Will Goldcorp’s Production Growth Take Off after Q3?



Production declined as expected

Goldcorp (GG) produced 571,000 ounces of gold in Q2 2018, a decline of ~10.0% year-over-year (or YoY). The decline in production was expected, as its Penasquito mine entered a planned stripping phase, which resulted in lower-grade ore. Also, the divestiture and closure of some of its mines also led to this decline in production.

On the other hand, its Cerro Negro and Eleonore mine ramp-up partially offset the decline from the above-mentioned factors.

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Goldcorp’s production growth

The company should see weak production growth in the third quarter as well, as it has modified the production plan for lower mill throughput and mill acreage. Thus, third-quarter production will likely be in line with second-quarter production. The fourth quarter, on the other hand, is expected to see a significant increase in production and lower unit operating costs due to benefits from the new pyrite leach circuit and the ramp-up of Eleonore and Cerro Negro.

With these developments in mind, the company has maintained its 2018 production guidance of 2.5 million ounces plus or minus 5%. It also maintained that its production is on track to increase 20% to 3.0 million ounces by 2021. In January 2017, Goldcorp laid out its plans for its 20% production and reserve growth in the next five years. The company reiterated its plan to achieve 20% improvements in reserves, production, and unit costs by 2021.

Peer production

Other miners in the gold space (GDX) (GDXJ) are also trying to increase their production. Some investors believe Barrick Gold’s (ABX) production growth could fall for several years due to its non-core asset sales.

Newmont Mining (NEM) has approved nine projects in the last three years, which it believes could contribute up to 1.7 million ounces on an annual basis to its production profile. Kinross Gold’s (KGC) management is focusing on increasing its mineral reserve estimates. In the next part of this series, we’ll look at Goldcorp’s project pipeline update and see whether its pipeline could help its production growth going forward.


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