George Gutowski

Goldcorp: There Are More Efficient Ways To Capture Gold

My concerns with Goldcorp or any Gold producer are always the corporate event risks. While Goldcorp is based in the America's the geo-political risks are muted but still existent. They are currently undertaking huge developments which offer completion risks, potential cost over runs issues as well as the day to day difficulties of extracting economically.

I have always been skeptical of the what if gold goes to $1,000 scenario. Yes the number appears highly leveraged. But then you probably need catastrophic world events to drive that price. If catastrophic events do occur and gold becomes a more important medium of exchange then you will want it in hand and not held as a financial asset in a stock portfolio.

Finally as a gold producer Goldcorp is naturally depeleting its reserves. It must continue spending money to expand existing reserves if possible and economic and or find entirely new reserves. Hence my comment about very low levels of exploration expenditure.

To my way of thinking gold companies at the exploration stage represent attractive leverage. As they transition from exploration and become mature producers the risk premium is not warranted and I feel actually owning gold either physically or in tradeable form is preferable.

A bar of gold will not ask you for anything. A mine manager will always have a capital expenditure budget that needs to be closely managed.