Could Goldcorp Inc. Rally in 2016?

Here’s why Goldcorp Inc. (TSX:G)(NYSE:GG) should be on your radar.

The Motley Fool

Gold miners really took it on the chin this year, and investors are wondering if 2016 could finally be the year that gold rebounds.

With the Fed now raising rates, you might think gold is headed for more pain, and it certainly could be, but support in the past few trading sessions suggests that not everyone in the market thinks so.

Goldcorp Inc. (TSX:G)(NYSE:GG) is often cited as the go-to stock in the sector. Let’s take a look at the current situation to see if the company could be poised for a rally next year.

Production

Goldcorp reported Q3 2015 production of 922,200 ounces, up 42% from the same period last year. The strong growth is the result of new mines coming online after several years of heavy investment. Production for 2015 is expected to be at the high end of the guidance for 3.3-3.6 million gold equivalent ounces.

The company’s Eleonore and Cerro Negro properties went into commercial production in 2015 and are still ramping up to their design capacity. The facilities hit a few speed bumps this year, which is par for the course in the industry, but the shift from development to production is significant for Goldcorp’s investors.

As production increases, costs should continue to come down. Goldcorp said Q3 2015 all-in-sustaining costs came in at US$848 per gold equivalent ounce, down significantly from US$1,066 per ounce in Q3 2014.

Balance sheet and cash flow

Goldcorp’s balance sheet is in good shape. The company finished Q3 with long-term debt of just US$2.5 billion and held US$330 million in cash, cash equivalents, and money-market holdings.

The firm also has US$3 billion in credit lines available.

Free cash flow for Q3 was US$243 million, a nice turnaround from the previous year when the company reported a negative number. The change comes as a result of higher production and lower capital spending.

Should you buy Goldcorp?

With much of the major investment on new mines now behind it, Goldcorp is in a position to generate solid free cash flow in the coming years. If gold prices firm up, the increase could be significant.

Forecasts for the price of gold in 2016 are all over the map, so more volatility should be expected. I wouldn’t back up the truck just yet, but contrarian types who think gold is near a bottom might want to start a small position in the stock.

If gold takes off in 2016, Goldcorp will certainly move with it.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Andrew Walker owns shares of Goldcorp.

More on Metals and Mining Stocks

Gold bars
Metals and Mining Stocks

Why Alamos Gold Jumped 7% on Wednesday

Alamos (TSX:AGI) stock and Argonaut Gold (TSX:AR) surged after the companies announced a friendly acquisition for $325 million.

Read more »

Nuclear power station cooling tower
Metals and Mining Stocks

If You’d Invested $1,000 in Cameco Stock 5 Years Ago, This Is How Much You’d Have Now

Cameco (TSX:CCO) stock still looks undervalued, despite a 258% rally. Can the uranium miner deliver more capital gains to shareholders?

Read more »

Super sized rock trucks take a load of platinum rich rock into the crusher.
Stocks for Beginners

Cameco Stock and More: 3 TSX Commodity Titans to Watch in 2024

Cameco stock and these others will provide you with growth that goes beyond just a year or two, with all…

Read more »

Handwriting text writing Are You Ready For Tomorrow question. Concept meaning Preparation to the future Motivation Stand blackboard with white words behind blurry blue paper lobs woody floor.
Stocks for Beginners

3 Reasons to Buy Lundin Stock Like There’s No Tomorrow

Lundin stock (TSX:LUN) has been killing its production of copper and plans on blowing its records out of the water…

Read more »

Gold bars
Stocks for Beginners

TSX Materials in March 2024: The Best Stock to Buy Right Now

Materials have been quite volatile, though the price of gold has surged to all-time highs. That makes this stock a…

Read more »

Gold bars
Metals and Mining Stocks

Will Gold Stocks Rally in 2024?

Down almost 30% from all-time highs, Franco-Nevada is a gold mining stock trading at a discount to consensus price target…

Read more »

A miner down a mine shaft
Stocks for Beginners

Canadian Mining Stocks: Buy, Sell or Hold?

Canadian mining stocks have seemed like such a strong investment, but with shares down significantly this year, what should we…

Read more »

Gold king in chess game face with the another silver team on black background (Concept for company strategy, business victory or decision)
Stocks for Beginners

Great News for Gold Stock Investors!

Gold has hit an all-time high! Which is good news for some gold stocks, and really good news for others.

Read more »