Wednesday, July 11, 2012

Goldcorp (GG) Lowers Production Guidance on Drought, Seismic Activity

Goldcorp (NYSE: GG) lowered its gold and by-product metal production estimates because of ongoing drought and seismic activity at its two leading mines.

For the year, Goldcorp dropped its overall production estimates from its previous guidance of 2.6 million ounces to a range of 2.35 million and 2.45 million.

Pressure came from its top Red Lake mining operations in the first half, while in the second half its Peñasquito property will be under pressure.

Because of decreased production expectations, the company altered its total cash cost guidance from $250 to $275 an ounce on a by-product basis to $310 to $340 an ounce; and from $550 to $600 an ounce to $625 to $650 an ounce on a co-product basis.

As for by-product metals, production guidance for copper remained the same at 110 million pounds. Silver production projections were lowered from 34 million ounces of silver to a range of 30 million to 31 million ounces; from 400 million pounds of zinc to a range of 310 million to 325 million pounds of zinc; and from 180 million pounds of lead to a range of 155 million to 160 million pounds.

CEO Chuck Jeannes said this about the two major mines:

"At Red Lake, we look forward to the resumption of mining in areas of the High Grade Zone that have been inaccessible due to de-stressing activities, but grade inconsistencies in the Footwall Zone experienced in the first six months of 2012 necessitate a conservative approach with regard to forecasting production during the second half of the year."

"At Peñasquito, the team is assessing opportunities to address water deficits as soon as possible. We are optimistic that sufficient water will be secured to accommodate long-term throughput forecasts but until those sources are secured, we have reduced the forecasts for ongoing throughput and production. We remain encouraged that the ore body continues to meet expectations with respect to grade and recoveries."

Expectations are plan production for the rest of 2012 at Peñasquito will be from 98,000 to 107,000 tpd, all of which will cut into gold, silver, lead and zinc production.

Year over year, gold production in the second quarter fell from 597,100 ounces to 578,600 ounces.

Shares of Goldcorp plunged by almost 10 percent Wednesday, dropping $3.58, or 9.74 percent, to $33.17.

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