Valuing Mining Companies

Yesterday, Goldcorp lost a $50 million bid in compensation from the U.S. government (read article here). The reasoning behind the bid was that the U.S. environmental regulations were violating NAFTA by making it economically unfeasible for GG to extract gold from mines located in the U.S.

Sadly, GG lost the $50 million bid, but what was surprising was the market reaction. As the news came out, the stock price declined from $36.50 to $36.02 which translates to approximately $307 million dollars. That means that the market destroyed $257 million dollar in value beyond the $50 million dollar - what is going on?

There are three plausible explanations:

1. The market overreacted and a correction should be experienced in the near future.
2. The market believes that the lose of this bid has a ripple effect which will destroy $257 million in value beyond the the $50 million bid. Not winning the bid is not only bad news for the current bid, but it also implies that GG is forced to comply with U.S. environmental regulations in the future. Therefore, GG may experience revenue declines or cost increases that equate to his destruction in value.
3. The market is not efficient (a topic for another day).