Goldcorp Inc. (USA) (GG): Will This Gold Miner Stop Falling?

Grade is a percent of gold in the ore. When there is little gold in the ore, costs rise. This happens because the cost to get the gold out of the earth is the same, regardless how much gold is in the ore. This cost spreads over the lesser amount of gold, thus raising all-in sustaining costs. Nevertheless, Goldcorp stated that it is on track to meet its all-in sustaining cost guidance between $1000 and $1100.

Liquidity is another important point to consider. Goldcorp reported $1.46 billion of cash and cash equivalents at the end of the first quarter. The company issued $1.5 billion in senior unsecured notes. Goldcorp has $2.27 billion in long-term debt. It has a very comfortable debt-to-equity ratio of 0.10. In comparison, Barrick has 0.59 debt-to-equity while Newmont has 0.37 debt-to-equity ratio. Goldcorp’s liquidity position is stable.

Bottom line

Goldcorp Inc. (USA) (NYSE:GG) trades at a 14.34 P/E and 11.79 forward P/E. In the current environment, these multiples are not very important because estimates for earnings are changed every month. Goldcorp has a solid portfolio of assets, good liquidity position, and low debt. If gold prices continue to fall, earnings projections for Goldcorp would fall too. This would lead to further decline in the price of the stock. Goldcorp is a very interesting stock to follow, and it might be attractive in the long-term. However, I do not advise to catch a falling knife. Gold prices must stabilize before Goldcorp’s shares would be able to rise.

The article Will This Gold Miner Stop Falling? originally appeared on Fool.com and is written by Vladimir Zernov.

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