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What Do Analysts Think about Goldcorp’s Bid for Kaminak?

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Higher ratings than peers 

Goldcorp (GG) currently has 43% “buy” ratings and 43% “hold” ratings. Its target price is $18.3, which implies a potential upside of 2% from its current market price of $17.9.

As you can see in the above graph, Goldcorp has a higher percentage of “buy” recommendations than its nearest peers (GDX), Barrick Gold (ABX) and Newmont Mining (NEM). Only Agnico-Eagle Mines (AEM) has a higher percentage of “buy” recommendations at 58%. Yamana Gold (AUY), on the other hand, has the lowest percentage of “buy” recommendations at 29%.

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However, you should note that analysts’ bullishness on Goldcorp has corrected sharply over the last quarter. At the beginning of 2016, 83% of analysts rated Goldcorp a “buy.” In response to Goldcorp’s disappointing production guidance for the next three years, analysts have pared back their estimates and ratings.

Analyst reactions

Credit Suisse (CS) is neutral on the Goldcorp-Kaminak transaction. The broker believes that while the transaction will add to Goldcorp’s project pipeline with minor dilution, the project could encounter some risks such as logistics and cost overruns.

According to Raymond James analysts, Phil Russo and David Sadowski, “We have long held the view that Coffee possesses significant exploration upside outside the current resource base.” For the transaction, they said, “On first glance, we view the deal value as fair, although we see room for moderate interloper risk despite the 27% shareholder lock up given the lack of development stage assets of the caliber of Coffee.”

Mackie analysts also feel that Coffee is one of the better development assets in Canada. They said, “We think this is a good offer by Goldcorp and recommend shareholders tender.” They also added, “Given the fairness of the offer, we doubt a higher bid will be received.”

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