Goldcorp Stock Fell despite Positive 2Q17 Results

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Part 5
Goldcorp Stock Fell despite Positive 2Q17 Results PART 5 OF 6

Goldcorp Improved Its Unit Costs for 2017

Goldcorp’s all-in sustaining costs

Goldcorp (GG) achieved AISC (all-in sustaining costs) of $800 per ounce in 2Q17—a significant improvement of 25% YoY (year-over-year). The company’s AISC was similar to what it achieved in 1Q17. Investors should note that this YoY improvement in costs is even more significant given that its production rose 3.5% during the quarter. The costs were lower than Goldcorp’s guidance of $850 per ounce for the year.

Goldcorp Improved Its Unit Costs for 2017

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The lower AISC in 2Q17 was mainly due to:

  • higher by-product production at Penasquito
  • higher by-product prices
  • higher gold sales
  • strengthening of the US dollar (UUP) against local currencies

These positives were offset by higher production costs at Goldcorp’s operations.

AISC guidance improved

As we discussed in the previous part, Goldcorp is making efforts to increase its production over the next five years. The company’s efforts will also drive down its AISC due to economies of scale. Goldcorp expects its AISC to fall to $700 per ounce from the expected $850 per ounce in 2017 or 18% lower between 2017 and 2021.

In addition to higher production, the company’s initiative to realize $250 million in sustainable annual efficiencies is also driving its costs lower. To reflect these efficiencies, Goldcorp reduced its AISC guidance for 2017 from $850 per ounce (+/-5%) to $825 per ounce (+/-5%).

AISC comparison

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

Newmont Mining (NEM) has a 2017 cost outlook of $940–$1,000 per ounce. Despite achieving cost improvements, Kinross Gold (KGC) remains a rather high-cost precious metal producer.


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