Goldcorp Inc.’s (GG) adjusted net earnings were
$459 million, or 57 cents per share compared with $244 million or
33 cents per share in the year-ago quarter. Results exceeded the
Zacks Consensus Estimate of 56 cents per share. Reported net
earnings were $336 million in the third quarter of 2011 compared
with $721 million in the third quarter of 2010.
Revenue
In the third quarter of 2011, revenues increased 48% year over
year to $1.3 billion, on gold sales of 571,500 ounces.
The average realized gold price for the quarter rose 39% to
$1,719 an ounce. Cash costs totaled $258 per ounce on a by-product
basis and $551 per ounce on a co-product basis. Output in the
quarter rose slightly as production gains at its Penasquito mine in
Mexico and its Marlin mine in Guatemala more than offset the impact
of production declines at some of its other operations.
Mining Update
Mexico: At the Penasquito
mine, gold and silver production were 55,800 and 4,203,200 ounces,
respectively, for the third quarter of 2011. Lead and zinc
production in the reported quarter totaled 33.6 million pounds and
66.4 million pounds, respectively. Cash costs for the third quarter
of 2011 was negative $796 per ounce of gold.
Progress at Penasquito on the supplemental ore feed system and
tailings facility improvements will remain on track for ramp-up to
full 130,000 tonnes per day throughput, which will resume by the
end of this year.
At Los Filos, gold production was 73,200 ounces at total cash
costs of $490 per ounce led by gold grades and recoveries. The
expansion of carbon plant capacity completed last quarter provided
an increase in solution processing capacity of 14%, which led to
the increase in metal production.
The 2011 exploration program continues to progress with the
objective of proving the extension of the Los Filos deposit toward
the 4P area and El Bermejal to the south and west. Results to date
are positive in proving both extensions.
Canada: At the Red Lake Mine, gold production
was 127,000 ounces at total cash costs of $405per ounce. Production
was affected by lower grades, realized from the High Grade Zone,
resulting from intersection of a lower grade section of the ore
body. Additionally, a significant amount of exploration and
development is continuing to bring the Upper Red Lake Complex, the
Far East Zone and the Footwall Zones into sustained production.
At Porcupine in Ontario, gold production during the third
quarter totaled 76,300 ounces at a total cash cost of $614 per
ounce. The Hoyle Pond Deep project advanced during the third
quarter as preparation progressed toward shaft sinking in the first
quarter of 2012.
Gold production at Musselwhite during the third quarter totaled
59,700 ounces at a total cash cost of $778 per ounce. Exploration
continued to focus on the surface and underground extension of the
Lynx Zone and PQ Deeps resources.
Guatemala: At Marlin in
Guatemala, gold production increased 50% to 95,000 ounces at a
total cash cost of negative $347 per ounce while silver production
increased 62% to 2,291,100 ounces. The growth was driven by
higher gold and silver grades and an 11% increase in tonnes milled.
Mining operations at Marlin will will be transformed exclusively
into underground mining as mining in the pit concludes during
2012.
Financial Position
At the end of September 30, 2011, cash and cash equivalents were
$1,476 million versus $556 million at the end of December 31,
2010.
Free cash flow generated during the quarter amounted to $224
million.
Project Pipeline
PuebloViejo: Construction of Pueblo Viejo in
the Dominican Republic is now more than 75% complete. A major
rainfall that occurred in May 2011 requires remediation of damage
to the partially constructed starter tailings dam facility and as a
result, the first production is now anticipated in mid-2012,
subject to the receipt of new tailings permit approvals.
Goldcorp's share of annual gold production in the first full
five years of operation is expected to average 415,000–450,000
ounces at total cash costs between $275 and $300 per ounce.
As part of a longer-term optimized power solution for Pueblo
Viejo, a plan is being advanced to build a dual fueled power plant
at an estimated incremental capital cost of about $0.3 billion
(100% basis) or $0.12 billion (Goldcorp's 40% share). The new plant
is expected to provide lower cost and long-term power to the
project.
Cerro Negro: In the quarter, Eureka continues
to decline, reaching a length of 1,432 meters, out of a total 3,900
meters. An amended Environmental Impact Assessment was submitted to
Provincial authorities, which once approved, will permit plant
throughput to be increased from 1,850 to 4,000 tonnes per day, and
mining to occur from three separate underground mines concurrently,
rather than just the Eureka vein. Earth works in and around the
plant area and access road upgrades also continued during the
quarter.
A regional exploration team is being developed that will allow
exploration outside of the core Cerro Negro vein areas later in
2011 and throughout 2012.
Eleonore project: At the project in Quebec,
36,000 meters of in-fill surface diamond drilling was completed by
the end of the quarter. Detailed engineering of the
production shaft and related infrastructure have progressed during
the quarter. Long-lead time delivery equipment is being
ordered. The Environmental and Social Impact Assessment
permit for full construction is expected to be received in the
fourth quarter of 2011.
Cochenour: The new 5.5 meter diameter Cochenour
shaft commenced to the 150 level. Construction of surface
facilities also progressed, including completion of head frame
steel erection and collar house, pumping and electrical
distribution equipment. The Cochenour-Red Lake Haulage Drift
advanced to 35% at quarter-end, with the two drills now testing the
exploration potential of this under explored area in the heart of
the Red Lake district.
Camino Rojo: Exploration and development work
continued at Camino Rojo, the advanced-stage satellite exploration
project near Penasquito. Drilling continued with a total of 18,767
meters drilled, including 44 resource expansion and in-fill core
holes, plus 10 condemnation holes in anticipation of site
facilities At Noche Buena, another advanced-stage district project
near Penasquito, new exploration drilling has confirmed
structurally controlled higher grade mineralization trends within
the resource envelope. Follow-up drilling has been planned to
in-fill the oxide portion of these trends.
El Morro:At the El Morro project, technical
work on the update to the 2008 feasibility study was completed
during the quarter and is now under management review.
However, the results indicated that the capital cost of gold
production is anticipated to be $3.9 billion when it will start
producing gold after 5-6 yrs of getting approval for the
project
Outlook
For 2011, Goldcorp reaffirmed its revised production guidance
between 2.5 million and 2.55 million ounces of gold.
Total cash costs for the year are expected to range between $180
and $220 per ounce on a by-product basis; and between $500 and $550
per ounce on a co-product basis.
Goldcorp stated that its strong balance sheet and its increasing
cash flows leave it well-positioned to fund projects in its
pipeline.
The company also indicated it may boost its dividend after it
completes its mine planning and budgeting process, which is
currently underway.
The company competes with Barrick Gold
Corporation (ABX) and Newmont Mining
Corp. (NEM).
We maintain our Neutral recommendation on Goldcorp. Currently,
it holds a Zacks #2 Rank (Buy) on the stock.
BARRICK GOLD CP (ABX): Free Stock Analysis Report
GOLDCORP INC (GG): Free Stock Analysis Report
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