Favorable production and cost profile
Goldcorp’s (GG) 2014 results were a little below market expectations. But the company is trying to make up for that with positive guidance for 2015. Approximately 20% growth with almost flat all-in sustaining costs, or AISC, is quite positive.
Goldcorp is the only senior gold miner to guide for 20% production growth with declining costs per unit. Other gold producers, including Barrick Gold (ABX) and Newmont Mining (NEM), have more or less flat production profiles for the next two to three years.
Free cash flow generation
With Éléonore and Cerro Negro now in operation, the company could start generating free cash flow, or FCF, in 2015. Goldcorp also says it can generate FCF at a gold price of $1,200 per ounce.
One thing that could worry investors going forward, however, is the gap in Goldcorp’s project pipeline. With Éléonore and Cerro Negro starting up, Goldcorp now only has early-stage projects in its pipeline. Until these projects become feasible, management might turn to some merger and acquisition opportunities to sustain its production growth.
Goldcorp’s balance sheet is quite strong and with further FCF generation, it should get even better.
Goldcorp’s asset portfolio is located in politically stable, low-risk jurisdictions in the Americas. This is one of Goldcorp’s key advantages.
All indicators point to a positive outlook for Goldcorp going forward.
The next Goldcorp development to watch for is its investor day on April 9, 2015. Management is expected to provide an update on the ramp-up of key projects and its project pipeline on that date.
Investors can invest in the VanEck Vectors Gold Miners ETF (GDX). GDX invests in intermediate and senior gold producers. Goldcorp makes up 10.3% of its holdings. The SPDR Gold Trust (GLD) tracks the spot gold price.