4 Min Read
By Julie Gordon TORONTO, July 25 (Reuters) - Goldcorp Inc, the world's largest gold miner by market capitalization, posted weaker-than-expected second quarter results on Thursday, hit by a sharp drop in the gold price and a $2 billion non-cash impairment charge. Shares of the Vancouver-based miner were down 0.24 percent to C$29.17 shortly after market open in Toronto. Goldcorp's net loss in the quarter was $1.9 billion, or $2.38 a share, compared with a profit of $268 million, or 41 cents a share, in the year-ago period. The company said the after-tax charge was primarily related to exploration potential at its Penasquito mine in Mexico, where lower metal prices have had a significant impact on the in situ market value. "It's a non-cash item, so we're not too bothered with that," said George Topping, a mining analyst at Stifel Nicolaus, of the impairment charge. "If gold prices go back up, it will be written back up again." Goldcorp's peers Barrick Gold Corp and Kinross Gold Corp both had major project-related writedowns last year, and analysts expect more to come. Barrick has already signaled further impairment charges when it reports next week. Bullion prices have fallen sharply so far this year, hitting a near 3-year low of about $1,180 an ounce in late June. Goldcorp's realized gold price dropped 15 percent to $1,358 an ounce in the quarter, down from $1,596 a year ago. In light of the declining gold price, the company said it is reviewing its short-term operating plans and cutting 2013 capital spending by $200 million to $2.6 billion. Goldcorp will defer some spending through 2014 at its three mines under construction - Cerro Negro in Argentina and Eleonore and Cochenour in Quebec - but said the reductions are not expected to have a material impact on project timelines. The miner has targeted a 10 percent cut to general and administrative costs in 2013, and reduced exploration spending by $25 million. Goldcorp also said it had found a new water source for its mill at Penasquito, removing a key obstacle to ramping it up to design capacity. Construction on the new well field will start in the fourth quarter and is set to cost about $150 million. EARNINGS MISS Adjusted to remove one-time items, earnings were 14 cents a share, coming in below the average analyst expectation of 22 cents a share, according to Thomson Reuters I/B/E/S. "The headline miss is explained by the lower gold price, mainly," said Topping. "They sold a lot of their quarterly production in June, just when the gold price was hitting it's lowest." Gold production rose 12 percent to 646,000 ounces, while silver production fell 12 percent to 7.2 million ounces. All-in sustaining costs were $1,279 per gold ounce in the quarter, while co-product cash costs rose 15 percent to $713 an ounce. Goldcorp said it remains on track to produce some 2.55 million to 2.8 million gold ounces in 2013, at all-in sustaining costs of $1,000 to $1,100 an ounce. Revenue declined 18 percent to $889 million in the quarter, despite a 17 percent increase in gold sales, as lower precious metal prices weighed.