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Can Goldcorp Meet Its Production Guidance for 2015?

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Goldcorp’s solid production growth year-over-year

In 3Q15, Goldcorp (GG) posted record gold production of 922,200 ounces, a 2% growth QoQ (quarter-over-quarter) and a 42% growth YoY (year-over-year). The high production was driven by the company’s Éléonore, Cerro Negro, and Pueblo Viejo mines, and partially offset by its Peñasquito mine.

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Analysis of Goldcorp’s mines

The Peñasquito mine reported gold production of 236,800 ounces, a sharp decline of 21% QoQ. The output in 3Q15 was impacted by ore grades lower than the previous quarter’s. However, production grew by 83% YoY on account of higher gold grades resulting from positive model reconciliation.

Gold production at the Cerro Negro mine increased by 3% QoQ and 614% YoY to 135,700 ounces. This strong growth was driven by the ongoing ramp-up of activities at the Mariana Central and Eureka sites. The Éléonore mine also reported a robust output of 86,700 ounces, a rise of 98% QoQ and 374% YoY. The key reason for growth was the extension of underground mining horizons to four from two in the previous quarter.

The Pueblo Viejo JV (joint venture) mine produced 115,000 ounces of gold, a solid growth of 32% QoQ and 2% YoY. The mine’s performance in prior quarters was impacted by maintenance activities.

Goldcorp expects to achieve higher end of production guidance

Goldcorp expects production for 2015 to be at the higher end of 3.3–3.6 million ounces. Management also noted that 2015 production at Peñasquito may exceed the estimated range of 700,000–750,000 ounces. The production at Cerro Negro is expected to be at 425,000–475,000 ounces. The ongoing folding and recovery issues may impact the 2015 Éléonore mine’s target production of 250,000–270,000 ounces.

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Higher production for peers

Both Newmont Mining Corporation (NEM) and Barrick Gold Corporation (ABX) released their earnings on October 28. Newmont’s production grew strongly by 8% QoQ and 16% YoY to 1.3 million ounces. Barrick Gold also posted a robust output of 1.7 million ounces, a growth of 15% QoQ and 1% YoY. Agnico Eagle Mines (AEM) also posted solid production growth in 3Q15. Kinross Gold Corporation (KGC) and Gold Fields (GFI) are yet to announce their 3Q15 results.

Gold-backed ETFs such as the iShares Gold Trust ETF (IAU), the Sprott Gold Miners ETF (SGDM), and the VanEck Vectors Gold Miners ETF (GDX) are alternative investment options for investors who are willing to take on exposure to the gold industry. Goldcorp forms 14% of SGDM’s holdings. In the next part of this series, we’ll analyze the performance of the major mines that helped Goldcorp report strong output.

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