Goldcorp Slumps Most Among Major Gold Miners on Mexico Shutdownby
Co. says Penasquito suspension shouldn’t affect 2016 guidance
Desjardins analyst says quick mine restart may be challenging
Goldcorp Inc. fell the most among large gold producers after the Vancouver-based company said it was halting work at one of its biggest mines amid a labor protest.
Four days after saying a blockade at the Penasquito mine in Mexico wasn’t affecting operations, the company announced a “controlled shutdown.” The shares lost as much as 5.4 percent, and were down 4.6 percent at 3:31 p.m. in Toronto, making it the worst performer on the BI Global Senior Gold Valuation Peer Group.
The protest by a trucking contractor follows transport-policy changes and cost-saving efforts by the company. Goldcorp has taken legal steps, including filing criminal charges against protest leaders who are refusing to meet, the company said. The decision to suspend operations was made after the blockade prevented the company from bringing in food, water and fuel to the 750 people on site.
Penasquito accounted for 31 percent of company sales last year, according to data compiled by Bloomberg. While Goldcorp said the interruption isn’t expected to affect overall production or cost guidance for 2016, Desjardins Capital Markets analyst Michael Parkin said resuming production could prove more difficult than expected.
“Earlier this year, the company performed the first site-wide shutdown of Penasquito and the restart proved to be somewhat challenging; we thus view this as a potential risk for 4Q16 when the blockade might be resolved and the mine and mill restarted,” Parkin wrote. “Overall, we view this morning’s news as a modest negative.”
In an interview in July, Goldcorp Chief Executive Officer David Garofalo said the company was halfway to achieving its goal of $250 million a year in sustainable savings. Having cut 750 jobs in Canada in the first quarter and 450 in Argentina, he said there was scope to further reduce head count across Canada and Latin America.