Goldcorp Inc is a company that deals in the production of senior gold. It is involved in the mining of gold ores, acquiring and development of property, exploration activities of precious metal, development of mines and its key business is the production of gold. It is said to be the fastest growing gold producing company in all of America with its operations stretched out far and wide. The Canadian company has its headquarters in Vancouver in British Columbia and boosts of a huge employee network of over 11,500 people from all around the world.
According to the Goldcorp website the company is committed to maintaining accountable practises in its mining endeavours and is focused towards leading growth and quality performance in the mining industry. The company further commits itself to ensuring success among its shareholders and partners who are its fundamental base of operation.
The key essence of this paper is to analyse Goldcorp Company under the SWOT analysis scheme. This is an acronym used in the finance sector which refers to “strengths, weaknesses, opportunities and threats”. When looking at strengths, this paper will try to analyse the factors that give the company the cutting edge over the rest of the companies in the same industry enabling its adverse and fast growth over time. It will also look at the strengths of the company and try to understand if the same factors will enable the company stay afloat in the industry in the coming years or whether a change of tactic is necessary.
When looking at the weaknesses this paper will try to explain the factors of the company that have been blocking the way forward for the company, which if changed will lead to a higher growth rate for the company and thus better returns. While looking at opportunities this paper will try and look at the factors that have prospered the company abreast and also look into the unexploited channels that the company needs to look into to enable its future growth and triumph.
The threats for the company are its loop holes which are time bombs for the company if not analysed early they might lead to its demise. Finally, this paper will in the same respect analyse the financial trends of the company in detail and give a projection of the expected financial results after a scrutiny of the past trends. In this same view it will also look into the company’s future plans and objectives and try and look at the looming threats for the company in future.
According to figures from the Toronto Stock Exchange as at 11:55AM on 1st April 2011 Goldcorp (GG) Inc had traded 798.4 million shares which opened at a trading price of C$47.88 (GG is the stock symbol of Goldcorp Inc in the stock market). The day’s highest share price as at that time from the opening of the day’s share trading was C$48.21 which was a significant drop of C$0.83 compared to the share price high at the same time the previous day.
This however should not be viewed as a cause for concern as the stock prices often tend to experience these slight fluctuations throughout the day. It should in no way come as a shock to find that the share price towards the closing of the day’s trading has gained a significant rise in share price. The market capitalisation of the company as at that time was C$37.9B.
A study of the financial reports over the last five years does reveal a lot of information about the performance of the company. A look into the company’s revenues starting December 31 2005 over to December 31 2010, the revenues have been on a constant increase. Various factors have contributed to this continuous rise. The key factor being the acquisition of new mines thus expanding productivity potential of the company.
The same results reveal that the company has sharply reduced exploration costs over the past year. This may be attributed to the fact that in the financial year ended 2009 the company had spent a lump sum in exploration and purchase of new mines. It might also be because the company decided not to purchase anymore mines as a result of the dwindling gold prices in the market. When looking at the combined ratio analysis of the company over the past five years which is obtained by adding the incurred losses to the expenses over the earned premium, a trend does emerge.
This trend reveals that the company has been making profits constantly over the past five years. This is displayed by the fact that the combined ratio analyses over the past five years has been descending down to below the 100% mark (“Stock Analysis”, 2011).
The company’s profitability has been on a constant rise over the past five years. The profitability ratio as per the calculations obtained from the company’s website is at 30.7% as per the 31st December year ending 2009. This is a significant rise from the previous year that had witnessed a drop in demand for the company products.
This was significantly higher compared to the industry performance in 2009, with the industry witnessing a general laxity in growth and sales. Efficiency in asset management is one of the factors that have contributed to the increase in profitability. Compared to other players in the same industry the company is by the far the best in its asset and debt management policy. This has played a key role in ensuring that the company constantly obtains funding from donors who are confident in its debt managing capabilities.
Incidences of debt defaulting are unheard of in the company portfolio for the time it has been in existence making an investors target in the market. Another factor that might explain the constant rise in profits for the company is the financial leverage the company has applied. The money leveraged to this company has over the past five years been used in the exploration and acquisition of new mining grounds. This displays the company’s ability to utilise finances. The company’s asset management policies have further enabled it maintain the wonderful profitability record that it has acquired over the years.
Every year huge financial commitments are channelled towards investing in new asset which according to the company’s investment scheme is the safest and most proficient way of storing money. One wonders how this company has been able to manage such good profit records in view of the difficult market conditions that have been witnessed in recent years. It has managed to beat competition and manage to stay afloat during this time as other companies sunk with the harsh conditions (“Goldcorp”, 2011).
Liquidity and capital resources
According to the management analysis and discussion report for the financial year ended 31st December 2010, the company witnessed a reduction in cash position from $6,708,698 to $2,130,137. This cash drop of $4,578,561 is split down into $4,077,094 which was used in investing activities, which was offset by $1,453,474 incomes received by the company as a result of options and warrants and $1,954,941 that was used up in operational activities.
The money that was channelled into investing activities by the company amounts to a sum round of $4,056,643 which was channelled into investment programs. 6,665,656 warrants and 1,820,000 options that were exercised by the company generated cash that was channelled into financing activities.
Goldcorp Inc is a company that experiences very steady and robust competition in the mining industry where it carries out its services. Its greatest competitors in the gold mining industry include; AngloGold Ashanti Ltd, Barrick Gold Corporation and Newmont Mining Corp. These three companies have over time proved to be the key competition for Goldcorp Inc.
They each have huge annual returns from gold mining and have each spread their interests over a large area within America proving the gold mining giants all over America. The competition emerges from the pricing of gold per ounce where each tries to beat the competition by maintaining the lowest price possible. In the recent past however there has emerged competition in their employee treatment. Each of these companies has been seen to poach experts from the other by offering better pay and benefits.
The miners have also been part of this war where each company tries to provide the best conditions for its miners in a bid to improve its public brand image which in-turn boosts sales (“Goldcorp”, 2011).
Mining association of Canada
The mining industry is structured in such a way that it is self-existent for most part. This is to imply that the industry does not get much regulation and governance from the government as compared to other players in the economy. The association known as the Mining Association of Canada aims at promoting the fundamental development of the mining and mineral industry in Canada with the absolute aim being the benefit of all Canadians.
According to the association’s mission, its greatest function is to attract interest towards mining to the broader society in general both nationally and internationally as well. It further wishes to work in tandem with governments towards the establishment of policies that affect miners and the mining industry in general.
It acts as the mouth piece of the mining industry to the federal government and also the link. Any jurisdictions made in this industry have to first be agreed upon by the miner’s association to ensure that they are of benefit to all concerned parties without one party having to bear more expense or loss. Over the years that the association has been in existence many changes and reforms have been witnessed in the industry, workers concerns have been looked into as a result of the association and the commodity has been bought at the best price as at the market trends then (“Goldcorp”, 2011).
Success tips in the mining industry
The mining industry is one that is encapsulated by very many challenges. For a company to be successful in this sector various factors have to be accounted for. One is the capital base; a company in the mining industry invests a lot of money in the mining of the commodity. For most part the results are fruitful, however this may not be a guarantee as sometimes the amount of gold retrieved from the mines might not be sufficient enough to cover for all the costs that have been incurred in the mining of the product.
This automatically leads to a huge loss for the company leading to diminishing returns and to some extent a company collapsing as a result of bankruptcy. This is to imply that for a company to be successful in the mining industry it has to be financially stable and has to be open mind when it comes to losses in the mining industry. Goldcorp Inc has over the years acquired a huge capital base as a result of the success of its mining activities it is thus very strategically placed in the mining industry which has made it a force to reckon with in the mining of gold (Smith, 2004).
A good resource base is also fundamental for a company to thrive well in the mining industry. A company that has vast resources within its disposal is better placed to succeed as opposed to one that has no resources to mine. Goldcorp Inc has been on a roll investing its returns in acquiring new mines for exploration.
This has played a key part in its thriving success in the mining industry. The company has over the past year alone acquired over three new mines adding to its already bloated mine count. This only serves to increase revenue and profitability for the company pushing it further above in the realms of success (Smith, 2004).
Technological and process advancement
Technological and process advancement is another key factor that majorly contributes to success in this industry. As a result of the rapid improvement in technology in all fields a successful mining company needs to stay abreast with the latest technological knowhow. This helps the company improve and better its service to the wide customer base that looks up to it. In view of this fact many mining companies are always trying to improve and upgrade their systems so as to ensure the customer gets the best service.
Goldcorp Inc knows this fact too well it is for this reason that I believe the company even decided to set up the innovations department which solely looks into ways of improving services by incorporating technology and science. This department is responsible for coming up with ideas and/or suggestions which are aimed towards hastening services and giving the company a competitive edge over the other players in the industry (Smith, 2004).
A comparative look at Goldcorp Inc against other players in the industry in this case its competitors does reveal that Goldcorp is a cut above the rest. This is easily seen by looking at the financial results of the last fiscal year for this company compared to its competitor’s results. This shows that Goldcorp is a strong player in this industry. The company’s enamours resource base is a major contributor of this fact. It has been reputed with having an employee base of highly qualified and experienced individuals, who play a part in its prosperity by channelling their immense knowledge into this company thus giving it strength over the rest.
Achievement of objectives
According to the Goldcorp’s Inc website the company’s key objective is the delivery of enduring value and infinite returns to its shareholders. The company further aims at producing high quality low cost gold with at most topographical diversification as well as ensuring good co-operation with the neighbours around the mine area.
Goldcorp Inc is on a mission to achieve this as it has been revealed from the way the company has been on a roll acquiring new mines all across America thus beating topographical barriers. As at the last fiscal year each shareholder of the company was given a dividend of 3.33cents per share which was relatively higher than the previous year. This is a key indicator that the company is committed towards providing the highest returns for its shareholders as it declares in its goals (“Goldcorp”, 2011).
Harsh market conditions
The current situations in the gold markets are not pleasing and may lead to companies having to trim down in order to cut cost. This has been as a result in the bad economic times that have hit the U.S which is a major market for the gold thus leading to a decline in gold markets.
The result of this is that companies have ended up closing down mines and thus people losing their jobs. This situation however may remain this way for quite some time until the global oil prices are back to normal which will also imply that economies will stabilise and thus gold prices appreciate. Before this happens companies are expected to keep their operations slow in order to save on costs for later on when the situation will relapse back to normal.
As a result of this difficult times Goldcorp might experience very minimal or no growth at all due to these circumstances. This situation nonetheless might not be a big challenge for Goldcorp Inc as it is a firm that has been around long and thus knows how to deal with such situations. It is expected to pull through this hard times very well as it has witnessed more difficult times in its existence (“Goldcorp, 2011”).
Goldcorp Inc has to incorporate a few strategies for it to survive the tough times. The company has already witnessed temporary shutdown of operations to some of its low producing mines. The key purpose of this is to reduce expenditure and thus save on costs of production. This is in view of the low gold prices and harsh market conditions. The company has in the meantime also kept on hold its new mines acquisition plan.
This is so as to first analyse the market trends carefully before going into a spending mode which might be detrimental if the economy does not pick up. In the same respect the company has had to temporarily cut down on its employee base so as to minimise cost. This will save the company about 21% in incomes. Another plan by the company that will enable it persevere this harsh time is the sell-out of mines considered not productive enough. The company has already identified a few mines that will have to be sold out to the highest bidders. This is in a quest to save on expenditure (“Goldcorp”, 2011).
The annual report of the year ended 2010 for Goldcorp Inc shows the company’s plans. It plans to channel its efforts this financial year towards exploration into new mining grounds. The company has set aside approximately $120,000 which will be channelled towards exploration activities. The company has further set aside a huge amount to be used for the purchasing of new mines. It also plans on investing and upgrading in new technology to improve its efficiency and services. This will lead towards better working conditions for the workers and better quality product being mined (“Goldcorp, 2011”).
In summary, this business report has been of great value in helping analyse this company on a wider scope. The reader will be able to get an insight on what the company is about on first read. He or she may not have had about the company before but on reading this business review the reader is able to get the full insight on the company. An investor looking to purchase stock on reading this review may be able to make a decision on whether to make an investment in this company’s shares dependent on its stock performance as it has been analysed to scale above.
Fact sheet for Goldcorp Inc – March 2011.
|12 months ended||Dec 31, 2009||Dec 31, 2008||Dec 31, 2007||Dec 31, 2006||Dec 31, 2005|
|Depreciation, depletion and amortization||(526,200)||(499,100)||(465,100)||(324,200)||(135,264)|
|Asset impairment charges||(24,000)||(47,100)||–||(174,700)||–|
|Other cost and expense, operating||(1,187,300)||(1,164,200)||(953,800)||(643,800)||(304,032)|
|General and administrative expense||(137,600)||(136,700)||(132,900)||(83,000)||(29,943)|
|Gain (loss) on disposition of assets||20,100||295,100||51,000||109,800||–|
|Operating income (loss)||836,100||801,100||663,300||565,100||419,134|
|Marketable securities, gain (loss)||50,200||(105,900)||5,500||(5,000)||10,142|
|Gain (loss) on derivative instruments, net, pre-tax||3,600||(2,600)||(23,500)||(4,100)||–|
|Investment income, interest||–||28,300||20,500||18,300||–|
|Foreign currency transaction gain (loss), before tax||(366,600)||1,058,900||(49,400)||5,300||474|
|Other non-operating income (expense)||(19,400)||2,200||10,000||63,800||10,508|
|Income (loss) from continuing operations before equity method investments and income taxes||444,900||1,774,800||581,700||598,600||440,258|
|Income (loss) from equity method investments||–||3,900||100||–||–|
|Income tax (expense) benefit||(206,700)||(295,400)||(160,300)||(154,500)||(142,370)|
|Income (loss) from continuing operations||238,200||1,483,300||421,500||444,100||297,888|
|Income (loss) from discontinued operations, net of tax||–||–||84,700||–||–|
|Net income (loss)||238,200||1,483,300||506,200||444,100||297,888|
|Net income (loss) attributable to non-controlling interest||2,000||(7,700)||(46,100)||(35,800)||(12,190)|
|Net income (loss) attributable to parent||240,200||1,475,600||460,100||408,300||285,698|
Goldcorp Inc. (2011). Financial reports. Web.
Smith, J. (2004). Productivity trends in the gold mining industry in Canada. Web.
Stock Analysis On Net. (2011). Goldcorp Inc. Web.