Goldcorp raises production, EPS estimates

The production estimate for this year has been upped again at Goldcorp‘s (G-T) Red Lake mine in northwestern Ontario.

The mine poured its first commercial gold bar in January. A feasibility study pegged production at 240,000 oz. gold at a cash cost of US$88 per oz. By early April, Goldcorp had increased the estimate to 400,000 oz. gold at less than US$75 per oz. The company now expects full-year production to hit 440,000 oz. at less than US$70 per oz.

On the back of the increased production estimate, Goldcorp has upped its earnings estimates for 2001 to 49 per share from 42. Cash flow is expected to ring in at 97 per share, up from 86.

During the first quarter of 2001, Goldcorp posted earnings of US$14.7 million (or 18 per share) on revenue of US$48.3 million. This was considerably higher than year-ago earnings of US$12,000 on US$10.4 million. Cash flow jumped to US$28.4 million from US$7.2 million.

At the end of May, 98,154 tons of ore had been processed at an average grade of 2.57 oz. gold per ton (or 88.1 grams per tonne), with a recovery rate of 89.3%. Production to May 31 tallied 233,874 oz., including a one-time 9,000-oz. inventory adjustment. Year-to-date cash costs have averaged US$57 per oz. The realized grade of reserves mined was 2.57 oz. per ton, 29% higher than predicted.

The company expects a revised reserve estimate in September. At the end of January, Red Lake’s high-grade reserves were upped to 3 million oz. from 2.3 million oz. This was attributed to an increase in the reserve grade to 1.68 oz. per ton from 1.37 oz. The company says the higher-than-expected realized grades suggest that ore reserve grade and tonnage may have been consistently underestimated.

Goldcorp has budgeted US$8 million for exploration at the Red Lake mine and $3 million for regional exploration in the surrounding area during 2001. Work at the mine will focus on expanding the high-grade reserves.

The reserves currently extend for 1,300 ft. to a depth of 5,700 ft. The company is looking to double the vertical extent. Initial work is focusing on possible extensions of the Hanging Wall 5 and Hanging Wall A zones, which account for more than 25% of the reserves.

Two exploration targets are Goldcorp’s Cochenour mine area and the Abino prospect. Cochenour is located 8 km northwest of the Red Lake mine. A compilation of all past exploration data has been completed. Highlights from old drilling include 12.5 ft. grading 22.66 oz. gold, 23.8 ft. grading 9.68 oz. gold and 10.7 ft. grading 30.89 oz. gold. The company is accelerating its exploration on the property.

Ten kilometres to the north, the Abino prospect is the site of a shallow shaft and ramp. This area has not seen any exploration since 1986. Better drill results include 1.52 ft. grading 6.2 oz. gold and 3.4 ft. grading 2.95 oz. gold.