Among the gold mining titans, the long-term outperformer will not be determined by operating efficiency, ore quality, nor expertise in project planning and development.
While those metrics are all vitally important, the greatest reward to shareholders will be found in the major gold miner that is most adept at replacing production on the cheap through a combination of exploration and asset acquisitions. Throughout the extractive industries, this process is called pipeline development, and lately Goldcorp (NYSE: GG ) has been standing out as a giant among golden titans.
As this new decade dawned, Goldcorp celebrated a successful defense of its home turf -- a 4.7 million-ounce gold-equivalent resource near its world-class Penasquito mine in Mexico -- from a series of counterbids from a joint venture that includes major rival Newmont Mining (NYSE: NEM ) .
This week, Goldcorp brazenly threw a wrench into Barrick Gold's (NYSE: ABX ) strategic plans by slipping into Barrick's backyard to acquire Xstrata's 70% stake in the El Morro project in Chile. Smaller producer New Gold (AMEX: NGD ) holds a 30% stake in the project, and a crucial right of first refusal over Barrick's bid that permitted Goldcorp to court the project with New Gold's cooperation.
Goldcorp will advance $463 million to New Gold to exercise that right before transferring the stake to Goldcorp, and New Gold will receive a cool $50 million in cash for facilitating the deal. For proven and probable reserves of gold and copper that combine for a present market value of almost $19 billion, the acquisition price is a bargain no matter how you slice it.
El Morro, located in the vicinity of Barrick's world-class Pascua-Lama development project, enhances Goldcorp's geographical profile with another mining-friendly jurisdiction, and strengthens Goldcorp's already low cost profile with a gold project that is replete with another highly prized metal: copper.
Alongside quality intermediate producer Yamana Gold (NYSE: AUY ) , Goldcorp owns a minority (37.5%) equity stake in the prolific Alumbrera copper and gold mine in Argentina, but otherwise the miner's operations were essentially confined to North and Central America. Chile boasts a hotbed of low-cost copper and gold production, dominated by large-scale operators like Freeport-McMoran (NYSE: FCX ) and Kinross Gold (NYSE: KGC ) .
Both through voluminous copper by-product at its new Chilean asset, and a treasure trove of silver by-product at (and nearby) flagship mines like Penasquito, Goldcorp is making an impressive run at extending its ability to produce sustained quantities of gold at some of the industry's lowest costs.
If gold prices are headed substantially higher, which this Fool considers a very safe expectation, then the asset purchases transacted during 2010 could easily determine which gold major will outperform its peers for years to come. Goldcorp has begun the year with an aggressive surge in this high-stakes game of survival of the fittest, cementing its position in this Fool's eyes as the richest major of them all.
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