Free cash flow profile
Currently, Goldcorp (GG) is free cash flow (or FCF) negative. It had a negative FCF of $355 in 3Q14. However, with three new low-cost mines starting—Cerro Negro, Éléonore, and Cochenour—Goldcorp should turn FCF positive in 2015. It’s important to note that these mines are on time and on budget. As a result, they shouldn’t increase Goldcorp’s costs.
Goldcorp has the advantage of strong production growth at lower costs. It’s in a stronger position to generate FCF than many other companies—including Barrick Gold (ABX), Newmont Mining (NEM), and Kinross Gold (KGC).
Goldcorp has a comfortable liquidity position. It had cash of $376 million. It had an undrawn credit facility of $1.5 billion as of September 30, 2014.
Goldcorp’s recent asset divestitures are a step in the right direction to generate cash. It sold its interest in the Marigold mine. It had 66.7% interest. The rest was held by ABX. It sold the interest to Silver Standard Resources Inc. (SSRI) in April 2014.
Marigold mine was a higher-cost mine. It had all-in sustaining costs (or AISC) of more than $1,500 per ounce—compared to Goldcorp’s overall AISC of $1,031 per ounce. It also sold its stake in Primero Mining Corporation (PPP) in March 2014. It wanted to optimize its portfolio.
Most capital-intensive phase is over
With three mines starting, Goldcorp’s most capital-intensive phase is over. Although there are other projects in the pipeline, Goldcorp is away from the capital-intensive phase of development and construction.