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Could Goldcorp’s Long-Term Plans Please Investors?

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Feb. 10 2017, Updated 10:36 a.m. ET

Could production accelerate?

Goldcorp (GG) missed its production estimate in 3Q16. Goldcorp has committed $1 billion to growth and expects to see production growth of 20% to 3 million ounces in the next five years. During its investor day on January 17, 2017, the company outlined several drivers for this. For an in-depth discussion of these drivers, please read Will 2017 Mark a Turnaround in Goldcorp’s Fortunes? 

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Costs should fall

Goldcorp expects its AISC (all-in sustaining costs) to fall to $700 per ounce from the expected $850 per ounce in 2017, or 18% over the next four years (2017–2021). Apart from higher production, other expected drivers of this reduction are:

  • $250 million in annual sustainable efficiencies
  • lower sustaining capital expenditure
  • optimization of assets

Among its peers (JNUG) (GDX), Barrick Gold (ABX) has the lowest AISC. It aspires to achieve AISC below $700 per ounce by 2019, which would be below the 25th percentile of the industry’s cost curve. Newmont Mining (NEM) has a 2016 cost outlook of $870–$930 per ounce. Despite achieving cost improvements, Kinross Gold (KGC) remains a rather high-cost precious metal producer, with 3Q16 AISC of $1,001 per ounce. Yamana Gold (AUY) has an AISC guidance of $880–$920 per ounce for 2016.

Growing reserves

Goldcorp’s (GG) objective is to increase its gold reserves by 20% over the next five years. During its investor day on January 17, 2017, the company gave insights into its plan to reach that goal. Goldcorp plans to increase its reserves from its existing portfolio. The reserves at the end of 2016 totaled 42.3 million ounces. The company is aiming for a 20% increase to 50 million ounces by 2021. Next, let’s look at Agnico Eagle Mines.

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