VANCOUVER—On July 10, 2012, Goldcorp Inc. announced gold production for the second quarter of 2012 and updated production and cash cost guidance for 2012.
Second Quarter Production:
Gold production totaled 578,600 ounces, an increase of 10 per cent compared to the first quarter of 2012. The final calculation of operating costs has not yet been completed, but total cash costs on a by-product basis for the second quarter are expected to be approximately $370 per ounce while by-product cash costs for the first half of 2012 are expected to be approximately $310 per ounce. On a co-product basis, cash costs are expected to be approximately $620 per ounce for the second quarter and $635 per ounce for the first half of 2012.
Red Lake gold production in the second quarter continued to be affected by the previously-announced operating delays in the High Grade Zone due to the need for rock de-stressing cuts at the 41 and 45 levels. The impact of continued seismic activity has increased over the last several weeks and in connection with the Company’s continued commitment to the highest possible safety standards, has slowed the advance of de-stressing efforts. The first de-stress cut at the 41 level has been completed and the second at the 45 level is expected to be completed later in the third quarter which is expected to deliver improved operating performance in the High Grade Zone over the second half of 2012.
Inconsistent mineralization in the Footwall Zone encountered in the first quarter has also continued into the second quarter while production in the Campbell Zone improved slightly compared to the first quarter. This has resulted in a change in forecast gold production at Red Lake to between 460,000 and 510,000 ounces in 2012 compared to previous guidance of 650,000 ounces. Over the balance of 2012, the Company will evaluate the impact of these conditions on Red Lake’s long-term production profile.
At Peñasquito, second quarter mill throughput was affected by inadequate water supply in the month of June. Prolonged drought conditions in the region have contributed to lower-than-expected water recharge in the well field as well as lower-than-expected water production from the pit dewatering program. This condition limited plant throughput in June and is also expected to affect plant throughput in the second half of 2012. The Company holds permits for sufficient quantities of water and is currently working to drill additional wells to increase water production. Concurrently, work is also underway to increase the quantity of water reclaimed from the tailings facility.
The current water deficit is expected to limit plant throughput to between approximately 98,000 and 107,000 tonnes per day over the balance of 2012. This is expected to result in gold production of between 370,000 to 390,000 ounces in 2012 compared to previous guidance of 425,000 ounces. Production of silver at Peñasquito is expected to total 23 to 24 million ounces; zinc production is expected to total 310 to 325 million pounds and lead production is expected to total 155 to 160 million pounds in 2012.
2012 Guidance Update:
In light of reduced first half production at Red Lake and lower second half production expectations at Peñasquito, full-year 2012 gold production guidance has been revised to between to 2.35 and 2.45 million ounces compared to previous guidance of 2.6 million ounces. Due to the lower expected production, total cash cost guidance has also been revised to $310 to $340 per ounce of gold on a by-product basis and $625 to $650 per ounce on a co-product basis. This compares to previous guidance of $250 to $275 per ounce on a by-product basis and $550 to $600 per ounce on a co-product basis.
Production of by-product metals for 2012 is forecast at approximately 30-31 million ounces of silver compared to previous guidance of 34 million ounces; and 310-325 million pounds of zinc and 155-160 million pounds of lead compared to previous guidance of 400 million pounds and 180 million pounds respectively. Production guidance for copper remains unchanged at 110 million pounds.
“We are disappointed with reducing production guidance due to operational issues at our two most important mines,” said Chuck Jeannes, Goldcorp President and Chief Executive Officer. “Our focus is on addressing these issues promptly and in a manner supporting the long-term opportunities at these key assets. At Red Lake, we look forward to the resumption of mining in areas of the High Grade Zone that have been inaccessible due to de-stressing activities, but grade inconsistencies in the Footwall Zone experienced in the first six months of 2012 necessitate a conservative approach with regard to forecasting production during the second half of the year.”
“Our highest priority at Red Lake and everywhere we operate is on the safety of our employees and contractors,” he continued. “At Peñasquito, the team is assessing opportunities to address water deficits as soon as possible. We are optimistic that sufficient water will be secured to accommodate long-term throughput forecasts but until those sources are secured, we have reduced the forecasts for ongoing throughput and production. We remain encouraged that the ore body continues to meet expectations with respect to grade and recoveries.”
While issues at Red Lake and Peñasquito have affected overall production, the Company confirmed last week that 2012 production guidance at the rest of their mines remains unchanged which will provide a stable base to its operating portfolio. 2012 capital spending plans also remain within expectations as Goldcorp continues to invest in its suite of growth projects.
Goldcorp’s second quarter financial results are scheduled to be released on July 26, 2012.
All Amounts in $US unless stated otherwise.