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XMFSinchiruna (27.01)

Goldcorp Dances a Rumba



June 25, 2010 – Comments (6) | RELATED TICKERS: GG , AUY , NEM

This one is in honor of my lovely wife, who dances a mean Rumba. :)

Goldcorp Dances a Rumba


"Goldcorp stepped smoothly into the early completion of a key second sulphide processing line at its emerging flagship Penasquito mine in Mexico this week. In the line's initial days of operation, Goldcorp reported peak throughput rates in excess of design capacity. By doubling mill capacity and proceeding to the final phases of construction, Goldcorp remains on track to achieve the mine's designed capacity of 130,000 tons per day by early 2011. Along the way, management expects Penasquito to yield 180,000 ounces of gold in 2010; and ramp up from there to record a long-term annual average of 500,000 ounces."

"Although Goldcorp's leading cost profile among industry majors was recently eclipsed by rival Newmont Mining (NYSE: NEM), Goldcorp's five-year forecast for costs beneath $300 per ounce (using a conservative basis of $1,000 gold and $16 silver) telegraphs a dominant position on the profitability scale. Over that same period, it is expected that production will rise by nearly 50% to 3.8 million ounces per year. As a result, over the long haul, I expect the cash flow from cash cows like Penasquito to boost Goldcorp's proven record as a leader in the industry's long-running consolidation trend."

"The emerging uncertainty surrounding the Marlin operation is an unfortunate development for a company that has been hitting its stride on all fronts over recent years. Ultimately, I expect imminent strength in gold prices to effectively counteract any ill effect from this singular snag, and I continue to rate Goldcorp as a superior choice among major gold miners. If chasing a red-hot growth stock near its 52-week high is just not your style, consider this low-cost producer that I have routinely highlighted as the most persistent bargain in gold: Yamana Gold (NYSE: AUY)."


6 Comments – Post Your Own

#1) On June 25, 2010 at 7:45 PM, cladd (< 20) wrote:

Goldcorp has done a great job of building value for shareholders.   Part of that process has been divesting smaller or noncore assets to focus on cornerstone operations that will continue to drive Goldcorp’s industry leading production growth and future cash flow

The process has created a lot of value for shareholders of the acquiring companies and should be followed closely.

Goldcorp recently agreed to sell the San Dimas gold-silver mine in Mexico to Mala Noche Resources Corp. This transaction follows on the heels of Goldcorp’s sale of the Escobal silver deposit in Guatemala to Tahoe Resources Inc., and the sale of its minority interest in Morelos Project to Torex Gold Resources

Today, Goldcorp closed the sale of the advanced exploration stage Ana Paula Project to Newstrike Capital Inc., and became a shareholder in Newstrike – Ana Paula is in the Guerrero Gold Belt, home of Torex's Morelos project and where Goldcorp has an operating mine.  Newstrike is the largest holder of concessions in this emerging goldbelt.

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#2) On June 25, 2010 at 9:02 PM, MoneyWorksforMe (< 20) wrote:


What is it exactly that you like so much about Yamana Gold? From a valuation standpoint they're okay...Financials are okay, nothing stellar. I have noticed they have trouble meeting/exceeding expectations. I really have serious trouble liking a company that consistently misses earnings targets...AUY missed earnings targets each of the previous 3 quarters...

I have liked and continue to like gold bullion/gold miners, but I just don't see how this one stands out from the rest. 

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#3) On June 25, 2010 at 10:19 PM, alstry (< 20) wrote:


You think should start selling discounted gold.....if any can be found;)

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#4) On June 26, 2010 at 12:33 PM, XMFSinchiruna (27.01) wrote:


Yamana will have its day in the sun, and it will burn through the industry's muted expectations.

There will be a finite ceiling to the number of disastrous derivative losses they will incur, and ultimately the sheer quality of the underlying ore bodies will realize their full value.

"From a valuation standpoint they're okay..." That's the understatement of the century. That's like saying Silver Wheaton was "less-than overpriced" at $2.52/share. I would liken Yamana shares today to Silver Wheaton shares at $8 in terms of relative discount to fair value. I would place fair value for Yamana shares at today's prevailing gold and copper prices at somewhere north of $25. There are stocks in the sector that may multiply 2.5X at a faster pace, perhaps, but few with Yamana's potential for as-yet unquantified organic growth opportunities and acquisitive potential from wild torrents of cash flow.

Yamana below $11 is an absolute steal, making it one of the safer bets at this maturing stage of the gold bull market where moats are getting harder to find. I'm not buying more here, because I'm focusing instead on the juniors, but I have a sizeable stake in Yamana that I haven't touched since 2006.

I'll see if I can have a chat with Mr. Marrone to discuss the derivatives issue. If anyone has specific questions for him ... let me know.

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#5) On June 26, 2010 at 10:21 PM, MoneyWorksforMe (< 20) wrote:

Argh...I stand corrected. I was comparing financial statements of I Am Gold Corp (IAG) with Yamana Gold last night and confused the two. I thought the yoy revenue gain was considerably less. I now see it stands at 60%, which is rather impressive...Other numbers do reflect rapid and promising growth....Thanks for the links. 

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#6) On June 27, 2010 at 3:16 AM, mhy729 (30.48) wrote:

TMFSinchiruna for MVF (Most Valuable Fool)!!  Rec'd here and at the source article.

I want to take this opportunity to thank you once more for the many informative and helpful comments/replies you've left in response to my inquiries.  My thanks!

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