Goldcorp Raises Its Holdings In Probe Metals

| About: Goldcorp Inc. (GG)

Summary

GoldCorp is acquiring 4.4 million shares of Probe Metals for $2.9 million. The acquisition is conditional on the closing of the acquisition of Adventure Gold by Probe Metals.

Goldcorp will own an aggregate of 10,577,846 Probe Metals Shares, representing approximately 15% of the issued and outstanding.

GG stock price has increased over 40% since January, and it is time to take some profit.

Source: Goldcorp - Éléonore Site.

Goldcorp Inc. (NYSE:GG)

This article is an update of my preceding article about Goldcorp Inc. published on Mars 2, 2016.

Goldcorp Inc., released its fourth-quarter 2015 results on February 25, 2015.

Today, April 8, 2016, The company announced the following:

it has entered into an agreement with Probe Metals Inc. ("Probe Metals"), pursuant to which the Company has agreed to subscribe for 4,400,000 common shares (the "Probe Metals Shares") in the capital of Probe Metals at a price of $0.66 per share for an aggregate subscription price of $2,904,000 (the "Private Placement").

The 4,400,000 Probe Metals Shares represent approximately 12.6% of the current issued and outstanding Probe Metals Shares. The acquisition of the Probe Metals Shares is conditional on the closing of the acquisition of Adventure Gold Inc. by Probe Metals (the "Transaction").

The Probe Metals Shares trade on the TSX Venture Exchange under the symbol "PRB", and the Probe Metals Shares will be issued from treasury pursuant to a private placement. Goldcorp currently owns 6,177,846 Probe Metals Shares (17.7% of the current issued and outstanding Probe Metals Shares) and has the right to acquire ownership of 4,400,000 Probe Metals Shares pursuant to the Private Placement, which will result in ownership of an aggregate of 10,577,846 Probe Metals Shares, representing approximately 30.3% of the current issued and outstanding Probe Metals Shares. Following completion of the Private Placement and the Transaction, Goldcorp will own an aggregate of 10,577,846 Probe Metals Shares, representing approximately 15% of the issued and outstanding Probe Metals Shares.

Probe Metals Inc, is a company Quebec-Ontario gold exploration, the company commenced trading on the TSX Venture Exchange under the symbol PRB.

From the last presentation of Probe metals:

Commentary:

Again, the acquisition of the Probe Metals Shares is conditional on the closing of the acquisition of Adventure Gold Inc. by Probe Metals, which seems the main focus that motivated Goldcorp in the first place.

Adventure Gold Inc., owns the Val D'or East project. Goldcorp will own 15% of the shares outstanding of Probe.

This is a tiny investment for Goldcorp. It may be a good bet for the future.

However, the company must focus on some immediate production problems. Recently, Goldcorp indicated a poor 2016 guidance, down about 14.2% using the middle point estimate:

Mine 2015 2016 %
Penasquito 860,3 550 −36,07%
Cerro Negro 507,4 500 −1,46%
Pueblo Viejo (40%) 381,7 420 10,03%
Red Lake 375,7 315 −16,16%
Eleonore 268,1 265 −1,16%
Porcupine 274,3 262,5 −4,30%
Musselwhite 270,3 250 −7,51%
Others 526,6 410 −22,14%
3464,4 2972,5 −14,2%
Click to enlarge

This situation has been aggravated by a recent dividend cut to $0.02/qtr. from $0.02/month, a cut of 2/3.

Furthermore, Proven and probable gold/silver reserves were down 17.9% year over year.

Reserves Gold M oz Silver M Oz
P1 + P2 - 2015 40,7 704,6
P1 + P2 - 2014 49,6 788,5
Click to enlarge

I will be more impressed if the company indicates a change in strategy that can enhance 2016 production.

Peñasquito mine production is expected to go down approximately 36% in 2016. The grades are expected to moderate over the year as mining transitioned away from the high grade portion of the pit.

Also M. Chuck Jeanne said that he was disappointed by Cochenour (Red Lake), and the production potential from this project has not been added to the 2016 production guidance.

Most importantly, to me personally is my disappointment at Cochenour. I helped buy this project and have pushed it along for the last seven years. We had planned and hoped for this deposit to be in production this year but it's simply geologically complex than we expected. And I am confident that Cochenour will be an important part of Red Lake's future. But until it's determined exactly how it'll be mined and how much it will produce, it won't be in the guidance.

In short, 2016 seems a tough year for Goldcorp on the production standpoint. However, the gold price has been quite strong since the beginning of the year and has helped the price per share which is up 42% since the January.

I believe it is time to take some profit.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.