Back to top

Analyst Blog

On Sep 10, we upgraded our recommendation on Goldcorp (GG - Analyst Report) 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.

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 Barrick Gold (ABX - Analyst Report), 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 2013.

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 2012.

Other Stocks to Consider

Other companies in the mining industry with favorable Zacks Rank are Gold Fields Ltd. (GFI - Snapshot Report) and Denison Mines Corp. (DNN - Snapshot Report). Both carry a Zacks Rank #2 (Buy).

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
RPC INC RES 24.91 +8.35%
LITHIA MOTO… LAD 94.59 +4.60%
DELTA AIR L… DAL 39.15 +3.90%
FLAMEL TECH… FLML 14.51 +3.50%
SOUTHWEST A… LUV 28.87 +2.92%