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Will Goldcorp’s All-In Sustaining Costs Be Higher than Peers’?

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Improved cost structure

Goldcorp (GG) continued with its lower cost trend, as the key cost metric AISC (all-in sustaining costs) fell 21% YoY (year-over-year) and remained almost flat QoQ (quarter-over-quarter) in 3Q15. Goldcorp’s AISC was $848 per ounce in 3Q15, compared with $846 per ounce in 2Q15 and $1,067 in 3Q14. The AISC was slightly higher than 2Q15’s due to higher production costs and a reduction in the carrying value of inventory, and partially offset by higher sales volumes.

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AISC for Goldcorp’s major mines

The Peñasquito mine’s AISC fell by 59% to $467 per ounce in 3Q15 from $1,142 per ounce in 3Q14. The higher AISC in 3Q14 was due to the reduction in the carrying value of inventory, amounted to $41 million. However, AISC increased by 12% QoQ due to a lower value of inventory and lower gold production.

In contrast, the Cerro Negro mine reported an AISC QoQ in 3Q15 that was 8% lower than 2Q15’s. The improved AISC in 3Q15 was driven by higher production, lower sustaining capital expenditures, and favorable currency, partially offset by higher operating costs.

The Éléonore mine’s AISC improved significantly in 3Q15 and reported an AISC of $974 per ounce, 41% lower than 2Q15’s. The solid improvement was primarily driven by higher gold production to the tune of $603 per ounce, followed by lower sustaining capex and favorable currency.

Goldcorp reaffirms its previous AISC guidance

Goldcorp reaffirmed its AISC guidance for 2015 at $850–$900 per ounce, which is 8% lower than 2014’s AISC of $949 per ounce. The lower cost will primarily be driven by higher gold production in 2015. However, the depletion, depreciation, and amortization are expected to increase from $425 per gold ounce to $450 per gold ounce. The company maintained its capital expenditure guidance in the range of $1.2 billion to $1.4 billion in 2015.

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AISC: Goldcorp compared with peers

Goldcorp’s peers, Barrick Gold Corporation (ABX), Newmont Mining Corporation (NEM), and Agnico Eagle Mines (AEM), reported better AISCs in 3Q15 than Goldcorp. Barrick Gold, Newmont Mining, and Agnico Eagle’s AISCs were $771 per ounce, $835 per ounce, and $759 per ounce, respectively, in 3Q15. Barrick is expecting its AISC to be in the range of $830–$870 per ounce in 2015 while Newmont and Agnico expect AISCs in the range of $880–$940 per ounce and $840–$860 per ounce in 2015, respectively. Goldcorp’s 2015 AISC is expected to be higher than Barrick’s but lower than Newmont’s and Agnico’s.

The Sprott Gold Miners ETF (SGDM) invests in US-listed gold miners. Kinross Gold (KGC) and Goldcorp form 14% and 4%, respectively, of SGDM’s holdings. Investors can also get exposure to gold through investing in the iShares Gold Trust ETF (IAU) and the SPDR Gold Trust ETF (GLD), which both track gold prices.

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