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Goldcorp (GG) Records Loss in Q2, Misses Estimates

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Goldcorp Inc. GG reported a net loss of $78 million or 9 cents per share for second-quarter 2016 versus net earnings of $392 million or 47 cents per share logged a year ago. Second-quarter 2016 earnings were hurt by lower production, partly offset by higher realized gold price.

Barring one-time items, net loss was a penny per share for the reported quarter, missing the Zacks Consensus Estimate of earnings of 4 cents.
Goldcorp, which is among the top gold producers, along with Barrick Gold ABX, Newmont NEM and Kinross Gold (KGC - Free Report) , posted revenues of $753 million in the reported quarter, down roughly 37% year over year. Revenues missed the Zacks Consensus Estimate of $898 million.

Average realized gold price for the quarter rose 7.4% to $1,277 per ounce from $1,189 per ounce in the prior-year quarter.

Gold sales plunged around 31.8% year over year to 616,100 ounces in the reported quarter, and production tumbled 32.5% to 613,000 ounces. All-in sustaining costs were $1,067 per gold ounce (up 25.1% year over year) due to lower sales volumes at Penasquito, Cerro Negro and Red Lake, while cash cost totaled $728 per ounce on a by-product basis (up 33.1% year over year) and $716 per ounce (up 9.1%) on a co-product basis.

Silver production fell roughly 49% year over year to 5.3 million ounces from 10.4 million ounces in the prior-year quarter.

Shares of the company fell around 5.9% to close at $17.73 on Jul 28.

Mining Highlights    

At the Penasquito mine, gold production was 36,000 ounces, a year-over-year decrease of around 87.9%. Production declined due to lower ore grade and recovery from the upper transitional ore and low grade stockpiles. Production was also down due to a 10-day shutdown for plant maintenance and a longer-than-expected period to ramp up the plant to full production owing to a number of restart issues. All-in sustaining cost was $3,094 per ounce compared with $416 per ounce in the year ago quarter.

Cerro Negro in Argentina produced 86,000 ounces of gold in the second quarter, at an all-in sustaining cost of $808 per ounce. Production fell compared with the year-ago quarter as a result of lower mill tonnage processed due to the exhaustion of surface stockpiles.

At Pueblo Viejo, where Goldcorp holds 40% interest and Barrick Gold holds 60% interest, gold production jumped nearly 14.9% year over year to 100,000 ounces (40% basis), at an all-in sustaining cost of $587 per ounce. The increase in gold production was backed by higher grades.

Financial Position

As of Jun 30, 2016, cash and cash equivalents were $328 million, down from $940 million as of Jun 30, 2015. Long-term debt was $2,603 million as of Jun 30, 2016, compared with $3,361 million as of Jun 30, 2015. The company’s adjusted operating cash flow fell to $307 million as of Jun 30, 2016, from $523 million as of Jun 30, 2015, mainly due to lower production, partly offset by higher realized gold price.


During the reported quarter, Goldcorp advanced its project pipeline with the completion of the Hoyle Deep project at Porcupine. Further, the company secured board approval to proceed with the Pyrite Leach Project at Penasquito (PLP), with an expected capital investment of roughly $420 million, and the Materials Handling Project at Musselwhite, with an expected capital investment of about $90 million , each of which are expected to increase gold production starting in 2019.  

The company concluded the acquisition of Kaminak, and its Coffee project in the Yukon, Canada after quarter end which is projected to provide a medium-term opportunity for low-cost, high-return gold production along with a solid pipeline of expansion opportunities at existing mines.


For 2016, Goldcorp reiterated its gold production guidance range of between 2.8 and 3.1 million ounces at AISC between $850 and $925 per ounce.

Third- and fourth-quarter production is expected to enhance over the second quarter as Penasquito returns to normal operations after its maintenance shutdown. Grades are likely to increase at a number of mine sites.  AISC are expected to decrease as a result of higher production.

With the approval to proceed to construction of the PLP and the Materials Handling Project, and the addition of the Coffee Project, growth capital for 2016 has been forecast to increase by about $90–$100 million to roughly $190–$200 million.

GOLDCORP INC Price, Consensus and EPS Surprise

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