Goldcorp Inc.’s (GG) third-quarter 2013 adjusted earnings (barring one-time items) of 23 cents a share beat the Zacks Consensus Estimate of 20 cents, but were well below 54 cents a share earned in the year-ago quarter.
Adjusted earnings exclude impacts of foreign currency translations losses and amendments to the company's service level agreement at its Pueblo Viejo operations. However, earnings include a negative impact of 3 cents per share for non-cash stock-based compensation.
Net earnings, as reported, in the quarter fell to $5 million or break even per share from $498 million or 61 cents a share in the prior-year quarter, hurt by lower gold pricing.
Goldcorp posted revenues of $929 million in the quarter, down 27.5% year over year. It missed the Zacks Consensus Estimate of $1,030 million. Average realized gold price for the reported quarter declined 20.5% to $1,339 per ounce from $1,685 per ounce in the prior-year quarter.
Gold sales increased 5.5% year over year to 652,100 ounces in the reported quarter and production increased 7.5% to 637,100 ounces. Silver production, on the other hand, declined 9.4% year over year to 7.7 million ounces from 8.5 million ounces in the prior-year quarter. All-in sustaining costs were $992 per ounce, while cash cost totaled $551 per ounce on a by-product basis and $706 per ounce on a co-product basis.
Mining Highlights
At the Red Lake mine, gold production went down almost 20% year over year to 97,000 ounces in the quarter. Total cash cost was $640 per ounce, a year-over-year increase of 19.6%.
At Porcupine in Ontario, gold production increased 43.2% to 76,000 ounces with total cash cost coming in at $637 per ounce.
Gold production at Musselwhite declined 8.7% to 59,800 ounces at a total cash cost of $768 per ounce.
At the Penasquito mine, gold production declined 9.6% to 113,900 ounces. Total cash cost was $403 per ounce of gold on a by-product basis compared with negative $608 per ounce in the year-ago quarter. Silver production at the mine was about 5.9 million ounces compared with 6.9 million ounces in the year-ago quarter. Planned construction activities for the Northern Well Field project are expected to start from fourth quarter of 2013.
At the Los Filos mine, gold production came down roughly 8% to 73,400 ounces at total cash cost of $640 per ounce. Gold production dropped due to severe storms that interrupted delivery of supplies to the mine site.
At Marlin, gold production increased 3.2% year over year to 49,400 ounces at a cash cost of $259 per ounce on a by-product basis. Silver production increased 12.6% to 1.7 million ounces.
At Alumbrera, gold and copper production totaled 28,900 ounces and 21.4 million pounds, respectively, reflecting a year-over-year decline of 28.6% and 31.4%, respectively. Total cash cost was a negative $281 per ounce on a by-product basis.
At Pueblo Viejo, where Goldcorp holds a 40% interest and Barrick Gold Corp. (ABX) holds 60%, gold production was 75,400 ounce in the quarter at a total cash cost of $553 per ounce on a by-product basis. The commercial operations of the new 215 MW power plant will start early in the fourth quarter.
Financial Position
As of Sep 30, 2013, cash and cash equivalents were $972 million, up 8.7% from $894 million as of Sep 30, 2012. Long-term debt stood at $1,481 million as of Sep 30, 2013, a roughly two-fold rise from $771 million as of Sep 30, 2012. The company’s adjusted operating cash flow was $375 million in the reported quarter.
Collaboration Agreement
Goldcorp has signed the Obishikokaang Collaboration Agreement with Lac Seul First Nation to set the foundation for continued consultation and support for current and future operations of Red Lake Gold Mines. The deal was signed on Aug 16 in the Municipality of Red Lake, Ontario.
The collaboration will define long-term economic benefits for the Lac Seul First Nation. It will also bring recognition for the 3,200 First Nation band members who have significant historical ties for the development of the Red Lake gold camp. Many band members also stay within the Municipality of Red Lake.
Project Update
Construction activities including plant construction, infrastructure, and mine development continued at the Cerro Negro project, Argentina. However, the project experienced several challenges related to issuance of necessary permits, which delayed the startup of construction works by nearly six months. Goldcorp now expects first gold production in mid-year 2014 with commercial production expected in the fourth quarter of 2014. It expects gold production from the project to be within 130,000 to 180,000 ounces in 2014.
The Eleonore gold project is progressing on track despite the general strikes at Qubec and forest fires. The strikes had disrupted development activities at project. First gold production from the project is expected by the end of 2014. Engineering and exploration activities progressed considerably in the third quarter.
The haulage drift has progressed 70% at the Cochenour project in the Red Lake district. Drilling activity for the underground exploration diamond drilling of the Bruce Channel Deposit has commenced. The Cochenour project remains on track and the first gold production is expected in the first half of 2015.
Outlook
Goldcorp narrowed its gold production guidance for 2013 to between 2.6 million and 2.7 million ounces from its earlier view of between 2.55 million and 2.8 million ounces. Total cash costs are projected between $550 and $575 per ounce of gold on a by-product basis and in the range of $700 to $725 per ounce of gold on a co-product basis. All-in sustaining costs are expected between $1,050 and $1,100 per ounce.
Goldcorp currently carries a Zacks Rank #3 (Hold).
Other companies in the gold mining industry worth considering are Pretium Resources Inc. (PVG) and Franco-Nevada Corp. (FNV). Both carry a Zacks Rank #1(Strong Buy).
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