GOLDCORP INC. (TSX: G, NYSE: GG) today announced gold production and preliminary cash costs for 2013, and provided production and cash cost guidance for 2014 and the five-year period ending 2018.
Goldcorp's year-end financial statements are scheduled to be released on February 13, 2014. The final calculation of capital and operating costs has not yet been completed, but all-in sustaining costs for the fourth quarter and 2013 are expected to be approximately $885 and $1,065 per ounce of gold, respectively. On a by-product and co-product basis, costs are expected to be approximately $560 per ounce of gold and $710 per ounce of gold respectively in 2013.
"A continued, consistent focus on execution led to the achievement of Goldcorp's 2013 guidance, including gold production and all-in sustaining costs," said Chuck Jeannes, Goldcorp President and Chief Executive Officer. "Every Goldcorp-operated mine either met or exceeded 2013 production guidance with the exception of Los Filos, where record floods last summer temporarily halted production. Just as importantly, our successful cost reduction efforts in the face of lower gold prices resulted in key efficiency and productivity gains while keeping our growth profile intact. We successfully achieved our cost guidance despite significantly lower realized metals prices.
"Led by our flagship Peñasquito and Red Lake operations, our portfolio of low-cost mines will provide the operating cash flows to finance the completion of construction and start-up of our two newest mines, Cerro Negro and Éléonore. As we approach first gold production at these assets, capital spending will decrease significantly. Another year of forecast double-digit production growth in 2014, along with decreasing costs and decreasing capital expenditures positions Goldcorp for margin expansion and growing cash flow this year. Beyond 2014, continued forecast production growth, decreasing costs and significantly lower capital spending will position Goldcorp for a prolonged period of significant free cash flow generation. We remain committed to our gold-focused strategy and our mission to be the best gold company in the world."
2014 Guidance
Goldcorp expects to produce between 3.0 and 3.15 million ounces of gold in 2014. Higher gold production will be driven by increasing grades at Peñasquito as mining progresses deeper into the Peñasco pit, and by the continued ramp-up at Pueblo Viejo. Expected mid-year initial gold production from Cerro Negro in Argentina and from Éléonore in Quebec in the fourth quarter also contribute to 2014 production growth. The timing of the ramp-up of production at Cerro Negro and Éléonore is expected to result in significantly higher gold production in the second half of 2014 compared to the first half of the year.
For 2014, the Company estimates that all-in sustaining costs will decrease to between $950 and $1,000 per ounce, compared to approximately $1,065 per ounce in 2013. Decreasing costs are expected to be driven by increasing grades and by-product production at Peñasquito, lower costs at Pueblo Viejo, low-cost production from Cerro Negro and Goldcorp's continued overall focus on cost efficiencies through the Operating for Excellence program.
Silver production is expected to show very strong growth with 2014 production forecast at between 34 and 36 million ounces (including approximately 22 to 25 million ounces at Peñasquito). Zinc production is expected to be between 315 and 325 million pounds and lead production is forecast between 135 and 145 million pounds. Copper production is forecast between 88 and 93 million pounds. On a gold equivalent basis2, Company-wide 2014 production is expected to total between 4.05 million ounces and 4.25 million ounces.
Price and cost assumptions used to forecast total cash costs and gold equivalent calculation for 2014 include: $1,200 per ounce for gold; by-product metals prices of $20.00 per ounce silver; $3.00 per pound copper; $0.90 per pound zinc; $1.00 per pound lead; an oil price of $100 per barrel; and the Canadian dollar and Mexican peso at $1.05 and $12.50 respectively to the US dollar. The Company continues to evaluate opportunities to contain input costs and minimize foreign exchange risk through the hedging of both fuel and currencies.
Mexico
At Peñasquito, mining in the higher grade portion of the pit will continue throughout 2014 and, combined with an assumed throughput of 110,000 tonnes per day, production is expected to increase significantly to between 530,000 and 560,000 ounces. On a gold equivalent basis2, production is expected to total approximately 1.2 million to 1.25 million ounces. Production expectations over the balance of the five-year period assume throughput of 110,000 to 115,000 tonnes per day. During the fourth quarter of 2013, construction commenced on the Northern Well Field, which will increase overall water availability upon expected completion by the end of 2014.
The Company typically undertakes post-investment reviews of recently-commissioned operations after there is sufficient, meaningful operational data to support reconciliation to the feasibility study on which the investment decision was made. In conjunction with such a review, and in response to increased operating costs, higher Mexican taxes and lower assumed gold, silver, zinc and lead prices, the Company has prepared a new life-of-mine plan for Peñasquito, and as a result, today, has filed a National Instrument 43-101 updated technical report. As detailed in the technical report, the 2014 and five-year production profile has been positively affected by the revised mine plan. The report indicates increased cash flows over the life of the mine, supporting the current carrying value of the Peñasquito cash-generating unit. It also includes a reduction to the projected mine life from 19 years to 13 years because the final two phases of the previous ultimate pit and lower-grade mineralized material will not be mined or processed under current assumptions. As reflected in a Material Change Report filed today, a commensurate reduction in the Mineral Reserve estimates has resulted. The higher strip ratio pushbacks and lower-grade material requiring higher commodity prices to be economically processed has been re-classified as Mineral Resources.
In 2014, exploration at Peñasquito will continue to focus on defining the high-grade core of the copper-gold, sulphide-rich skarn mineralization located below and adjacent to current Mineral Reserves. Metallurgical test work on the mineralization is underway. In addition to exploration, Goldcorp is investigating the potential for producing a saleable copper concentrate at Peñasquito. An additional study is also underway to assess the viability of leaching a pyrite concentrate from the zinc flotation tailings. Successful implementation of one or both of these new process improvements has the potential to significantly improve the overall economics and add to the Mineral Reserves of Peñasquito through addition of another saleable product, and increasing gold and silver recoveries, respectively. Completion of the studies is expected by the end of 2014.
Negotiations are continuing between Minera Peñasquito and authorized representatives of the Cerro Gordo Ejido and the Company remains confident that a mutually beneficial settlement of the land claim will be reached.
Approximately 50 kilometres from Peñasquito, the Camino Rojo project continues to demonstrate the potential to become Goldcorp's next major growth project, with drilling continuing to confirm the potential for a large-scale, sulphide mining operation. Previous five-year Company guidance had included production from a small oxide deposit near surface. These ounces have been removed from the five-year guidance until the Company completes a comprehensive pre-feasibility study. The pre-feasibility study is expected to commence in mid-2014 with expected completion by mid-2015.
