Goldcorp profit drops more sharply than expected

Thu May 2, 2013 11:08am EDT
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By Julie Gordon

TORONTO (Reuters) - Miner Goldcorp Inc (G.TO: Quote) said on Thursday that its first-quarter profit dropped by a steeper-than-expected 35 percent as lower metal prices and higher costs outweighed a boost in gold sales.

Shares of the world's largest gold miner by market capitalization fell 2.1 percent to C$28.46 on the Toronto Stock Exchange.

Even though gold prices have plunged recently, the Vancouver-based miner said it was still committed to spending $2.8 billion this year as it brings three new mines into production through 2015.

With those new mines in Canada and Argentina, Goldcorp plans to boost its output by about 50 percent by 2017. That bucks a trend among many of the top gold miners of scrapping new projects to return cash to shareholders.

"Our shareholders can count on continued discipline as we advance our growth strategy and focus on execution and prudent cost management at our mines and projects," Chief Executive Officer Chuck Jeannes said in a statement.

While long-term fundamentals should support a strong gold price, Jeannes said the company had put a "contingency plan" in place to defer spending should market conditions warrant.

The price of gold fell sharply last month to a two-year low of about $1,320 an ounce, but has since recovered to about $1,460. That is still well below Goldcorp's average realized gold price of $1,622 in the first quarter.

With prices volatile, miners are under pressure to bring down operating and capital costs, improve margins and defer nonessential spending.   Continued...

President and Chief Executive Officer of Goldcorp., Chuck Jeannes, delivers a speech at the annual general meeting held at the Pan Pacific Convention centre in Vancouver, British Columbia May 18, 2011. REUTERS/Ben Nelms