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Investors Will Be Watching Goldcorp’s Q4 2018 Volume Target

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Production declined more than expected

Goldcorp (GG) produced 503,000 ounces of gold during the third quarter, a decline of ~20.5% YoY (year-over-year). While the company has guided for a decline during the quarter on its planned stripping phase at Peñasquito, the decline was higher than expected.

The major reason for lower-than-expected loss from Goldcorp was the lower production of all metals from its Peñasquito mine. This production was impacted by lower throughput and planned grades from stockpiles due to the commissioning of its Peñasquito Pyrite Leach Project.

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Reduction in guidance for the fourth quarter

GG expects its fourth-quarter production to come in at 620,000 ounces, which could push its fiscal 2018 volume to 2.28 million ounces. This volume would still be slightly lower than its previous guidance of 2.5 million ounces (plus or minus 5.0%).

This improvement in the fourth quarter is expected, as all the major production for Peñasquito is expected to come from higher grade ore and as Éléonore and Cerro Negro continue their ramp-ups. The company attributed this reduction in guidance to lower-than-expected production from:

  • Musselwhite during the construction phase of its materials handling project
  • stoppage of equity accounted gold from Leagold after its merger with Brio gold
  • lower budgeted grades and recoveries from Pueblo Viejo

Long-term outlook

Goldcorp (GG) affirmed that its project pipeline is continuing to advance in support of its 20/20/20 growth plan, which is targeting an improvement of 20.0% each in its production, reserves, and unit costs by 2021. However, investors will be watching for the company to deliver on its fourth-quarter guidance in full, as it has disappointed them for the last few quarters. A non-achievement of its guidance could pressure its stock further.

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 to its production profile on an annual basis. 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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