Goldcorp Corp. (GG) announced expansion plans for the Cerro Negro epithermal gold deposit, acquired from Andean Resources in December 2010. The project is located in the southern Argentinean province of Santa Cruz at an elevation of approximately 600 meters above sea level.
In this regard, Goldcorp expects the average annual gold production during the first 5 years to be approximately 550,000 ounces at average cash costs of less than $200 per ounce of gold, resulting in the doubling of the plant throughput to 4,000 tonnes per day.
Based on the existing reserves, the total mine life is estimated to be 12 years and the annual production is expected to average 340,000 ounces per year at cash costs of approximately $290 per ounce. The mining of multiple veins creates significant flexibility for optimization of the mine plan as additional reserves are developed.
Total capital expenditures of its first production in mid-2013 are expected to be approximately $750 million, including $130 million in 2011. In December 2010, the project received approval to commence construction from Environmental Impact Assessment.
Exploration drilling is ramping up to a total of 10 drill rigs on site in the second quarter with an updated budget of approximately $19 million for 2011.
In February, Goldcorp announced a near-doubling of total gold resources at Cerro Negro. The total proven and probable reserves have grown by more than 100% to 4.3 million ounces, resulting in a net addition of 2.2 million ounces to Goldcorp’s total proven and probable reserves, now at 62.3 million ounces. A total of 36.2 million silver ounces have also been added to the proven and probable reserves.
Goldcorp is one of the world’s fastest growing senior gold producers. Its low-cost gold production is 100% unhedged. The company faces stiff competition from AngloGold Ashanti Ltd. (AU), Barrick Gold Corporation (ABX) and Newmont Mining Corp. (NEM).
Goldcorp’s archrival Agnico also announced a 256% increase in its quarterly dividend in December, when it planned to raise the quarterly payment to $0.16 a share, starting on March 15, 2011.
We maintain our Neutral recommendation on Goldcorp. Currently, it holds a Zacks #3 Rank (Hold) on the stock.
BARRICK GOLD CP (ABX): Free Stock Analysis Report
ANGLOGOLD LTD (AU): Free Stock Analysis Report
GOLDCORP INC (GG): Free Stock Analysis Report
NEWMONT MINING (NEM): Free Stock Analysis Report
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