Goldcorp (GG) Earnings Top, Turns to Profit on Lower Costs - Analyst Blog

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Goldcorp Inc. 's ( GG ) second-quarter 2014 adjusted earnings (excluding one-time items) increased 40% to $164 million or 20 cents per share from $117 million or 14 cents a share earned in the year-ago quarter. Earnings per share topped the Zacks Consensus Estimate of 14 cents.

Adjusted earnings exclude one-time items including foreign exchange translation gains, shares of net earnings of associates, and loss from the disposal of mining interests. However, earnings include stock-based compensation impact of roughly $16 million or 2 cents per share.

Net earnings, as reported in the quarter, were $181 million or 22 cents per share, in contrast to a net loss of $1,934 million or a loss of $2.38 per share in the year ago quarter. The company benefited from lower costs in the quarter.

Goldcorp posted revenues (as adjusted) of $1,116 million in the quarter, up 3.8% year over year. It exceeded the Zacks Consensus Estimate of $1,064 million. Average realized gold price for the reported quarter declined 4.6% to $1,296 per ounce from $1,358 per ounce in the prior-year quarter.

Gold sales increased 2.4% year over year to 639,500 ounces in the reported quarter while production increased 0.4% to 648,700 ounces.

Silver production rose 25.1% year over year to 9 million ounces from 7.2 million ounces in the prior-year quarter. All-in sustaining costs were $852 per ounce (down 30.6% year over year), while cash cost totaled $470 per ounce on a by-product basis and $643 per ounce on a co-product basis, both falling year over year.

Mining Highlights

At the Penasquito mine, gold production totaled 167,400 ounces, an increase of 90% year over year. All-in sustaining cost was a record low at $362 per ounce due to the continued success of the 'Operating for Excellence' program and higher by-product credits. Initial permits for the Northern Well Field at the Penasquito mine were sanctioned with constructions expected to be complete by mid-2015. Also the concentrate enrichment process project and the pyrite leach project are expected to be completed in late 2014 and early 2015, respectively.

Gold production at Los Filos dropped 41.7% year over year to 48,700 ounces at an all-in sustaining cost of $1,077 per ounce. Operations at the Los Filos mine were suspended for 43 days before resuming. A new five-year land occupancy agreement was inked on May 5, 2014, following the negotiation with the Carrizalillo Ejido.

Gold production at Red Lake decreased 26.9% year over year to 89,500 ounces at an all-in sustaining cost of $1,066 per ounce. Gold production was negatively impacted by a decrease in mill throughput. Due to de-stress activities, lower stopes were available in the High Grade Zone. Production is expected to rise in the second half of 2014.

At Porcupine in Ontario, gold production in the quarter was 68,800 ounces, down 1.4% year over year at an all-in sustaining cost of $895 per ounce.

At Pueblo Viejo, where Goldcorp holds a 40% interest and Barrick Gold Corp. ( ABX ) holds 60%, gold production increased 32% year over year to 107,100 ounces (40% basis) at an all-in sustaining cost of $618 per ounce.  

Financial Position

As of Jun 30, 2014, cash and cash equivalents were $1,220 million, up 35.7% from $899 million as of Jun 30, 2013. Long-term debt stood at $2,471 million as of Jun 30, 2014, up 8% from $2,287 million as of Jun 30, 2013. The company's adjusted operating cash flow was $376 million in the quarter compared with $388 million in the year-ago quarter. Dividends of $122 million were paid in the reported quarter.

Acquisitions/Divestments

In Mar 2014, the company sold its interest in the Primero mine for $201 million. In Apr 2014, Goldcorp also sold its interest in Marigold mine in Nevada.

Project Update

The first gold pour at the Cerro Negro project was announced on Jul 25, 2014.

The Eleonore gold project in Quebec remains on track for first gold production in late 2014 and for commercial production in the first quarter of 2015.

At the Cochenour project, the haulage drift connecting the Bruce Channel deposit to the Red Lake complex was 96% complete. The project remains on track for its first production in the third quarter of 2015.

At the Camino Rojo project near Penasquito in Mexico, favorable exploration and concept study results demonstrate that it will become Goldcorp's next major growth project.

Mine development is in progress for the underground deposits of Eureka and Mariana Central. Production commenced at Eureka, while production at Mariana Central is forecast to commence in the second half of 2014.

Outlook

Goldcorp reiterated its production guidance for 2014 in the range of 2.95 million and 3.10 million ounces. It now expects all-in sustaining costs to be at the bottom end of its guidance of $950 to $1,000 per gold ounce, reflecting the lower-than-expected costs in first-half 2014. The company also narrowed its capital spending guidance to a range of $2.3 billion to $2.4 billion for 2014 from $2.3 billion to $2.5 billion guided previously.

Goldcorp currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the gold mining industry include AngloGold Ashanti Ltd. ( AU ) and Sibanye Gold Ltd ( SBGL ), both carrying a Zacks Rank #1 (Strong Buy).


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: GG , SBGL , ABX , AU

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