March 8 (Bloomberg) -- Goldcorp Inc., the world's third- largest gold producer, said fourth-quarter profit fell 35 percent as a $175 million reduction in the value of a Brazilian mine erased the benefit of higher prices and output.

Net income fell to $65.9 million, or 11 cents a share, from $101.7 million, or 27 cents, a year earlier, Vancouver-Goldcorp said today in a statement. Sales surged 91 percent to $513.3 million after the acquisitions of Glamis Gold Ltd. and mines formerly owned by Placer Dome Inc.

Goldcorp agreed last month to sell its Amapari mine in Brazil and the Peak mine in Australia to GPJ Ventures Ltd. for $300 million. Goldcorp slashed the estimated reserves at Amapari to 485,000 ounces from 1.34 million ounces. ``The cost did not support moving forward'' with building a mill, 11Chief Executive Officer Kevin McArthur said in a telephone interview.

``It was a problematic mine,'' said Paul O'Brien, an analyst at Raymond James Ltd. in Toronto. ``You can see from the recoveries, they have not been up to expectation.''

Profit included a gain of $88 million from the sale of some shares in Silver Wheaton Corp. Excluding some items, profit was $113.5 million, or 19 cents a share, Goldcorp said. The company was expected to earn 20 cents, the estimate of nine analysts surveyed by Bloomberg. O'Brien projected 16 cents.

Goldcorp fell 43 cents, or 1.4 percent, to C$29.35 on the Toronto Stock Exchange. The shares had dropped 11 percent this year. O'Brien rates Goldcorp ``strong buy'' and does not own the stock.

Amapari Mine

Wheaton River Minerals Ltd., which Goldcorp acquired in April 2005, bought the Amapari mine in January 2004 for $25 million in cash and some shares and warrants.

The mine started production in September 2005 and was scheduled to produce more than 180,000 ounces of gold in 2006 at a cash cost of $160 per ounce. Instead, output was 84,200 ounces with a cash cost of $524 an ounce, Goldcorp's highest.

Goldcorp decided against building a mill to process ores containing sulfide minerals and then excluded those ores from reserve calculations, CEO McArthur said.

The mine was ``high cost,'' McArthur said. ``It's quite remote in Brazil. The size of it wasn't meaningful to the new company and it had a short life.''

Goldcorp reduced mining in Australia to focus on the Americas, McArthur said. Toronto-based GPJ, which will change its name to Peak Gold Ltd., agreed to pay $200 million in cash and $100 million in Peak stock, leaving Goldcorp with a 22 percent stake in Peak.

First-Quarter Gain

A pretax gain of $50 million from the Peak sale will be reported in the first, Chief Financial Officer Lindsay Hall said on a conference call with investors.

Goldcorp in May spent $1.6 billion for Placer's stakes in four mines and a project and completed its $7.6 billion buyout of Glamis in November to become the third-largest gold company by market value. Barrick Gold Corp. is the biggest, followed by Newmont Mining Corp.

Goldcorp sold gold on average for $620 an ounce, up 26 percent from a year earlier. Gold prices gained as investors sought a hedge against inflation and diversified from stocks and bonds. The metal reached a 26-year high of $732 on May 12, spurring producers to step up acquisitions and exploration to replenish reserves.

Gold production almost doubled to 587,900 ounces in the quarter. The cost of producing each ounce of gold jumped to $160 from minus $73, including credits from sales of silver and copper byproducts.

Output Forecast

Goldcorp reiterated its February forecast that production this year will rise 54 percent to 2.6 million ounces and cash costs will rise to $150 an ounce from $33 last year.

Gold grades at the El Sauzal mine in Mexico may be lower than forecast, CEO McArthur said on the conference call. The mine recovered 4.7 grams of gold from a ton of ore in 2006, above the reserve grade of 2.11 grams a ton.

``In mining the high-grade core of the deposit over the last couple of years, especially just late last year, we came to understand that we were having some in-pit losses,'' McArthur said. ``We are not getting all of the reserves there that were in the model. We have gone to a more conservative model.''

To contact the reporter on this story: Choy Leng Yeong in Seattle at clyeong@bloomberg.net

Last Updated: March 8, 2007 16:20 EST