News Column

Fitch Affirms Goldcorp Inc.'s IDR at 'BBB'; Outlook Stable

May 21, 2014

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has affirmed Goldcorp Inc.'s (TSE:G, NYSE: GG, Goldcorp) Issuer Default Rating and ratings on the unsecured revolving credit and unsecured notes at 'BBB'. A full list of ratings is provided at the end of this release.

The Rating Outlook is Stable.

Key Rating Drivers:

Goldcorp's credit rating reflects its sizable long-lived reserves in areas of relatively low geopolitical risk, favorable cost position and strong project pipeline, as well as plans for substantial development spending over the medium term. Goldcorp is committed to maintaining a conservative investment-grade capital structure given its exposure to gold prices. In weak gold markets, the company has the ability to defer development and exploration and focus on cash preservation.

Liquidity at March 31, 2014 was strong, with cash on hand of $1 billion, and $1.4 billion available under the company's $2 billion revolver due in March 2018. Goldcorp should remain well within its current financial covenants of a maximum ratio of total debt-to-tangible net worth of less than or equal to 1.00:1. The company has a $862.5 million out-of-the-money convertible issue due in August 2014. Fitch expects the issue to be refinanced.

Liquidity should remain adequate to support Goldcorp's large capital spends in 2014. With capex in 2014 expected to be between $2.3 billion and $2.5 billion, Goldcorp could be free cash flow (FCF) negative up to $1.4 billion in 2014 assuming average 2014 gold prices at $1,200/oz. and depending on the timing of spending.

The company has closed on the sale of its interest in Marigold for proceeds of $183 million on April 4, 2014 and the sale of its shares in Primero for $201 million on March 26, 2014.

The company's main projects under construction are Cerro Negro in Argentina, and Eleonore Cochenour in Canada. The initial capex estimate for Cerro Negro is between $1.6 billion and $1.8 billion, of which $1.3 billion has been spent to March 31, 2014. First gold production is expected at around mid-year 2014. The Eleonore project has an initial capex estimate of between $1.8 billion and $1.9 billion of which $1.5 billion was spent as of March 31, 2014. First gold production is expected in late 2014. The initial capex estimate for Cochenour is $496 million, of which $331 million has been spent to March 31, 2014. First gold is expected in the fourth quarter of 2014.

Fitch expects spending to moderate in 2015 with the completion of Cerro Negro, Eleonore and Cochenour.

Goldcorp's earnings are sensitive to gold prices; a $100/oz. decline from the company's assumption of $1,200/oz. could result in a $236 million decline in FCF before dividends. Costs are sensitive to the Canadian dollar (CAD); a 10% appreciation in the CAD relative to the U.S. dollar from the company's assumption of CAD1.05=USD1.00 could result in a $115 million decrease in FCF before dividends.

Financial leverage is elevated with total debt of $3 billion covering the LTM ended March. 31, 2014 operating EBITDA of $1.2 billion by 2.4x.

The Stable Outlook reflects Fitch's expectation that Total debt/EBITDA will not exceed 3.5x when borrowing is at its peak and will generally be below 2x. Should internal cash generation fall behind expectations, Fitch expects expenditures to be cut or to be supported by new equity issuance or asset sales.

RATING SENSITIVITIES:

Negative: Future developments that may, individually or collectively, lead to negative rating action include:

--Deterioration in gold prices and internally generated cash flow without an equal management response in the form of reduced spending, dividends, assets sales or the raising of equity.

--Total Debt/EBITDA not to exceed 3.5x at the peak and 2.0x on average longer term.

Positive: Future developments that may, individually or collectively, lead to positive rating action include:

--Sustained positive FCF generation.

Fitch affirms Goldcorp's ratings as follows:

--IDR at 'BBB';

--$2 billion senior unsecured revolving credit facility at 'BBB';

--$862.5 million senior unsecured convertible notes due Aug. 1, 2014 at 'BBB';

--$500 million 2.125% senior notes due March 15, 2018 at 'BBB'; and

--$1 billion 3.70% senior notes due March 15, 2023 at 'BBB'.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria & Related Research:

--'Corporate Rating Methodology' dated Aug. 05, 2013.

Applicable Criteria and Related Research:

Corporate Rating Methodology: Including Short-Term Ratings and Parent and Subsidiary Linkage

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=715139

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=831182

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.



Fitch Ratings

Primary Analyst:

Monica M. Bonar, +1 212-908-0579

Senior Director

Fitch Ratings, Inc.

33 Whitehall Street

New York, NY 10004

or

Secondary Analyst:

Christopher M. Collins, CFA, +1 312-368-3196

Director

or

Committee Chairperson:

Sean T. Sexton, CFA, +1 312-368-3130

Managing Director

or

Media Relations:

Brian Bertsch, +1 212-908-0549

brian.bertsch@fitchratings.com

Source: Fitch Ratings


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