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Goldcorp: Which Mines Are Expected to Exceed 2015 Guidance?

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Nov. 6 2015, Published 5:55 p.m. ET

Higher production for 9M15

Goldcorp (GG) posted a quarterly production of 922,000 ounces, a growth of 2% QoQ (quarter-over-quarter) and 42% YoY (year-over-year). Goldcorp’s production for 9M15 rose strongly by 98% YoY to 2.6 million ounces on account of higher output from its Éléonore, Cerro Negro, and Pueblo Viejo mines.

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Peñasquito reported weak quarterly production

During 3Q15, gold production from the Peñasquito mine fell 21% QoQ to 236,800 ounces. Production was impacted by lower gold grades. The gold grade declined to 1.1 grams per ton, compared with 1.3 grams per ton in the prior quarter. However, production from the Peñasquito mine for 9M15 increased by 63% YoY to 690,400 ounces due to higher gold grades and increased metallurgical recoveries. Goldcorp expects its Peñasquito mine’s gold production to exceed the previously guided range of 700,000–750,000 ounces in 2015.

Significant production improvement at Cerro Negro mine

In 3Q15, the output from the Cerro Negro mine increased six-fold YoY and 3% QoQ to 135,700 ounces. Cerro Negro mine’s gold production rose 139% YoY to 359,600 ounces in 9M15 from 150,300 ounces in 9M14, primarily led by higher mining rates at the Mariana and Eureka mines. Goldcorp is well-positioned to achieve the output of 425,000–475,000 ounces in 2015 from this mine.

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Lower production at Éléonore mine

The Éléonore mine posted a quarterly production of 86,700 ounces, a robust growth of 98% QoQ and 374% YoY. Éléonore’s 9M15 production increased nearly six-fold to 130,500 ounces from 18,300 ounces in 9M14, primarily driven by mine expansion and optimization initiatives. However, gold grades and production are expected to decline in the coming quarters due to operational issues. As a result, Goldcorp expects to miss the 2015 production target of 250,000–270,000 ounces from this mine.

Production guidance comparison

Goldcorp expects to achieve the higher end of its 2015 production guidance of 3.3–3.6 million ounces. Its closest peer, Kinross Gold Corporation (KGC), also expects higher production and raised its 2015 production guidance slightly to 2.5–2.6 million ounces from the earlier guidance of 2.4–2.6 million ounces. Agnico Eagle Mines (AEM) also increased its 2015 production guidance to 1.7 million ounces from 1.6 million ounces.

Investors can diversify their portfolios through investing in gold-backed ETFs such as the Sprott Gold Miners ETF (SGDM) and the SPDR Gold Trust ETF (GLD). Agnico Eagle and Kinross Gold make up 8.7% of SGDM’s holdings. In the next part of this series, we’ll discuss Goldcorp’s cash costs.

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