The shares of Goldcorp Inc. (USA) (NYSE:GG) and Teck Resources Ltd (USA) (NYSE:TCK) are trading higher after a joint venture between the two was announced. According to the announcement, the companies have decided to combine their projects in the El Morro and Relincho mines in Chile into a single project. It will be called Project Corridor and the project will progress as a 50/50 joint venture. The joint approach will help both Goldcorp Inc. (USA) (NYSE:GG) and Teck Resources Ltd (USA) (NYSE:TCK) cut their capital expenditures. The press release has revealed an initial capital cost of $3.5 billion for Project Corridor, which is much lower than the individual capital costs of $3.9 billion, as per 2011 studies, and $4.5 billion, as per 2013 studies, for the El Morro and Relincho projects, respectively. On a combined basis, these two projects would contain nearly 16.6 billion pounds of copper, 8.9 million ounces of gold, and 464 million pounds of molybdenum, based upon mineral reserve figures dated December 31, 2014.
While discussing the benefits of the joint venture, Don Lindsay, President and CEO of Teck Resources Ltd, said, “Combining these two neighbouring assets is a common sense approach that allows us to consolidate infrastructure to reduce costs, reduce the environmental footprint and provide greater returns over either standalone project.” The companies plan to transport ore from the El Morro site to a single line mill in Relincho.
The shares of Goldcorp Inc. (USA) (NYSE:GG) are up by 3.13% in today’s trading session to $13.52 per share and down by 27.27% year-to-date. The shares of Teck Resources Ltd (USA) (NYSE:TCK) are trading comparatively higher today, gaining 22.10% to $6.74 per share. Its shares have declined by 51.02% year-to-date.
The deal should please the smart money we follow, who were bullish on both companies in the second quarter. In Goldcorp Inc. (USA) (NYSE:GG), 24 hedge funds held net positions worth $848.23 million. The aggregate positions rose by 5.53% in comparison with the first quarter, while the hedge fund ownership jumped by five. The smart money maintained a similar outlook for Teck Resources Ltd (USA) (NYSE:TCK), with 15 hedge funds having aggregate holdings of $97.69 million. The hedge funds bought up plenty of shares of the company, pushing their aggregate holdings 176.50% higher. At the end of the second quarter, three more hedge funds reported equity positions in Teck Resources Ltd (USA) (NYSE:TCK) compared to three months earlier.
At Insider Monkey, we track hedge funds’ moves in order to identify actionable patterns and profit from them. Our research has shown that hedge funds’ large-cap stock picks historically delivered a monthly alpha of six basis points, though these stocks underperformed the S&P 500 Total Return Index by an average of seven basis points per month between 1999 and 2012. On the other hand, the 15 most popular small-cap stocks among hedge funds outperformed the S&P 500 Index by an average of 95 basis points per month (read the details here). Since the official launch of our small-cap strategy in August 2012, it has performed just as predicted, returning 118% and beating the market by more than 60 percentage points. We believe the data is clear: investors will be better off by focusing on small-cap stocks utilizing hedge fund expertise rather than large-cap stocks.
