Goldcorp Inc. was downgraded to neutral from buy at Citi Research following disappointing fourth quarter earnings along with a weak production outlook.
Analyst Brian Yu noted that Goldcorp has faced several obstacles in recent quarters, the most recent setback being the reclassification of their Cochenour project in Red Lake, Ont.
This late-stage project is once more in the advanced exploration stage after recent drill results demonstrated that the mineralization is different than anticipated.
Yu also noted that Goldcorp’s lonore project is ramping in a slower-than-anticipated pace and its core Pe?asquito mine is approaching many years of low-grade production.
As a result, the analyst expects Goldcorp’s valuation premium versus both Barrick Gold Corp. and Newmont Mining Corp. will narrow.
On a more positive note, he pointed out that Goldcorp retains a powerful balance sheet with US$3.5 billion of liquidity and really should generate positive free cash flow.
