Goldcorp Inc. (GG) recently released its gold production and cash cost for 2012 and provided its cash cost guidance for 2013 and for the five-year period ending 2017.
Goldcorp’s production for the fourth quarter and full-year 2012 reached 696,700 ounces and 2.39 million ounces, respectively. Both were within the company’s revised guidance range. Goldcorp achieved its production target despite the challenging economic conditions.
Goldcorp expects production in 2013 in the range of 2.55 million and 2.80 million ounces of gold. The company anticipates production to speed up in the second half of the year based on the ramp up at Pueblo Viejo and higher grades at Penasquito late in the year.
The company anticipates silver production between 29 million and 31 million ounces in 2013. Zinc production is expected between 285 million and 305 million pounds. Further, lead production has been projected between 145 million and 160 million pounds. Copper production is expected in the range of 95 million to 100 million pounds.
The company also adopted an "all-in sustaining cash cost" measure, which fully defines the total costs associated with producing gold. For 2013, the company estimates all-in sustaining cash costs of $1,000 to $1,100 per ounce. Cash costs are expected between $525 and $575 per ounce on a by-product basis and between $700 and $750 per ounce on a co-product basis.
The company expects cash costs to rise in 2013 on a year-over-year basis due to industry-wide cost inflation and the impacts of lower grades and by-product production at Penasquito.
Mining Highlights and Forecast
Canada - The Red Lake mine faced production delays in the beginning but finally achieved operational stability. The mine produced 507,500 ounces of gold in 2012. In 2013, Goldcorp expects production at the mine to be in the range of 475,000 to 510,000 ounces.
The Eleonore project in Quebec is expected to start production by late 2014 and is expected to make a significant contribution in 2015.
Mexico - The Penasquito mine also faced several issues in 2012 like water availability issues, limited throughput rates and affected economic efficiency. The mine produced 411,300 ounces in 2012 and is expected to produce gold in the range of 360,000 to 400,000 ounces in 2013.
Central and South America - The Marlin mine produced 207,300 ounces of gold in 2012. Goldcorp forecasts its production in the range of 185,000 to 200,000 ounces in 2013. The company remains very optimistic about the Pueblo Viejo project, which upon completion is expected to contribute 330,000 and 435,000 gold ounces on a 40% basis. Cerro Negro is the next project in line, which is expected to contribute substantial new gold production in 2014.
Goldcorp expects to have $900 million in cash and $2 billion credit facility by the end of 2013. The company expects to generate strong cash flows in the year, which in turn, will fund the company’s growth projects.
Capital expenditures for 2013 are estimated to be approximately $2.8 billion, of which, roughly 60% will be allocated to projects and 40% to operations. Exploration expenditures are expected to total approximately $225 million in 2013, of which, roughly a third will be expensed.
The company’s Board also approved an 11% increase in its annual dividend. The increase will be reflected in the first monthly dividend payment of 5 cents per share for 2013.
The company estimates gold production to increase approximately 70% over the next five years to 4 million to 4.2 million ounces in 2017. Average five year by-product cash costs are expected to remain below $500 per ounce.
We currently have a long-term Neutral recommendation on Goldcorp. The company, which competes with Barrick Gold Corporation (ABX) and Newmont Mining Corp. (NEM), carries a short-term Zacks Rank #3 (Hold).
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