On January 13, Goldcorp (NYSE: GG) announced production and cost guidance for 2011.
Let’s just say that my investment thesis for Goldcorp—that this is a low-cost producer of gold with rising production—remains intact.
In 2010, the company said, gold production grew to a record 2.52 million ounces. For 2011, Goldcorp forecast production of 2.7 million ounces. Over the next five years, the company projected that gold production will increase by 60%.
The company hasn’t finished final accounting for 2010 operating costs (Goldcorp reports year-end results on February 24), but Goldcorp expects that total cash costs will be about $285 an ounce (including revenue from byproducts such as copper from mining gold), or less than $450 an ounce on a co-product basis (which allocates cost on a metal-by-metal basis.) Cash costs, the company projects, will continue a downward trend over the next five years.
After a cash payment of $765 million as part of its acquisition of Andean Resources, Goldcorp finished the year with $530 million in cash. Cash flow for 2011 will be approximately $2.5 billion. Goldcorp projects capital expenditures for 2011 at $1.8 billion, with plans for the construction of six new mines over the next five years.
I think Goldcorp should be a core part of any inflation-hedge, gold portfolio. (The stock is a member of both my Jubak’s Picks 12-18 month portfolio and my Jubak Picks 50 long-term portfolio.) I’d use the recent pullback in gold and gold stocks—Goldcorp is down almost 10% from December 6 to January 13—as an opportunity to build positions.
As of January 14, I’m raising my target price to $55 a share by October 2011 from my previous target of $51 by December 2010. The shares peaked in December around $46.
Full disclosure: I don’t own shares of any of the companies mentioned in this post in my personal portfolio. The mutual fund I manage, Jubak Global Equity Fund (JUBAX), may or may not now own pos
