What Goldcorp’s healthy prospects mean for investors

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Dec. 4 2020, Updated 10:50 a.m. ET

Goldcorp’s prospects

Goldcorp (GG) grew rapidly from an intermediate player in the gold mining industry. It became one of the leading senior gold miners (GDX).

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Low political risk

Goldcorp’s asset portfolio is located in politically stable, low-risk jurisdictions in the Americas. This is one of Goldcorp’s key advantages. Many gold miners—including Barrick Gold (ABX) and others—are facing political instability and taxation issues.

An example is the Zambian government’s proposal to increase royalty from 6% to 20%. To learn more about this, read Market Realist’s, Barrick Gold: Strong 3Q14 earnings, important opportunities. This could make the Lumwana mine not viable for Barrick.

Goldcorp also gives priority to acquisition targets that are based out of politically stable jurisdictions. Its last bid was for Osisko Mining. Osisko is based in Quebec, Canada.

Quality growth

Goldcorp’s production growth is much stronger than most of its peers. Other companies include ABX and Newmont Mining (NEM). Goldcorp’s management expects 50% production growth over the next two years. The Cerro Negro,Éléonore, and Cochenour mines are coming online. This will lead to increased production. It will also reduce the all-in sustaining costs (or AISC). The three mines have fewer costs than the rest of the company. This could offset some of the negative impact from low commodity prices.

Strong balance sheet

Goldcorp’s balance sheet is among the strongest in the sector. It has more flexibility to maintain and grow dividends. It can consider acquisition targets when the situations arise.

All of the factors mentioned above give Goldcorp an advantage over its peers. However, investors need to watch the ramp-up risks for the projects in pipeline. If the decline in gold (GLD) prices is too steep, it could lead to a write down of assets. It could also lead to more high grading. This would result in a shorter reserve life. It could be negative in the future.

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