A CIBC report itemized the revisions and noted their cumulative impact.
In a March 11 research note, analyst Anita Soni reported that CIBC lowered its price target on Goldcorp Inc. (G:TSX; GG:NYSE) to US$12 per share from US$12.50 (current share price is about US$10.93) after adjusting its model on the major "to reflect 2019 guidance, year-end results and technical reports."
Soni noted CIBC made three changes to its standalone model of Goldcorp and described what they were.
In one, the analyst relayed, CIBC lowered its projected 2019 total production to 2.279 million ounces (2.279 Moz) from 2.324 Moz due to Goldcorp intending to lower output at Cerro Negro, Musselwhite and Porcupine. CIBC's adjusted figure still falls within the miner's guidance of 2.2–2.4 Moz of production in 2019.
A second model revision involved increasing costs and all-in sustaining cost (AISC) to $503 per ounce ($503/oz) and $886/oz, respectively, up from $490/oz and $858/oz. Spurring this change, Soni indicated, were actual Q4/18 figures, 2019 guidance and recently obtained technical reports on Éléonore and Red Lake. CIBC's new estimates are higher than Goldcorp's projected ranges of $400–500/oz for actual costs and $750–850/oz for AISC.
Third, CIBC raised its 2019 capex estimate on Goldcorp, to $936 million from $803 million to reflect increases at Cerro Negro and Peñasquito, Soni explained. Unlike the previous, the new dollar amount falls within Goldcorp's guidance of $865–975 million.
The result of CIBC's new financial model on the gold miner lowered the net present value 5% (NPV5) by about 4%. As such, the bank trimmed its target price on Goldcorp. It does, however, maintain its Neutral rating.
CIBC expects Goldcorp shares to be range-bound "awaiting the final outcome of the proposed acquisition by Newmont."
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Disclosures from CIBC, Goldcorp Inc., March 11, 2019
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Important Disclosure Footnotes for Goldcorp Inc. (GG)
CIBC World Markets Inc. expects to receive or intends to seek compensation for investment banking services from Goldcorp Inc. in the next 3 months.
CIBC World Markets Corp., CIBC World Markets Inc., and their affiliates, in the aggregate, beneficially own1% or more of a class of equity securities issued by Goldcorp Inc.
Disclosure for Newmont Mining Corp. (NEM): CIBC World Markets Inc. expects to receive or intends to seek compensation for investment banking services from this company in the next 3 months.