Goldcorp Inc.’s (GG - Analyst Report) third-quarter 2014 adjusted earnings (excluding one-time items) decreased 63.2% to $70 million or 9 cents per share from $190 million or 23 cents a share earned in the year-ago quarter. Earnings per share missed the Zacks Consensus Estimate of 18 cents. Earnings were impacted by non-cash reduction in the value of low-grade stockpiles at the Penasquito mine.
Adjusted earnings exclude one-time items including unrealized losses from the foreign exchange translation of deferred income tax assets and liabilities, unrealized losses on derivatives, and the impairment against the carrying amount of El Sauzal as a result of speeding up closure activities due to previously-reported pit wall instability. However, earnings include stock-based compensation impact of roughly $19 million or 2 cents per share.
Net loss, as reported in the quarter, was $44 million or 5 cents per share, in contrast to net earnings of $5 million or a penny per share in the year ago quarter.
Goldcorp's price fell as much as 14% in the trading session following the earnings announcement. The stock is down nearly 13% since the earnings release based on last Friday's close.
Goldcorp posted revenues (as adjusted) of $1,088 million in the quarter, down 6.2% year over year. It missed the Zacks Consensus Estimate of $1,111 million. Average realized gold price for the reported quarter declined 5.5% to $1,266 per ounce from $1,339 per ounce in the prior-year quarter.
Gold sales decreased 1.6% year over year to 641,400 ounces in the reported quarter while production increasing 2.3% to 651,700 ounces.
Silver production rose 0.9% year over year to 7.8 million ounces from 7.2 million ounces in the prior-year quarter. All-in sustaining costs were $1,066 per ounce (up 7.1% year over year), while cash cost totaled $597 per ounce on a by-product basis (up 8.3%) and $682 per ounce (down 3.4%) on a co-product basis.
Mining Highlights
At the Penasquito mine, gold production totaled 129,500 ounces, an increase of 13.7% year over year. Production however decreased from the sequential quarter due to lower grades and recoveries due to the supplementing of fresh ore feed with ore from stockpiles. All-in sustaining cost was $1,142 per ounce, a decline from the sequential quarter due to lower gold production, higher sustaining capital and higher operating costs. Construction is ongoing at the Northern Well Field (NWF) project at the Penasquito mi with completion expected by mid-2015.
Gold production at Los Filos dropped 12.7% year over year to 64,100 ounces at an all-in sustaining cost of $808 per ounce. Production increased over the sequentially prior quarter as mining activity resumed following the second-quarter suspension of mining.
Gold production at El Sauzal mine totaled 6,100 ounces in the third quarter, down 71.5% year over year. Mining was suspended in Sept 2014 due to pit wall instability and minimal gold production is expected for the remainder of the year. The company has elected to speed up the closure of El Sauzal beginning in the fourth quarter of 2014.
The company reported first gold production from the Eleonore mine in Quebec and ore stockpile was 244,000 tons at the end of the reported quarter. The company expects commercial production to begin by the first quarter of 2015.
Gold production at Red Lake increased 2.7% year over year to 99,600 ounces at an all-in sustaining cost of $955 per ounce. Gold production increased from the second quarter of 2014 due to increased grade and tons from the High Grade Zone which followed the completion of planned de-stress activities that contributed to increased stope availability.
At Porcupine in Ontario, gold production in the quarter was 74,300 ounces, down 2.2% year over year at an all-in sustaining cost of $946 per ounce. Production increased from the previous quarter due to higher tonnage and higher grades.
At Pueblo Viejo, where Goldcorp holds a 40% interest and Barrick Gold Corp. (ABX - Analyst Report) holds 60%, gold production increased 48.8% year over year to 112,200 ounces (40% basis) at an all-in sustaining cost of $559 per ounce. Gold production increased over the prior quarter due to higher grades.
Cerro Negro in Argentina continued to ramp-up after it produced its first gold on July 25, 2014, with commercial production expected in the fourth quarter of 2014. Gold production for the quarter totaled 19,000 ounces.
Financial Position
As of Sep 30, 2014, cash and cash equivalents were $376 million, up 61.3% from $972 million as of Sep 30, 2013. Long-term debt stood at $2,472 million as of Sep 30, 2014, up 66.9% from $1481 million as of Sep 30, 2013. The company’s adjusted operating cash flow was $399 million in the quarter compared with $375 million in the year-ago quarter. Dividends worth $122 million were paid in the reported quarter.
Project Update
At the Cochenour project, the haulage drift connecting the Bruce Channel deposit to the Red Lake complex was complete. The project remains on track for its first ore from production stopes in the third quarter of 2015.
At the Camino Rojo project near Penasquito in Mexico, Goldcorp plans to commence a pre-feasibility study before the end of 2014, with completion expected in early 2016.
Production mining at Mariana Central is expected to commence in the first quarter of 2015.
Outlook
Goldcorp, one of the leading gold mining companies along with Barrick Gold, Newmont (NEM - Analyst Report) and Kinross Gold (KGC - Analyst Report), expects to meet its production guidance for 2014 but due to the lower-than-expected production at El Sauzal due to pit wall instability and the second-quarter stoppage at Los Filos the company now expects gold production to be at the low end of its previous guided range of 2.95 million and 3.1 million ounces.
The company now expects all-in sustaining costs towards the low end of its guidance range of $950 to $1,000 per ounce for 2014.
Goldcorp reiterated its capital spending outlook and expects it to be in the range of $2.3 billion and $2.4 billion for 2014. The company also remains well-positioned for sustained growth in free cash flow in 2015 and beyond.
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