Goldcorp Takes $1.96 Billion Writedown After Price Slump

Goldcorp Inc. (G), the biggest gold producer by market value, wrote down the value of assets by $1.96 billion and is slowing some project spending because of lower metal prices.

The writedown helped lead to a second-quarter net loss of $1.93 billion, or $2.38 a share, compared with net income of $268 million, or 26 cents, a year earlier, the Vancouver-based miner said today in a statement.

Profit excluding the writedown and other one-time items was 14 cents a share, trailing the 23-cent average of 19 estimates compiled by Bloomberg. Sales fell 18 percent to $889 million, missing the $1.15 billion average estimate.

Gold-mining companies have announced at least $13 billion of writedowns in the past two months after the precious metal’s steepest quarterly drop in London trading in more than nine decades. Goldcorp said its writedown was mainly related to the value of exploration potential at its Penasquito mine in Mexico, its biggest source of revenue last year.

“Penasquito continues to possess strong exploration upside, but due to lower metals prices, the current in situ market value of exploration potential has decreased significantly,” Chief Executive Officer Chuck Jeannes said in the statement.

Shares Drop

Goldcorp fell 1.2 percent to C$28.88 at the close in Toronto, compared with a 0.5 percent increase for the S&P/TSX Global Gold Sector Index of 50 companies.

Goldcorp is reviewing operating plans and will defer some spending this year and next at mines it’s building in Argentina and Canada. The changes aren’t expected to have material impacts on project schedules, the company said.

Capital spending will be about $2.6 billion, or $200 million lower than a previous forecast, Goldcorp said. The company also plans to cut administration expenses by about 10 percent and reduce its exploration budget by 11 percent.

Gold, which rose for 12 consecutive years, slipped into a bear market in April and has dropped 21 percent this year in New York. Goldcorp’s average realized price in the quarter was $1,358 an ounce, compared with an average of $1,417 an ounce on the Comex in New York.

“This happens in a falling price environment and if you are unlucky on the timing of gold sales,” George Topping, a Toronto-based analyst at Stifel Nicolaus & Co., said in a note.

Jeannes said profit was affected by the timing of gold sales. Goldcorp sold about half of the gold and silver in the quarter in June, when gold prices fell to a 34-month low.

Goldcorp is Canada’s second-biggest gold miner by sales. It overtook Toronto-based Barrick Gold Corp. (ABX) this year to become the most valuable company in the industry, despite producing less than half the metal.

To contact the reporter on this story: Liezel Hill in Toronto at lhill30@bloomberg.net

To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net

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