Goldcorp Posts Surprise Loss in Gold Rout; Shares Tumble

  • Production rose more than analysts estimated in the quarter
  • Gold futures averaged 12 percent less than a year earlier

Goldcorp Inc., the largest gold producer by market value, surprised analysts with a third-quarter loss as efforts to lower costs and increase output were countered by lower prices and impairments. Shares fell the most in three months.

The Vancouver-based miner had a loss of 4 cents a share excluding a writedown on stockpiles and other one-time items, it said Thursday in a statement, compared with a 4-cent average profit estimate of 22 analysts tracked by Bloomberg. Sales rose to $1.1 billion from $839 million a year ago, beating the $1.05 billion average estimate.

“It’s a miss, it’s messy, but if you get into the cash flow where it’s arguably less messy, they posted strong cash flow and decent free cash flow,” Andrew Kaip, an analyst with BMO Capital Markets, said by telephone from Toronto.

The company’s shares slumped 10 percent in New York, the biggest decline since July 20.

Newest Mine

Like its peers, Goldcorp has been working to strengthen its balance sheet after prices slumped about 40 percent from a 2011 peak. The company, which operates in North and South America, faced output setbacks at its Eleonore mine after higher-than-expected “folding” in the rocks affected about ten percent of the ore body. This won’t affect the ramp-up of Eleonore to full production by the first quarter of 2018, Jeannes said in the interview.

Third-quarter gold production rose to 922,200 ounces from 651,700 ounces a year earlier. Eleven analysts estimated an average of 902,900 ounces of output. All-in sustaining costs, a measure to compare miners’ performance, were $848 an ounce in the third quarter, lower than the $896.60 average of five estimates.

Money Banked

Free cash flow was $243 million, compared with negative free cash flow of $355 million for the third quarter of 2014. Excluding $1 million in non-controlling interests, the net loss was $191 million, or 23 cents a share, wider than the loss of $44 million, or 5 cents, a year earlier, the company said.

“We paid down our credit facility during the quarter and put money in the bank which is the ultimate measure of success,” Goldcorp Chief Executive Chuck Jeannes said in a telephone interview Thursday. “The non cash charges led to a GAPP earnings loss but if you look through those, the operations and the cash generation were very strong.”

Work on a new water source at the Penasquito mine in Mexico was suspended in the third quarter because of a local blockade. Goldcorp continues to negotiate with the local community and is advancing a plan to go around them, Jeannes said said. It is also working with union representatives to resolve a labor dispute at its Cerro Negro mine in Argentina and Jeannes said he doesn’t expect that dispute to have a material impact.

The company took write-downs related to foreign exchange. The Canadian dollar lost 6.15 percent against its U.S. counterpart during the quarter, while the Mexican peso weakened 7 percent and Argentina’s currency fell 3.5 percent.

Gold futures averaged $1,123.77 an ounce in the third quarter in New York, 12 percent less than a year earlier.

(An earlier version of this story corrected the first paragraph to clarify the company had a loss.)

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