Tencent Music Entertainment Group V.TME

"it looks like there’s some opportunities"

[bohicam]

According to Goldcorp Chief Executive Officer Chuck Jeannes:

Wire: Bloomberg News (BN) Date: Sep 18 2012 0:01:00
Goldcorp Says M&A Valuations Attractive: Corporate Canada

By Liezel Hill
Sept. 18 (Bloomberg) -- Goldcorp Inc., the world’s second-
largest producer of the metal, said mining acquisition targets
are looking more attractive as tougher financing conditions have
depressed share prices.
“The development-company valuations have come down to
where, at least on paper, it looks like there’s some
opportunities,” Chief Executive Officer Chuck Jeannes, 53, said
in an interview last week. “There’s a lot of looking going
on.”
Exploration and development companies, or so-called
juniors, underperformed the large gold miners last year after
they struggled to raise funds and investors shunned risky
assets. The juniors are on average lagging the seniors again
this year, even after rising 25 percent since hitting a more
than two-year low on June 28.
The 74 companies in a Bloomberg Industries index of gold
explorers now trade at an average 1.53 times book value, versus
a three-year average of 2.58.
“A lot of the juniors have been hard up for cash, the
financing window wasn’t necessarily open,” Marc Sontrop, a
Toronto-based portfolio manager at Interward Asset Management
Ltd., said by phone on Sept. 14. “I think we’re going to see
takeover activity pick up, given the valuations.”
The Bloomberg Industries Global Explorers Gold Competitive
Peers Index has fallen 15 percent this year, compared with a 2.8
percent decline in an index of 14 senior gold producers, which
includes Vancouver-based Goldcorp. In that time, gold futures in
New York have gained 13 percent.

‘More Attractive’

“The challenge is now finding something that after
thorough due diligence you would want, and finding something
that the owners are willing to part with at what are
historically low prices,” Jeannes said in the interview on the
sidelines of the Denver Gold Forum. “There are things that look
more attractive today than they have been for some time.”
There have been seven takeovers of gold companies worth
$200 million or more announced this year, valued at $2.54
billion. That compares with nine deals valued at $11.61 billion
in the same period last year.
Shares of gold explorers, which rose sharply from December
2008 to March 2011, have been “beaten down” since then, said
Sonny Tahiliani, managing director at MacroMoves Capital
Advisors Inc., a New York-based consultancy.

‘Operational Hiccups’

“The tide went out due to a combination of factors
including overvaluation, stagnant gold price, cost escalation,
new super profits taxes, funding evaporation and high profile
operational hiccups by the majors, which highlighted to nervous
investors the rarity of economically feasible gold deposits,”
Tahiliani said by e-mail.
Jeannes said he expects gold equities broadly will
outperform the metal as investors seek to take advantage of
historically low valuations and producers promise to make better
investment decisions. Miners including Barrick Gold Corp., the
biggest producer of the metal by market value, and Kinross Gold
Corp. have said they will be more disciplined in spending on
projects and will target higher returns rather than output
growth.
“I think there is a positive reaction to that, that’s what
investors have wanted to hear, and so it’s giving them more
comfort in the industry,” Jeannes said. “It’s not ounces, it’s
value, and that’s always been our mantra.”
A focus on returns doesn’t exclude production growth, he
said. Goldcorp is building three new mines, in Canada and
Argentina, and has a joint venture with Barrick in the Dominican
Republic, Pueblo Viejo, that started production last month.

Cash Flow

The company’s cash flow per share may increase 75 percent
from 2012 to 2015, according to the average of analysts’
estimates compiled by Bloomberg. In comparison, Toronto-based
Barrick’s cash flow is projected to rise 9.3 percent in the same
period.
Goldcorp is also prepared to sell assets that don’t fit its
strategy or offer the right returns, Jeannes said. There are no
“obvious candidates” for divestitures right now, he said.
The company produced 2.51 million ounces of gold in 2011
and expects output of 2.35 million to 2.45 million this year.
Goldcorp raised its cost forecasts and lowered output
projections on July 10, citing difficulties at the Red Lake mine
in Ontario, its top producer, and water shortages at the
Penasquito operation in Mexico.
Large producers are more cautious about acquisitions after
“some big misses” with deals that weren’t well received by
investors, Silver Wheaton Corp. CEO Randy Smallwood said in an
interview.

‘Gun-Shy’

“The market is a bit gun-shy and there is a bit of a
sentiment to sit on the cash and be a bit more patient before
you go acquiring those growth opportunities,” he said in Denver
on Sept. 11. “At the same time, you’ve got these undervalued
equities that are screaming out that there’s some pretty good
deals out there in terms of acquisitions, so I don’t see that
lasting very long.”
Silver Wheaton, based in Vancouver, pays miners upfront for
a discount on future production, usually to help pay for project
development. Smallwood said about a third of the talks Silver
Wheaton is involved in right are with companies interested in
doing streaming deals to help fund acquisitions.
Detour Gold Corp., which plans to start production early
next year at its first gold mine, located in Ontario, said it’s
probably seen as a takeover target. That’s because it owns a big
operation in a mining-friendly region with construction nearing
completion, CEO Gerald Panneton said in a Sept. 12 interview.

‘Constant Analysis’

“I just hope it’s not soon, because it’s cheap now,”
Panneton said of his company’s stock price. Detour Gold, based
in Toronto, isn’t currently in any acquisition talks, he said.
As for Goldcorp, the company has “constant analysis of
various things going on year-round,” Jeannes said. The company,
which has mines in the Americas, would prefer to stay in the
region.
“We love the relative ease of running a north-south
strategy with all of our mines within four time zones,” Jeannes
said. “But as I’ve said for some time, we do look all around
the world -- we are the second-largest gold company on the
planet by market cap and we can’t just ignore half of the
planet.”

For Related News and Information:
Goldcorp news: G CN <Equity> CN BN <GO>
Commodity price forecasts: CPF <GO>
Top commodity stories: CTOP <GO>
Mining stories: NI MNG <GO>

--Editors: Steven Frank, Jacqueline Thorpe

To contact the reporter on this story:
Liezel Hill in Toronto at [phone] or
[e-mail]

To contact the editor responsible for this story:
Simon Casey at [phone] or
[e-mail]

[TAGINFO]

*G CN <Equity>
G CN <Equity>
ABX CN <Equity>
K CN <Equity>
*SLW CN <Equity>
SLW CN <Equity>
*DGC CN <Equity>
DGC CN <Equity>

NI CACOL
NI DOMREP
NI ARGENT
NI US
NI MEX

-0- Sep/18/2012 04:01 GMT

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Copyright (c) 2012, Bloomberg, L. P.

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