Mr. Chuck Jeannes reports
GOLDCORP ANNOUNCES THIRD QUARTER OPERATING AND FINANCIAL RESULTS
Goldcorp Inc. had adjusted quarterly revenues of $1.1-billion, generating adjusted net earnings of $70-million, or nine cents per share, compared with adjusted net earnings of $190-million, or 23 cents per share, in the third quarter of 2013 (all amounts are in U.S. dollars). Adjusted operating cash flow was $399-million, compared with adjusted operating cash flow of $375-million in the third quarter of 2013. The company also announced the on-schedule commencement of gold production at the Eleonore mine in Quebec, including first gold poured on Oct. 1, 2014.
The company reported a net loss for the quarter of $44-million, or five cents per share, compared with net earnings of $5-million, or one cent per share, in the third quarter of 2013. Both reported earnings and adjusted earnings were negatively impacted by a $36-million (four cents per share) non-cash reduction in the value of low-grade stockpiles at Penasquito.
Third quarter 2014 highlights
- Gold sales of 641,400 ounces on gold production of 651,700 ounces;
- Adjusted revenues of $1.1-billion;
- All-in sustaining costs of $1,066 per ounce;
- Adjusted net earnings of $70-million, or nine cents per share;
- Adjusted operating cash flow of $399-million;
- Dividends paid of $122-million;
- Ramp-up at Cerro Negro in Argentina and Eleonore in Quebec progressing on schedule.
"The continued ramp-up of new mines Cerro Negro and Eleonore, coupled with stable performance at our existing mines, position us for a strong finish to 2014," said Chuck Jeannes, Goldcorp president and chief executive officer. "We expect to meet our 2014 production guidance, but the lower-than-expected production at El Sauzal due to pit wall instability and the second quarter stoppage at Los Filos will cause gold production to be at the low end of our previously guided range of between 2.95 million and 3.1 million ounces. With respect to cost guidance, the success of our operating for excellence programs has exceeded our expectations, with over $185-million of additional savings already realized through the first nine months of 2014 versus our previous target of $100-million for the year. This performance is expected to help drive all-in sustaining costs toward the low end of our guided range of between $950 and $1,000 per ounce for the year. With new project capital spending beginning to wind down, Goldcorp remains well positioned for sustained growth in free cash flow in 2015 and beyond."
Financial review
Third quarter gold production increased over last year's third quarter despite the loss of gold production from the divestiture of Marigold earlier in the year and lower production from El Sauzal as a result of the suspension of operations due to pit wall instability. Gold sales in the third quarter were 641,400 ounces on production of 651,700 ounces compared with sales of 652,100 ounces on production of 637,100 ounces in the third quarter of 2013. Silver production totalled 7.8 million ounces compared with 7.7 million ounces in the prior year's third quarter. All-in sustaining costs were $1,066 per ounce of gold in the third quarter of 2014 compared with $995 per ounce in the third quarter of 2013. The all-in sustaining costs for the third quarter of 2014 include a $41-million reduction ($64 per ounce) in carrying value of the low-grade stockpile at Penasquito due to improvements to the mine plan that defers processing of low-grade stockpiles to the end of the mine life and also recognizing lower anticipated recoveries from those stockpiles. Excluding the impact of the reduction in carrying value, Goldcorp's all-in sustaining costs would be $1,002 per ounce in the third quarter of 2014.
Adjusted revenues of $1.1-billion were comparable with the third quarter of 2013. Reported net loss in the quarter was $44-million, or five cents per share, compared with net earnings of $5-million, or one cent per share, in the third quarter of 2013. Adjusted net earnings in the third quarter totalled $70-million, or nine cents per share, compared with $190-million, or 23 cents per share, in the third quarter of 2013. Adjusted net earnings in the third quarter of 2014 primarily exclude the unrealized losses from the foreign exchange translation of deferred income tax assets and liabilities in the amount of $85-million, or 10 cents per share, unrealized losses on derivatives in the amount of $14-million, or two cents per share, and the impairment against the carrying amount of El Sauzal as a result of accelerating closure activities due to previously reported pit wall instability in the amount of $13-million, or two cents per share. Adjusted net earnings include the impact of non-cash stock-based compensation expenses which amounted to approximately $19-million, or two cents per share, for the quarter. The reduction in carrying value of Penasquito's low-grade stockpile inventory had an approximate impact of four cents per share. Adjusted operating cash flow was $399-million, or 49 cents per share, compared with $375-million, or 46 cents per share, in last year's third quarter.
Mexico
At Penasquito, gold production totalled 129,500 ounces in the quarter at an all-in sustaining cost of $1,142 per ounce. Production decreased compared with the prior quarter as a result of lower grades and recoveries due to the supplementing of fresh ore feed with ore from stockpiles. All-in sustaining costs increased over the prior quarter due to lower gold production, higher sustaining capital and higher operating costs attributable to the $41-million impact ($288 per ounce) of the reduction in carrying value of the long-term inventory stockpile.
Construction is well under way at the Northern well field (NWF) project, with completion expected mid-2015. Contingency plans remain in place for fresh water supply to Penasquito until the NWF is operational. Also at Penasquito, prefeasibility studies for the concentrate enrichment process project and the pyrite leach project are advancing and are expected to be completed in late 2014 and early 2015, respectively. Both of these projects have the potential to significantly enhance the overall economics and mine life of Penasquito.
The exploration program at Penasquito continues to focus on defining the copper-gold sulphide-rich skarn deposit located below and adjacent to the diatreme orebody. Current exploration activities include drilling to establish the vertical and horizontal size and extent of the skarn deposit.
The mineral resource estimate for the Penasquito mine contained in the technical report entitled "Penasquito Polymetalic Operation, Zacatecas State, Mexico, NI 43-101 Technical Report," dated Jan. 8, 2014, has been corrected because it did not include an updated increase in mineral resources. Refer third quarter 2014 management's discussion and analysis for the corrected mineral resource estimation for the Penasquito mine as of Dec. 31, 2013.
Gold production at Los Filos was 64,100 ounces in the third quarter at an all-in sustaining cost of $808 per ounce. Production increased over the prior quarter as mining activity resumed following the second quarter suspension of mining. The exploration program continues to focus on infill drilling and converting the inferred mineral resources into reserves at El Bermejal north and the underground mine.
At El Sauzal, gold production totalled 6,100 ounces in the third quarter. Mining was suspended on Sept. 2, 2014, due to pit wall instability and minimal gold production is expected for the remainder of the year. The company has elected to accelerate the closure of El Sauzal beginning in the fourth quarter of 2014. Remediation activities required for the closure of the El Sauzal mine continued during the third quarter of 2014 with a focus on overburden dumps, revegetation and tailings regrading.
Canada
At Eleonore in Quebec, the company was pleased to report first gold was poured on Oct. 1, 2014. Mining of ore took place in three stopes during the quarter, with the ore stockpile on surface increasing to 244,000 tonnes at the end of the third quarter. Commercial production remains on track for the first quarter of 2015. Exploration drilling continued to successfully infill the lower portions of the mine.
At Red Lake in Ontario, gold production in the third quarter was 99,600 ounces at an all-in sustaining cost of $955 per ounce. Increased production over the prior quarter was a result of increased grade and tonnes from the high-grade zone following the completion of planned destress activities that contributed to increased stope availability. During the quarter, strong exploration results from surface drilling continued to be received at HG Young, an exciting new target 1.5 kilometres northwest of the Campbell complex. Rehabilitation is focused on the 14 level at the Campbell complex, which will provide access at HG Young for exploration diamond drilling from underground in 2015.
At Porcupine in Ontario, gold production in the third quarter was 74,300 ounces, at an all-in sustaining cost of $946 per ounce. Production increased as a result of higher tonnage and higher grades. Higher tonnage was the result of the completion of the No. 1 Winze rehabilitation early in the quarter, and the increasing grades were a result of the higher grade ore from the Hollinger open pit displacing the processing of the lower-grade stockpile material. Overburden and prestripping activities continued at the Hollinger project with approximately 1.2 million tonnes placed on the environmental control berm. The environmental control berm is targeted for completion in the first quarter of 2015. Once completed, mining operations will commence 24 hours a day.
Central America
At the Pueblo Viejo joint venture in the Dominican Republic, Goldcorp's share of third quarter gold production increased to 112,200 ounces, with silver production of 354,800 ounces. Gold production increased over the prior quarter due to higher grades. Silver production was lower due to lower recoveries resulting from the downtime of two lime boil tanks due to scaling issues during the quarter. Stripping activities continued to increase during the quarter and are expected to continue for the remainder of 2014 and into 2015. All-in sustaining costs at Pueblo Viejo decreased for the sixth consecutive quarter to $559 per ounce.
South America
Cerro Negro in Argentina continued to ramp up following first gold production on July 25, 2014, with commercial production expected in the fourth quarter of 2014. Gold and silver production for the quarter totalled 19,000 ounces and 233,700 ounces, respectively. Production mining continues at Eureka, while production mining at Mariana Central is expected to commence in the first quarter of 2015. Cerro Negro continues to operate on diesel power generation with permanent power from the national grid now expected by the end of the fourth quarter of 2014. The initial capital guidance range has been narrowed to between $1.65-billion and $1.70-billion.
Growth projects
At the Cochenour project at Red Lake, the haulage drift connecting the Bruce Channel deposit to the Red Lake complex is now complete. The project remains on track to produce first ore from production stopes in the third quarter of 2015. Exploration drilling in the deeper portions of the deposit continued to yield positive results with eight drill rigs in operation.
At the Camino Rojo project near Penasquito, the company intends to commence a prefeasibility study before the end of 2014, with completion expected in early 2016. Drilling continued during the third quarter of 2014 to enhance and expand the resource. Metallurgical testing of the sulphide, transition and oxide zones continues, with waste rock drainage studies for waste material in process.
Guidance outlook
for 2014
The company today reconfirmed 2014 production guidance of between 2.95 million and 3.1 million gold ounces. In light of the pit wall instability at El Sauzal and the suspension of activities at Los Filos in the second quarter, the company expects gold production guidance to be at the low end of the range of between 2.95 million and 3.1 million ounces. The company expects all-in sustaining costs at the low end of its guidance range of between $950 and $1,000 per gold ounce. Capital spending guidance remains unchanged at between $2.3-billion and $2.4-billion for 2014.
SUMMARIZED FINANCIAL RESULTS
(In millions of U.S. dollars, except per share and where noted)
Three months ended Sept. 30,
2014 2013
Revenues $1,088 $1,160
Gold produced (ounces) 651,700 637,100
Gold sold (ounces) 641,400 652,100
Copper produced (thousands of pounds) 16,800 21,400
Copper sold (thousands of pounds) 18,600 21,800
Silver produced (ounces) 7,815,800 7,744,600
Silver sold (ounces) 8,454,400 8,025,700
Lead produced (thousands of pounds) 37,000 41,000
Lead sold (thousands of pounds) 41,400 40,800
Zinc produced (thousands of pounds) 81,000 76,300
Zinc sold (thousands of pounds) 85,400 66,800
Average realized gold price (per ounce) $1,266 $1,339
Average London spot gold price (per ounce) $1,282 $1,327
Average realized copper price (per pound) $2.98 $3.40
Average London spot copper price (per pound) $3.17 $3.21
Average realized silver price (per ounce) $15.71 $18.71
Average London spot silver price (per ounce) $19.75 $21.36
Average realized lead price (per pound) $0.98 $0.95
Average London spot lead price (per pound) $0.99 $0.95
Average realized zinc price (per pound) $1.07 $0.85
Average London spot zinc price (per pound) $1.05 $0.84
Total cash costs -- byproduct (per gold ounce) $597 $551
Total cash costs -- co-product (per gold ounce) $682 $706
All-in sustaining costs (per gold ounce) $1,066 $995
Production data
Red Lake mines
Tonnes of ore milled 164,400 204,200
Average mill head grade (grams per tonne) 20.80 15.11
Gold ounces produced 99,600 97,000
Total cash costs -- byproduct (per ounce) $533 $640
All-in sustaining costs (per ounce) $955 $986
Porcupine mines
Tonnes of ore milled 1,123,600 1,123,600
Average mill head grade (grams per tonne) 2.22 2.26
Gold ounces produced 74,300 76,000
Total cash costs -- byproduct (per ounce) $663 $637
All-in sustaining costs (per ounce) $946 $921
Musselwhite mine
Tonnes of ore milled 263,600 364,500
Average mill head grade (grams per tonne) 7.67 5.37
Gold ounces produced 62,500 59,800
Total cash costs -- byproduct (per ounce) $654 $768
All-in sustaining costs (per ounce) $897 $1,114
Penasquito mines
Tonnes of ore mined 8,709,700 19,818,000
Tonnes of waste removed 38,173,700 24,968,400
Tonnes of ore milled 10,446,900 10,115,100
Average head grade (grams per tonne) -- gold 0.59 0.50
Average head grade (grams per tonne) -- silver 23.21 24.08
Average head grade (%) -- lead 0.23 0.27
Average head grade (%) -- zinc 0.52 0.55
Gold ounces produced 129,500 113,900
Silver ounces produced 5,569,300 5,892,600
Lead (thousands of pounds) produced 37,000 41,000
Zinc (thousands of pounds) produced 81,000 76,300
Total cash costs -- byproduct (per ounce) $579 $403
Total cash costs -- co-product (per ounce) $819 $843
All-in sustaining costs (per ounce) $1,142 $830
Los Filos mine
Tonnes of ore mined 5,727,700 6,805,300
Tonnes of waste removed 10,910,200 11,626,000
Tonnes of ore processed 5,722,600 6,753,400
Average grade processed (grams per tonne) 0.73 0.67
Gold ounces produced 64,100 73,400
Total cash costs -- byproduct (per ounce) $623 $640
All-in sustaining costs (per ounce) $808 $891
El Sauzal mine
Tonnes of ore mined 163,100 587,300
Tonnes of waste removed 2,584,000 3,121,900
Tonnes of ore milled 169,700 504,500
Average mill head grade (grams per tonne) 1.20 1.40
Gold ounces produced 6,100 21,400
Total cash costs -- byproduct (per ounce) $2,004 $751
All-in sustaining costs (per ounce) $2,198 $831
Marlin mine
Tonnes of ore milled 485,000 497,800
Average mill head grade (grams per tonne) -- gold 2.98 3.24
Average mill head grade (grams per tonne) -- silver 113 118
Gold ounces produced 45,400 49,400
Silver ounces produced 1,658,000 1,715,000
Total cash costs -- byproduct (per ounce) $478 $259
Total cash costs -- co-product (per ounce) $716 $603
All-in sustaining costs (per ounce) $985 $635
Wharf mine
Tonnes of ore mined 1,105,600 166,800
Tonnes of ore processed 1,082,900 996,900
Average grade processed (grams per tonne) 0.73 0.63
Gold ounces produced 16,200 16,700
Total cash costs -- byproduct (per ounce) $845 $980
All-in sustaining costs (per ounce) $1,028 $1,204
Alumbrera mine
Tonnes of ore mined 884,500 2,420,700
Tonnes of waste removed 3,466,500 4,847,400
Tonnes of ore milled 2,964,100 3,304,300
Average mill head grade (grams per tonne) -- gold 0.34 0.37
Average mill head grade (%) -- copper 0.32 0.37
Gold ounces produced 22,800 28,900
Copper (thousands of pounds) produced 16,800 21,400
Total cash costs -- byproduct (per ounce) $819 $(281)
Total cash costs -- co-product (per ounce) $1,006 $777
All-in sustaining costs (per gold ounce) $1,404 $307
Pueblo Viejo mine
Tonnes of ore mined 1,599,700 672,200
Tonnes of waste removed 2,002,900 186,900
Tonnes of ore processed 655,600 407,200
Average grade (grams per tonne) -- gold 5.72 6.23
Average grade (grams per tonne) -- silver 33.9 48.9
Gold ounces produced 112,200 75,400
Silver ounces produced 354,800 137,000
Total cash costs -- byproduct (per ounce) $438 $553
Total cash costs -- co-product (per ounce) $481 $576
All-in sustaining costs (per gold ounce) $559 $690
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF (LOSS) EARNINGS
(In millions of U.S. dollars, except for per share)
Three months ended Sept.30, Nine months ended Sept. 30,
2014 2013 2014 2013
Revenues $ 859 $ 895 $ 2,663 $ 2,717
Mine operating costs
Production costs (530) (509) (1,536) (1,509)
Depreciation and depletion (192) (158) (541) (463)
(722) (667) (2,077) (1,972)
Earnings from mine operations 137 228 586 745
Exploration and evaluation costs (12) (9) (29) (34)
Share of net earnings (loss) of associates 15 (155) 131 (101)
Impairment of mining interests and goodwill (19) - (19) (2,558)
Corporate administration (63) (66) (188) (189)
Earnings (loss) from operations and associates 58 (2) 481 (2,137)
Gains (losses) on securities, net 5 (3) 9 (15)
(Losses) gains on derivatives, net (14) 8 (6) 79
Gain on disposition of mining interest, net - - 18 -
Finance costs (15) (12) (42) (40)
Other income (expenses) 5 (2) (21) -
Earnings (loss) from continuing
operations before taxes 39 (11) 439 (2,113)
Income tax (expense) recovery (83) 11 (187) 473
Net (loss) earnings from continuing operations (44) - 252 (1,640)
Net earnings (loss) from discontinued operation - 5 (15) 20
Net (loss) earnings (44) 5 237 (1,620)
Net (loss) earnings from continuing
operations attributable to
Shareholders of Goldcorp (44) - 250 (1,640)
Non-controlling interest - - 2 -
(44) - 252 (1,640)
Net (loss) earnings attributable to
Shareholders of Goldcorp (44) 5 235 (1,620)
Non-controlling interest - - 2 -
(44) 5 237 (1,620)
Net (loss) earnings per share
from continuing operations
Basic (0.05) - 0.31 (2.02)
Diluted (0.05) (0.01) 0.30 (2.03)
Net (loss) earnings per share
Basic (0.05) 0.01 0.29 (2.00)
Diluted (0.05) - 0.28 (2.01)
We seek Safe Harbor.
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