Friday, October 1, 2010

Goldcorp (NYSE:GG) Growing Organically and by Acquisition

Goldcorp (NYSE:GG) has lagged the surge in gold prices in 2010, up only about 7 percent, while gold prices have soared by 17 percent so far.

A couple of concerns are missing their numbers last quarter, falling 2 cents a share below earnings expectations of 29 cents a share. The other is the acquisition of Andean Resources for $3.4 billion, which came with a 35 percent premium.

In an interview with The Street, CEO Chuck Jeannes said he didn't feel Goldcorp overpaid for Andean.

Jeannes said, This is one of those once-in-a-decade kind of opportunities that comes around. It's a very high-quality deposit which in our business means extremely low cost, both capital cost and operating cost, and it's got the opportunity to grow significantly over many, many years ... so we think actually the price we paid is accretive to Goldcorp's shareholders particularly on cash flow per share."

As far as how quickly it'll be accretive to the earnings of the company, Jeannes said starting in 2013 and onward there should be "significant accretion."

When queried about organic growth, Jeannes said the company wants to grow organically, which he described as exploration at existing projects, as well as via acquisitions.

Even though Andean will make the company better, Jeannes said without it the gold miner was still growing at a projected rate of 50 percent annually over the next five years.

So while they didn't need Andean for growth, it has made them a stronger company going forward, concluded Jeannes.

3 comments:

Anonymous said...

Goldcorp is in a key position, particularly as the jewel in their previous acquisition crown, Pensaquito, ratchets up its early-stage production. Goldcorp's three-prong growth strategy: organic, exploration and acquisition, has served it well in becoming a top producer at low cost. Its management and balance sheets are strong and its outlook, anchored by Red Lake, is strong.

Mike said...

Please sell your Goldcorp so I can get more shares for less

Anonymous said...

I'll sell you my GG for $60 ps