Goldcorp Inc.’s (GG) reported net earnings in the first quarter of 2011 were $651 million compared with $232 million in the first quarter of 2010. Adjusted net earnings were $397 million, or 50 cents per share compared with $159 million or 22 cents per share in the first quarter of 2010. Results exceeded the Zacks Consensus Estimate of 48 cents.
Revenue
In the first quarter of 2011, revenues increased 69% year over year to $1,216 million, on gold sales of 627,300 ounces. Revenues missed the Zacks Consensus Estimate of $1,295 million.
Record realized gold prices and Goldcorp’s strong production boosted revenues. The average realized gold price for the quarter rose 26% to $1,694 an ounce. Cash costs, including a by-product credit, were $188 an ounce.
Mining Update
Mexico: At the Penasquito mine gold and silver production was 57,600 and 4,374,400 ounces, respectively, for the first quarter of 2011. Lead and zinc production in the reported quarter totaled 36.5 million pounds and 55.6 million pounds, respectively.
Strong by-product silver, lead, and zinc credits contributed to by-product cash costs during the quarter of negative $1,488 per ounce of gold.
At Los Filos, gold production was a record of 94,600 ounces at total cash costs of $427 per ounce. The record performance at Los Filos further established Goldcorp’s position as a key contributor to its asset portfolio.
Construction of the fourth stage of the heap leach pad commenced during the fourth quarter of 2010, which is expected to be completed in the second quarter of 2011.
Canada: At the Red Lake Mine gold production was strong at 186,100 ounces at total cash costs of $322 per ounce. Production in the quarter increased 2.7% year over year while cash costs increased 8.1% versus the year ago quarter.
A significant amount of exploration and development is in progress to bring the Upper Red Lake and Far East zones into sustained production, both as alternate sources of ore and to complement the fill-the-mills program.
At Musselwhite in Ontario gold production was 67,300 ounces – an increase of 9.8% year over year at a total cash cost of $621 per ounce. Gold production at the Porcupine in Ontario, declined 3.7% year over year to 59,800 ounces at a total cash cost of $733 per ounce.
Guatemala: At Marlin in Guatemala, gold production increased 12.9% to 77,800 ounces at a total cash cost of negative $324 per ounce. Silver production jumped 41% to 1,769,000 ounces.
Financial Position
At the end of March 31, 2011, cash and cash equivalents were $1,280 million versus $556 million at the end of December 31, 2010.
In the first quarter of 2011, operating cash flow increased 108% to $586 million from $282 million in last year’s first quarter.
Project Pipeline
PuebloViejo: Construction of Pueblo Viejo in the Dominican Republic continues to advance with its record realized pre-production capital budget of $3.3 – $3.5 billion (100% basis) being committed. All four autoclaves are on site and have been placed on their foundations.
In the quarter the company also attained the environmental permits for temporary power sources and two of the four autoclaves have been brick-lined in preparation for operation.
Cerro Negro: In the quarter the company announced results from a feasibility study and came up with a new development plan from which the company expects to more than double the plant throughput to 4,000 tonnes per day, contributing to an average of 550,000 ounces of gold production per year over the first five full years.
Average cash costs during the first five years of production are expected to be less than $200 per ounce of gold. Based only on existing reserves, annual gold production is expected to average 340,000 ounces per year at cash costs of approximately $290 per ounce over a 12-year mine life.
Eleonore project: At the project in Quebec, 12,000 metres of surface diamond drilling was completed in the first quarter of 2011. A new mine plan provides for doubling the plant throughput to 7,000 tonnes per day starting in 2017 with gold production averaging approximately 600,000 ounces per year over 15 years.
Initial gold production is scheduled to start in the fourth quarter of 2014. Life-of-mine cash costs are expected to be below $400 per ounce and the total capital cost to full production is approximately $1.4 billion.
The project is expected to receive final clearance to commence construction with the receipt of the Environmental and Social Impact Assessment (ESIA) permit in the third quarter of 2011.
Cochenour: Full scale development of this project is underway. Estimated life-of-mine gold production is expected to average between 250,000 – 275,000 ounces per year over an approximate 20-year mine life at total cash costs below $350 per ounce.
Camino Rojo: Exploration and development work continued at Camino Rojo the advanced-stage satellite exploration project near Penasquito. At Camino Rojo, exploration activities continued and a total of 20,300 metres were drilled from five rigs.
El Morro: At the El Morro project, approval of the Environmental Impact Assessment (EIA) was received in March 2011. Once the project receives the other sectoral permits it will enable El Morro to commence condemnation drilling focusing on selected areas of plant, mine waste, tailing and camp.
Outlook
For 2011, Goldcorp stood by its production outlook for the year, with output expected to be in a range of 2.65 million to 2.75 million ounces, but the company announced that it may revisit its cash cost guidance of $280 – $320 per ounce if an improving trend continues.
The Vancouver-based company, which has development projects across the Americas, plans to expand production by 60% to 4 million ounces in 2015.
The company competes with Barrick Gold Corporation (ABX) and Newmont Mining Corp. (NEM).
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
GOLDCORP INC (GG): Free Stock Analysis Report
NEWMONT MINING (NEM): Free Stock Analysis Report
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