|
|
|
|
April 6, 2010 Dear Friend,
We are encouraged that
Goldcorp will has almost ten projects underway to add to
reserves. The El Morro acquisition appears to be 4 mm oz.
The Canplats acquisition involves a 4 mm oz gold and 68 mm
oz silver resource. The Gold Eagle acquisition of 2008 may
come into reserves after 2012 at 5+ mm oz and the Eleonore
acquisition of 2006 may come into reserves in 2012 after
tunneling through it conservatively as well. Almost ten
satellite targets surround Penasquito, which we will visit
next Tuesday in Mexico. Extensions to Red Lake are under
evalution. Claude Resources and Mega Precious Metals have
regional targets they may hope to sell to Goldcorp to
integrate into Red Lake. The Musselwhite, Porcupine and
other existing mines have incremental extension
opportunities as well.
Consequently, we upgraded
Goldcorp to Overweight from Neutral and raised our price
target to $43 per share in spite of its premium valuation.
We estimate about a 50% reserve gain through 2015 from the
current pool of assets and ongoing exploration programs. We
believe the success will justify the $600 per oz valuation,
and note that all the projects are in the Americas and
relatively low cost much like Agnico-Eagle Mines. Two
projects, Penasquito and El Morro, are > $1.5 billion high
capital costs.
In the mid-1980s, several
"high discovery" stocks correctly traded at large premiums
as Freeport-McMoRan Copper, Barrick Gold, Franco-Nevada,
etc. found much more gold, and we sense Goldcorp may be
forecasting exploration success similarly. The "premium"
may have information content in effect.
This contracts to Barrick
Gold, Newmont Mining or AngloGold where reserve replacements
are less certain, costs rising and political risks more
formidable. A particular worrisome trend is Barrick Gold's
"unbundling" in its African Barrick Gold IPO, where the
Tanzanian mines traded at 1/3 of the typical valution. The
whole may trade for more than the sum of its parts,
signaling overvaluation.
It struck fear into our
heart when AngloGold Ashanti mentioned possible asset sales,
as its mines in Ghana, the DRC, Tanzania, South Africa and
Colombia representing nearly 3/4 of its assets might all
suffer deep discounts like African Barrick. We lowered
AngloGold Ashanti to Underweight with a $30 down from
Overweight with a $50 target upon considering unbundling,
cost inflation and reserve gains. AngloGold sold a 7 mm oz
Western Australian reserve to buy into Congo, whose
government earns no praise these days.
Faithfully
John C. Tumazos
|
Copyright © 2008 John Tumazos Very Independent Research,
LLC
|
