Yahoo Finance Why Didn’t Goldcorp’s Lower Production Surprise the Markets?
Where Might Goldcorp Be Headed after Its 1Q16 Results?
Decline in production
Goldcorp’s (GG) gold production declined 14% quarter-over-quarter in 1Q16 to 783,700 ounces. But this decline was largely expected due to scheduled maintenance and stockpile depletions. On a year-over-year basis, however, the company achieved an 8% increase in production, mainly due to the ramping up of the Cerro Negro and Eleonore mines.
The company indicated that in 2Q16, the production could decline another 15% sequentially. This is due to a ten-day scheduled shutdown at Penasquito and planned lower-grade mining sequences at most of its mines.
Long-term guidance is conservative
Goldcorp has maintained its production guidance of 2.8 million–3.1 million ounces for 2016. Investors should note that Goldcorp disappointed the Market in 4Q15 when it reduced its three-year forward guidance. It said that it reflects a strong focus on cash rather than ounces.
Goldcorp gave a three-year forward production guidance of 2.8 million–3.1 million ounces for 2016, 2017, and 2018. Previously, the company guided for higher production guidance at 3.3 million–3.7 million ounces per year. But we noted that there could be a significant upside to the guidance, as some of the projects aren’t included in the guidance.
Comparable earnings
Goldcorp’s peers (GDX) are also trying to increase production. Agnico Eagle Mines (AEM), Goldcorp (GG), and Newmont Mining (NEM) have stable production profiles. But Kinross Gold (KGC) and AngloGold Ashanti (AU) might have trouble replacing their reserves in the long term.
There are various ways to invest in gold. You can physically purchase gold, invest directly in gold miners, or invest in gold ETFs. The gold-backed SPDR Gold Shares (GLD), for example, is a major ETF for investors looking for exposure to gold.
In the next part of our series, we’ll explore Goldcorp’s project pipeline to have a sense of a long-term production upside.
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