Goldcorp Inc.: Contamination of Selenium at Penasquito
- By Alberto Abaterusso
Goldcorp Inc. (GG) has been having problems with selenium contamination at Penasquito gold mine since October 2014, when the Canadian miner informed the Mexican government about a rise in levels of contamination for the first time.
Since then, the situation has gotten worse and two weeks ago, the company told Mexican regulators that contaminated water had also been found in other areas of its property.
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The intrinsic value of GG
But, the long-running leak of contaminated water that Goldcorp is handling should not have any impact on the people's health, plants and the environment surrounding the mine or on the company's production of gold.
"Goldcorp said it has not informed villagers living near the mine because its tests showed the leak had not affected groundwater beyond its property line or contaminated the local drinking water" (Reuters.com); furthermore the company has a safety management system that helped quickly identify the problem at the mine.
Regarding the safety matter, Penasquito continues to implement the Goldcorp safety management system to ensure the safety of all workers and a rescue team is actively involved with local communities, providing emergency response training and preparation.
Penasquito adheres to all official environmental regulations and has acquired a Waste Comprehensive Plan, a Single Environmental License and the Annual Operation Certificate and Management Plan for the Reproduction of the White-Tailed Deer. Penasquito is incorporated in the National Environmental Audit Program. A comprehensive system of environmental management has been implemented as well. Endangered cactus species have been transplanted along with other types of flora. To avoid health problems in the community, soil, air and water conditions are monitored, reducing waste by 10% on average per year.
The Penasquito gold mine is situated in a semi-desert region of the northern state of Zacatecas (9 miles east of the town of Mazapil) and in 2015, produced 860,300 ounces of gold, about 25% of the total production of the company.
Source: Goldcorp Inc.'s website
Since the release of the news on Penasquito's issue, the stock fell by 8.6%. At this article's time of writing, the stock gained 40% YTD.
Analyst's recommendation on GG is rated 2.6. It ranges between 1 (strong buy) and 5 (sell).
Source: Yahoo Finance
The stock is trading around $16.00 on the NYSE at the analyst target price is $21.48. The Enterprise Value/EBITDA is 11.51 and the Price/Book (mrq) is 1.04.
Disclosure: I have no positions in Goldcorp Inc.
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This article first appeared on GuruFocus.
Warning! GuruFocus has detected 6 Warning Signs with GG. Click here to check it out.
The intrinsic value of GG
