Goldcorp Stumbles

July 11, 2012 Company Profiles, Gold Stocks, Market Movers, Profiles No Comments

There is no question that the powers that be are doing everything that they can to knock down gold so that they can keep the dollar as the safe haven of choice during the fiat currency meltdown that is currently plaguing the world. They have been pretty successful for the last 5 months and today the market hammered Goldcorp (GG) after its late Tuesday announcement that the company trimmed its 2012 gold production forecast to between 2.35 million and 2.45 million ounces, from their original estimate of 2.6 million.

Shares of Goldcorp, which is one of the one of the world’s largest gold producers, fell 10% on Wednesday, making it the company’s worst one-day loss since October 2008. Thus far, the company has fallen 30% for the year. The question becomes, does the loss of approximately 200,000 ounces for the year justify a a 10% decline for the stock? When you look at Goldcorp’s financials and the properties that they are mining , this is clearly a temporary setback that does not merit this kind of sell off. There are obviously other forces at work here.

Goldcorp cited problems at its two most important mines, Red Lake in Ontario and Peñasquito in Mexico. The company cited “destressing” efforts that halted operations at Red Lake, and a drought that has caused a water shortage at Peñasquito.

Canaccord Genuity’s analysts cut estimates on Goldcorp’s second-quarter earnings per share to 45 cents from 60 cents. It is interesting to note that they kept Goldcorp with a buy rating and $63 target price! Their analysts said,

“While we view today’s news as negative, we believe that the expectation of reduced guidance has already led to 9.5% under performance since releasing [first quarter] results.”

Goldcorp’s earnings per share have declined 30% since this past January. Apparently any deviation from the estimates in the gold market will serve as the excuse to pound a company’s shares in the current gold mining environment.

Gold will not stay much longer in this sideways trading range because there are too many factors that are weighing against the U.S. dollar. Once the pendulum swings back, gold is going to $2,000 per ounce before years end and this speed bump in Goldcorp’s path will be in the rear view mirror.

The $63 target price will prove to be very low when $2,000 per ounce is the norm. There is no question that Goldcorp is an easy double from this level. Do your homework and check out the company’s financials and you will see a sound company with plenty of cash, little debt and a lot of ounces in the ground. On top of that they are one of the lowest cost producers in the sector!

I own this company and I am adding shares at this level. It’s financially sound and a very low cost producer. If I have any regrets, it is that I wish that I had foreseen this drop in the gold price so that I could have sold and doubled my shares at this price point.

I am not a broker, just a trader that has traded this company for years and I feel confident that Goldcorp will be reaching new highs shortly.

Till next time, good luck and good trading!