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

CHICAGO--()--Fitch Ratings affirms Goldcorp Inc.'s (TSE:G, NYSE: GG; Goldcorp) Issuer Default Rating (IDR) and ratings on the unsecured revolving credit and unsecured notes at 'BBB'. Approximately $4.8 billion in principal amount of debt and commitments is affected by this action. A complete list of ratings is provided at the end of this release.

The Rating Outlook is Stable.

Key Rating Drivers:

Goldcorp's credit ratings reflect its sizable long-lived reserves in areas of relatively low geopolitical risk, favorable cost position and strong project pipeline, as well as plans for moderate 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 is fairly strong, with cash on hand of $365 million at March 31, 2015, and $860 million 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.

Liquidity should remain adequate to support Goldcorp's capital spends in 2015. With capital expenditures in 2015 expected to be much lower than 2014, at only $1.2 billion to $1.4 billion. Goldcorp is expected to be free cash flow (FCF) neutral to slightly negative after dividends in 2015, depending on capex and working capital swings, but Fitch expects the company to generate FCF when capital spending drops below $1.2 billion. The next maturity is the $500 million notes due in 2018.

The company closed on the sale of the Wharf Mine in February 2015 for proceeds of $105 million and acquired Probe Mines Limited for total consideration of C$526 million, which was mostly in the form of Goldcorp stock.

The company's Cerro Negro mine in Argentina and Eleonore mine in Canada began commercial production in the first half of 2015. Its Cochenour project in Canada is not complete yet, but of the initial capital expenditure estimate of $496 million, $384 million has been spent as of March 31, 2015.

Goldcorp's earnings are sensitive to gold prices; a $100/oz. decline in gold prices from the company's assumption of $1,200/oz. could result in a $267 million decline in FCF before dividends. Costs are sensitive to the Canadian dollar; a 10% appreciation of the Canadian dollar relative to the U.S. dollar based on the company's assumption of CAD1.14=USD1.00 could result in a $70 million decrease in FCF before dividends.

Financial leverage is elevated with total debt of $3.9 billion covering LTM ended March. 31, 2015 operating EBITDA of $1.2 billion by 3.4x.

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.

KEY ASSUMPTIONS:

--Gold price of $1,200/oz.;

--Costs within guidance;

--Capex within guidance;

--Successful ramp ups at Cerro Negro and Eleonore.

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 1.5x on average longer term.

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

--Sustained positive FCF generation.

Fitch has affirmed the follwoing ratings:

--IDR at 'BBB';

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

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

--$550 million 3.625% senior notes due 2021 at 'BBB';

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

--$450 million 5.450% senior notes due 2044 at 'BBB'.

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

Applicable Criteria & Related Research:

--'Corporate Rating Methodology' dated May 28, 2014.

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=749393

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=985058

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Contacts

Fitch Ratings
Primary Analyst:
Gregory M. Fodell
Associate Director
+1-312-368-3117
Fitch Ratings, Inc.
70 W. Madison
Chicago, IL 60602
or
Secondary Analyst:
Monica M. Bonar
Senior Director
+1-212-908-0579
or
Committee Chairperson:
Jason Pompeii
+1-312-368-3210
or
Media Relations:
Alyssa Castelli, New York, +1 212-908-0540
Email: alyssa.castelli@fitchratings.com
Elizabeth Fogerty, New York, +1 212-908-0526
Email: elizabeth.fogerty@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst:
Gregory M. Fodell
Associate Director
+1-312-368-3117
Fitch Ratings, Inc.
70 W. Madison
Chicago, IL 60602
or
Secondary Analyst:
Monica M. Bonar
Senior Director
+1-212-908-0579
or
Committee Chairperson:
Jason Pompeii
+1-312-368-3210
or
Media Relations:
Alyssa Castelli, New York, +1 212-908-0540
Email: alyssa.castelli@fitchratings.com
Elizabeth Fogerty, New York, +1 212-908-0526
Email: elizabeth.fogerty@fitchratings.com