Goldcorp Inc. (GG, Financial) announced through its website that it has agreed to buy New Gold’s (NGD, Financial) 4% gold stream in its Chilean mine, El Morro, for $65 million in cash.
The El Morro deposit is part of NuevaUnión, the ownership of which is shared by Goldcorp through a 50-50 joint venture with Teck Resources Ltd. (TECK, Financial).
The project combines Goldcorp’s El Morro deposit and Teck Resources’ Relincho deposit.
During the fourth quarter of 2015, New Gold sold its 30% interest stake in the El Morro to Goldcorp for net cash proceeds of $62 million, the extinguishment of a loan of $94 million and the 4% gold stream in question.
El Morro had approximately 8.92 million ounces of gold and 6.5 billion pounds of copper in proven and probable reserves on Dec. 31, 2015. El Morro is considered to be one of the largest gold and copper deposits in Chile.
The 4% gold stream interest of New Gold in El Morro equaled approximately 357,000 ounces of proven and probable gold reserves as of Dec. 31, 2015.
Goldcorp was trading at $16.88 per share Thursday, down 7 cents or minus 0.38% from the previous trading day.
The stock gained 24.04% year to date following the rise in the price of gold and outperformed the VanEck Vectors Gold Miners (GDX, Financial) index by 4.48%.
Goldcorp is trading at 1.08 times the book value and at 12.51 times the EBITDA.
Analysts’ recommendation mean on Goldcorp sits midway between a buy and a hold. The recommendation rating is 2.5 which ranges between a 5.0 (Strong Buy) and 1.0 (Sell).
The analysts’ average target price per share is $18.11 which represents a 7.6% upside from the current share price.
As of the most recent quarter, the Canadian gold producer had approximately $383 million in cash on hand and securities that can readily be converted into cash. The total debt amounted to $2.93 billion.
Over the 12 trailing months’ period, the miner generated cash flow of $961 million from operations.
Goldcorp will release its fourth-quarter 2016 and full-year financial results on Feb. 15. Waiting for the results, analysts forecast an EPS of 9 cents, which represents a 160% increase from the EPS that the miner reported one year ago for the comparable quarter.
Source: Yahoo Finance
The estimate of 9 cents is the average of 16 calls and ranges between a low estimate of 6 cents and a high estimate of 14 cents.
Disclosure: I have no positions in any stocks mentioned in this article.
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