Goldcorp: Strong Growth, Dividends Attract Investors

Includes: ABX, GG
by: James West

Goldcorp’s (NYSE:GG) announcement Monday of its seventh monthly dividend payment to shareholders of $0.015 per common share underscored the company’s strong growth and attractiveness to investors.

The company’s share price has climbed steadily throughout 2009 from $37.75 in January to Friday’s close of $41.43, a gain of 9.7%. That is still a far cry from the company’s all time high of $52.48 touched just about one year ago on July 15, 2008, but also well up from the company’s multi-year low of $17.77 set in October last year.

Goldcorp raised $862 million in June through the issuance of 2% convertible notes, which it said would be used to retire debt associated with higher cost revolving credit facility and for capital expenditures and general working capital.

Goldcorp has been growing steadily through a strategy of acquisition of mid-tier gold producers in politically safe jurisdictions, as evidenced by its 2008 acquisition of Gold Eagle Mines Ltd. for $1.5 billion, and its 2006 acquisition of Glamis Gold Corp.

Goldcorp earned US$506 million on revenue of $2.41 billion in 2008, amounting to net earnings for shareholders of $2.07 per share, an increase of 218% over 2007’s net earnings of $0.65 a share on revenue of $2.2 billion. The company produced 2.3 million ounces of gold in 2008, and grew reserves to 46.2 million ounces from 43.3 million ounces in 2007.

Goldcorp expects to increase gold production to 3.5 million ounces annually by 2013 through the development of its Penasquito Project in Mexico and Pueblo Viejo in the Dominican Republic, where it is in a joint venture with Barrick Gold Corp. (NYSE: ABX).

CEO Chuck Jeannes said the company would continue to seek out “transformative” acquisition opportunities such as Glamis and Gold Eagle, and was in no hurry to make acquisitions just for the sake of size.

Disclosure: Long ABX and GG