In part because of the specter of political uncertainty in Washington and rising geopolitical tensions, the price of gold has risen more than 12% year to date. Now, therefore, seems like the right time to get to know one of the leading gold producers a little better. So let's dig in and acquaint ourselves with Goldcorp (NYSE: GG), a leader in the mining industry.
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1. The name game
True to its name, gold figures prominently in the company's business. According to the company's 2016 annual report, gold sales accounted for $2.86 billion, or 81%, of the company's consolidated revenue from continuing operations in 2016. But the yellow stuff isn't the only thing the company digs out of the ground. In the same year, silver, zinc, and lead sales accounted for 11%, 6%, and 2%, respectively, of consolidated revenue from continuing operations.
2. JV in the DR
The world's second largest gold-producing mine in 2016, Pueblo Viejo, is the subject of a joint venture between Goldcorp, which retains 40% ownership, and Barrick Gold (NYSE: ABX). Located in the Dominican Republic, Pueblo Viejo, of all the projects in Goldcorp's portfolio, accounted for the most gold-production -- 467,000 ounces last year. Management expects the mine to play an equally important role in 2017. According to the company's guidance, Pueblo Viejo will produce 415,000 gold ounces, representing, again, the company's largest gold-producing mine.
Among Goldcorp's leading assets, Pueblo Viejo retains another distinction; it is the mine with the highest margin. In fiscal 2016, Goldcorp reported all-in sustaining costs (AISC) of $439 per gold ounce at the mine. Management forecasts AISC to creep up to $530 per gold ounce in fiscal 2017; however, it is still expected to be the mine with the highest margin.
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3. History 101
Incorporated, initially, in 1994, Goldcorp acquired Glamis Gold Ltd. in 2006 in a transaction valued at approximately $8.6 billion. The acquisition was effective Dec. 1, 2006, which also became Goldcorp's new date of incorporation.
4. Laying a yellow brick road throughout Chile
Currently, Goldcorp's only South American gold-producing operations are located in Argentina; however, the company is working to further extend its reach throughout the continent. In 2015, Goldcorp formed a 50-50 joint venture, NuevaUnion, with Teck Resources in Chile. Management doesn't foresee commercial production at NuevaUnion commencing before 2021, as the project is early in development; Goldcorp expects to complete a pre-feasability assessment by the end of 2017.
Further illustrating its interest in Chile, Goldcorp announced, this past spring, the formation of another joint venture with Barrick Gold to develop two projects: Cerro Casale and Caspiche. In the company's press release, David Garofalo, Goldcorp's president and CEO, stated, "The joint venture with Barrick has the potential to allow us to consolidate infrastructure to reduce capital and operating costs, reduce the environmental footprint, and provide increased returns compared to two standalone projects."
5. Golden days ahead
Working to increase net asset value per share over the next five years, management has identified a three-pronged approach to increase shareholder value over the next five years. In addition to growing both reserves and production by 20%, management aspires to reduce AISC by 20%.
If successful, this would represent a tremendous turnaround for the company. According to Morningstar, Goldcorp's book value per share has dropped 44% from fiscal 2012 to 2016.
6. Viva Mexico
Besides its ability to boast that it operates (in part) one of the largest gold-producing mines in the world, Goldcorp can also lay claim to owning, Penasquito, the largest gold-producing mine in Mexico.
The mine figures prominently in Goldcorp's financials. In fiscal 2015 and 2016, the mine, among all those in Goldcorp's portfolio, generated the most revenue -- $1.65 billion and $1.04 billion, respectively.
Management is relying on developmental projects at Penasquito to help the company achieve its goals of growing production and reserves. In addition to a significant stripping phase over the next three years, the Pyrite Leach Project is expected to begin producing gold in Q1 2019, and when it does, the project is expected to add incremental annual production between 100,000 and 140,000 ounces.
7. The end of an era
Goldcorp recently announced that it will soon be saying goodbye to an old friend. The company intends to permanently end mining operations at the Dome underground mine located at the Porcupine site in Canada. According to Ontario newspaper The Sudbury Star, the Dome mine began operations in 1910 and "is the longest continuously operating gold mine in Canada."
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