Cerro Negro becomes Goldcorp’s newest mine

Goldcorp’s (TSX: G; NYSE: GG) Cerro Negro mine in Argentina produced its first gold dore bar on July 25 and is on track to reach commercial production by the end of this year. 

As well, Goldcorp has trimmed initial capital guidance at Cerro Negro by US$100 million to between $1.6 and $1.7 billion, down from its previous estimate of between US$1.6 and U.S.$1.8 billion. 

The high-grade operation is expected to churn out between 130,000 and 180,000 ounces of gold before the year is out.

President and chief executive officer Chuck Jeannes said the milestone “signals the start of a prolonged period of increased production, decreasing costs and reduced capital pending for Goldcorp, resulting in significant expected free cash flow generation in 2015 and beyond.”

The company has several projects that offer near-term production. Its Éléonore project in Quebec is on track for first gold in late 2014 and for commercial production during the first quarter of 2015, while the haulage drift connecting the Bruce Channel deposit to the Red Lake complex at its Cochenour project in the Red Lake district of Ontario is about 96% complete.

Goldcorp reported its second-quarter results on July 31 with highlights including adjusted net earnings of US$164 million, or US20¢ per share, compared to US$117 million, or US14¢ per share, in the second quarter of 2013, an increase of about 40%. 

The company produced 648,700 oz. gold in the quarter, up from 646,000 ounces in the second quarter of 2013, at all-in sustaining costs of US$852 per oz., down from US$1,227 per oz. in the year-earlier quarter.  Operating cash flow reached US$376 million, or US46¢ per share, compared to US$388 million, or US48¢ per share, in the second quarter of 2013.

Silver production totaled 9.0 million ounces compared to 7.2 million ounces in the year-earlier quarter. 

Jeannes noted in prepared remarks that cost improvements were “particularly impressive” at the Peñasquito mine in Mexico, where higher mill throughput, grades and recoveries, drove gold production higher. Production in the second quarter reached 167,400 ounces at a record-low all-in sustaining cost of US$362 per ounce.  

At Red Lake in Ontario, gold production reached 89,500 ounces at an all-in sustaining cost of US$1,066 per oz.  Production was affected by a decrease in mill throughput resulting from lower tonnes as remnant mining of the Campbell Complex continued.  Red Lake production was also affected by lower stope availability in the High Grade Zone, as planned de-stress activities were undertaken, the company explains. Production is expected to increase in the second half of this year as more stopes become available.

At Porcupine in Ontario, meanwhile, second-quarter gold production totaled 68,800 ounces with all-in sustaining costs decreasing to US$895 per oz.

Finally, at its Pueblo Viejo joint venture in the Dominican Republic, Goldcorp’s share of second-quarter gold and silver production increased to 107,100 ounces and 392,800 ounces, respectively, driven by higher tonnes processed and higher silver recoveries.  All-in sustaining costs at Pueblo Viejo fell for the sixth consecutive quarter to US$618 per oz.

On the exploration front, Goldcorp says its program at Peñasquito continues to focus on defining the copper-gold sulphide rich skarn deposit below and adjacent to the diatreme ore body. The company is drilling to establish the vertical and horizontal size and extent of the skarn deposit.

At its Camino Rojo project near Peñasquito, Goldcorp says exploration results continue to support the project’s potential to be a major new gold operation.  Goldcorp plans to start a pre-feasibility study before the end of 2014 and finish it by the first quarter of 2016.   

Exploration also continued with three drills from surface on HG Young, a new discovery about 1.5 km northwest of the Campbell Complex.  The company plans to rehabilitate an historical drift from Campbell to enable more intensive drilling from underground. Exploration efforts also continue to focus on the NXT zone as well as the R zone and FW zone, where the company has received economic intersections.  

Goldcorp completed a $1 billion note offering in the quarter and extended the expiration of its undrawn US$2 billion revolving credit facility from March 6, 2018 until July 18, 2019. 

The company has confirmed its 2014 production guidance of between 2.95 and 3.1 million oz. gold at all-in sustaining costs of US$950-US$1,000 per oz. It has pegged its capital spending budget for the year at between US$2.3 billion and US$2.4 billion, compared to its previous guidance of US$2.3 billion and US$2.5 billion.