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Canada`s Goldcorp shines in gloomy stock markets

October 10, 2002 11:13:38 (ET)
LONDON, Oct 10 (Reuters) - While global equity markets sink ever lower, stocks in a mid-size Canadian gold producer Goldcorp (GG,Trade) have outperformed some of the world's best known companies, the firm's top executive said on Thursday.

Speaking to potential investors at a gold forum in London, organised by Canada's Sprott Securities, Robert McEwen said his company was the "ultimate gold stock", boasting a compound annual growth of 36 percent since 1993.

"We have significantly outperformed the market over the past few years," he said.

McEwen said that $100 invested in Goldcorp in 1993 would now be worth $1,773, compared with $1,275 for Microsoft, $679 for IBM and a paltry $251 for the Nasdaq index.

Goldcorp's success stems from its discovery of giant high grade gold deposits in Canada's Red Lake mine in Western Ontario -- now considered as the richest gold mine in the world.

With no debts, no hedge book and rising gold prices, cash rich Goldcorp even started to hold back some of its 600,000 ounces of annual production in inventory last year.

The company has also bought gold and McEwen said Goldcorp now has more than five tonnes of gold in its inventories.

"We have a strong belief that gold prices are going higher," McEwen said "We have a positive leverage to gold which is unrestricted to the upside."

Hedging, a standard financial tool aimed at locking in profits if prices dip by pre-selling unmined gold at forward, has fallen out of favour with major producers as gold prices have firmed to their highest level in 2-1/2 years this year.

"What's very clear is that the market dislikes hedgers," he said, adding that two-thirds of the gold industry world-wide hedges its production.

LOW COSTS

Goldcorp also boasts one of the lowest production costs in the world -- with an average cost per ounce of $65 for its Red Lake mine and $96 overall.

That compares with costs of closer to $200 for major gold companies.

"We're looking for innovation and to break the mindset of the industry," McEwen told investors.

His company even turned to the Internet two years ago, offering $500,000 in prize money to help pinpoint the best spot to drill for gold, attracting detailed plans from some 50 geologists, academics and miners.

"Fifty percent of the proposals matched those of Goldcorp's, but more importantly, 50 percent didn't -- giving us a lot of new possibilities.

McEwen believes firmly in gold's ability to notch up impressive gains over the next few years, especially given the current climate of low interest rates, ailing stock markets and a weaker dollar.

"When there is no confidence in the market...buy gold," he said, adding that over the last 18 months, the yellow metal has been the best performing asset class.

Gold prices ((XAU=)) have seen a hefty move higher over the past year, culminating in a 2-1/2 year peak at $330.30 in June. They have since backtracked to the current level of $318.

On the New York Stock Exchange on Thursday, Goldcorp was quoted at $9.54, compared with just over $12.00 back in June at the peak of the gold price rally.

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