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Goldcorp - GG

Here is MER research report. Seems recent GG drilling results may not be so favorable...

• Last night, Goldcorp released the latest drill results from its prolific Red Lake gold mine in Ontario. Highlights of these results are set out below:

• While the latest drill results (from two holes) show that the High Grade Zone (HGZ) does continue at depth by another 400 feet (down to 7,250 feet vertical), the zone does appear to be getting thinner and lower grade at depth (though future
work will focus on intersecting higher grade areas).
• On September 6th, 2002, the company reported that the High Grade Zone (HGZ) appeared to be widening at depth. Drillhole 37L032AW intersected 10.8 ozs/ton gold over 70 feet at a vertical depth of 6,850 feet. This was within a 338 foot interval
containing 10 zones of gold mineralization.
• In the latest release, Goldcorp released the results the two holes testing the depth potential of the HGZ. First, Hole 37L034AW, drilled 150 feet below the drill result above, intersected four zones of mineralization over 194 feet. These included 7.34 oz/ton (opt) gold over 14 feet, 3.18 opt over 13.5 feet and 0.98 opt over 21.5 feet.
• The second hole, drillhole 37L034 intersected three zones of the HGZ with the deepest being at a vertical depth of 7,250 feet (400 feet below hole 37L032AW) which included 0.91 opt over 4.0 feet and 1.21 opt over 6.0 feet. This is substantially lower grade than the two holes above, which Goldcorp believes this hole intersected the thinner and lower grades margins of the HGZ (future work will focus on the intersecting the higher grade areas).
• Goldcorp also reported the deepest intersection (ever) at the Red Lake mine. Hole 37L034 intersected 1.72 opt over 7.6 feet at a vertical depth of 7,500 feet. The hole is in the hanging wall, parallel the HGZ.
• In our opinion, Goldcorp had a very successful exploration year at Red Lake as it exceeded its goal of extending the known mineralization in the HGZ to the 7,100 vertical foot level (now at 7,250 feet).
• However the latest (two drill) results indicate the HGZ is thinning at depth. While we estimate that hole 37L034AW (first one) has the potential to add up to 200,000 ozs to resources, we believe the market was pricing in (to Goldcorp’ share price)
well over half million ozs of new gold resources.
• At the current share price, Goldcorp is trading at 3.54 times NAV (based on longterm price of $325/oz), well above the average P/NAV (of 2.4 times) for the high quality North American gold producers (at $350/oz l-t price, Goldcorp at 3.1x).
• On a historical basis, our analysis shows that gold companies have traded between 1.0 and 3.0 times NAV. Based on Goldcorp’s premium valuation, we have reduced from buy to hold.