) recently issued its second-quarter 2012 gold production figures
and updated its full year guidance. The company lowered its full
year target due to weak production from the Red Lake mine in the
first half of the year and lower expectations from the Peñasquito
mine for the second half.
BARRICK GOLD CP (ABX): Free Stock Analysis
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The market did not react favorably to Goldcorp's slashed guidance.
The stock fell almost 10% after the production and guidance figures
Production and Cost Highlights
Goldcorp's gold production clocked 578,600 ounces in the second
quarter, a jump of 10% sequentially. Although, the company has not
finalized its operating costs for the quarter yet, it expects total
cash costs of approximately $370 per ounce on a by-product basis.
For the first half of 2012, the company expects by-product cash
costs to be roughly $310 per ounce.
Goldcorp's cash costs on a co-product basis are expected to be $620
per ounce in the second quarter. It expects cash costs on a
co-product basis to be approximately $635 per ounce for the first
half of 2012.
At Red Lake, Goldcorp's production in the second quarter continued
to be weighed down by operating delays in the High Grade Zone due
to increased seismic activity. Production from this mine slid 38.6%
in the first quarter due to this reason along with inconsistent
mineralization in the Footwall Zones.
These issues continued into the second quarter and led Goldcorp to
slash its Red Lake production guidance for the year considerably.
The company now expects Red Lake to produce between 460,000 and
510,000 ounces this year, as against the earlier forecast of
Insufficient water supply in June affected mill throughput at
Peñasquito in the second quarter. The area is experiencing
protracted drought conditions, which have led to below average
water recharge in the well field and lower water production from
the pit de-watering program.
Although the company is trying to resolve the situation by drilling
more wells and ramping up the quantity of water reclaimed from the
tailings facility, it expects that the problem will persist for the
rest of 2012. The bottleneck is expected to affect plant throughput
to the tune of 98,000 and 107,000 tons per day for the remainder of
As a result, Goldcorp now forecasts gold production of 370,000 to
390,000 ounces this year at Peñasquito, compared to the earlier
estimate of 425,000 ounces. In addition, silver production is
expected to be in the range of 23 to 24 million ounces in 2012.
Operating issues at the two mines have led Goldcorp to lower its
production guidance for the year. It now expects to produce 2.35 to
2.45 million ounces of gold this year, down from its previous
forecast of 2.6 million ounces.
Also, as production levels are expected to fall, costs will
inevitably rise. Goldcorp now projects total cash cost of $310 to
$340 per ounce of gold on a by-product basis, up from the earlier
estimate of $250 to $275 per ounce. On a co-product basis, it
expects cash cost of $625 to $650 per ounce versus the previous
estimate of $550 to $600 per ounce.
We currently have a long-term Neutral recommendation on Goldcorp.
The company, which competes with
Barrick Gold Corporation
Newmont Mining Corp.
), retains a Zacks #3 Rank, indicating a short-term Hold