Goldcorp achieves record revenues and cash flow; gold reserves increase for eighth consecutive year
Feb. 15, 2012, 5:21 p.m. EST
Goldcorp achieves record revenues and cash flow; gold reserves increase for eighth consecutive year
VANCOUVER, Feb. 15, 2012 /PRNewswire via COMTEX/ — Toronto Stock Exchange: G New York Stock Exchange: GG
(All Amounts in $US unless stated otherwise)
GOLDCORP INC. CA:G +4.45% GG -1.46% reported fourth quarter gold production of 687,900 ounces at a total cash cost1 of $261 per ounce, leading to record revenues of $1.5 billion and operating cash flows before working capital changes2 of $831 million. Reported net earnings in the quarter were $405 million compared to $560 million in the fourth quarter of 2010. Adjusted net earnings3 were $531 million, or $0.66 per share, compared to $431 million, or $0.59 per share, in the fourth quarter of 2010.
Fourth Quarter 2011 Highlights
Revenues increased to $1.5 billion, on gold sales of 685,000 ounces.
Record operating cash flows before working capital changes totaled $831 million or $1.03 per share.
Adjusted net earnings totaled $531 million, or $0.66 per share.
Total cash costs were $261 per ounce on a by-product basis. Co-product cash costs1 totaled $529 per ounce.
Dividends paid amounted to $91 million. Dividend increased 32% to $0.54 per share.
Certificate of Authorization was issued for the Éléonore project in Quebec allowing full construction to commence immediately.
Received approval of amended Environmental Impact Assessment at the Cerro Negro project in Argentina.
Entered into a $2 billion senior revolving credit facility, replacing the existing $1.5 billion facility.
Full-Year 2011 Highlights
Revenues increased 43% over 2010, to a record $5.4 billion driven by gold sales of 2.5 million ounces.
Adjusted net earnings increased 70%, to a record $1.8 billion, or $2.22 per share.
Record operating cash flows before working capital changes totaled $2.7 billion or $3.35 per share.
Total cash costs were $223 per ounce on a by-product basis and $534 per ounce on a co-product basis.
Dividends paid amounted to $330 million.
Proven and probable gold mineral reserves increased 8% to 64.7 million ounces; 6% on a per share basis.
“Strong, low-cost gold production and another year of gold reserve growth provided a great finish to another solid year for Goldcorp,” said Chuck Jeannes, Goldcorp President and Chief Executive Officer. “Our record performance is the result of strength throughout the mine portfolio, as demonstrated by sustained operational excellence at Los Filos in Mexico, which led to a record year at this important operation. Marlin in Guatemala had a particularly strong quarter and year as mining in the final, higher grade portions of the open pit were completed and the mine successfully transitioned to an exclusively underground operation. In addition, Red Lake in Ontario finished with a strong quarter for the year, highlighting the continued strength of this flagship operation.
“At Peñasquito in Mexico, approximately $360 million in cash flow from operations was generated in just its first full year of commercial production illustrating the growing power of this operation to drive our results for many years to come. Mechanical work on the final phase of throughput ramp-up is in commissioning and we are on track to reach average throughput of 130,000 tonnes per day by the end of the current quarter as forecasted.
“Stability throughout the mine portfolio, led by planned gold production growth at Peñasquito of over 65% in 2012, leaves us well-positioned to achieve overall production guidance this year of 2.6 million ounces of gold at what we expect to be the lowest cash costs in the senior gold sector. Beginning in 2012, the first of four major new sources of gold production is expected to come on line that will drive a 70% increase in overall gold production by 2016. New gold production of approximately 85,000 ounces is forecast to Goldcorp’s account at the Pueblo Viejo joint venture in the Dominican Republic in 2012, followed by first gold at Cerro Negro in Argentina in 2013. Initial gold production is also expected at two new Canadian pure gold projects in 2014: Cochenour in Red Lake, Ontario and Éléonore in Quebec. Each of these growth projects is permitted and construction is progressing according to plan, supporting our expectations of a very achievable path to 4.2 million ounces of gold production in 2016.”
2011 Marks Eighth Consecutive Year of Reserve and Resource Growth
The Company also announced today that proven and probable gold mineral reserves increased by 8% to 64.7 million ounces, the eighth consecutive year that Goldcorp has increased gold reserves. Measured and indicated gold mineral resources increased 10% to 28.2 million ounces in 2011. Proven and probable silver mineral reserves totaled 1.2 billion ounces and measured and indicated silver mineral resources totaled 418 million ounces, representing one of the largest silver reserves in the industry. Overall gold reserve growth was driven by exploration success at Cerro Negro, Los Filos and Porcupine.
“Strong growth in reserves and resources in 2011 once again highlights the continued success of Goldcorp’s focused exploration programs, which discovered new gold reserves at a cost of approximately $14 per gold ounce,” added Jeannes. “The consistent ability of Goldcorp to increase the amount of gold reserves represented by each of our common shares represents true leverage to the gold price. In 2011, gold reserves increased 6% on a per share basis.”
Complete mineral reserve and mineral resource data including tonnes, grades and ounces is available at http://www.goldcorp.com . The following summary accounts for the changes in gold ounces year over year:
Proven and probable reserves as of January 1, 2011 60.1 moz Mined ounces during 2011 (including mining depletion) (3.4) moz Net discovered ounces and converted resources during 2011 6.2 Net changes due to metal prices/engineering 1.8 Proven and probable reserves as of January 1, 2012 64.7
At Cerro Negro, an aggressive, sustained drilling program in 2011 resulted in more than a doubling of gold reserves to 4.54 million ounces and a significant expansion in gold resources, which are inclusive of the Cerro Negro reserve and resource update announced in April 2011. Exploration drilling ramped up throughout the year to a total of 8 drill rigs on site focused on in-fill and extensional drilling of Mariana Central, Mariana Norte and San Marcos veins. These efforts have resulted in significant extensions in the strike length of all three veins and demonstrated the continued emergence of the adjacent Mariana Norte hanging wall and San Marcos Sur veins. In order to complete mine plans for Mariana Central, Mariana Norte and San Marcos, only drilling results received through late September 2011 were included in calculating year-end reserve and resources for Cerro Negro. An exploration program budgeted at $28 million for 2012 is expected to result in delineation of additional mineralization supporting mineral resource estimation and potential conversion to mineral reserve at Cerro Negro in the year ahead.
Exploration success and a higher gold price assumption at Los Filos contributed to a 42% increase in proven and probable gold reserves, to 7.8 million ounces. Drilling has confirmed the extension of Los Filos mineralization towards the 4P south area, and has resulted in the connection of the two pits. The El Bermejal pit has been further extended towards the north. At Porcupine in Ontario, proven and probable gold reserves increased 23% to 4.1 million ounces, driven by extensions of current ore zones in the Hoyle Pond underground operation.
Following a full year of operations and the availability of new cost data at Peñasquito, approximately 220 million tonnes of low grade gold material were moved from proven and probable gold reserves into the measured and indicated gold resource category, reflecting higher operating cost assumptions than were contemplated in the original 2006 feasibility study. In 2012, exploration at Peñasquito will target additional high grade mineralization in mantos beneath the pit bottoms in addition to testing the potential for block cave mining of deep mineralized zones.
Red Lake 2011 proven and probable gold reserves totaled 4.0 million ounces. Drilling of the High Grade Zone has identified the possibility of a fault offset of the zone below the 52 level, approximately 300 metres and5 years ahead of the current mining horizon. Deep underground drilling conducted several years ago identified high grade ore intercepts at both the 55 and 57 levels that suggest the continuity of the zone. Drilling efforts are currently investigating the extensions of these intercepts. During 2012, plans are underway to extend the ramp and increase power and ventilation to allow additional exploration drilling in the deepest portions of the mine.
Record Financial Results; Gold Margin Surpasses $1,400 Per Ounce4
Gold sales in the fourth quarter were 685,000 ounces on production of 687,900 ounces. This compares to sales of 678,600 ounces on production of 689,600 ounces in the fourth quarter of 2010. Production was driven by record performance at Marlin in Guatemala, a result of higher grades that were consistent with the mine plan that included the completion of the open pit at the end of the year. Peñasquito in Mexico experienced increased volumes a result of greater mill throughput and realized higher grades.
Reported net earnings in the quarter were $405 million compared to $560 million in the fourth quarter of 2010. Adjusted net earnings in the fourth quarter totaled $531 million, or $0.66 per share, compared to $431 million or $0.59 per share, in the fourth quarter of 2010. Adjusted net earnings in 2011 exclude the effect of a non-cash foreign exchange loss on translation of deferred income tax assets and liabilities, a non-cash provision related to the revision in estimates on the reclamation and closure costs for the Company’s closed mine sites, impairment charges related to certain of its equity investments, and unrealized gains on derivative instruments but include the impact of non-cash stock option expenses, which amounted to approximately $24 million or $0.03 per share for the quarter. Operating cash flows before changes in working capital were a record $831 million compared to $648 million in last year’s fourth quarter. Gold margin was $1,402 per ounce of gold sold.
During the quarter the Company entered into a $2.0 billion credit facility with a syndicate of 15 lenders. The credit facility replaced the existing $1.5 billion credit facility and is intended to be used to finance growth opportunities and for general corporate purposes.
For the twelve months ended December 31, 2011, revenues increased by 43% to $5.4 billion. Year-to-date total cash costs were $223 per ounce on a by-product basis and $534 per ounce on a co-product basis.
Net earnings in the twelve months ended December 31, 2011 were $1.9 billion or $2.34 per share, compared to net earnings of $2.0 billion or $2.79 per share in the same period in 2010. Adjusted net earnings were a record $1.8 billion, or $2.22 per share, compared to $1.0 billion or $1.43 per share, in 2010. Cash flow from operations before changes in working capital increased 59% to $2.7 billion from $1.7 billion in the twelve months ended December 31, 2010.
Mexican Mines a Foundation of Sustained Gold Production
During 2011, Peñasquito continued its ramp up toward full design capacity of 130,000 tonnes per day, remaining on track for the end of the first quarter 2012. The high pressure grinding roll (HPGR) supplemental feed project is in the mechanical commissioning phase with several of the conveyor belts already having been successfully tested. Throughput from the two 50,000 tonne-per-day capacity semi-autogenous grinding (SAG) lines averaged 93,700 tonnes per day during the fourth quarter and 107,000 tonnes per day in December, resulting in gold production of 82,300 ounces for the fourth quarter and 254,100 ounces for the year. Silver production totaled 5,865,600 ounces for the fourth quarter and over 19 million ounces for the year. Lead and zinc production for the fourth quarter totaled 46.1 million pounds and 97.9 million pounds, respectively. For the year lead and zinc production totaled 154.7 million pounds and 286.4 million pounds, respectively. Strong by-product silver, lead and zinc credits contributed to by-product cash costs during the quarter of negative $447 per ounce of gold and negative $847 per ounce of gold for the year. As the mine ramps up to full design capacity early in 2012, full year gold production is expected to be 425,000 ounces at negative by-product cash costs.
Los Filos gold production increased 16% compared to the third quarter of 2011 to 85,200 ounces, driven by increased tonnage processed, higher solution throughput and higher grades. Total gold production for the year amounted to a record 336,500 ounces, an increase of 10% from 2010 due to the increasing grades and recoveries. The construction of the next phases of the heap leach pad facility commenced during the fourth quarter of 2011 with completion expected in the second quarter of 2012.
Red Lake and Porcupine Pace Gold Production in Canada
Gold production at Red Lake increased 21% compared to the third quarter of 2011 to 154,000 ounces at total cash costs of $374 per ounce. For 2011, gold production totaled 622,000 ounces at total cash costs of $360 per ounce. During 2012 production will benefit from an increase in tonnes mined from lower-grade zones, with gold production expected to total 650,000 ounces. Additionally, exploration and development work continued to advance the Upper Red Lake Complex, the Far East Zone and the Footwall Zones into sustained production as alternate sources of ore and to complement the fill the mills program and provide flexibility. Evaluation of the potential of near-surface, bulk long-hole mining, based on recent results from surface drilling, will continue into mid-2012.
At Porcupine in Ontario, strong grade and tonnage contributions from Dome underground operation led to fourth quarter gold production of 74,700 ounces at a total cash cost of $593 per ounce. For 2011, gold production totaled 273,100 ounces at a total cash cost of $656 per ounce. The Hoyle Pond Deep project continued to progress, which will access deeper discovered zones of gold mineralization and enhance operational flexibility and efficiencies throughout the Hoyle Pond underground complex. A pilot raise was completed to align the shaft in preparation for the commencement of shaft sinking planned for the first half of 2012.
On January 9th, the Company announced approval of the Hollinger open pit project. The $75 million construction phase for the project has begun and will continue for a period of 12-18 months, with initial focus on equipment procurement, installation of the dewatering system, site clearing and development of the five-kilometre haulage road between the Hollinger site and the Dome mill. The mine is expected to begin production in the third quarter of 2012.
Commitment to Sustainable Prosperity Continues in Guatemala
At Marlin, production of both gold and silver reached record highs as production peaked at 382,400 ounces for the year at total cash costs of negative $343 per ounce. Gold production for the quarter was 130,700 ounces at total cash costs of negative $337 per ounce. Gold production at Marlin in 2012 is expected to total approximately 210,000 ounces consistent with the planned transition to an exclusively underground operation as mining in the primary open pit is now complete. Stockpiled material is expected to make up approximately 40% of the mill feed in the coming year.
On December 7, 2011 Goldcorp was pleased to announce that the Inter-American Commission on Human Rights notified the Government of Guatemala of its decision to modify the precautionary measures that it issued on May 24, 2010 calling on the Government to take action, including suspension of mining activity at Marlin. As modified, the precautionary measures no longer seek to have the Government suspend operations at the Marlin mine. Investigations conducted by the government demonstrated that Marlin has not damaged and does not present a threat to the environment or health of the communities in the vicinity of the mine.
Advancing a High-Quality Project Pipeline
To fund the growth pipeline, capital expenditures for 2012 are forecast at approximately $2.6 billion of which approximately 60% is allocated to projects and 40% for operations. Major project capital expenditures in 2012 include approximately $500 million at Cerro Negro, $400 million at Éléonore, $350 million at Pueblo Viejo, and $185 million at El Morro.
Gold production from Pueblo Viejo, the 40% owned gold project in the Dominican Republic operated by Barrick, is expected to contribute slightly to the Company’s overall 2012 production profile starting in mid-2012, with a subsequent ramp-up to a forecast annual average of 415,000 to 450,000 ounces of gold in the first five years of full production at cash costs of less than $350 per ounce5. Overall construction is approximately 90% complete following a delay caused by damage to the partially constructed starter tailings dam facility due to a heavy rainfall event in May 2011. Remediation of the starter tailings dam continues to progress, with the joint venture in receipt of all necessary approvals to allow construction of the starter dam to its full height. As part of a longer-term, optimized power solution for Pueblo Viejo,a plan is underway to build a dual-fuel power plant at an additional cost to construct of approximately $300 million (100%) to the joint venture (or $120 million representing Goldcorp’s 40% share). The new plant is expected to provide lower cost, longer term power to the project.
Following Pueblo Viejo, the high grade Cerro Negro deposit is positioned to be the next source of new gold production for the Company in 2013. With production expected to average approximately 550,000 ounces of gold in its first five full years of production, Cerro Negro is well-positioned as Goldcorp’s next cornerstone gold mine. The development plan for Cerro Negro includes plant throughput of 4,000 tonnes per day and allows for concurrent mining from multipleveins. With the December 2011 approval of the amended Environmental Impact Assessment (EIA) by the Provincial authorities in the Santa Cruz province, mining will initially take place in the Eureka, Mariana Central and Mariana Norte veins. Engineering, Procurement and Construction Management activities are steadily progressing with detailed engineering 42% complete by the end of 2011. The Eureka decline, designed to access the first ore from Cerro Negro, has advanced to a length of 1,621 metres of a total planned decline length of approximately 3,900 metres. It has now extended beyond the 450 metre elevation level, an important horizon that will facilitate the commencement of bottom-up mining of the top half of the deposit in 2012. Excavation of the new ramps into the Mariana Central and Mariana Norte veins is expected to commence in the first quarter of 2012. Estimated Cerro Negro capital expenditures for 2012 that were included in the April 2011 Feasibility Study estimate of $750 million have been increased by $50 million, half of which is due to inflationary pressures specific to Argentina. No additional impact for foreign exchange or inflation is included for 2013 at this time. In the event that current Argentine inflation levels persist into 2013 without a decrease in the exchange rate reported, capital expenditures may be subject to further increases.
The Cochenour gold project in Ontario is a key component of the Company’s overall optimization plan for the long-term future of the Red Lake operation. Construction of the five-kilometre Cochenour-Red Lake Haulage Drift advanced to 36% of completion at year-end, and two drills continue to test the exploration potential of this underexplored area. A two-kilometre section of the track was laid from the shaft station. By the end of 2012 the haulage drift is expected to be 66% completed, which will allow the development of significantly more drill stations, thus further accelerating exploration.
The sinking of the Cochenour shaft continues to progress. At year-end the shaft had been widened to a depth of 83 metres. During 2012, sequencing of near-shaft exploration and initial ore body definition will progress and the ultimate shaft depth and extent of development required will be defined with additional drilling planned this year.
During the fourth quarter the Éléonore gold project in Quebec commenced construction of the production shaft and associated infrastructure following receipt of the certificate of authorization issued by the Quebec Minister of Sustainable Development, Environment and Parks. Equipment with long lead times for delivery is in the process of being ordered and construction activities include the upgrade of waste-water treatment facilities, waste rock pad expansion, and installation of the construction camp, administration offices and other related infrastructure. The construction of two permanent bridges has been completed, and winter road operations have begun.
The exploration ramp has now advanced to 831 metres in length. The ramp will provide drilling access close to the ore body, which commencing late in 2012, will delineate the resources within the early mining area. The exploration shaft has now reached the 650 metre station level. Development work on the station level was completed in January. This station will ultimately connect to the exploration ramp and the production shaft, and will provide access to the upper ore body. Once shaft sinking is completed, the development work on this level will facilitate the first drilling of the deeper parts of the ore body to be carried out during the fourth quarter 2012.
Exploration drilling focused mostly between level 450 metres and 800 metres below surface, and continued to define the central portion of the ore body, increase the level of confidence in the geological model and mineral resources and test high-grade results to the north.
At Camino Rojo in Mexico, an advanced-stage project near Peñasquito, the 2011 drill program completed a total of 77,360 metres drilled in 353 holes. Column leach tests on oxide material began during the third quarter 2011 and are nearing completion. Samples of transitional material were shipped to a third party laboratory where leach tests are ongoing. Metallurgical and mineralogical characterizations of the sulphide zone material are underway. The geologic model and an updated resource block model were largely complete by year-end and will form the basis of the mine plan for the feasibility study which is on track for completion in mid-2012.
At Noche Buena, another advanced-stage project near Peñasquito, the 2011 drill program ended with 22,694 metres drilled, distributed in 66 holes to explore the lateral and vertical extension of the higher trends in the oxide. Initial results earlier in the year showed structurally controlled higher grade mineralization trends. Geologic modeling is underway and will form the basis of the resource to be used in the feasibility study which is expected to be available by mid-2012.
In January 2012, the Company announced a decision to proceed with construction of the 70%-owned El Morro copper-gold project in Chile. Construction at site will commence in September, 2012 and extend over a five-year period at a capital cost of $3.9 billion. Development activities initiated in early 2012 include access road construction, engineering, equipment procurement and exploration. Drilling will focus on additional condemnation for site infrastructure, testing potential extensions of the La Fortuna deposit, and obtaining samples for geotechnical studies and metallurgical optimization. Initial production is expected in 2017 with full production expected in 2018. Drilling continues with two diamond rigs and one RC drill on site, operating in the future mine waste site, and the plant and tailings facility areas, an additional rig arrives on site in the first quarter of 2012. Over its 17-year mine life, El Morro is expected to produce an average of over 210,000 ounces of gold and 200 million pounds of copper per year to Goldcorp’s account. Current open pit proven and probable mineral reserves on a 100% basis total 520 million tonnes at 0.54% copper and 0.5 grams per tonne gold (6.2 billion pounds copper and 8.3 million ounces gold) and will support a 90,000 tonne-per-day concentrator.
Guidance For 2012
On January 9th, Goldcorp announced production and cash cost guidance for the 2012 year. The Company has forecast a 4% increase in gold production to 2.6 million ounces. Total cash costs are expected to be between $250 to $275 per ounce of gold on a by-product basis and between $550 to $600 per ounce of gold on a co-product basis.
This release should be read in conjunction with Goldcorp’s 2011 financial statements and MD&A report on the Company’s website, http://www.goldcorp.com , in the “Investor Resources – Reports & Filings” section under “Annual Reports”.
Complete reserve and resource information for all metals, including tonnage, grade and accompanying metals price assumptions has been posted at http://www.goldcorp.com . …
full figures here: