IKN

idle and fond bondage

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.

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