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A stock in a sweet spot like this might come along just once in a blue moon.

Although we just had a blue moon last month, Goldcorp's (NYSE: GG  ) position of relative strength among major gold miners has been years in the making, and recent strategic moves to build out the company's production pipeline lay the foundation for a lasting competitive advantage over even traditional gold mining titans like Barrick Gold (NYSE: ABX  ) and Newmont Mining (NYSE: NEM  ) .

In this respect, the Barricks of the world could become a victim of their own enormous size. In a world where truly massive gold deposits -- like those in South Africa that dominated global production for decades -- are increasingly scarce, top tier miners face a daunting (and perhaps untenable) challenge in their quest to replace production with new greenfield discoveries or through acquisitions. As we have seen, competition for gold asset purchases is heating up, and in time that will tend to drive acquisition costs sharply higher.

Goldcorp issued operating results for 2009 this week along with production and cost estimates through 2013. The numbers are rather awe-inspiring. The company outpaced its own production guidance by 100,000 ounces in 2009, and estimates a by-product cash cost $295 per ounce of gold produced. Although Goldcorp cannot compete with mid-tier producer Yamana Gold's (NYSE: AUY  ) remarkable 2009 comparable cost of just $190 per ounce from continuing operations, Goldcorp remains the lowest-cost producer among its major mining peers, and a veritable cash flow machine the way gold prices are shaping up. Accordingly, Goldcorp estimates mammoth 2010 cash flow of $1 billion (cue the Dr. Evil voice-over).

To conquer the gold mining world, Goldcorp anticipates 58% growth in production volume from 2.4 million ounces in 2009 to 3.8 million ounces in 2014, with every year in between yielding a solid incremental rise. Production costs for 2010 are forecast to rise to $350 per ounce.

Meanwhile, the company is investing $130 million in exploration for 2010. Making the most of sophisticated underground equipment now offered by the likes of Bucyrus (Nasdaq: BUCY  ) and Joy Global (Nasdaq: JOYG  ) , Goldcorp's proposed 5-kilometer underground tram connecting the Cochenour deposit to existing facilities at Red Lake will provide an exciting bonus. The tram will open underground access to exploration along a highly prospective area of one of the world's most impressive gold-bearing camps.

With a powerful combination of voluminous cash flow and available liquidity, enormous potential to expand reserves through exploration of existing properties, a proven track record of developing low-cost mining operations with innovative engineering solutions, and a resounding strategic victory over its rivals through recent asset purchases, Goldcorp has all the right ingredients in place for enduring outperformance of its major rivals. Fools appear to agree, as Goldcorp trounced competitors like Kinross Gold (NYSE: KGC  ) for the title of top major gold producer (garnering 69% of votes in a recent Motley Poll). 

Please take a moment to share your thoughts in the comments section below.

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 in the CAPS community under the user name TMFSinchiruna. He tweets. He owns shares of Kinross Gold and Yamana Gold. The Motley Fool has a gilded disclosure policy.

Read/Post Comments (3) | Recommend This Article (13)

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.

  • Report this Comment On January 13, 2010, at 5:31 PM, adartmouth wrote:

    goldcorp is cool but yamana is better for the reasons you say (cash cost), and the fact it is SO CHEAP compared to the majors including goldcorp. Yamana is only half way between late 08 crash price and early 08 peak price, where as goldcorp has virtually clawed it all back. both stocks are destined to double their old highs in this bull market, but that means way more reward from yamana's current price than goldcorps, or to put it another way, you missed the boat on goldcorp here much more so than yamana.

  • Report this Comment On January 13, 2010, at 6:37 PM, XMFSinchiruna wrote:


    I likewise consider Yamana among the best-positioned of its peer group of mid-tier miners, although smaller rivals like Eldorado Gold are strong competitors as well. From a value standpoint, it is tough to beat. I am eager to see, however, how long these annoying derivative losses continue to plague earnings.

    When declaring Goldcorp the best of the majors, I am essentially referring to miners with 40m-plus GEOs. That's about my personal cut-off point between majors and intermediates.

    Fool on!

  • Report this Comment On January 28, 2010, at 1:28 AM, pjakesmith wrote:

    I really love to read some articles that have great positive impacts on its reader and benefit by reading such article especially concerning Gold and the stock market. I admire these writers in sharing their views and or opinions that can enlighten the mind of the readers. Great Job and continue inspiring readers.

    <a href=" Saint Gaudens</a>

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