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Is There a Significant Upside to Goldcorp’s Production Guidance?

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Dec. 4 2020, Updated 10:52 a.m. ET

Record gold production

In 2015, Goldcorp (GG) achieved record gold production of 3.5 million ounces. This is a solid 24% growth YoY (year-over-year). The company achieved its production guidance of 3.3–3.6 million ounces, and two new mines came into production during the year.

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Guidance is conservative

Goldcorp gave three-year forward production guidance at 2.8–3.1 million ounces for 2016, 2017, and 2018. Previously, the company guided for higher production guidance at 3.3–3.7 million ounces per year. It mentioned that a stable three-year forward production profile reflects a strong focus on cash rather than ounces.

The mid-point guidance implies 3.0 million ounces, which would be a decline of 14.7% from the production level achieved in 2015. Its Peñasquito mine in Mexico will enter a lower-grade portion of the pit in 2016, which will result in the majority of the YoY decline.

However, this guidance implies minimum attainable production. As project studies get completed, there could be an upside to this guidance. The projects that could provide an upside to Goldcorp’s guidance include Peñasquito’s Pyrite Leach Plant, the Camino Rojo oxide project, materials handling at the Musselwhite mine, the HG Young deposit, the Cochenour project, and the Borden Gold project. We’ll discuss these projects in detail in the next part of this series. Management is probably using the opportunity of a new CEO (chief executive officer) to reset the expectations lower.

Comparable earnings

Goldcorp’s peers (GDX) are also trying to increase their production. While Agnico Eagle Mines (AEM), Goldcorp (GG), and Newmont Mining (NEM) have stable production profiles, Kinross Gold (KGC) and AngloGold Ashanti (AU) might have problems replacing their reserves in the long term.

There are various ways to invest in gold, such as physically purchasing gold, investing directly in gold miners, and investing in gold ETFs. The gold-backed SPDR Gold Shares (GLD), for example, is a major ETF for investors looking for exposure to gold.

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