To: vraimantYou've got to be kidding. Looking at financials and following the money isn't self-righteous, it is prudent. I didn't start this with, I think I'll go undermine Goldcorp, but to ensure I hadn't missed something about Northern Orion, and to do a relative value comparison of another stock. It just so happened that Goldcorp was the most relevant stock because of the common ownership of the Alumbrera mine. I anticipated finding Goldcorp somewhat overvalued say 10%-20%, not something trading at more than double or triple the price the fundamentals actually support.
Goldcorp is in a serious gold bubble I don't see how it can't seriously crash at some point. Hype is the only thing that is keeping it up because the financials just aren't there. Yeah, the market isn't rational, not at all, but eventually it will correct.
The value of the reserve in the ground for Goldcorp is absolutely pathetic compared to the market cap.
50 million ounces @625 is $31 billion.
1.5 billion pounds copper @ $2.85 is $4 billion.
I don't know the silver, but the gold and copper aren't even double market cap and there are costs to getting it out of the ground.
Most other companies, well maybe not the bubbled gold companies, have reserves in the ground worth at least 5-10 times the market cap.
Sure, Goldcorp has interests in properties that still require drilling, feasiblity studies, capital costs to build mines, etc. But didn't I just read on here that big gold finds aren't happening, and Goldcorp needs big gold finds. Have you checked the financials, 2 out of 10 of the mines were making 80% of the money. And heck, when I think about it, didn't I just over state the reserve of gold by 9 million ounces? Isn't it actually 41 million ounces?
And there there are the exceptions, the grossly undervalued exceptions, like Northern Orion -- reserves are a whopping 41 times the market cap.
It's Alumbrera reserve share is 500 million pounds copper, 750,000 oz gold.
And its gem, Agua Rica, has 7.6 billion pounds of copper, 3 million ounces of gold and 350 million pounds of Molybdenum, and this is after subtracting for what isn't recoverable. In the ground there is actually 13 million ounces of gold, but only 6 million ounces in the reserve and it has a low recovery rate, to end up with 3 million ounces that can be sold. Copper, actually 17 billion pounds of resource, and moly actually 1.4 billion pound.
Copper - $23 billion
Gold - $2 billion
Molybdenum - $9 billion
Total - $34 billion
The reserve in Northern Orion is approaching that of Goldcrop, but its diluted market cap is about 1/25th of Goldcorp. Undiluted its market cap is 1/40th of Goldcorp. And if I did that overstating error that I think I did, Northern Orion's reserves exceed Goldcorps.
Even at bearish prices of $2 for copper, $400 for gold and $12 for moly, in the ground value of reserves, is $21 billion or 26 times market cap.
One is seriously undervalue, and the other is seriously overvalued. The market will correct.