Tuesday, September 7, 2010

GMP Likes Goldcorp (NYSE:GG) Over Barrick (NYSE:ABX), Newmont (NYSE:NEM)

Over the next several years, GMP Securities said they believe Goldcorp (NYSE:GG) will be a nice surprise for investors, saying production growth for gold and other metals will be substantial, outperforming major rivals Barrick Gold (NYSE:ABX) and Newmont Mining (NYSE:NEM).

GMP analysts George Albino and Matthew Sheppard gave the nod toward Goldcorp among the top gold miners "with its locked-in and easily financeable growth."

They balanced that with this: "...in a very strong price environment, however, its strengths become a weakness given its low operating and financial leverage result in the lowest NAV or cash flow leverage to gold."

Barrick, on the other hand, offers value in their opinion, "We believe Barrick offers reasonable value, operating scale and liquidity, but lacks Goldcorp's ability to grow organically," said the analysts.

With Newmont it wasn't a question of performance, but of having come off a strong performance with not much upside for production growth. "Newmont, in part because of its recent outperformance, does not present as compelling a case for investors in our view - its biggest drawback is a challenge in maintaining, let alone, increasing, gold production," said GMP.

Surprisingly, they believe Goldcorp and Barrick are in position to "offer opportunities for strong returns to investors. The relative underperformance of the senior producer has, in our opinion, been overdue leaving potential returns here better than for many of the smaller gold companies."

That's a strong, contrarian statement, as most analysts and commentators like the smaller miners better, and view them as having much better growth potential.

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