Fitch Rates Goldcorp Inc.'s Prospective $1B Notes 'BBB'; Outlook Stable

Fitch Ratings rates Goldcorp Inc.'s (TSE:G, NYSE: GG, Goldcorp) $1 billion, in aggregate, new senior unsecured notes at 'BBB'. Goldcorp intends to use the proceeds of the notes to repay the $862.5 million of convertible notes maturing Aug. 1, 2014 and repay outstanding borrowings under the $2 billion revolving credit facility. 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 is strong, with cash on hand of $1 billion at March 31, 2014, and pro forma for the transaction, $1.5 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.

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

The company has closed on the sale of its interest in Marigold for proceeds of $195 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, Eleonore in Canada, and Cochenour in Canada. The initial capital expenditure estimate for Cerro Negro is $1.6 billion to $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 capital expenditure estimate of $1.8 billion of which $1.5 billion was spent as of March 31, 2014. First gold production is expected in late 2014. The initial capital expenditure 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 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 in gold prices from the company's assumption of $1,200/oz. could result in a $236 million decline in free cash flow before dividends. Costs are sensitive to the Canadian dollar; a 10% appreciation of the Canadian dollar relative to the U.S. dollar from the company's assumption of CAD1.5=USD1.00 could result in a $115 million decrease in free cash flow before dividends.

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

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 free cash flow generation.

Fitch currently rates Goldcorp as follows:

--Issuer Default Rating 'BBB';

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

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

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

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

Fitch has assigned the following ratings:

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

--$450 million 5.450% senior notes due 2044 '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=833135

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