The year 2012 has not been encouraging for
) so far and the company has yet to spread cheers among its
investors. The company had curtailed its full-year guidance last
month and followed it with a disappointing second quarter
In what can be construed as bucking the trend, Goldcorp recently
announced that it has registered its first gold production at the
Pueblo Viejo mine in the Dominican Republic.
Goldcorp holds a 40% interest in the Pueblo Viejo mine while
Barrick Gold Corporation
) holds the remaining stake and also serves as the mine operator.
In its recently-reported quarter, Goldcorp stated that it expects
production at the mine to commence this month, and the ore is now
being processed by the first two out of the four autoclaves.
Pueblo Viejo is expected to contribute around 68,000 to 85,000
ounces of gold to Goldcorp's production this year. Total cash costs
are expected in the range of $400-$500 per ounce. Despite the
expected costs at the mine being higher than Goldcorp's full-year
target of $310 to $340 per ounce, they are expected to decline over
time as production ramps up.
Goldcorp expects total cash costs of less than $350 per ounce
(excluding future inflation) for the first five years of full
production. Also, the mine is expected to contribute between
415,000 to 450,000 ounces to the company's production over the same
Goldcorp is an unhedged producer of gold and as such, it is
well-positioned to gain from increase in gold prices. However,
declining production and escalating costs have weighed on the
company's performance. 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 had forced the company to slash
In such circumstances, the commencement of production at Pueblo
Viejo comes as a positive for Goldcorp.
We currently have a long-term Neutral recommendation on
Goldcorp. The company, which competes with Barrick Gold Corporation
Newmont Mining Corp.
), holds a Zacks #4 Rank, indicating a short-term Sell rating.
BARRICK GOLD CP (ABX): Free Stock Analysis
GOLDCORP INC (GG): Free Stock Analysis Report
NEWMONT MINING (NEM): Free Stock Analysis
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