Oct. 31 (Bloomberg) -- Goldcorp Inc., the world's second- largest gold producer by market value, said third-quarter profit rose fourfold because of higher bullion prices and a foreign- exchange gain.

Net income increased to $297.2 million, or 42 cents a share, from $75.8 million, or 11 cents, a year earlier, Vancouver-based Goldcorp said today in a statement. Profit excluding the $240.2 million gain on future tax liabilities was 9 cents a share, trailing the 14-cent average estimate of 19 analysts surveyed by Bloomberg.

Chief Executive Officer Kevin McArthur is attempting to boost production and protect profit margins by digging new, lower-cost mines in Canada, Mexico and the Dominican Republic. Goldcorp pays most costs in local currencies and sells metal in dollars, giving it the benefit of declines in the Mexican peso and Canadian dollar, even as metal prices fell. Lower oil and steel prices could also help cut operating expenses.

``Goldcorp could benefit most from a depreciating Canadian dollar and Mexican peso,'' Goldman, Sachs & Co. analyst Oscar Cabrera said in an Oct. 29 note to clients. Barrick Gold Corp. and ``Goldcorp see the largest potential declines in cash costs with their existing portfolios, but could add to the decline with the startup of new development projects.''

Gold traded at an average $874.17 an ounce in the quarter, 27 percent higher than the year-ago period.

Goldcorp dropped C$1.26, or 5.1 percent, to C$23.26 at 9:45 a.m. in Toronto Stock Exchange trading. The stock dropped 27 percent this year through yesterday, compared with a 51 percent drop in the 16-member Philadelphia Gold & Silver Index.

Sales Increase

Revenue rose 5.4 percent to $552.2 million. Gold sales during the quarter rose 5.1 percent to 550,500 ounces, the company said.

Costs more than doubled to $346 an ounce because of higher wages and prices for energy and equipment. Lower prices for silver and copper byproducts, which mitigate gold-production costs, also contributed to higher operating expenses, the company said.

Goldcorp reaffirmed its production forecast for the year of 2.3 million to 2.4 million ounces at a cash cost of less than $300 an ounce, the company said in July when lower-grade ore and mining disruptions prompted it to reduce its initial target from 2.6 million ounces.

McArthur had planned to invest about $4 billion to boost output to 4 million ounces by 2012.

The company sold its stake in Silver Wheaton Corp. at the beginning of the year to repay debt. At the end of the third quarter, it had no outstanding loans and cash of $454 million.

Penasquito, Pueblo Viejo

Full production from the Penasquito silver and gold mine in Mexico is expected in late 2009. That will be followed a year later by output from the $2.7 billion Pueblo Viejo joint venture with Barrick Gold Corp. in the Dominican Republic, the company has said.

``We remain well-positioned to execute our growth programs,'' McArthur said in the statement. ``Given market uncertainty and the metals price environment, we will continue to be disciplined in our use of capital, with an emphasis on successful completion of our cornerstone Penasquito project.''

Copper averaged $3.42 a pound during the quarter, 1.3 percent higher than a year earlier. Gold traded at an average $874.17 an ounce, 27 percent higher than the year-ago period.

Both metals have slumped since the end of the quarter. Copper dropped 34 percent through yesterday, and gold declined 16 percent.

To contact the reporter on this story: Stewart Bailey in New York at sbailey7@bloomberg.net.

Last Updated: October 31, 2008 09:47 EDT