Scotia Capital Analyst: Goldcorp Offers Great Growth with Low Risk

Goldcorp Inc. (GG) has received a major endorsement from Scotia Capital analyst David Christie. While Mr. Christie noted that the stock "seems expensive" compared to peers, he still likes almost everything the company has to offer.

He pointed out that a wave of acquisitions has given Goldcorp 43% production growth between 2007 and 2012, which ranks as the best among the big producers. On top of that, the company has relatively low cash costs and is in very mining-friendly jurisdictions.

In a note to clients, he wrote:

With 74% of its reserves in Canada, the United States, and Mexico, Goldcorp has what we believe to be the lowest political risk profile of the senior global gold producers.

Goldcorp has built itself into a large producer through acquisitions, and Mr. Christie figures there could be more to come. The company has no debt and plenty of cash after selling its stake in Silver Wheaton Corp. (SLW) for C$1.5-billion, and he expects it will have almost C$2.5-billion by 2012 if nothing changes.

"The question going forward is, 'Can Goldcorp continue to add value and growth through acquisitions, or will exploration need to become a bigger focus for the company?'" he wrote. He also thinks a big part of the story going forward will be Goldcorp's ability to build and run the giant Penasquito mine in Mexico.

Mr. Christie rates the stock a "sector perform" with a price target of $50.00 a share. He noted that Goldcorp trades at higher multiples to net asset value and cash flow per share than its competitors, and that the current price takes into account its big growth profile. However, he thinks it becomes a "very attractive investment" when it trades below $38.00 a share.