Goldcorp (GG, Financial) should benefit from the optimization of its operations. It has added many strong assets to its production portfolio. Also, it has eliminated unprofitable ounces from its remnant mining Campbell and sold off its Wharf mine.
A closer look at Goldcorp's asset profile
It owns prospective assets like Peñasquitos, Red Lake, Cerro Negro, Los Filos, Porcupine, Marlin, Musselwhite and El Sauzal across the world. These assets have high grade gold with plenty of reserves estimated. Also, it is developing many other projects such as Cochenour (Red Lake), Dee JV South Arturo, Cermino Rojo and Ell Moro. This exciting exploration of these resources has certainly reinforced its position in the industry as these resources are delivering quality gold production for Goldcorp. It is now in a better position to deliver healthy returns to its shareholders.
In addition, the company remains focused generating strong free cash flow from this portfolio of assets. It is strategically working on additional organic opportunity within its portfolio for its young mines.
Furthermore, the increased production and lower costs profile this year reflects its growing input from two of its new young mines, Cerro Negro and Eleonore. These assets remain cornerstone operation for Goldcorp in the long run. It plans to ramp up the production at these assets this year.
Apart from these two flagship mines, its Red Lake mine promises very strong production in 2015. The company expects total production of 400,000 to 425,000 ounces of gold at AISC of $934/ounce from Red Lake this year. This mine has high-grade intercepts. It remains on track with its exploration activities at this mine. It plans to have five drills from the surface this year.
It expects strong production and low costs to enhance its free cash flow going forward. This should excite its investors as $1.2 billion of sustained free cash flow will strengthen its balance sheet. Also, the company will be in a better position to explore additional organic opportunity with this strong free cash flow.
Conclusion
Goldcorp is making significant progress with respect to its costs of production. It senses a lot of rooms to further improve its costs of production in the future that should improve its profitability in the future. Also, its production remains pretty promising in the long run that should improve its top line performance going forward. The analysts expect its earnings to grow at CAGR of 11.00% for the next five years. This indicates reasonable growth for its earnings over the coming years.
The stock is trading at the forward P/E of 20.67 and has PEG ratio of 2.44 that signify better days ahead for its shareholders. Its balance sheet carries total cash of $549 million and has total debt of $3.59 billion. Goldcorp has operating cash flow of $1.01 billion and levered free cash flow of $38.62 million.
