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7/27/17

The performance of major gold mining companies, February 29th 2016 to date

  • Barrick (ABX) up 20%
  • Agnico Eagle (AEM) up 36%
  • Newmont (NEM) up 42%
  • Kinross (KGC) up 42%
  • Franco Nevada (FNV) up 21%
  • Royal Gold (RGLD) up 84%
We can even add these:
  • Gold and Silver Index (XAU) up 34%
  • Precious Metals ETF (GDX) up 18%
  • Gold bullion ETF (GLD) up 1%
And then, this:
  • Goldcorp (GG) down 10%
Fact: David Garofalo became CEO of Goldcorp on February 29th, 2016.

UPDATE: Reader 'DR' has a thought:

"...You highlighted Goldcorp's 10% drop on the blog today. You may be interested to see a summary of how their Yukon mine development project is progressing..."

UPDATE 2: David Garofalo on BNN today. Watch it here, but in three words it's "Everything Is Awesome". Utter bollocks. In the Q&A the BNN guys mention the call on the stock made this morning by Peter Ward of Renaissance Macro Research. Your humble scribe strongly agrees with Ward's call and FYI, here below is the front page of his note to clients out pre-open. Since this was published GG is down 7.1%, so work it out for yourself.

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Goldcorp
Reiterate Underweight Rating – Cut Target to $12

We have been and remain negative on Goldcorp shares. The company reported a decent quarter that we suspect may have included some non-recurring gains such as a large tax benefit. Management will host a call later today to clarify.
As we have discussed, the company has committed to make a major investment in Cerro Casale – a low grade and very remote copper/gold project in Chile. In our opinion, the inclusion of Cerro Casale in “Proven & Probable” reserves reflects a shocking lack of conservatism. Yes, we realize Barrick and Kinross did so for many years. But, we expected better from Goldcorp given management’s acknowledgment that the project still needs years of study. The project has already been studied for over twenty years. We visited the property in 1996. The project was not advanced by previous owners during the last decade when gold prices exceeded $1700 per ounce and copper exceeded $4.00 per pound. Current prices are much lower. Therefore, it’s hard for us to discern what makes the project more attractive now. The challenges of a lack of infrastructure and shortage of water in the Atacama desert have not improved to our knowledge.
Our thesis is intact. We believe Goldcorp is depleting its high quality and low risk reserves. Therefore, GG’s earnings multiple should continue to contract. YTD, gold is up 9% and GG shares are down 7%. As we have said before, it is far too simplistic to view gold equities as merely levered plays on the commodity price. We continue to find attraction in a pair trade that is long gold and short shares of Goldcorp.