Goldcorp Inc.
(
GG
) has closed its earlier announced sale of 8,422,460 shares of
Primero Mining Corp. at a price of C$5.25 per share. The offering
fetched aggregate gross proceeds of roughly C$44.2 million (US$45.2
million) to the Canadian gold mining giant.
Goldcorp, in September 2012, announced the sale 9% of its
roughly 41% interest in Toronto-based Primero, a company engaged in
the production of precious metals with operations in Mexico, to a
syndicate of underwriters led by Scotiabank. Pursuant to the deal,
the underwriters agreed to buy 8,422,460 common shares of Primero
at a price of C$5.25 a share.
Following the stake sale, Goldcorp will now hold roughly
31,151,200 shares, representing around 32% of the outstanding
shares of Primero. The shares will continue to be held by Goldcorp
subject to a three year lock-up period that began on August 6,
2010. Per the agreement, Primero will not receive any proceeds from
the offering.
Primero owns 100% of the San Dimas gold/silver mine in Mexico.
The company, in September 2012, announced its estimated mineral
resources and mineral reserves (as of June 30) for the San Dimas
mine.
Primero reported that its contained gold in probable mineral
reserves increased 79,000 ounces from end-2011 to 584,000 ounces.
Moreover, contained gold in indicated mineral resources increased
17% over the same period to 678,000 ounces. Primero also reported
contained silver in probable mineral reserves of 34.7 million
ounces, indicated mineral resources of 40.6 million ounces and
inferred mineral resources of 67.5 million ounces.
Goldcorp, which competes with
Barrick Gold Corporation
(
ABX
), is an unhedged producer of gold and as such, it is well
positioned to gain from increase in gold prices. It enjoys a
leading position in the industry and aims to attain 70% production
growth by 2016.
The company has a high leverage to spot gold prices due to its
completely unhedged position. This will help it to derive the
maximum value due to rising gold prices in the future. Moreover,
Goldcorp is one of the lowest-cost gold producers and has a strong
balance sheet.
However, Goldcorp has been hit by a decline in production from
the Red Lake mine. The company has reduced its gold production
target for 2012 given the weak production from the Red Lake mine in
the first half of the year and lower expectations from the
Penasquito mine for the second half.
Goldcorp currently retains a Zacks #3 Rank, which translates
into a short-term Hold rating. We have a long-term Neutral
recommendation on the stock.
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