Goldcorp
While most of the interest is on the juniors and explorers, Goldcorp is a sound major that is printing money like a bernank.
Moody's just gave them a currency upgrade:
The following is a press release from Moody's Investors Service:
New York, June 14, 2011 -- Moody's Investors Service upgraded Goldcorp Inc's foreign currency issuer rating to Baa2 from Baa3. The outlook is stable.
RATINGS RATIONALE
The upgrade to Baa2 reflects Goldcorp's stronger production profile following the completion and ramp up of the Penasquito gold/silver mine in Mexico and improvement at other key mines such as Red Lake as well as the company's ability to continue to achieve very competitive production costs. This profile will continue to support stronger debt protection metrics, which we believe are sustainable even if gold prices correct from present robust levels. At current gold and silver prices this operating profile will also provide solid margins and cash flow in 2011 and provide a good base for ongoing strategic investments.
The Baa2 rating reflects Goldcorp's multiple mine, metals (gold and silver predominate), and geographic diversity, as well as the politically stable locations of the company's operations. In addition, the rating acknowledges the company's strengthening reserve profile (60.1 million ounces of gold at year end 2010), competitive cost position (aided by substantial by-product credits), and ability to generate solid operating cash flow. Lastly, the company's debt-light capital structure provides it with financial flexibility to pursue its aggressive growth profile while maintaining appropriate leverage for its rating even should gold prices retreat to around the $1,000/oz level.
At the same time, the rating considers the investment requirements ($1.8 billion planned capex in 2011) associated with Goldcorp's strategic growth objective, which is to increase gold production by over 60% to 4.0 million ounces (from the current 2.5 million ounces) by 2015, principally from organic growth from its project pipeline, including key projects such as Pueblo Viejo, expected start-up 2012, Cerro Negro expected start-up in 2013, Cochenour, expected start-up late 2014, and Eleonore, expected start-up late 2014. In addition, we expect cost upward cost pressure to continue industry wide and note that Goldcorp's earnings remain exposed to volatility in the Canadian Dollar and Mexican Peso given the high labor component in the company's cost structure (specifically at the company's Penasquito mine)
The stable outlook reflects Moody's expectation that the company will, over the next 12 to 18 months, continue to generate solid operating cash flow, prudently manage its investment decisions relative to anticipated levels of cash flow, and maintain a conservative capital structure and healthy liquidity position.
Given the company's extensive capital investment requirements over the next several years, along with Moody's expectation for a pullback in gold and silver prices, an upgrade is unlikely over the next 12 to 15 months.
However, should Goldcorp continue to progress toward its growth targets while at the same time maintaining free cash flow to debt of greater than 12% and debt to EBITDA of less than 1.50x on a sustainable basis, an upgrade could be considered.
A downgrade could be considered should operating performance deteriorate to the point that debt to EBITDA exceeds 2.75x, CFO minus dividends to debt falls short of 20%, capital expenditure requirements lead to a persistently negative ratio of free cash flow to debt, or liquidity contracts substantially.
Upgrades:
.Issuer: Goldcorp Inc.
... Issuer Rating, Upgraded to Baa2 from Baa3
Incorporated in Ontario and headquartered in Vancouver, British Columbia, Goldcorp is primarily a gold and silver producer with 2010 gold sales of approximately 2.5 million ounces and gold reserves of approximately 60 million ounces. The company's operating assets (as of year-end 2010) include three gold mines in Canada (Red Lake, Porcupine and Musselwhite), three mines in Mexico (Penasquito, Los Filos and El Sauzal), the Marlin mine in Guatemala, the Marigold mine (67% interest) and Wharf mine in the United States, and the Alumbrera mine (37.5% interest) in Argentina.
The company's pipeline of projects include the Eleonore and Cochenour gold projects in Canada, the Cerro Negro project in Argentina, the El Morro project in Chile and the Pueblo Viejo project (40% interest) in the Dominican Republic. In 2010, Goldcorp generated $3.8 billion of revenues and $2.0 billion of EBITDA.
