The Benchmark to Follow Right Now

by Mitchell Clark, B. Comm.

Regular readers of this column know that I like to follow a number of companies on a regular basis, not just for investment examples, but also to use as benchmarks as to what’s going on in the world. What’s happening with IBM, Hewlett-Packard, and GE tells you a lot about the state of the global economy, as well as the state of specific industries.

I always like to follow several resource companies — and one that I take a keen interest in is Goldcorp Inc. (NYSE/GG), one of the best gold producers in the business.

This company sells all its gold (and other metals) in an unhedged manner so, whatever the spot price of the commodity, that’s the price they get when they sell a gold bar. Now, this also works in the opposite direction and this is why Goldcorp’s stock price trades similarly to the spot price of the commodity.

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I really like this company and how it does business. I also think that owning some gold-related investments will be a very successful strategy, as inflation will creep back into the economy. You can’t have all this spending with borrowed money as well as a whopping increase in the money supply without some price inflation down the road.

What’s interesting about Goldcorp is its operational performance. In its first quarter this year, the company’s revenues were basically flat, because the spot price of gold retreated. The company, however, was able to increase its production substantially and was able to grow its profits.

Earnings for its latest quarter ended March 31, 2009, grew to 290.9 million dollars, or $0.40 per share, representing an increase of 27% over the first quarter of 2008. The company reported that its gold sales in the first quarter increased to 607,900 ounces, with a total cash cost of $288.00 per ounce. This was a substantial increase in production from 517,800 ounces at a total cash cost of $238.00 per ounce in the first quarter of 2008. Taking into consideration all the metals it produced in the first quarter, the company’s total cash costs were $353.00 per gold equivalent ounce, as compared to $395.00 per ounce in 2008. That’s headed in the right direction.

This year, Goldcorp expects to produce some 2.3 million ounces of gold. The company also expects to expand its gold production by 50% over the next five years. This expected increase in production is very important, because, just like its first quarter of 2009, the company has demonstrated that it can grow its profits, even if gold sales are flat. So, even if the spot price of gold trades between $900.00 and $1,000 an ounce, a 50% increase in production over the next five years should yield some record profits.

This company can still do great even if gold stays around current levels. But, if the spot price goes up over the coming years, as I think it will, Goldcorp could be in for some major windfall profits. I don’t know if this situation will pan out (sorry about the pun), but, like I say, even if the price of gold stays at current levels, this company should be able to produce an excellent performance.

The Benchmark to Follow Right Now
by Mitchell Clark, B. Comm.

Regular readers of this column know that I like to follow a number of companies on a regular basis, not just for investment examples, but also to use as benchmarks as to what’s going on in the world. What’s happening with IBM, Hewlett-Packard, and GE tells you a lot about the state of the global economy, as well as the state of specific industries.

I always like to follow several resource companies — and one that I take a keen interest in is Goldcorp Inc. (NYSE/GG), one of the best gold producers in the business.

This company sells all its gold (and other metals) in an unhedged manner so, whatever the spot price of the commodity, that’s the price they get when they sell a gold bar. Now, this also works in the opposite direction and this is why Goldcorp’s stock price trades similarly to the spot price of the commodity.

I really like this company and how it does business. I also think that owning some gold-related investments will be a very successful strategy, as inflation will creep back into the economy. You can’t have all this spending with borrowed money as well as a whopping increase in the money supply without some price inflation down the road.

What’s interesting about Goldcorp is its operational performance. In its first quarter this year, the company’s revenues were basically flat, because the spot price of gold retreated. The company, however, was able to increase its production substantially and was able to grow its profits.

Earnings for its latest quarter ended March 31, 2009, grew to 290.9 million dollars, or $0.40 per share, representing an increase of 27% over the first quarter of 2008. The company reported that its gold sales in the first quarter increased to 607,900 ounces, with a total cash cost of $288.00 per ounce. This was a substantial increase in production from 517,800 ounces at a total cash cost of $238.00 per ounce in the first quarter of 2008. Taking into consideration all the metals it produced in the first quarter, the company’s total cash costs were $353.00 per gold equivalent ounce, as compared to $395.00 per ounce in 2008. That’s headed in the right direction.

This year, Goldcorp expects to produce some 2.3 million ounces of gold. The company also expects to expand its gold production by 50% over the next five years. This expected increase in production is very important, because, just like its first quarter of 2009, the company has demonstrated that it can grow its profits, even if gold sales are flat. So, even if the spot price of gold trades between $900.00 and $1,000 an ounce, a 50% increase in production over the next five years should yield some record profits.

This company can still do great even if gold stays around current levels. But, if the spot price goes up over the coming years, as I think it will, Goldcorp could be in for some major windfall profits. I don’t know if this situation will pan out (sorry about the pun), but, like I say, even if the price of gold stays at current levels, this company should be able to produce an excellent performance.