Those at the top of their game are often the targets of intense and undeserved ire.
As the consistent lowest-cost operator among the world's major gold miners, Goldcorp (NYSE: GG ) is at once a favorite pick among savvy precious-metal investors ... and a favorite punching bag for a vociferous band of gold-bashers. I have been emitting staunchly bullish signals about Goldcorp for quite some time now, but even I once vilified this powerful force in the gold industry.
Now I stand ready to combat the common critiques that suggest Goldcorp is fully valued. Today, the company's $1.2 billion in 2009 cash flow is enough to drown out criticisms regarding an overdue pot at the end of the rainbow. After doling out nearly $132 million in dividends in 2009, not even the unfortunate drag of persistent currency translation effects has prevented shareholders from sharing the wealth.
Adjusting for epic volatility in the U.S dollar, which turned a neutral foreign exchange effect a year ago into a $129 million drain on profitability in the fourth quarter, Goldcorp actually more than doubled its prior-year earnings with profit of $182.7 million ($0.25 per share). To offer Fools a sense of the currency impacts that international corporations contend with amid this ongoing financial crisis, Goldcorp's full-year foreign exchange gain of $1.06 billion in 2008 collapsed into a corresponding $367 million charge for 2009. Goldcorp is hardly alone in facing these hardships, as my prior looks at Yamana Gold (NYSE: AUY ) and Kinross Gold (NYSE: KGC ) will attest.
The best things in gold aren't free
With that out of the way, it's time to discuss precisely why it is that Goldcorp appears to command a relative premium to some of its peers. In short, this is because Goldcorp has no peers! Among the major gold miners -- epitomized by the true mammoths of the space like Barrick Gold (NYSE: ABX ) and Newmont Mining (NYSE: NEM ) -- Goldcorp is king. Boasting a byproduct cash cost of just $295 per ounce for 2010 production of 2.42 million gold ounces, the miner's unrivaled by a producer of its scale.
If production growth is your metric of choice, Goldcorp measures up beautifully with a recipe for a 57% increase to 3.8 million ounces by 2014. The primary drivers of this growth spurt will be Penasquito, Pueblo Viejo, and Red Lake. Penasquito is already producing concentrates, with commercial production on track for the third quarter of 2010. The Pueblo Viejo joint venture with Barrick is fast-tracking a mill expansion concurrent with mine construction activities that would enhance throughput by 33% to 24,000 tons per day. High-grade gold abounds in the Red Lake region, which is why Goldcorp is spending $71 million in 2010 to eventually feed ore from the nearby Cochenour deposit into the existing Red Lake mill complex.
Making all the right moves
Fools seeking the masters of wily acquisitions will view the company's brilliant deal with New Gold (AMEX: NGD ) to beat Barrick's bid for a 70% stake in the El Morro project as a classic moment in this competitive gold consolidation trend. Proving equally adept at defensive plays, Goldcorp kept Newmont out of its backyard while further expanding the Penasquito gold camp with its winning bid for Canplats Resources.
What is a Fool to make of these new additions to Goldcorp's mineral wealth? Let's hear it straight from the horse's mouth, courtesy of CEO Chuck Jeannes: "In a gold price environment exhibiting sustained strength well above $1,000 per ounce, our peer-leading cash margins will produce the necessary internally generated cash flows to build these growth opportunities."
If silver is your most precious metal, the 75% of Penasquito silver not subject to a silver stream with Silver Wheaton (NYSE: SLW ) ensures Goldcorp's reliability as a low-cost leader in gold. Moreover, the discovery of a silver deposit in Guatemala with 130 million ounces in measured and indicated resources identified thus far provides a hint of Goldcorp's greatest gift of all: its immeasurable organic growth potential. Scoring a sixth consecutive year of replacing annual production with a 5% net gain in reserves, Goldcorp closed 2009 with 48.8 million ounces of gold and a remarkable 1.3 billion ounces of silver.
So by all means, toss around any critiques or complaints about Goldcorp that you like ... and be sure to voice your thoughts in the comments section below. But please understand that Goldcorp's strengths render its skin pretty resilient. Perhaps the old adage applies: If you can't beat them; join them.