Goldcorp Inc. (G), the second-largest gold producer by market value, reported first-quarter earnings that trailed analysts’ estimates as production declined at a Canadian mine. The shares fell the most in more than two years.
Net income fell 26 percent to $479 million, or 51 cents a share, from $651 million, or 81 cents, a year earlier, the Vancouver-based company said yesterday in a statement. Profit excluding mark-to-market gains on securities and other one-time items was 50 cents a share, less than the 53-cent average of 18 estimates compiled by Bloomberg. Sales climbed 11 percent to $1.35 billion.
The company said gold output dropped 39 percent at Red Lake in Ontario, its top producer, because of difficult ground conditions and lower-than-expected grades. The company produced 524,700 ounces of gold at all its mines in the first quarter, compared with 637,600 ounces a year earlier. George Topping, a Toronto-based analyst at Stifel Nicolaus & Co., had estimated production of 572,400 ounces.
The company will complete a review of the production plan at Red Lake by midyear, Chief Executive Officer Chuck Jeannes said yesterday in a telephone interview. He said it’s too early to say whether the company will need to revise its output and cost forecasts. The ground problems probably aren’t “very serious,” he said.
“We’ve experienced these kinds of things in the past,” Jeannes said. “We’ll have a much better sense by the end of the second quarter where we stand.”
Goldcorp dropped 6 percent to C$38.02 at the close in Toronto, the biggest decline since July 28, 2009. The 64-company S&P/TSX Global Gold Index (SPTSGD) fell less than 0.1 percent.
Goldcorp said in January it expected to produce 2.6 million ounces of gold this year at costs of $550 to $600 an ounce. The company plans to boost annual production by about 70 percent to 4.2 million ounces by 2016, as new mines start up in the Dominican Republic, Argentina and Canada.
All the projects are still on schedule, Jeannes said.
Goldcorp said its average cost to produce and sell gold increased in the first quarter, primarily because of lower gold production. So-called co-product cash costs were $648 an ounce in the quarter compared with $504 a year earlier, the company said. Brian Yu, an analyst at Citigroup Inc. in San Francisco, had estimated average costs of $571 an ounce. Stifel’s Topping estimated $628.
Goldcorp’s results were “dragged down by poor production at Red Lake,” Topping said in a telephone interview yesterday.
Red Lake is the “cornerstone on which the company has been built,” Topping said. “It’s very important, it is their high- grade, low-cost operation.”
Jeannes said mergers and acquisitions in the gold sector may accelerate as potential targets look cheaper.
“With the valuations having come down, it’s probably more likely that you will see activity in the sector,” he said.
“We’re not stressed to go out and buy anything, but we always keep our eyes open,” he said.
Gold, which has risen for 11 straight years, averaged $1,694 in the first quarter in New York, 22 percent more than a year earlier. Futures for June delivery rose 0.9 percent to $1,657.80 an ounce at 10:38 a.m. on the Comex.
Barrick Gold Corp. (ABX), based in Toronto, is the world’s largest producer of the metal.
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