Goldcorp eclipses Barrick by market cap

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SummaryGoldcorp has been creeping up on Barrick for years.

Goldcorp Inc briefly surpassed Barrick Gold Corp to become the world's biggest gold miner by market capitalization this week, even though Barrick owns more mines and produces far more gold than its growth-focused peer.

Barrick battled back late on Wednesday to land slightly above Goldcorp.

Goldcorp has been creeping up on Barrick for years, but this week was the first time the smaller producer surpassed the longtime top dog, which is under pressure due to delays and rising costs at its massive Pascua-Lama gold and silver project on the border between Chile and Argentina.

It's not necessarily that Goldcorp is doing so well, it's just that Barrick is doing so poorly, said John Ing, president and mining analyst at Maison Placements Canada in Toronto.

Pascua-Lama, which is now expected to cost up to $8.5 billion to build, will be the most expensive gold mine ever constructed, he said.

That, together with disappointing earnings reflecting a narrowing of margins, really deflated enthusiasm for the world's so-called leader among the gold miners, Ing said.

Barrick stock has fallen nearly 23 percent since the beginning of 2012, while Goldcorp stock has been buoyed by better-than-expected third-quarter earnings. Goldcorp is down 3.1 percent this year.

Goldcorp's market cap was C$35.32 billion (US$35.47 billion) at the close on Tuesday, while Barrick's market cap stood at C$35.30 billion. Barrick climbed back to C$36.18 billion on Wednesday at the close, while Goldcorp stood at C$36.08 billion.

While Goldcorp lags Barrick in output - it plans to produce just 2.35 million to 2.45 million ounces this year compared with Barrick's 7.3 million to 7.5 million ounces - the Vancouver-based miner has a strong growth profile.

Goldcorp is in the sweet-spot of what investors are looking for, it's kinda like a Goldilocks, said Joung Park, a mining analyst at Morningstar.

It's big, so it's a little more stable than some of the junior miners, but it still has the growth profile of a junior or mid-tier miner.

Goldcorp's newest mine, the Pueblo Viejo joint venture with Barrick in the Dominican Republic, is set for commercial production by the end of this year. Goldcorp plans to bring three more major projects into production through 2014, which will substantially increase its annual output.

Toronto-based Barrick, by comparison, plans a modest boost in output to 8 million ounces a year by 2016.

Despite the fact that Barrick is spending billions constructing mega-gold projects, we believe they will have trouble achieving net growth, said Adam Graf, a mining analyst with Dahlman Rose in New York.

They have a much larger production base to build from, so on a percentage basis, it's a bigger challenge to grow. Also, Barrick has many older mines that are coming to the end of their natural lives, or are fighting lower ore grades to stay operating.

That means ounces from Barrick's new mines will go towards replacing those being lost at older projects.

Of 24 analysts surveyed by Thomson Reuters I/B/E/S, 18 rank Goldcorp as a Buy or Strong Buy, with five Holds and one Underperform.

Out of a total of 29 analysts, Barrick has 16 Buy or Strong Buy rankings, with 12 Holds and one Underperform.

Barrick, which fired Chief Executive Aaron Regent in June amid disappointment with the performance of the shares, has a stake in some 22 producing gold mines around the world.

Goldcorp, by contrast, holds a stake in 12 producing mines across the Americas.

Barrick's shares closed up 2.47 percent at C$36.15 on Wednesday on the Toronto Stock Exchange, while Goldcorp's closed up 1.76 percent at C$44.51. ($1 = 0.9958 Canadian dollars)

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