What Led Goldcorp to Report Higher-than-Expected Costs in 2Q16?



Goldcorp’s all-in sustaining costs

Goldcorp’s (GG) all-in sustaining costs (or AISC) for 2Q16 were $1,067 per ounce. This was an increase of 26% year-over-year (or YoY) and 28% quarter-over-quarter.

As we saw in the previous article, the company’s production was lower than expected, which led to higher unit costs.

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AISC guidance

While Goldcorp expected some of the rise in AISC due to expected lower production, some unexpected events led to even higher costs.

The company’s management maintained that along with production, costs should also normalize in the second half of 2016. The return of Penasquito to normal operations and the improvement in grades should aid costs. The second half of 2016 should see costs normalize as production reverts to a higher level. Goldcorp has maintained its AISC guidance for 2016 at $850–$925 per ounce.

AISC: Goldcorp compared to its peers

Goldcorp’s closest peers Newmont Mining (NEM) and Barrick Gold (ABX) have reduced their AISC guidances for 2016 due to better-than-expected cost controls.

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

In the next part of our series, we’ll see how analysts are rating Goldcorp after its recent results.


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