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Record revenues and cash flow for local mining company

Goldcorp fourth quarter results
Lisa Dumontier

It was good news for Goldcorp shareholders last week as the Company released its fourth quarter results for 2011. Reporting gold production of 687,900 ounces at a total cash cost of $261 per ounce, record revenues of $1.5 billion and operating cash flows before working capital changes of $831 million, the final tally is in prepping the Company for new highs in 2012.

“Strong, low-cost gold production and another year of gold reserve growth provided a great finish to another solid year for Goldcorp,” confirmed Chuck Jeannes, Goldcorp President and Chief Executive Officer. “Our record performance is the result of strength throughout the mine portfolio, as demonstrated by sustained operational excellence at Los Filos in Mexico, which led to a record year at this important operation. Marlin in Guatemala had a particularly strong quarter and year as mining in the final, higher grade portions of the open pit were completed and the mine successfully transitioned to an exclusively underground operation. In addition, Red Lake in Ontario finished with a strong quarter for the year, highlighting the continued strength of this flagship operation.”

Covering the three months ended on December 31st, the fourth quarter of 2011 proved profitable for Goldcorp Inc. which boasted gold sales—driven by record performance at Marlin in Guatemala—of 685,000 ounces on production of 687,900 ounces comparing to 678,000 ounces on production of 689,600 ounces in the fourth quarter of 2010. Reported net earnings in the quarter were $405 million compared to $560 million in the fourth quarter of 2010 and adjusted net earnings hit the $531 million mark, $100 million higher then what was recorded during the fourth quarter of 2010.

Other highlights of the fourth quarter include:
• Total cash costs were $261 per ounce on a by-product basis. Co-product cash costs totalling $529 per ounce;
• Dividends paid amounted to $91 million. Dividend increased 32 per cent to $0.54 per share;
• Gold margin was $1,402 per ounce of gold sold; and
• Net earnings hit $1.9 billion of $2.34 per share as compared to net earnings of $2 billion or $2.79 per share in the same period of 2010.

“Strong growth in reserves and resources in 2011 once again highlights the continued success of Goldcorp’s focused exploration programs, which discovered new gold reserves at a cost of approximately $14 per gold ounce,” noted Jeannes. “The consistent ability of Goldcorp to increase the amount of gold reserves represented by each of our common shares represents true leverage to the gold price. In 2011, gold reserves increased 6 per cent on a per share basis.”

As confirmed in the fourth quarter results, Goldcorp’s Red Lake assets performed well in 2011 with proven and probable gold reserves totalling 4 million ounces. According to the Company, drilling of the High Grade Zone has identified the possibility of a fault offset of the zone from below the 52 level and after deep underground drilling identified high grade ore intercepts at both the 55 and 57 levels, drilling efforts are currently underway to investigate the extensions of these intercepts. Plans are also underway this year to extend the ramp and increase the power and ventilation to allow for additional exploration drilling in the deepest sections of the mine.

Gold production at Red Lake increased 21 per cent over the third quarter of 2011 to 154,000 ounces at a total cash cost of $375 per ounce with 2011 gold production totalling 622,000 ounces at total cash costs of $360 per ounce. “During 2012, production will benefit from an increase in tonnes mined from lower-grade zones, with gold production expected to total 650,000 ounces,” detailed the Company. “Additionally, exploration and development work continues to advance the Upper Red Lake Complex, the Far East Zone and the Footwall Zones into sustained production as alternate sources of ore and to complement the fill the mills program and provide flexibility.” Evaluation of the potential of near-surface, long-hole mining, based on recent results from surface drilling is also pegged to continue into mid-2012.

A key component of the Company’s overall long-term plans for the future of the Red Lake operation, the Cochenour gold project saw increased action during the fourth quarter of 2011. Construction of a five-kilometre Cochenour-Red Lake Haulage Drift advanced to 36 per cent of completion by year-end and two drifts continue to test the exploration potential of this unexplored area. Additionally, a two-kilometre section of the tack was laid from the shaft station and by the end of 2012, the Company has confirmed that the haulage drift is scheduled to be 66 per cent complete which will enable the local asset to develop more drill stations further accelerating exploration.

The sinking of the shaft at Cochenour also remains on track and by the end of 2011, Goldcorp had managed to widen the infrastructure to a depth of 83 metres. During 2012, the Company detailed that sequencing of the near-shaft exploration and initial ore-body definition will progress and with additional drilling planned for this year, the ultimate shaft depth and extent of development required will be defined.

Wrapping up 2011, the fourth quarter results also provided final insight into 12 months of hard work and advancement on the Goldcorp front with full-year highlights that include:
• An 43 per cent revenue increase over 2010, to a record $5.4 billion driven by gold sales of 2.5 million ounces;
• An 70 per cent adjusted net earnings increase to a record $1.8 billion, or $2.22 per share;
• Record operating cash flows before working capital changes totalling $2.7 billion or $3.35 per share;
• Total cash costs of $223 per ounce on a by-product basis and $534 per ounce on a co-product basis;
• $330 million in dividends paid; and
• An 8 per cent increase of proven and probable gold mineral reserves to 64.7 million ounces; 6 per cent on a per share basis.

“Stability throughout the mine portfolio, led by planned gold production growth at Peñasquito of over 65 per cent in 2012, leaves us well-positioned to achieve overall production guidance this year of 2.6 million ounces of gold at what we expect to be the lowest cash costs in the senior gold sector,” finished Jeannes. “Beginning in 2012, the first of four major new sources of gold production is expected to come on line that will drive a 70 per cent increase in overall gold production by 2016. New gold production of approximately 85,000 ounces is forecast to Goldcorp’s account at the Pueblo Viejo joint venture in the Dominican Republic in 2012, followed by first gold at Cerro Negro in Argentina in 2013. Initial gold production is also expected at two new Canadian pure gold projects in 2014: Cochenour in Red Lake, Ontario and Éléonore in Quebec. Each of these growth projects is permitted and construction is progressing according to plan, supporting our expectations of a very achievable path to 4.2 million ounces of gold production in 2016.”

All amounts noted in United States dollar values unless otherwise indicated. For full report details visit www.goldcorp.com.

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