Goldcorp Inc. GG fell 0.78% to $10.17 per share on the New York Stock Exchange on Wednesday.
During intraday negotiations, the stock was a whisper away from a new 52-week low of $10.10 and more than 50% from the 52-week high of $15.55.
Goldcorp – one of the major producers of gold in the world – is trading very cheap. The following chart powered by GuruFocus will give you a better idea about its affordability. As you can see in the chart below, the share price is considerably below the 200-, 100- and 50-day simple moving average lines. For the 52 weeks through Sept. 5, Goldcorp has fallen 28%.
Despite the significant fall, the Canadian gold stock has done slightly better than the VanEck Vectors Gold Miners ETF GDX, whose share price has declined 30%.
Goldcorp has a market capitalization of $8.87 billion versus a book value of $14.31. That is a further indication of a cheap stock. Concerning the EV-to-EBITDA ratio, which is another of the most used ratios by investors in gold stocks, this at 9.92 is almost on par with the industry median of 9.3.
The 14-day relative strength index is 28.39, which is suggesting that the stock has reached oversold levels and signalling that a correction in the share price to the upside may happen soon.
The majority of analysts on Wall Street are seeing the Canadian gold mining company with metal properties in North America, Mexico, Central and South America, as a buy. As of Sept. 2018, there were 12 analysts out of a total of 22 who are recommending buying shares of Goldcorp. Nine analysts are suggesting holding the stock, while one analyst is predicting that Goldcorp will underperform within the next 52 weeks. As a result of those surveys, the mean recommendation rating is 2.1. The range is 1 (strong buy) to 5 (sell).
The average target price is $17.33 per share. That is a mean of 20 estimates, which range between a low of $12 and a high of $27.
Commodity permitting, Goldcorp is forecasted to take off and gain over 70% within the following 52 weeks.
There are some catalysts here that will help the share price to accomplish such a target.
The Pyrite Leach Project that the company is developing at Peñasquito in Mexico and a robust pipeline of potential large-scale new mineral deposits are providing the shareholders of Goldcorp with opportunities for significant value accretion.
The advancement of the Pyrite Leach Project at Peñasquito is proceeding so fast that the company is anticipating the beginning of the commercial production of gold already for the last quarter of this year. The Mexican open pit, which is fully owned by Goldcorp, is one of the most significant contributors to the company.
Peñasquito accounts for 20% of the total production of gold and for 33% of the total revenue of Goldcorp. In full fiscal 2017, the Mexican gold mine has produced 417,000 ounces and is targeting 310,000 ounces for full fiscal 2018 at an all-in sustaining cost of $250 per ounce. At Peñasquito, Goldcorp holds about 8.95 million ounces of gold in proven and probable reserves.
The development of Peñasquito is part of the 20/20/20 program that Goldcorp aims to accomplish before 2022. That means a 20% growth in mineral reserves and total production from current levels and a 20% decline in the all-in sustaining cost per ounce of gold sold. Peñasquito will give its input through the mining of higher gold grade from the Peñasco open pit mine and the development of a second open pit mine. The second open pit, the Chile Colorado, will allow the workers to reach gold and to mine silver, lead and zinc.
A 40% gold recovery from the tailings will also give its contribution to the output growth at Peñasquito. Goldcorp is investing $420 million in facilities improvement to recover gold from waste materials.
The pipeline of new mineral deposits, which are offering a potential of large-scale production, includes the Borden metal project in Canada. Here the company is developing what will be the first all-electric underground mine in Canada. That means that working at underground will be safer for miners, and the impact on the environment will be minimal. At Borden, Goldcorp is forecasting the beginning of commercial production of gold for the second part of 2019.
Borden is expected to cover about 33% of the total production of gold that Goldcorp will milk from its reserves at the Porcupine mine by 2020. Porcupine in Ontario hosts about 8.05 million ounces of gold in proven and probable reserves and for full fiscal 2018 it is expected to produce 275,000 ounces of gold at an all-in sustaining cost of $925 per ounce of metal sold.
Besides Peñasquito and Porcupine, Goldcorp has three other main gold producing assets in Canada, which are Éléonore, Musselwhite and Red Lake mines, the Argentinian Cerro Negro gold mine and the Pueblo Viejo mine in the Dominican Republic.
For full fiscal 2018, Goldcorp is keeping estimates of gold production at 2.375 million to 2.625 million ounces. The all-in sustaining cost is expected at $760 to $840 per ounce of metal sold.
As of Dec. 30, 2017, Goldcorp had about 53.5 million ounces of gold in proven and probable reserves.
Over the last 12 months of operations, Goldcorp has proven to be more profitable than most of its peers with an Ebitda margin of 35.2% versus an industry median of about 23%.
GuruFocus is measuring the past profitability & growth of Goldcorp with a rating of 6 out of 10.
The balance sheet of Goldcorp is moderately solid for GuruFocus, which is assigning a rating of 5 out of 10.
Disclosure: I have no positions in any security mentioned in this article.
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