Precious metals have corrected significantly, and Gold is back at the bottom of the range. Presuming that $1200-$1450 is the range for the medium term, one can expect a bounce. The stocks have also corrected and most are near the 52 week lows. The valuations are good if one considers some specific companies, and any rebound in gold price can take those stocks much higher. Most of the companies have made cost adjustments to align themselves to the low price scenario. Goldcorp has taken the impairment hits, and is trading at less than its book value. However, there has been yoy increase in all-in sustaining costs in Q3'13, and the sales also declined sharply. The all-in costs in Q3 came in at $992 per ounce compared to $801 for Q3'12. This compares well will many peers, though there are even development stage companies with lower expected cost of production like Pershing Gold (PGLC. Analysts are relatively positive on the stock. One analyst on SA recently expressed positive sentiments about the company in comparison with Barrick Gold (ABX). The author mentioned that Goldcorp has implemented a successful and disciplined growth and capital allocation strategy, and is much lower on debt. It operates in low risk jurisdictions and maintains its strong focus on gold with only a small exposure to silver. The cash position is also good as it had more than $1 billion on September 30. Goldcorp needs to keep the costs of production and capex under control so that it can deliver better results in future quarters. The focus on cost rationalization is evident from what the management stated during the earnings release. Most of its mines saw reductions in costs compared to Q2, and the efforts can have positive impact on future financial results. Importantly, the management stated that the company was past the peak of capital expenditure. Low cost companies will be preferred by investors, and Goldcorp appears to be taking the right steps to lower the costs systematically.
