Heading into earnings for the myriad miners of silver and gold, another sharp retreat by the notoriously volatile industry raises the prospect once more for savvy Fools to identify some unmistakable bargains in this long-term bull market.
I have called Goldcorp's (GG +0.00%) stock a considerable bargain anywhere beneath $50 per share, and I stand by that long-term assessment despite a set of specific challenges that have affected recent price performance. Goldcorp shares shed more than 2% Wednesday on the eve of that company's third-quarter report, during a day that saw gold dropping to test price support at $1,700 per ounce. Because this well-respected miner has run into its share of near-term operational snags in recent months, it seems a timely opportunity to discuss the sorts of items to be watchful for in Thursday's report.
First and foremost, Fools will wish to remain alert for any updates regarding the Red Lake operation. Goldcorp was forced to reduce guidance from its flagship operation back in July after encountering a combination of "seismicity" concerns that slowed efforts to conduct "de-stressing" work in the surrounding rock to ensure a safe work environment. That de-stressing work has since been completed, but evaluation of the potential for similar issues to recur is ongoing. As we learned through Agnico-Eagle Mines' (AEM 0.22%) geotechnical challenges at the Goldex mine, these matters require careful analysis before a conclusive determination can be made.
Also impacting Red Lake's output, Goldcorp found that portions of the mine's Footwall Zone were showing ore grades beneath those anticipated, and any further insight into the scope of that new development will be key to gauging whether and when the operation will be able to return to previously anticipated production levels. I don't expect too much clarity to emerge from this earnings report, since the company has indicated it would spend "the remainder of 2012" evaluating these developments, but that doesn't mean Foolish investors can't remain watchful for any clues they may wish to provide.
What I think Fools will find as they scrutinize Goldcorp's results are the hallmark signs of a quality mine operator that's swift in responding to the periodic challenges that are utterly inherent to commercial-scale mining activity. The revised production guidance issued after the second quarter is likely to hold, and I suspect the company will be well on the way toward accessing fresh water supplies at Peñasquito after that region's drought drained 11% from the company's initial estimate for 2012 output from the mine. Investors with positions or interest in Silver Wheaton (SLW 0.66%) or Royal Gold (RGLD +1.26%) will likewise wish to take note, as both companies are beneficiaries of full-capacity production at Peñasquito. A cozy realized gain on the sale of some shares of Primero Mining (PPP +0.00%) will likely be spread across the third and fourth quarters, further enhancing the company's enviable financial strength.
I'll be watching for those updates and much, much more as Goldcorp reveals its third-quarter earnings, and I invite investors to stay tuned for my post-earnings analysis by bookmarking my article list or following me on Twitter.
- Add Goldcorp to My Watchlist
- Add Agnico-Eagle Mines to My Watchlist
- Add Silver Wheaton to My Watchlist
- Add Royal Gold to My Watchlist
- Add Primero Mining to My Watchlist
