Goldcorp’s third-quarter miss
Goldcorp (GG) reported its third-quarter earnings results after the market closed on October 24. Goldcorp, Barrick Gold (ABX), Agnico Eagle Mines (AEM), and New Gold (NGD) kick-started the gold sector’s (GDX) earnings season yesterday.
GG’s revenue and earnings came in below analysts’ consensus expectations. It reported adjusted EPS of -$0.08, which missed the consensus estimate by $0.05. Its revenue of $621 million also missed analysts’ estimate by ~8%.
GG’s gold production came in at 503,000 ounces, a fall of 20.5% YoY (year-over-year) and 12% sequentially. On its lower production, its all-in sustaining costs (or AISC) also disappointed, rising 20.8% annually and 17.5% sequentially to $999 per ounce. Goldcorp also missed analysts’ expectations for its second-quarter and first-quarter earnings results.
What caused the larger-than-expected loss?
While most analysts were factoring in a weaker quarter, as was flagged by the company, its costs and losses were higher than what was broadly expected. The major reason for the larger-than-expected loss was the lower production of all metals at the company’s Peñasquito mine, which was affected by lower throughput and planned grades from stockpiles due to the commissioning of its Peñasquito Pyrite Leach Project.
Stock plunges 13%
Goldcorp stock was down in after-hours trading on the earnings miss, and at 11:30 AM EDT on October 25, it was trading down 13.8%, significantly underperforming the VanEck Vector Gold Miners ETF (GDX), which was down 3.1%. GG’s current price implies a steep loss of 28% YTD (year-to-date).
GG expects its fourth-quarter production to come in at 620,000 ounces, pushing its full-year volumes to 2.28 million ounces—still slightly lower than its previous guidance of 2.5 million ounces (plus or minus 5%). It expects its AISC to come in at $750 per ounce in the fourth quarter. The improvement is expected to result from major production associated with higher-grade ore at Peñasquito and continued ramp-ups at Éléonore and Cerro Negro.
GG confirmed that its project pipeline is continuing to advance in support of its 20/20/20 growth plan, which is targeting improvements of 20% each in its production, reserves, and unit costs by 2021. We discussed these expectations in more detail in A Look at Goldcorp’s 20/20/20 Growth Plan in Q2 2018.