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Goldcorp - I will close my under perform positive

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August 11, 2008 – Comments (9) | RELATED TICKERS: GG

Goldcorp remains an over priced pig.  Their last financial reports were out last week.

Notice the co-production cost of gold production is skyrocketing.  A few years back it was under $100/ounce and now it is over $400/ounce.  That is due to the grossly declining grade of what they are mining.  My link looks at costs with declining grade when all else remains the same.  The quality reserves they once mastered have been replaced by garbage.  There are other cost increases but the declining grade is enormous.

The full effects of the share dilution are finally showing up.  I suppose they have been showing up since last quarter.  Gold bugs complain about government printing money, but gold companies seem to print stock a lot faster than governments print money.

Look at the book value, the 6 billion created out of thin air.  We've seen the effects of repricing inflated book values to true values, and I think that will eventually be coming for Goldcorp.  You can not create $6 billion out of thin air.

Right now copper has had a strong price.  Gold has had a strong price.  Prices are strong.  The results are a disaster.  Prices are declining, expect more of what I wrote about on how copper affects them.

They are also so far behind their promises.  When I wrote "How I Discovered the Gold Bubble," their materials said they expected to produce 2.8 million ounces of gold.  They are at 2.2 million ounces roughly 1.5 years later.  They were saying they were going to 3.5 million ounces, now their 2008 guidance is 2.3 million ounces.

I will close Goldcorp positive and I will get several times to close it and re-open it on the way down to below $10.

Pig stock.

9 Comments – Post Your Own

#1) On August 11, 2008 at 4:05 PM, abitare (39.81) wrote:

u r great! I sold my GG after reading your review.

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#2) On August 11, 2008 at 4:23 PM, anchak (99.84) wrote:

Yep! Amen to abit's comment ....helped me stear clear of this....Dwot... if you had to pick a miner who would you pick?

I think Gold will soon be in oversold territory.... I have the answer from Chris (TMFSinchiruna) ...but needed to hear a skeptic's view

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#3) On August 11, 2008 at 4:31 PM, goldminingXpert (29.48) wrote:

anchak... TMFSinchiruna has a negative score here and a CAPS rating below 50, Dwot and I however have a much better track record. GDX might not be a bad play here if you want to buy something. I put an outperform on it today in hopes of a snapback rally. I also grabbed some calls on Barrick (ABX). However, the long-term picture still isn't real friendly. As I've said before, this is a trader's market.

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#4) On August 11, 2008 at 4:48 PM, dexion10 (27.61) wrote:

great post dwot - I learned a lot - this is very interesting.

 

goldminingXpert... I like ABX too... I wish I had waited to green thumb it though! 

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#5) On August 11, 2008 at 7:06 PM, anchak (99.84) wrote:

goldminingXpert..... I do not want to take a stance or anything - but just because Chris's score sucks for the moment - that doesnt mean he becomes less of an expert. Also on the other hand - if you go thru Chris's blog you would see I defended your comments there. I simply see a fundamental difference between the two of you - you are a trader, Chris is a Commodity bull and and an investor.

Thanks for the pointers on Barrick.....

Dwot....waiting for your pick ma'am 

 

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#6) On August 11, 2008 at 9:51 PM, MaskedMan2007 (99.25) wrote:

If you want to take a look at where the gold price could go in the next few weeks, take a look at my latest blog post : Where are gold and crude oil going ?

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#7) On August 12, 2008 at 12:05 AM, dwot (61.86) wrote:

anchak, I do not have one in mind right now.  The declines in base metal prices and going to bring earnings down big time on every last existing miner and they've priced themselves as if the strong prices would exist forever and even get stronger.

I never thought you should go for a mine with a P/E over 12, but, with the declines in metal prices a P/E of 12 can go to 50 very easily, but it does take 4 quarters to have the decline in metal prices work its way through.  I figured a P/E of 12 would give you time to get out without losing a big chunk if metal prices decline badly.  

I think you are going to see this sector declining as sales revenue decline due to the falling commodity prices.

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#8) On August 12, 2008 at 9:02 AM, dexion10 (27.61) wrote:

Dwot - I could use your help  - could you and other recommend my blog on Jim Cramer getting people killed in natural gas stocks.

I'd like this blog to make most recommended of the day. I think this is one of my best fundamental blogs yet. 

This blog is similar to your blog about Goldcorps gross margins - you'll see that nat gas stocks have a similar problem with gross margins. 


You can visit my blog here

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#9) On August 12, 2008 at 11:34 AM, dwot (61.86) wrote:

Ok dexion, I'm heading over now.  Natural gas was good maybe 12-15 months ago,  I think that's when the price was $6-7, not now...

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