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How Goldcorp’s Prospects Look Based on Its 4Q16 Earnings

PART:
1 2 3 4 5 6
Part 4
How Goldcorp’s Prospects Look Based on Its 4Q16 Earnings PART 4 OF 6

How Goldcorp Plans to Lower Its Costs Going Forward

Goldcorp’s all-in sustaining costs

Goldcorp’s (GG) all-in sustaining costs (or AISC) in 4Q16 were $747 per ounce, a fall of 24% year-over-year (or YoY) and 8% quarter-over-quarter.

How Goldcorp Plans to Lower Its Costs Going Forward

How Goldcorp Plans to Lower Its Costs Going Forward

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Investors should note that this fall in costs came despite lower production in 4Q16, as we saw in the previous part of this series.

GG’s AISC for 2016 came in at $856 per ounce, which was at the lower end of the company’s guided range of $850–$925 per ounce. These lower AISC were due to lower production costs and the favorable impact of the strengthening US dollar (UUP) against the Argentine and Mexican pesos.

AISC guidance

Goldcorp is making efforts to increase its production over the next five years. The same measures that will increase its production will also drive down its AISC due to economies of scale.

Goldcorp expects its AISC to fall to $700 per ounce from 2017’s expected $850 per ounce, or by 18% from 2017 to 2021. Other drivers of this reduction include the following:

  • $250 million in annual sustainable efficiencies
  • lower sustaining capital expenditure
  • optimization of assets

AISC: Goldcorp compared to its peers

Among GG’s peers (JNUG) (GDX), Barrick Gold (ABX) has the lowest AISC. It aspires to achieve AISC of below $700 per ounce by 2019, which would be below the 25th percentile of the industry’s cost curve.

Newmont Mining (NEM) has a 2016 cost outlook of $870–$930 per ounce. Despite having achieved cost improvements, Kinross Gold (KGC) remains a rather high-cost precious metals producer. In 3Q16, it had AISC of $1,001 per ounce. Yamana Gold (AUY) has an AISC guidance of $880–$920 per ounce for 2016.

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