Goldcorp Well Placed to Exploit Mining-Share Collapse, CEO Says

By Stewart Bailey

Sept. 10 (Bloomberg) -- Goldcorp Inc., the world's second- largest gold miner by market value, said it has $1.2 billion in cash and no debt, putting it in a good position to make acquisitions amid a collapse in mining stocks.

The Vancouver-based company will look mainly in Mexico and Canada, where its largest operations are located, Chief Executive Officer Kevin McArthur said yesterday in an interview at the Denver Gold Forum. At the same time, Goldcorp will push ahead, exploring for new sources of ore near its existing mines and developing new deposits, he said.

McArthur believes the forced sale of assets by hedge funds is the cause of bullion's plunge by almost 25 percent since touching a record in March. For smaller miners, the effect of lower metal prices has been exacerbated by the continuing credit crisis, which has constrained their ability to get the loans they need to develop projects. Shares have plummeted.

``When sentiment is bad, and if you believe in the premise that we're in a long-term bull market, this is good time to knock on a few doors and take advantage,'' he said. ``We're looking at another couple of possibilities here and there that look attractive for us.''

`Fire Sale'

McArthur predicts gold prices, depressed by a ``fire sale'' of assets by hedge funds, could double to $1,500 an ounce in 18 months. In making acquisitions, he will face competition from rivals Kinross Gold Corp., Randgold Resources Ltd. and Newmont Mining Corp., all of which believe the crash in mining stocks has created opportunities for buying distressed rivals.

Goldcorp, dropped C$2.36, or 8.1 percent, to C$26.94 yesterday in Toronto Stock Exchange trading. The stock has fallen 34 percent in the past six months, compared with a 40 percent plunge in the 16-member Philadelphia Stock Exchange Gold & Silver Index.

Last year, needing cash to finance the construction of its new Penasquito mine in Mexico and its share of the Pueblo Viejo mine in the Dominican Republic, and foreseeing the looming liquidity crisis, the company elected to sell its 48 percent stake in Silver Wheaton for C$1.57 billion ($1.47 billion).

``We saw this liquidity crisis coming, which is why we cashed up,'' McArthur said. ``We're very pleased with the situation right now. We see juniors lacking capital and expertise and what do we have? Capital and expertise. It's a good environment for us to grow our business.''

Acquisitions

McArthur agreed in July to pay C$1.5 billion for Gold Eagle Mines Ltd. to add a deposit of the precious metal near its Red Lake mine in Canada. While acquisitions are likely to be in Canada and Mexico, the company will also consider Brazil, Argentina and Chile, he said.

For targets close to its existing mines, where infrastructure and staff can be shared, the company will consider buying smaller deposits that contain reserves of ``hundreds of thousands of ounces.'' In territories where Goldcorp has no presence, acquisitions would have to ``move the needle'' by adding at least 3 million to 5 million ounces, McArthur said.

Goldcorp's production this year is expected to be 2.3 million to 2.4 million ounces at a cash cost of less than $300 an ounce, the company said in July.

To contact the reporter on this story: Stewart Bailey in Denver at sbailey7@bloomberg.net.

Last Updated: September 10, 2008 09:25 EDT