Goldcorp’s 1Q17 price performance
Goldcorp’s 4Q16 results beat market expectations, mainly due to lower costs and higher gold prices. The market was happy with the company’s results. Its stock rose 6.1% after they were announced.
Investors also were also happy with Goldcorp’s guidance. The company is planning to increase its production and reserves by 20% over the next five years while reducing its costs 20% at the same time.
Transactions during 1Q17
On March 28, 2017, Goldcorp made three significant announcements in two separate releases:
- It will acquire from Kinross Gold (KGC) 25.0% interest in the Cerro Casale project in Chile and 100% interest in the Quebrada Seca exploration project adjacent to Cerro Casale.
- It will also acquire 25.0% interest in Cerro Casale from Barrick Gold (ABX), which holds 75.0% interest in the project.
- It will acquire Exeter Resources (XRA) and its 100%-owned Caspiche project. This junior miner’s only project is located in the Maricunga Gold Belt in Chile, ~10.0 kilometers north of Cerro Casale.
As a result of these transactions, Goldcorp will form a 50-50 joint venture with Barrick for the Cerro Casale project, which should help to jointly advance the project.
For a detailed analysis of the project, read Impact of Chilean Joint Venture on Barrick Gold and Goldcorp.
Goldcorp’s cost update
Goldcorp expects its AISC (all-in sustaining costs) to fall to $700 per ounce from 2017’s expected $850 per ounce, or 18%, from 2017 to 2021. Other drivers of this reduction include the following:
- $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 of below $700 per ounce by 2019, which would be below the 25th percentile of the industry’s cost curve.
Newmont Mining (NEM), on the other hand, expects its costs to rise for the next two years.
Despite achieving cost improvements, Kinross Gold (KGC) remains a rather high-cost precious metal producer, with 2016 AISC of $984 per ounce.
Next, let’s look at Kinross Gold.