On Sep 10, we upgraded our recommendation on
) to Neutral. While the gold mining giant remains challenged by
high costs, we are encouraged by progress of its project pipeline
and signs of a recovery in gold prices.
BARRICK GOLD CP (ABX): Free Stock Analysis
DENISON MINES (DNN): Free Stock Analysis
GOLD FIELDS-ADR (GFI): Free Stock Analysis
GOLDCORP INC (GG): Free Stock Analysis Report
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Why the Upgrade?
Both revenues and adjusted earnings for second-quarter 2013,
reported on Jul 25, missed Zacks Consensus Estimates. Goldcorp
swung to a loss on a reported basis on a sizable impairment
charge and lower gold prices. However, both gold production and
gold sales rose by double digits in the quarter. The company
retained its production and cost guidance for the full year.
Goldcorp anticipates production to speed up in second-half 2013
based on the ramp up at Pueblo Viejo, which it jointly owns with
), and higher grades at Penasquito late in the year. The company
is progressing well with its development projects and remains on
track to attain its long-term production targets.
In addition, Goldcorp is an unhedged producer of gold and, as
such, it should gain from the recent rebound in gold prices if it
can keep costs under control. Gold recovery is picking up steam
as reflected by the recent rebound of prices to a $1,350 plus
territory after touching a three-year low of $1,180.71 in Jun
While a strong dollar is still weighing on the price of the
yellow metal, the prevailing macroeconomic uncertainty may
support gold demand. Moreover, improving physical demand is
expected to support gold prices.
However, Goldcorp is exposed to certain short-term challenges at
Penasquito, one of its largest mines. Production at Penasquito
remains affected by some water supply issues and lower grade.
Goldcorp is also seeing cost pressures across its Canadian and
Mexican mines. The company expects cash costs to rise in 2013 on
a year-over-year basis, partly due to industry-wide cost
inflation. For 2013, the company estimates all-in sustaining cash
costs of $1,000 to $1,100 per ounce, up from $874 per ounce in
Other Stocks to Consider
Other companies in the mining industry with favorable Zacks Rank
Gold Fields Ltd.
Denison Mines Corp.
). Both carry a Zacks Rank #2 (Buy).