Goldcorp (NYSE:GG) announced its Q2 earnings on Thursday morning. In all the report was solid, as the company grew earnings from $114 million in the second quarter of 2013 (adjusted) to $164 million in the most recent quarter. Operating cash-flow came in at $376 million compared to $388 million last year due to a falling gold price. Production rose marginally from 646,000 ounces to 648,000 ounces despite the fact that Goldcorp is a growth company, as the company spent last year developing projects to bring into production this year. The company brought down its production costs meaningfully: cash costs went from $646/oz. on a by-product basis down to $470/oz. on a co-product basis. All in sustaining costs came down to $852/oz. from $1,227/oz.
From these figures we can see that this was a relatively productive quarter for Goldcorp. The company has done an excellent job of bringing production costs down as it has been working to bring its Cerro Negro and Eleonore projects into production (it has successfully commenced production at the former project). Given these achievements it shouldn't be surprising that Goldcorp is the highest valued gold miner in the world despite the fact that there are other companies that produce more gold.
However, despite my bullish statements in February, investors should be concerned about a few things. First, the stock isn't cheap on a price to earnings or a price to cash-flow basis as investors are willing to pay a premium for the company's growth. That's fine except that after this year there is no apparent immediate growth, and this is a second reason for concern. The company has development projects but none that are near production. This is why management was so eager to go after Osisko Mining and why it will likely try to buy another company with a large, long-life mine (although these are becoming increasingly rarer). Third, the company has a couple of projects such as Wharf, El Sauzal, and Marlin which are near the end of their lives assuming the company doesn't find more resources. Therefore, despite these strong Q2 results I would hold back on taking a position in Goldcorp for now and see what develops.
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