Goldcorp lifts bottom line (April 24, 2003)

Stronger realized gold prices and sales volumes enabled Goldcorp (G-T) to weather weaker production and post a higher quarterly profit.

Net earnings topped US$14.4 million (or US8 per share) in the three months ended March 31 as revenue climbed to roughly US$47.5 million. This compares with earnings of US$12.9 million (US8 per share) on US$39 million in the first quarter of 2001.

Cash flow rang in at negative US$14.3 million, which compares with an inflow of US$20.3 million a year ago. Higher taxes are to blame, and cash flow is expected to be positive over the remainder of the year.

Goldcorp produced 133,743 oz. during the recent quarter, or 11,950 oz. less than a year ago; however, sales volumes were up 5%, 129,866 oz., and realized prices rang in 18% higher.

The Red Lake mine cranked out 117,339 oz. — 6% less than a year ago. Headgrades were actually up, but this was offset by a drop in recovery rates.

Cash costs averaged US$74 per oz., versus US$65 per oz. a year earlier. The increase mainly reflects the fall in the greenback relative to the loonie, higher stope-development costs and substantial higher electricity rates.

Goldcorp says that miners are back in a higher-grade section of the deposit and that recovery rates have improved as a result. By year-end, it expects the mine to have produced 510,000 ounces at an average cash cost of US$75 per oz.

Goldcorp plans to sink a second shaft at the mine that is expected to increase annual production by 45%, to 740,000 oz. The shaft will eventually bottom at 7,150 ft. and be capable of hoisting 4,000 tonnes of material to surface daily.

Capital costs are pegged at US$85 million and be repaid in just over a year. At a gold price of US$325 per oz., the project generates a 47% internal rate of return.

The Wharf mine in South Dokata came in below budget, producing 16,404 ounces at a cash cost of US$278 per oz. Both production and costs are expected to improve over the course of the year.

In 2001, Wharf produced 20,810 oz. at a cash cost of US$278 per oz. Production and costs for the current year are forecast at 87,000 oz. and US$246 per oz.

Goldcorp also owns an industrial minerals operation in Sask. Production, revenue, earnings and cash flow all rose during the quarter.

On March 31, Goldcorp had US$295 million in working capital, and most of its current assets were held in the form of cash and bullion. The company now has 223,576 oz. of the yellow metal in its vault, or 14% more than it had at the year’s start.

Goldcorp remains debt-free and pays an annual dividend of US15 per share. The dividend, which is paid bi-monthly, was increased to its current amount earlier this year.