Goldcorp tags US$1.8B for mines, doubles profit
Peter Koven, Financial Post · Friday, Feb. 25, 2011
Goldcorp Inc. said it will invest more than US$1.8-billion to develop its Eleonore and Cochenour gold projects in Canada, while also projecting a huge increase in expected output from Eleonore.
The news came Thursday as the Vancouver-based miner reported fourth-quarter adjusted earnings of US$417.1million, or US57¢ a share, more than double the year-ago profit of US25¢. The numbers exceeded the highest sell-side analyst estimates.
Eleonore and Cochenour, in Quebec and Ontario, respectively, are expected to increase Goldcorp’s production by about 850,000 to 875,000 ounces a year. While board approval of these projects was just a formality, new studies showed they should both be lucrative.
The surprise was Eleonore, which is targeting production of more than 600,000 ounces a year, an increase of 80% over the prior estimate.
Goldcorp hiked its guidance at Eleonore after coming up with a development plan that calls for two separate, vertically stacked mining operations that target different parts of the deposit. The processing plant will handle 7,000 tonnes of material a day, double the original estimate. Cash costs are expected to be under US$400 an ounce.
Cochenour is the project in the Red Lake camp that Goldcorp acquired when it bought Gold Eagle Mines Ltd. for $1.5-billion in 2008. That development plan calls for production of 250,000 to 275,000 ounces a year at low cash costs of US$350 an ounce.
“The Eleonore and Cochenour projects are key components of Goldcorp’s next generation of gold growth projects, and the positive results of these studies confirm our expectations for sustained, high quality gold production from two very important areas in Canada,” chief executive Chuck Jeannes said.
Both projects are expected to go into production in late 2014.
For 2010, Goldcorp said it sold 2.4 million ounces of gold. The company expects to grow production 60% over the next five years as new projects ramp up or come online. “Goldcorp is ideally positioned to accelerate cash flow and earnings in 2011 and over the next several years,” Mr. Jeannes said.
Like its rivals, Goldcorp is bringing in cash faster than it can spend it. With a healthy outlook on the sector and plenty of excess cash on hand, the world’s second-largest gold company hiked its monthly dividend 11% to US3.3¢ a share.
Goldcorp’s full-year earnings in 2010 were a record US$1.6-billion, on revenue of US$3.8-billion.