You couldn't tell by solely looking at the price movement of Goldcorp's (GG +0.00%) stock, but the company glittered brightly in 2017. Despite shares falling more than 6% through the year while the S&P 500 climbed more than 19%, the gold miner had numerous reasons to deem 2017 a success.
Along with the execution of its five-year growth strategy and development projects, Goldcorp made progress in optimizing its portfolio. Overall, the market may have been unimpressed with these achievements, but Wall Street certainly took notice. Two weeks ago, an analyst at Credit Suisse upgraded Goldcorp's stock and raised her price target from $15.50 to $19, according to TheFly.com.
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One year down and four to go
Last year management, seeking to increase shareholder value by 2021, announced an ambitious five-year growth plan: to increase both gold production and reserves 20% over the fiscal 2016 levels, and reduce all-in sustaining costs (AISC) 20% from the fiscal 2016 amount.
According to preliminary results, Goldcorp -- exceeding the midpoint of its guidance -- achieved gold production of 2.569 million ounces in fiscal 2017. Consequently, management believes the company is on track to meet its gold production target of 3 million to 4 million ounces by 2021.
The company also succeeded in reducing costs. Whereas Goldcorp had AISC of $856 per gold ounce in fiscal 2016, preliminary results suggest that AISC for fiscal 2017 were $825 per gold ounce. One critical strategy to help achieve the fiscal 2021 AISC target of $700 per gold ounce is by identifying $250 million in annual sustained efficiencies by 2018. Last year, Goldcorp came $70 million closer to achieving this target, leaving it with $60 million to be identified in the coming year.
In terms of growing reserves, Goldcorp also glittered; management estimates the company ended fiscal 2017 with 53.5 million ounces in reserves, leaving it well-positioned to achieve the target for 2021 of 60 million ounces.
Exceeding expectations
In order to achieve the 2021 gold production target, Goldcorp will rely on two expansion projects: the Pyrite Leach Project at Penasquito and the Materials Handling Project at Musselwhite.
Advancing at a greater clip in 2017 than management had originally imagined, the Pyrite Leach Project is now expected to commence gold production in the fourth quarter of 2018 -- three months ahead of schedule.
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Thanks to the project, it's not only production of the yellow metal which is expected to increase; silver production is set to grow as well. Management estimates that the Pyrite Leach Project will add 1 million ounces and 44 million ounces of gold and silver, respectively, over the life of the mine.
Besides the Mexican mine, Goldcorp accomplished a noteworthy feat at the Materials Handling Project at Musselwhite in Ontario. Management advanced the project, which is expected to decrease haulage time by 75%, and kept it under the $90 million budget in 2017. Completion of the project is expected in the first quarter of 2019.
Sporting a new, lustrous look
According to management, the ideal scenario for Goldcorp would be gold production of 3 million to 4 million ounces from six to eight camps. In pursuit of this, the company went shopping (and selling) in 2017.
Arguably, Goldcorp's most notable move was the increased presence it gained in Chile. Having acquired interests in two properties, Goldcorp then entered into a joint venture with Barrick Gold to consolidate the two projects into an operation dubbed Norte Abierto. As of June 30, 2017, Cerro Casale and Caspiche, the two projects which make up Norte Abierto, have proven and probable gold reserves of 11.6 million ounces, along with 2.7 billion pounds of copper.
Looking to add value to its portfolio through subtraction, Goldcorp completed the sale of more than $500 million in noncore assets last year, the proceeds of which helped to fund the acquisitions in Chile.
Investor takeaway
Goldcorp left 2017 glistening a lot more than when it began the year. The company is well-positioned to realize its five-year growth strategy and increase shareholder value, and the new look to the portfolio should serve the company well.
Investors, however, shouldn't interpret this as a sign that now's the time to initiate or build a position in the gold-mining leader. Plenty of risks still remain, so, as always, tread carefully and dig much deeper before picking up shares.
