Falling gold prices force financial review at Goldcorp
BNamericas reported that Vancouver based Goldcorp has reduced 2013 capital expenditure guidance from USD 2.8 billion to USD 2.6 billion in response to falling gold prices.
Mr Chuck Jeannes president and CEO of Goldcorp said that capital expenditures in Q2 were USD 629 million compared with USD 577 million YoY. The company also suspended work at its early stage Cerro Blanco project in Guatemala due to the decline in prices. Care and maintenance activities will continue at the site and the project will be revisited depending on market conditions. Exploration spending for this year has been cut from USD 225 million to USD 200 million while general and administrative expenses have been downsized from USD 180 million to USD 164 million.
Impairment;
The sharp decline in commodity prices and the market valuations of exploration properties also resulted in a Q2 impairment charge of USD 1.83 billion on the value of its Penasquito mine in Mexico and USD 131 million on Cerro Blanco.
Options;
Goldcorp had previously stated a range of options to deal with volatile gold prices. With gold at around USD 1,400 per oz, the company continues growth projects but starts the reduction of G&A and exploration expenses.
Mr Jeannes said that "With a below USD 1,400 per oz gold price environment we have looked at cuts in G&A and the deferral of non critical capital spending but that does not impact our near term production. If gold begins to average USD 1,200 per oz or below, the company begins to look at deferring capital projects at mines and the slowing of spending at growth projects, followed by the reconfiguration or eventual shutdown of higher cost mines.”
For now, Mr George Burns COO of Goldcorp has been looking at opportunities to improve mine operations including modifications to mine sequences. At the same time, Goldcorp is deferring capital expenditures at its Cerro Negro project in Argentina as well as at its Eleonore and Cochenour projects in Canada. The company recently announced the suspension of the exploration program at Cerro Negro.
Mr Jeannes said that "There is no defined timeframe [of how long gold prices would have to be under US$1,200/oz] before making decisions. It depends on a variety of factors to give us the best estimate of future prices. It also depends largely on the mines themselves and if they are able to make adjustments so that they are not bleeding cash. The high cost operations are aware of that and are working very hard to reinvent themselves."
Prices;
Goldcorp realized an average gold price of USD 1,358 per oz in Q2, a 16% decrease from USD 1,622 per oz in the first quarter. All in sustaining costs totaled USD 1,279 per oz in Q2, while cash costs totaled USD 646 per oz on a by product basis and USD 713 per oz on a co product basis.
Mr Jeannes said that "Nearly half of sales came in June, when prices were down which significantly impacted revenue. However, gold production and cost guidance for 2013 have not been affected and remain at 2.55 to 2.8Moz of gold at all in sustaining costs of USD 1,000 per oz to USD 1,100 per oz.
Source - Business News Americas.com