Goldcorp Guards the Golden Henhouse

Don't let it get away!

Keep track of the stocks that matter to you.

Help yourself with the Fool's FREE and easy new watchlist service today.

If you're a chicken farmer, the last thing you want is a fox buying a chunk of adjacent farmland.

In an alternate universe where foxes can buy property, building a good fence might suffice to protect your livelihood. Here on Earth, though, the entrepreneurial farmer will take no chances and purchase the additional acreage himself, and this is precisely what gold farmer Goldcorp (NYSE: GG  ) intends to do.

With the role of the sly fox played by the tenacious Minera Penmont joint venture between rival Newmont Mining (NYSE: NEM  ) and silver miner Fresnillo, Goldcorp is determined to protect its own backyard from an encroaching menace. Refusing to back down from a battle royal that has ensued over the Camino Rojo property belonging to explorer Canplats Resources, Goldcorp has raised its bid for a second time to match (and thereby quash) a counter-offer from the joint venture.

In the process, an initial offer of $225 million has been raised to more than $270 million. Using a 50:1 ratio of gold to silver, which remains conservative even with today's historically anomalous 65:1 spread, Camino Rojo contains a measured and indicated resource of 4.7 million gold equivalent ounces (GEOs) with a market value of $5.1 billion. Even Goldcorp's twice-raised bid still amounts to a bargain basement price of $58 per ounce of gold equivalent in the ground.  

Earlier in the year, I remarked at the undeniable bargain obtained by Kinross Gold (NYSE: KGC  ) when it purchased the Lobo Marte project in Chile from Teck Resources (NYSE: TCK  ) and Anglo American for $42 per ounce of gold, and given the intervening increase in the price of gold, this deal falls right into the same ballpark. Since I don't expect either bidder to balk at this price, the bidding war may continue yet if Newmont and Fresnillo are determined enough to tread upon Goldcorp's turf.

The turf in question, near Goldcorp's flagship Penasquito mine in Mexico's Zacatecas state, is historically known more for its prolific silver production than gold. Accordingly, even Penasquito's 17.4 million ounces of gold are virtually dwarfed by gargantuan silver reserves of more than 1 billion ounces. With a silver lode of that magnitude, even the 25% share of production that belongs to Silver Wheaton (NYSE: SLW  ) is enough to vault the silver stream specialist into a nomination for the best stock of 2010. Even Royal Gold (Nasdaq: RGLD  ) is in on the Penasquito act with a royalty interest, but there's plenty leftover for Goldcorp.

This Fool is continuing to peruse potential ancillary targets in the Zacatecas region that might be prompting Newmont and Fresnillo to make such a forceful stand for this resource in Goldcorp's back yard. Stay tuned for more, as I'm guessing the final shot has yet to be fired in this battle for gold.

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 46 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 in the CAPS community under the username TMFSinchiruna. He tweets. He owns shares of Kinross Gold, Royal Gold, and Silver Wheaton. The Motley Fool has a gilded disclosure policy.

Read/Post Comments (0) | Recommend This Article (12)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1075468, ~/Articles/ArticleHandler.aspx, 10/22/2016 5:31:46 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 8 hours ago Sponsored by:
DOW 18,145.71 -16.64 -0.09%
S&P 500 2,141.16 -0.18 -0.01%
NASD 5,257.40 15.57 0.30%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/21/2016 4:02 PM
GG $15.51 Up +0.11 +0.71%
Goldcorp CAPS Rating: ***
KGC $3.92 Down +0.00 +0.00%
Kinross Gold CAPS Rating: **
NEM $36.35 Down -0.66 -1.78%
Newmont Mining CAPS Rating: ***
RGLD $68.35 Down -1.62 -2.32%
Royal Gold CAPS Rating: ****
SLW $24.33 Down -0.08 -0.33%
Silver Wheaton CAPS Rating: ****
TCK $20.50 Up +0.17 +0.84%
Teck Resources CAPS Rating: ***