Goldcorp Inc.’s (GG) fourth-quarter 2013 adjusted earnings (barring one-time items) of 9 cents a share missed the Zacks Consensus Estimate of 23 cents, and were well below 57 cents a share in the year-ago quarter. The company’s share price, however, increased 3.7% during the trading session following the announcement on its positive outlook for 2014. Goldcorp expects a 13%–18% increase in gold production in 2014.
Adjusted earnings exclude the impacts of non-cash foreign exchange loss on translation of deferred income tax assets and liabilities, a non-cash deferred tax impact of Mexican, Argentinean and Guatemalan tax changes, net impairment charges, loss on disposition related to some of its equity investment, unrealized losses for sale securities, and a non-cash provision related to the increase in estimates on the reclamation and closure costs for the company's inactive and closed mine sites. However, earnings include stock-based compensation impact.
Net loss, as reported, in the quarter was $1.1 billion or $1.34 per share compared with net earnings of $504 million or 47 cents per share.
For full year, adjusted earnings were 78 cents per share, down 61.5% year over year and missed the Zacks Consensus Estimate of 92 cents. On a reported basis, net loss was $3.34 per share compared with earnings of $1.95 in 2012.
Goldcorp posted revenues (as adjusted) of $1,203 million in the quarter, down 16.2% year over year. It missed the Zacks Consensus Estimate of $1,242 million. Average realized gold price for the reported quarter declined 25.9% to $1,254 per ounce from $1,692 per ounce in the prior-year quarter.
Gold sales increased 12.5% year over year to 725,700 ounces in the reported quarter and production increased 9.8% to a record 768,900 ounces. Silver production rose 36.5% year over year to 9.8 million ounces from 7.2 million ounces in the prior-year quarter. All-in sustaining costs were $810 per ounce, while cash cost totaled $467 per ounce on a by-product basis and $645 per ounce on a co-product basis.
For full year, adjusted revenues were $4.7 billion, beating the Zacks Consensus Estimate of $4.2 billion.
Mining Highlights
At the Penasquito mine, gold production totaled 141,700 ounces, an increase of 25.5% year over year and 24% sequentially. All-in sustaining cost amounted to $473 per ounce. The sequential increase in production was due to higher ore grades, consistent with mining in the deeper portion of the pit, and improved metallurgical recoveries.
Gold production at Los Filos edged up 1.3% year over year and 28% sequentially to 94,000 ounces at an all-in sustaining cost of $860 per ounce. The sequential increase in gold production was due to an increase in tonnage processed as third quarter production was hurt by the record floods, and higher grades from the processing of superior underground material.
Gold production at Red Lake increased 32% sequentially to 128,000 ounces at an all-in sustaining cost of $822 per ounce due to higher grades, partly offset by 7% lower mill throughput.
At Porcupine in Ontario, increased grades from the VAZ zone in Hoyle Pond and bulk zones in the Dome underground led to gold production of 78,900 ounces at an all-in sustaining cost of $907 per ounce in the reported quarter.
At Pueblo Viejo, where Goldcorp holds a 40% interest and Barrick Gold Corp. (ABX) holds 60%, gold production increased 139.5% year over year and 39% sequentially to 104,700 ounces (40% basis) at an all-in sustaining cost of $688 per ounce. Sequentially, production increased due to an increase in tons milled during the quarter following the completion of the autoclave modifications during the fourth quarter.
Financial Position
As of Dec 31, 2013, cash and cash equivalents were $625 million, down 17.4% from $757 million as of Dec 31, 2012. Long-term debt stood at $1,482 million as of Dec 31, 2013, compared with $783 million as of Dec 31, 2012. The company’s adjusted operating cash flow was $439 million in the reported quarter.
Acquisitions/Divestments
In Jan 2014, Goldcorp announced that it has commenced its offer to acquire all of the outstanding common shares of Osisko Mining Corporation. As per the offer, Goldcorp will provide Osisko shareholders 0.146 of Goldcorp common share and C$2.26 in cash for each Osisko common share. Goldcorp announced its plans to acquire all of the outstanding common shares of Osisko for about C$2.6 billion ($2.4 billion) in cash and shares.
Earlier this month, Goldcorp announced that the company along with its joint venture partner Barrick will sell their respective stakes in Marigold mine in Humboldt County, Nev. to Silver Standard Resources Inc. (SSRI) for $275 million in cash. The transaction is expected to close in Apr 2014. The completion of the transaction is subject to customary closing conditions, including regulatory approvals.
Project Update
The first gold production at the Cerro Negro project is expected by mid-2014 with commercial production expected in the fourth quarter of 2014. The company expects gold production in the range of 130,000–180,000 ounces for 2014.
At the Cochenour project, the first gold production is expected in the fourth quarter of 2014 with minimal ounces expected for the year. Once the project is fully ramped-up to full production, annual gold production is expected in the range of 225,000 and 250,000 ounces.
At the Eleonore project in Quebec, stope development commenced on levels 440m, 410m and 380m to allow production drilling in the first quarter of 2014. The initial capital forecast remains unchanged at $1.8 and $1.9 billion. Goldcorp expects gold production in 2014 to be in the band of 40,000 to 60,000 ounces. Average annual gold production, once the mine reaches full production, is expected to be about 600,000 ounces.
Outlook
For 2014, Goldcorp expects a 13%–18% increase in gold production to a range of 3–3.15 million ounces. All-in sustaining costs are expected to reduce to between $950 and $1,000 per ounce of gold. The company will revise both gold production and cash cost guidance following the expected closing of the Marigold divestiture in Apr 2014.
Capital expenditures for 2014 are anticipated between $2.3 billion and $2.5 billion, of which roughly 60% is allocated to growth projects and 40% for sustaining capital at existing operations.
Goldcorp currently carries a Zacks Rank #3 (Hold).
Another company in the gold mining industry worth considering is Franco-Nevada Corp. (FNV) which carries a Zacks Rank #1(Strong Buy).
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