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Why Goldcorp’s Production Growth Plan Seems Impressive

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Accelerating production

Goldcorp’s (GG) production volumes have been on a downtrend for the last three years. It reported gold production of 3.5 million ounces in 2015, which fell to 2.9 million ounces in 2016. According to the company’s mid-point guidance, production is expected to fall further to 2.5 million ounces in 2017. The deceleration in production is due to asset sales and mine closures.

This deceleration should, however, stop after 2017. Goldcorp is expecting flat volume growth in 2018 year-over-year at 2.5 million ounces. Its production after that is expected to accelerate. It’s expecting to reach 2.7 million tons in gold production by 2019 and eventually reach its goal of 3 million ounces by 2021.

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Drivers for production growth

Goldcorp aims to achieve 20% growth in production by 2021. It plans to achieve this through the following:

  • ramping up Eleonore and Cerro Negro to their nameplate capacities by mid-2018
  • improving grades at Peñasquito as the company goes through an intensive stripping campaign
  • improving recoveries and increasing production by 120,000 ounces per year at Pyrite Leach
  • increasing Musselwhite’s production by 20% due to materials handling
  • increasing production of its Coffee and Borden projects toward the back end of its production profile, which is expected to contribute 20% to production growth

There are still some projects that are outside of this forecast increase in production. They include the HG Young and Cochenour projects, which could provide more upside to the company’s planned 20% growth by 2021.

Peer production

Other miners in the gold space (GDX) (GDXJ) are also trying to increase their profitable productions. Newmont Mining (NEM) has approved eight projects since mid-2014. They’re expected to add to production up to 1.2 million ounces at all-in sustaining costs of $750 per ounce.

For more information on Newmont Mining, be sure to read Newmont Mining’s Position for 2018 and Subdued Outlook for Gold.

Kinross Gold’s (KGC) management is focusing on doubling its mineral reserve estimates. Barrick Gold’s (ABX) production could, however, fall for some years going forward due to asset sales. The company is focusing on value over volume.

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