In a series of recent articles we investigated the country risk of various mining jurisdictions in which US-listed precious metal miners are active. We collated country risk ratings for these countries from eight different sources and averaged these ratings into compounded country risk scores. The most recent results from this work can be found in this article. Most definitions of country risk include factors such as political risk, exchange rate risk, economic risk, sovereign risk, transfer risk, socio-economic risk and others. Depending on the source, various contributing factors of country risk are weighted differently. Readers interested in the specific definitions are encouraged to follow the links to our sources given in this article. We used our compounded country risk score to evaluate country risk exposure for selected gold and silver mining companies using 2011 production results and reserve statements. As 2012 data becomes available we are providing updates and in the present article we would like to do so for Goldcorp (GG).
As of this week, Goldcorp is the largest gold mining company by market capitalisation ($22.6B). The forward P/E has dropped to 9.73 in the aftermath of the recent drop in gold price. Analysts on Yahoo.com give a median price target of $47.50; close to twice the share price of $27.84 at the time of writing. Last year's gold production was reported as 2.4M gold equivalent ounces from 11 mines in 6 countries. The table below gives the 2012 numbers for production, reserves and resources at each of Goldcorp's mines and projects. For this article only precious metals were considered. For the computation of gold equivalent ounces we used a silver to gold ratio of 50.
Consolidating the production and reserve data showing summations for each country of exposure results in the table below. The data is already calculated in percentages of gold-equivalent ounces. Country risk ratings as documented here are also shown in the central column of the table. Country risk ratings range from 0 to 100 with low numbers indicating low risk and high numbers indicating high risk. The right side of the table shows the weighted risk contributions for each country separately for production, reserves and resources with summarised scores in the bottom line. The individual ratings can be interpreted as ratings going from present risk (production) into the future (inferred resource).
The country risk rating for Goldcorp based on production computes to 30.07 slightly down from last years rating of 30.69. This rating indicates moderate risk levels.
The rating increases sharply to 37.42 when looking at gold reserves due to a proportional smaller contribution by Canadian mines and a significantly higher contribution from the Pueblo Viejo mine in the Dominican Republic.
Risk levels decrease again when considering resources (35.01 for measured & indicated, and 27.25 for inferred) due to proportionally rising contributions from Canada and Chile.
Country Risk ratings are slightly lower for the 2012 data when compared to last year as shown in the diagram below. However, we expect increasing risk levels going into the near-term future due to production at the Pueblo Viejo mine in Dominica gaining in importance. However, we also note that country risk assessments for the Dominican Republic have been showing improvements. A continuation of this trend would also benefit Goldcorp's country risk profile.
Note: last year's statistics did not differentiate between different resource classes.