For the most part of 2015, Goldcorp (GG) has underperformed its closest peers, primarily due to its worse-than-expected 2014 results, as well as ramp-up risks associated with its growth projects in 2015. Going forward, the company’s strong production profile and ramp-up of its key projects could lead to a re-rating of the stock with respect to its peers.
Comfortable financial position
As discussed above, Goldcorp’s balance is less leveraged as compared to its peers, which include Newmont Mining (NEM), Barrick Gold (ABX), and Kinross Gold (KGC). Going forward, Goldcorp plans to repay its debt from asset proceeds, which should be a positive in a weaker gold price environment.
Also, the continued ramp-up of its Cerro Negro and Eleonore mines means more sustainable production profile and the potential for cash flow generation going forward. Costs per unit are also declining based on increasing production, higher grades, and efficiency efforts.
Managing volatile gold price environment
Goldcorp’s management is quite proactive in managing the volatile gold price environment. Cutting dividends despite healthy free cash flow generation is evidence of the company’s approach. The management also mentioned during the call that in case of a gold price environment below $1,000 per ounce, it might reconfigure and shut down mines or operations that are running on a net cash deficit basis. Goldcorp’s management also said that despite a strong balance sheet, it will not operate in a mode where dollars keep going out for an extended period of time.
Investors who don’t want to pick up individual companies can invest in gold miners through the VanEck Vectors Gold Miners ETF (GDX), which invests in senior and intermediate gold miners. Newmont forms 6.4% of its holdings. The SPDR Gold Shares ETF (GLD), on the other hand, provides exposure to spot gold prices.