long-term production targets. The company’s growth drivers lie in its vast array of development and exploration projects. It has an impressive lineup of such projects including the Cerro Negro gold project in Argentina and Eleonore and Cochenour gold projects in Canada.
Moreover, Goldcorp remains committed to return capital to its shareholders, leveraging a healthy balance sheet and strong cash flows. The company returned $122 million to its shareholders in the form of dividend in the second quarter.
However, Goldcorp faces geopolitical challenges along with risks due to volatility in metals pricing. The volatile gold pricing environment represents a headwind.
Goldcorp also has a debt-laden balance sheet. Its long-term debt rose 8% year over year to roughly $2.5 billion at the end of the second quarter. Decreasing gold reserve is another concern.
Other Stocks to Consider
Other companies in the gold mining space worth considering include AngloGold Ashanti Ltd. (AU), Asanko Gold Inc. (AKG) and Pretium Resources Inc. (PVG).
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