Toronto Stock Exchange: G
New York Stock Exchange: GG
Goldcorp Reports Third Quarter Earnings
November 9, 2007
VANCOUVER, BRITISH COLUMBIA, November 9, 2007 - GOLDCORP INC. (TSX:
G, NYSE: GG) today reported adjusted net earnings of $82.3 million1
, or $0.12 per share, for the quarter ended September 30, 2007.
Third Quarter 2007 Highlights:
- Gold production increases
28% to 556,200 ounces2
- Gold sales increase 29% to
537,200 ounces2
- Realized gold price of $685
per ounce
- Total cash costs of $140
per gold ounce2,3 , net of by-product credits
- Strong margin growth to
$545 per gold ounce on a by-product basis
- Net earnings of $75.8
million or $0.10 per share
- Operating cash flow of
$208.6 million (before working capital adjustments)4
- Dividends of $31.7 million
paid during the quarter
- Agreement to acquire 100%
ownership of key Canadian gold mines
- Reaffirms 2007 production
guidance of 2.2 to 2.3 million ounces of gold at a total cash cost of $150
per ounce
"During the third quarter, Goldcorp grew gold production at much lower
cash costs than industry averages," said Kevin McArthur, President and
Chief Executive Officer of Goldcorp. "We enjoy the best gross margin
in the senior space, enabling shareholders to participate fully in the
continued strong market for gold. Maintaining this margin advantage and
growing production by over 50% in the next few years remains our primary
focus.
"Our operational and corporate initiatives are bearing fruit in this
year of consolidation and transition. We have demonstrated quarter-over-quarter
improvements, although these were somewhat diluted in the third quarter by
storm-related power outages at Red Lake and a late concentrate shipment at
Alumbrera. These effects are not expected in the fourth quarter and beyond.
In fact, planned completion of the Red Lake expansion and the start-up at
commercial operations at Los Filos in Mexico will lay the groundwork for a
strong 2008."
Financial Review
Gold sales in the third quarter increased to 537,200 ounces at a total cash
cost of $140 per ounce, compared with 421,400 ounces at a total cash cost of
$84 per ounce in 2006. On a co-product basis, total cash costs were $299
per ounce compared to $272 per ounce in 2006. On both a by-product and
co-product basis, Goldcorp remains the lowest cost, highest margin senior gold
producer in the industry. The average realized price per ounce of gold
sold increased to $685 compared to $620 per ounce in the third quarter of
2006.
Adjusted net earnings totalled $82.3 million, or $0.12 per share. At
the 37.5%-owned Alumbrera mine, both gold and copper sales were significantly
lower than production due to a concentrate shipment being delayed until the
second week of October. The Company estimates that the delay reduced third
quarter earnings by $0.03 per share. Operating cash flow before non-cash
working capital adjustments was $208.6 million compared to $171.9 million in
last year's third quarter as higher production and realized metals prices more
than offset increases in production costs. Net earnings in
the quarter were $75.8 million, prior to adjustments, compared to net earnings
of $59.5 million in the third quarter of 2006.
On September 25, 2007, Goldcorp entered into an agreement with Kinross Gold
Corporation to acquire Kinross' 49% share of the Porcupine gold mine and its
32% share of the Musselwhite gold mine, both in Ontario, in exchange for
Goldcorp's 50% interest in the La Coipa silver-gold mine in Chile and $200
million in cash. The transaction highlights Goldcorp's continuing commitment to
simplify its business and to focus on long-lived gold assets within the
Company's core operating districts. The transaction is expected to close in the
fourth quarter of 2007. La Coipa results have been reclassified as discontinued
operations, except for certain operational statistics and other information,
where noted.
For the nine months ended September 30, 2007, gold sales increased to
1,614,900 ounces at a total cash cost of $151 per ounce, compared with
1,108,500 ounces at a total cash cost of negative $35 per ounce in 2006.
Adjusted for certain non-cash items, net earnings amounted to $260.5 million,
or $0.37 per share. Gold production in the nine month period increased 50% to
1,653,700 ounces in 2007 compared with 1,105,400 ounces in the 2006 period.
Operations Review
Canada
Cash costs at Goldcorp's Canadian mines and projects were impacted by the
strengthening Canadian dollar and higher consumables and maintenance costs
during the third quarter. Compared to the second quarter of 2007, the increased
value of the Canadian dollar impacted cash costs by $13 per ounce at Red Lake,
$24 per ounce at Musselwhite and $26 per ounce at Porcupine. The Canadian mines
contributed approximately 45% of Goldcorp's quarterly gold production.
Third quarter gold production at Red Lake mine increased 4% to 163,400
ounces compared to the 2006 quarter. An 11% increase in ore grade was
partially offset by a 7% throughput reduction brought on by storm-related power
outages. Upgrades to the ventilation system remain in progress that will
remove current constraints on production. Early in the fourth quarter,
raise bore work was completed on what is the largest continuous air shaft in
North America. Reaching the surface from a depth of over 2,200 feet and
measuring over 18 feet in diameter, the raise will enable a threefold increase
in ventilation capacity. The entire Red Lake expansion project is slated for
completion in the second quarter of 2008.
Goldcorp's current 68% share of gold production at Musselwhite totalled
39,800 ounces at a cash cost of $490 per ounce. Investments to replace
aging mine equipment continued during the quarter, with upgrades expected to
enhance productivity and efficiencies.
At Porcupine, Goldcorp's current 51% share of gold production totalled
36,800 ounces at a cash cost of $483 per ounce. Throughput at Porcupine
was affected by a multi-week planned mill shutdown for upgrades and
maintenance. The September 25 agreement that will result in full ownership of
Musselwhite and Porcupine mines in Ontario is expected to close in the fourth
quarter.
Mexico
The El Sauzal mine in Chihuahua state continued to anchor Goldcorp's growing
production profile in Mexico, producing 77,600 ounces of gold in the quarter at
a cash cost of $117 per ounce. San Dimas mine contributed an additional
44,400 ounces of gold production at a cash cost of $255 per ounce. The 25%
increase in production at San Dimas from the prior quarter was driven by higher
feed grade to the mill. Goldcorp's newest mine, Los Filos in Guerrero
state, produced over 13,000 ounces of gold, the proceeds of which went to
offset construction costs as the mine approaches commercial production,
expected by the end of 2007.
Los Filos, comprised of two pits-Los Filos and El Bermejal, is expected to
be the largest gold mine in Mexico in 2008. Ore is being mined from the
two pits at a rate of 50,000 tonnes per day. Ore placement at the run-of-mine
heap leach pad is now averaging in excess of 1,000 gold ounces per day,
and ramp-up of gold production is proceeding as expected. Difficulties
with an ore chute installation at Los Filos have delayed implementation of the
crushing/stacking circuit, and the Company is evaluating options, including the
possibility of moving to 100% run-of-mine operations.
Central and South America
Goldcorp's 37.5% share of third quarter gold and copper production at
Alumbrera mine in Argentina increased to 66,000 ounces and 40.8 million pounds
respectively. Cash costs net of by-product copper sales revenue were negative
$1,057 per ounce. As mentioned above, gold and copper sales were
significantly lower than production in the quarter due to the delay of a
concentrate shipment to the second week in October. Consequently,
earnings resulting from this shipment have been delayed and will be booked in
the fourth quarter.
The Marlin mine in Guatemala continued to demonstrate strong sequential
improvement in its second year, with production increasing to 58,700 ounces of
gold at total cash costs of $176 per ounce. Ore production from
underground mining continued to ramp up, averaging over 1,100 tonnes per
day. Construction of an additional leach tank designed to enhance silver
recoveries is expected to come on line by the end of the fourth quarter.
Development Projects
Pe�asquito
Construction and development activity at Goldcorp's largest project remained
on schedule during the third quarter. Topsoil removal and pre-stripping
activities commenced on the initial bench of the Pe�asco pit. A 120 tonne
bulk sample was extracted from a 600 meter decline beneath the Pe�asco outcrop,
and a pilot plant run on the sample is now underway. The
Pabellon-Salaverna road, which provides new and improved access for equipment
and materials deliveries, was opened to the public in September. All
towers and cable for the 400 kV power line have been installed, and the line is
expected to be energized early in 2008. The tenth water well in the
Cedros Basin was completed, contributing to an excellent supply of water for
the project.
Construction of the crusher installations, oxide conveyor, leach pad, Merrill
Crowe facility and mill foundation are on schedule. The Company expects to
produce the first gold ounces from heap leaching of oxides in 2008 and mill
start-up in 2009.
Feasibility work continues on an option to increase mill throughput at
Pe�asquito from 100,000 tonnes per day under the current feasibility study to
130,000 tonnes per day. The Company expects to provide further details in
December, 2007.
�l�onore
Development and exploration progress at �l�onore continued, with four drill
rigs in operation, �l�onore is located in a relatively unexplored area in
Qu�bec in what Goldcorp believes to be the core of one of the world's most
important new gold districts.
Four drill rigs remain active at �l�onore. Two rigs are drilling in the
Roberto zone, a third is drilling under the south area and the fourth is
drilling the north high grade shear zone extension. In-fill drilling of the
Roberto zone continues in order to grow the NI 43-101 resource within the
well-defined mineralized shell. The Roberto Zone remains open along
strike and at depth. The recent discovery of a high grade shear zone,
extending north of Roberto is expected to contribute significantly to future
resource estimates, and the impact of this new discovery is being worked into
feasibility planning efforts.
Construction of the air strip and access road is scheduled to begin in
2008. Permitting and pre-feasibility work are ongoing, with a full
feasibility study expected by the end of 2008.
Pueblo Viejo
Goldcorp's 40% share of the Pueblo Viejo gold deposit in the Dominican
Republic amounts to 7.2 million ounces of gold. Barrick, the 60% owner
and operator of the project, continued to make progress toward an updated
feasibility study to determine potential development of the deposit. Discussions
with the Dominican government continue on its relocation action plan as well as
power and water treatment solutions. Discussions are ongoing with third parties
for the supply of reliable, efficient power. Work on the process flow
sheet to recover zinc contained within the gold reserves is returning
encouraging results and will be included in an updated feasibility study which
envisages an initial 18,000 tpd operation.
Exploration
The Company advanced exploration efforts at its mines and projects with a
majority of third quarter expenditures coming at the Pe�asquito and �l�onore
projects. Steady progress has been made in exploration programs throughout the
year, including at Pe�asquito, �l�onore, Red Lake, Musselwhite and Porcupine,
and the Company will provide an update of these activities in early December.
Based on overall success to date, it is expected that Goldcorp will more than
replace proven and probable reserves mined throughout the year.
Sustainability
In September, Marigold, Dee and Daisy mines received the 2007 Governor's
Excellence in Mining Reclamation award from the Nevada Division of Minerals.
This prestigious award recognizes the innovative reclamation and closure
efforts underway at all three mines. In October, El Sauzal and San Dimas mines
received Silver Helmet awards from the Mexican Mining Chamber-two of only four
such awards given out in Mexico this year. The Silver Helmet is the highest
award for safety given by the Mexican Mining Chamber. in Mexico for their
outstanding safety records. These awards and recognitions serve to
underscore Goldcorp's commitment to responsible operations.
For a full explanation of the third quarter results, please refer to the
Management's Discussion and Analysis and Financial Statements on the Company's
website, www.goldcorp.com.
A conference call will be held Friday, November 9th at 10:00 a.m. (PT) to
discuss these results. Participants may join the call by dialing toll free
1-866-542-4236 or 416-641-6125 for calls from outside Canada and the US.
A recorded playback of the call can be accessed after the event until December
7th, 2007 by dialing 1-800-408-3053 or 416-695-5800 for calls outside Canada
and the US. Passcode: 3237257. A live and archived audio webcast will also
be available at www.goldcorp.com.
Goldcorp is the lowest-cost and fastest growing multi-million ounce gold
producer with operations throughout the Americas. Its gold production
remains 100% unhedged.
- Adjusted net earnings are
reported net earnings adding back the unrealized non-hedge derivative
after tax loss of $5.0 million, net unrealized loss on securities after
tax of $6.2 million less foreign exchange
gain on revaluation of future income tax liabilities of $2.6 million and a
dilution gain of $2.1 million. Adjusted net earnings is a non-GAAP
measure, the Company believes that, in addition to conventional
measures, prepared in accordance with GAAP, certain investors use this
information to evaluate the Company's performance and ability to generate
cash flow. Accordingly, it is intended to provide additional information
and should not be considered in isolation or as a substitute for measures
of performance prepared in accordance with GAAP.
- Non-GAAP performance
measure - includes the results of La Coipa, which for accounting purposes
have been reclassified as discontinued operations.
- The Company has included a
non-GAAP performance measure, total cash cost per gold ounce, throughout
this document. The Company reports total cash costs on a sales basis. In
the gold mining industry, this is a common performance measure but does
not have any standardized meaning, and is a non-GAAP measure. The Company
follows the recommendations of the Gold Institute standard. The Company
believes that, in addition to conventional measures, prepared in
accordance with GAAP, certain investors use this information to evaluate
the Company's performance and ability to generate cash flow. Accordingly,
it is intended to provide additional information and should not be
considered in isolation or as a substitute for measures of performance
prepared in accordance with GAAP.
- Operating cash flow before
working capital adjustments is a non-GAAP measure which the Company
believes provides a better indicator of the Company's ability to generate
cash flow from its mining operations. Cash provided by operating
activities reported in accordance with GAAP was $189.0 million in the
third quarter of 2007.
Cautionary Note Regarding Forward-Looking Statements
Safe Harbor Statement under the United States Private Securities Litigation
Reform Act of 1995: Except for the statements of historical fact contained
herein, the information presented constitutes "forward-looking
statements" within the meaning of the Private Securities Litigation Reform
Act of 1995. Such forward-looking statements, including but not limited to
those with respect to the price of gold, silver, copper, zinc and lead, the
timing and amount of estimated future production, costs of production, reserve
determination and reserve conversion rates involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievement of Goldcorp to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements. Such factors include, among others, risks related to the
integration of acquisitions, risks related to international operations, risks
related to joint venture operations, the actual results of current exploration
activities, actual results of current reclamation activities, conclusions of
economic evaluations, changes in project parameters as plans continue to be
refined, future prices of gold, silver and copper, zinc and lead as well as
those factors discussed in the section entitled "General Development of
the Business - Risks of the Business" in Goldcorp's Form 40-F on file with
the Securities and Exchange Commission in Washington, D.C. and Goldcorp's
Annual Information Form on file with the securities regulatory authorities in
Canada. Although Goldcorp has attempted to identify important factors that
could cause actual results to differ materially, there may be other factors
that cause results not to be as anticipated, estimated or intended. There can
be no assurance that such statements will prove to be accurate as actual
results and future events could differ materially from those anticipated in
such statements. Accordingly, readers should not place undue reliance on
forward-looking statements.
For further information, please contact:
Jeff Wilhoit
Vice President, Investor Relations
Goldcorp Inc.
Telephone: (604) 696-3074
Fax: (604) 696-3001
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e-mail: info@goldcorp.com
website: www.goldcorp.com
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