Goldcorp’s Strategic Focus Amid Gold Price Decline and Growth Plans

Goldcorp is confident that its corporate focus on cost containment and continuous improvement will guide it through a market decline. The price of gold in 2013 fell roughly 46 percent in the first half of the year, reaching a nearly three-year low of $1,180 per ounce at the end of June.

“We’re looking through our entire portfolio to ensure that we’re spending money wisely in an effort to preserve returns to our shareholders in this volatile metals environment,” says Jeff Wilhoit, vice president of investor relations of the Vancouver-based gold producer.

The company is focused on five key attributes Wilhoit says keep the company in solid standing with investors. These are growth, low cash costs, maintaining a strong balance sheet, operating in regions with low political risk and conducting business in a responsible manner.

“We are careful with our capital and operate with an eye to create sustainable prosperity, not just for our shareholders, but for all of our employees and communities in which we operate,” he adds.

Goldcorp’s cost containment and continuous improvement strategy includes tracking the productivity of the equipment it uses at its production site, such as shovels and trucks. The company wants to ensure this equipment is used in the most efficient manner possible. “The small incremental gains in efficiency we gain from doing this can result in significant cost savings over time,” Wilhoit says.

Strong Assets

With 11 operating assets in North and South America, Goldcorp has become one of the world’s fastest-growing senior gold producers.

One of Goldcorp’s top producing mines is Red Lake in Ontario, considered by many in the industry to be the richest gold mine in the world. The Red Lake mine produced 507,000 ounces of gold in 2012 alone.

The company in 2010 began production in the open-pit Peñasquito mine in Zacatecas, Mexico, which is anticipated to produce between 360,000 to 400,000 ounces of gold this year. In addition, the mine is expected to produce 20 million to 21 million ounces of silver, 285 to 305 million pounds of zinc and 145 to 160 million pounds of lead.

Goldcorp’s other producing assets are:

• Porcupine, an underground and open pit mine complex in Timmins, Ontario;
• Musselwhite, an underground mine in Opapamiskan Lake, Ontario;
• Marigold, an open pit mine in Humboldt County, Nev.;
• Wharf, an open pit, heap leach operation in Lead, S.D.;
• Marlin, an underground mine in Guatemala;
• Alumbrera, a gold and copper operation in northwestern Argentina;
• Pueblo Viejo, a gold mine in the Dominican Republic;
• Los Filos, an open pit and underground mine in Mezcala, Guerrero, Mexico;
• El Sauzal, an open pit operation in Urique, Chihuahua, Mexico.

In addition to its own assets, Goldcorp also seeks out exploration partnerships and joint ventures with exploration companies. “These partnerships provide us with low-risk access to exploration upside, while benefiting our partners through additional project funding and assistance with technical expertise to advance projects beyond the exploration phase,” the company says.

Growth Opportunities

Three projects will help Goldcorp solidify its status as one of Canada’s most successful gold producers.

The company in 2010 acquired the Cerro Negro project, located in the Santa Cruz province of Argentina. The project contains several high-grade vein structures.

Goldcorp anticipates that gold production will begin at Cerro Negro in late 2013. Annual gold production is expected to average 525,000 ounces in the first five years of full production, the company says.

“Since acquiring the property, gold reserves and resources have nearly doubled, and new discoveries support our expectations that Cerro Negro will be a long-lived, high quality asset with low production costs,” Goldcorp adds. “Cerro Negro’s ideal physical setting and easily accessible veins will result in near-term, cash flow-accretive gold production.”

Exploration drilling is now underway and production is anticipated in 2015 at Cochenour, a project located in the same gold production district as Goldcorp’s Red Lake mine. The project is expected to yield between 225,000 to 250,000 full ounces of gold per year.

Ore in the Cochenour mine will be accessed both through a shaft and an underground haulage drift and then processed using existing facilities at the Red Lake mine, Wilhoit notes.

Goldcorp’s third growth project is the Éléonore project now under development in James Bay, Quebec. Underground exploration development is now underway, and the project is on target for initial production in late 2014. A pre-feasibility study, completed in 2011, estimated the project has the potential to produce more than 600,000 ounces of gold annually, according to the company.

“These three growth projects are the focus of our efforts right now and are key to the company’s future,” Wilhoit says.