Goldcorp Inc.’s GG second-quarter 2015 adjusted earnings (excluding one-time items) came in at $65 million or 8 cents per share, down from $164 million or 20 cents per share recorded in the year-ago quarter. The decline was due to lower realized margins on gold and by-product metal sales given lower realized prices, higher production costs resulting from the slower ramp-up at Eleonore and increased depreciation and depletion cost. Earnings, however, surpassed the Zacks Consensus Estimate of 7 cents.
Adjusted earnings exclude one-time items including realized gain on the sale of the Tahoe Resources shares and the Arturo mine project, unrealized losses from the foreign exchange translation of deferred income tax assets and liabilities, unrealized gains on derivatives and Goldcorp’s share of impairment losses associated with specific power assets at the Pueblo Viejo mine. However, earnings include the impact of stock-based compensation.
Net earnings, attributable to shareholders of Goldcorp, for the quarter was $392 million or 47 cents per share compared with net earnings of $181 million or 22 cents per share in the second quarter of 2014.
Goldcorp, which is among the top gold producers along with Barrick Gold ABX, Newmont NEM and Kinross Gold KGC, posted revenues of $1,188 million in the reported quarter, up around 34% year over year. Revenues also surpassed the Zacks Consensus Estimate of $1,104 million. Average realized gold price for the quarter declined 0.3% to $1,189 per ounce from $1,296 per ounce in the prior-year quarter.
Gold sales increased around 41.2% year over year to 903,000 ounces in the reported quarter, while production increased 40% to 908,000 ounces. All-in sustaining costs were $846 per gold ounce (down 0.7% year over year), while cash cost totaled $547 per ounce on a by-product basis (up 14.1%) and $656 per ounce (up 2%) on a co-product basis.
Silver production rose 16.1% year over year to 10.4 million ounces from 9 million ounces in the prior-year quarter.
Goldcorp’s shares rose around 1% in the trading session following the earnings release. The stock is up around 1.5% since the earnings announcement based on yesterday’s close.
Mining Highlights
At the Penasquito mine, gold production was a record 298,000 ounces, up sequentially and an increase of 78% year over year. The sequential increase was driven by higher production resulting from higher sulphide grades. All-in sustaining cost of $416 per ounce increased from the year-ago quarter figure of $362 but declined sequentially. The sequential decrease was due to increased gold production. Production at Penasquito is expected to be at the top end of 2015 guidance of 700,000 ounces and 750,000 ounces.
Gold production at Los Filos increased 38.6% year over year as well as sequentially to 67,500 ounces due to higher grades and recoveries, resulting from recovery improvement projects which were initiated in the previous quarter. All-in sustaining cost was $1,071 per ounce compared with $1,077 per ounce in the year-ago quarter.
Gold production at Red Lake increased 1.5% year over year but declined sequentially to 90,800 ounces at an all-in sustaining cost of $879 per ounce. The sequential decrease was due to decreased grades from fewer tons mined in the High Grade Zone due to mine sequencing.
The company declared commercial production from the Eleonore mine in Quebec in Apr 2015. Gold production from the mine totaled 43,800 ounces in the second quarter of 2015. Production increased sequentially due to better process and filtration plant availability after the successful resolution of earlier-reported start-up issues.
At Porcupine in Ontario, gold production in the quarter was 72,400 ounces, up sequentially and also 5.2% year over year, at an all-in sustaining cost of $1,010 per ounce. Production rose from the previous quarter due to higher mill throughput, mainly resulting from improved weather conditions.
Gold production at Musselwhite in Ontario increased over the prior quarter to 60,900 ounces as a result of increased mill throughput.
At Pueblo Viejo, where Goldcorp holds a 40% interest and Barrick Gold Corp. ABX a 60% interest, gold production fell 18.6% year over year to 87,200 ounces (40% basis), at an all-in sustaining cost of $688 per ounce. Gold production also fell over the prior quarter due to lesser than planned gold recoveries, mostly associated with a higher proportion of carbonaceous ore.
Cerro Negro in Argentina, produced 131,300 ounces of gold in the second quarter of 2015. Mine ramp-up continued during the reported quarter with a focus on the higher-grade Mariana Central mine.
Financial Position
As of Jun 30, 2015, cash and cash equivalents were $940 million, down 23% from $1,220 million as of Jun 30, 2014. Long-term debt stood at $3,361 million as of Jun 30, 2015, compared with $2,471 million as of Jun 30, 2014. The company’s adjusted operating cash flow was $358 million in the reported quarter compared with $376 million in the year-ago quarter.
Outlook
Driven by strong second-quarter results, Goldcorp expects production for 2015 to be at the top end of its forecast of 3.3 million and 3.6 million gold ounces. The company reduced its expectation for all-in sustaining cost to the range of $850 and $900 per gold ounce compared to prior guidance of $875 and $950 per gold ounce.
Depreciation, depletion and amortization (DD&A) expense is projected to be roughly $425 per gold ounce sold, up from previous guidance of $390 per gold ounce sold. The increase is mainly due to the impact of the delay in obtaining the additional mining license at Marlin and further refinements to the DD&A per gold ounce owing to Cerro Negro and Eleonore ramp-up to sustained operating levels.
The company reiterated its capital spending guidance between $1.2 billion and $1.4 billion for 2015.
Excluding the impacts of foreign exchange on deferred tax assets and liabilities, and the dilution and disposition gain on the sale of Tahoe and the related taxes, Goldcorp continues to expect an annual effective tax rate of 45% in 2015.
Corporate administration expense guidance, excluding share-based compensation, has also been cut to about $170 million for 2015 compared to the prior guidance of $185 million
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