A Banner Day for Goldcorp

Both gold and its mining namesake began this week by strutting their stuff.

Gold rocketed to yet another all-time high (nominal) price above $1,140 per ounce Monday, while the U.S. dollar flirted dangerously beneath the 75-handle on the U.S. Dollar Index (USDX).

Meanwhile, the aptly named Goldcorp (NYSE: GG  ) continues to frame a future that is far more certain than that of the besieged and fundamentally impaired dollar. For starters, Goldcorp announced Monday an all-stock offer for junior exploration company Canplats Resources. The roughly $225 million transaction targets the explorer's Camino Rojo project in the vicinity of Goldcorp's world class Penasquito mine. Goldcorp CEO Chuck Jeannes places the addition of this acreage -- with 3.4 million ounces of measured and indicated gold -- within a broader vision for the Penasquito district: "Along with the steady advancement of our Noche Buena project located north of Penasquito, we can envision a potential network of low-cost satellite operations that would contribute significantly to Penasquito production over the long term."

As Jeannes points out, focusing pipeline development efforts in proximity to existing operations can offer important synergies to miners, and an operation of Penasquito's scale accrues no shortage of equipment, local expertise, and skilled workers that can significantly enhance the efficiency of development efforts. Fools will recall that Barrick Gold (NYSE: ABX  ) is pursuing a 70% stake in the El Morro project near its huge Pascua Lama development project, and will recognize the pattern in Kinross Gold's (NYSE: KGC  ) offer for a stake in exploration property adjacent to its Fort Knox mine in Alaska. Pan American Silver (Nasdaq: PAAS  ) , for its part, is leveraging its experience in Argentina by targeting Aquiline Resources' sizeable Navidad project.

Sweetening the 41% premium offered to Canplats shareholders, Goldcorp will also toss 10 million Canadian dollars and some additional Canplats properties into a new exploration company that it will spin off from the deal. The progenitor of Silver Wheaton (NYSE: SLW  ) is hardly a stranger to successful spinoffs, and Goldcorp will keep a 10% slice in case the explorer finds gold.

Finally, Goldcorp moved one step closer to the 22.4 million ounces of gold buried beneath its Pueblo Viejo joint venture with Barrick Gold, as the president of the Dominican Republic issued a resounding statement of support for the project. Although "peak gold" strains the growth prospects for major miners as a group, prompting Foolish interest in the new Market Vectors Junior Gold Miners ETF (NYSE: GDXJ  ) , I believe that Goldcorp possesses the necessary riches to reward shareholders handsomely.

Gold is a hot topic on the blogs at Motley Fool CAPS. Join the free service today and see just how many Fools are taking the long view when it comes to investing in gold. The "Gold" tag at CAPS lists 47 potential investments, and you'll find Christopher's comments on most of them.

Fool contributor Christopher Barker can be found blogging actively and acting Foolishly within the CAPS community under the username TMFSinchiruna. He tweets. He owns shares of Kinross Gold, Pan American Silver, and Silver Wheaton. The Motley Fool has a disclosure policy.


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  • Report this Comment On November 18, 2009, at 12:05 PM, jesusfreakinco wrote:

    Good article... Mis-spelling "handomely".

    Keep up the good work. You alluded to impact of SLW in this article. Could you expand on that a bit?

    Thanks,

    JFC

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