Goldcorp has been around since the 1980′s, but the company really didn't make a name for itself until 2000. That is the year they launched "The Goldcorp Challenge", which was a contest with $575,000 in prize money. The company posted all its proprietary mining data on a website and asked the world to help them find Red Lake's next six million ounces of gold.
Long story short, that 6 million oz was found and the Red Lake mine went from producing 53,000 ounces of gold a year, at a cost of $360 an ounce, to producing just over 500,000 ounces at a cost of $60 per ounce.
Since then, the company has grown through several major acquisitions including Wheaton River and Glamis Gold. Today the company is the second biggest gold producer by market cap, with only Barrick Gold trading at a higher valuation.
Red Lake – Canada
The Red Lake mine is Canada's largest gold mine, and in 2009 produced 623,000 ounces at a cash cost of $288/oz. It is also one of the world's richest gold mines and lowest cost producers. The mine is composed of two operating complexes: the Red Lake Complex and the Campbell Complex. In May 2006 Goldcorp acquired the Campbell Complex from Placer Dome.
As described earlier, after the discovery of a high grade ore zone and subsequent expansion of mine facilities, the Red Lake Complex was revitalized and achieved full production on January 1, 2001.
On September 25, 2008 Goldcorp acquired Gold Eagle Mines Ltd. Gold Eagle's principal asset was the Bruce Channel gold discovery which is adjacent to Goldcorp's Red Lake mine and immediately southwest of Goldcorp's past-producing Cochenour-Willan Mine. Both Gold Eagle and Goldcorp agree that the discovery is likely the downdip structure of the Cochenour deposit, part of which has also been identified on Goldcorp's side of the boundary. Cochenour was closed in 1971 after the known gold reef was mined out.
In order to access the Cochenour/Bruce Channel deposit quickly and efficiently, plans are well underway to enlarge and upgrade the existing Cochenour shaft and to construct a five-kilometre high-speed tram on the 5,400-foot level connecting to the Red Lake mine. This will enable Goldcorp to haul ore from the Bruce Channel deposit directly to the Red Lake mine for processing at the existing mill facility. The tram will also open up several miles of untested ground for exploration.
Peñasquito – Mexico
Peñasquito is Goldcorp's newest gold mine, and this thing is big! Goldcorp acquired the property in 2006 through its acquisition of Glamis Gold. In 2007 they started construction, and in October 2009 the first lead and zinc concentrates were produced. Concentrate shipment to smelters commenced with first sales recorded in November 2009. The mine will ramp up to 100% by early 2011. The total cost of the project was $1.7 billion, actually that's a bargain if you look at the cost of other large mines out there.
Peñasquito is composed of two open pits – Peñasco and Chile Colorado containing gold, silver, lead and zinc. At December 31, 2009:
- Proven and probable gold reserves totalled 17.8 million ounces
- Silver reserves totalled 1,070.1 million ounces
- Proven and probable lead and zinc reserves total 7.2 billion pounds and 15.9 billion pounds respectively
Annual production over the life of mine (estimated 22 years) is expected to ramp up to approximately:
- 500,000 ounces of gold
- 28 million ounces of silver
- 450 million pounds of zinc
- 200 million pounds of lead
All in all, the Penasquito mine is expected to produce over 1 million gold equivalent ounces per year for Goldcorp. As a side note, Silver Wheaton does get 25% of the silver production from the mine. That's a very nice silver stream they have coming.
Porcupine – Canada
The Porcupine mine consists of the Hoyle Pond and Dome underground and a central milling facility within the city of Timmins, Ontario. The mine has produced more than 64 million ounces of gold since production began in 1910.
At Porcupine, preparatory work continues for the Hoyle Pond deep project. The project is being advanced in order to access newly-discovered zones of gold mineralization. The planned capital investments of approximately $150 million will be incurred over the next four years.
In total, proven and probable gold reserves at Porcupine increased by 490,000 ounces during 2009 and measured and indicated gold resources grew by 2.15 million ounces. The continued processing of low grade stockpiled ore at Porcupine is expected to temporarily decrease gold production in 2010.
Musselwhite – Canada
Musselwhite is an underground mine in northwestern Ontario, Canada. Commercial production began in April 1997 and by 2001 the mine had poured its one millionth ounce. Today, cumulative production exceeds 1.7 million ounces.
Goldcorp originally acquired its 68.1% interest in the Musselwhite mine in May 2006 from Placer Dome. On December 21, 2007, Goldcorp acquired the remaining interest in the mine.
With existing mineral reserves, Musselwhite has an expected mine life of eight years; however, excellent exploration potential within and around the mine is likely to expand reserves and extend mine life.
Los Filos – Mexico
The Los Filos mine consists of two open pit mines (Los Filos and El Bermejal). Commercial production for Los Filos commenced January 1, 2008 and in 2009 Los Filos became Mexico's largest producer.
The Los Filos and El Bermejal deposits have been developed as a twin open pit-heap leach operation, with two different methods of ore processing. Higher grade ore from within the Los Filos deposit is crushed and agglomerated before being conveyor stacked and heap leached. Lower grade ore from Los Filos and El Bermejal deposits is hauled from the open pit directly to the leach pad and is bulk heap leached.
El Sauzal – Mexico
El Sauzal is a conventional open pit, oxide milling operation which achieved commercial production in December 2004. El Sauzal is approaching the latter years of its mine life and the planned decline in production is occurring.
Goldcorp controls seven exploration concessions surrounding the El Sauzal deposit comprising an area of more than 100 square kilometers.
Marigold Mine – Nevada
Marigold Mine is a run of mine heap leach operation that commenced production in 1988. The mine was transformed from a modest, conventional milling operation into a large and extremely efficient heap leach mine. Exploration led to the discovery of the Millennium ore body in the southern reaches of the property which then led to the Millennium Expansion project.
Goldcorp has a 66.67% interest in the Marigold mine and Barrick holds the remaining 33.33% interest. In 2009, Goldcorp'share of gold production from the Marigold mine amounted to 98,000 ounces of gold.
Wharf – South Dakota
Wharf is an open pit gold mine and heap-leach operation in the Bald Mountain Mining District of South Dakota. The property consists of several areas of adjoining gold mineralization amenable to open pit mining. The mine has been operating since 1983 but reserves were projected to be depleted early in 2010 with leaching operations winding down. However, positive exploration results have extended the mine life to approximately 2014.
Marlin – Guatemala
The Marlin deposit was discovered in western Guatemala through regional grass-roots exploration in 1998 by Montana Exploradora, S.A. and was later purchased by Francisco Gold Corporation in 2000. In 2002 Francisco Gold Corporation merged into Glamis and effectively transferred control of the Marlin mine to Glamis. Construction of the project commenced in early 2004 after the Guatemalan government issued the necessary environmental permits and licenses.
The Marlin Mine is a conventional milling operation with a combination of open pit and underground mining. The project lies within a highly prospective land package of approximately 100,000 hectares that encompasses the main Marlin deposit and other important mineralized zones.
Alumbrera – Argentina
Alumbrera is one of the world's largest and lowest cost gold and copper operations. Located in north western Argentina, Alumbrera was the country's first and largest major mining development in the modern era.
Goldcorp owns a 37.5% interest in Alumbrera mine with Xstrata and Yamana as joint venture partners.
Advanced Development Projects
Pueblo Viejo – Dominican Republic
Pueblo Viejo is one of the largest gold assets in the world and is poised to become a worldclass operation with a projected mine life of more than 25 years. Goldcorp owns 40% of the mine with Barrick owning the remaining 60%.
Pueblo Viejo is advancing on time and on budget toward a projected start-up in the fourth quarter of 2011. Over the first five years of production, Goldcorp's 40% share of production is expected to average between 415,000 and 450,000 ounces of gold per year at total cash costs of $250 to $275 per ounce.
Total pre-production capital costs for Pueblo Viejo are budgeted at $3.0 billion on a 100% basis, which includes $0.3 billion in recently allocated capital to expand throughput to 24,000 tonnes per day.
Goldcorp's 40% share of Pueblo Viejo's proven and probable reserves stood at 9.5 million ounces of gold at an average grade of 2.93 grams per tonne on December 31, 2009.
Éléonore – Canada
In 2005, Goldcorp purchased the Éléonore project for $420 million from Virginia Gold. A feasibility study will be completed by the end of 2010.
At the end of 2009, the Éléonore deposit contained 3.15 million ounces of measured and indicated gold resources at an average grade of 11.92 grams per tonne, compared to 2.28 million ounces of measured and indicated gold resources at an average grade of 10.05 grams per tonne at December 31, 2008.
A recently completed prefeasibility study determined:
- Average annual gold production of 330,000 oz
- Cash cost below $400 per oz
- 16-year mine life
- Production will start in 2015
- Capex of approximately $800 million
El Morro – Chile
The El Morro copper-gold project in Chile is 30% owned by New Gold and Goldcorp owns the remaining 70%. Xstrata Copper did own the 70% originally, however, in January 2010 New Gold announced the exercise of its right of first refusal to acquire that 70% of the El Morro project for $463 million. That right of first refusal came into effect in October 2009, when Barrick Gold announced its offer to purchase 70% of El Morro from Xstrata for $465 million. In other words, Barrick tried to buy Xstrata's 70% stake in the project, but New Gold had the right to match the offer, so they did.
However, New Gold turned around and sold that 70% interest to Goldcorp, which didn't make Barrick too happy. And after the Goldcorp deal was announced, Barrick commenced legal proceedings to attempt to challenge New Gold's exercise of its right of first refusal.
I don't think Barrick has a case here. And I would think that Goldcorp's lawyers would have already made sure of this before they went through with the deal.
Anyway, back to the deal with Goldcorp. Goldcorp has agreed to fund 100% of the development capital for the project which will be repaid through 80% of New Gold's share of cash flow once the project is in production. Once repaid, New Gold will receive its proportionate 30% share of the cash flow. Goldcorp continues to work through the permit review process for the project with a target to begin construction in early 2011.
Some highlights:
- 6.7 million oz of gold and 5.7 billion oz of copper in reserves
- La Fortuna Resource has significant potential to grow
- Neighbouring El Morro deposit largely under-explored to date
- Goldcorp to make development of El Morro a priority
- Peñasquito project team now focused on El Morro
- Total capital ~ $2.5 billion per Feasibility Study
Noche Buena and Camino Rojo – Mexico
Noche Buena and Camino Rojo are two advanced stage satellite exploration projects near Penasquito. Both contain oxide gold deposits near the surface that can be mined conventionally and processed through low-cost heap leaching. Both have showings of sulphide systems, below or adjacent to the oxide material. Goldcorp acquired Camino Rojo through its $242 million acquisition of Canplats Resources.
Financials and Production
Q2 2010 highlights:
- Revenues increased 34% over the 2009 second quarter, to $844.3 million on gold sales of 598,000 ounces.
- Total cash costs for the quarter were $363 per ounce on a by-product basis and $448 per ounce on a co-product basis.
- Operating cash flows totalled $382.6 million.
- Second processing line at Penasquito achieved mechanical completion in June, ahead of schedule.
- Dividends paid amounted to $33.0 million.
- Sale of Escobal to Tahoe Resources Inc. unlocks balance sheet value.
- Agreement to sell San Dimas to Mala Noche Resources Corp. to further simplify asset portfolio.
At the end of Q2 2010, Goldcorp had $497 million in cash and $732 million in long-term debt.
For 2010, Goldcorp expects to produce 2.55 million ounces of gold at total cash costs of approximately $350 on a by-product basis and $450 on a co-product basis.
Conclusion
Goldcorp is the lowest cost producer among all the majors thanks to its extremely high grade Red Lake mine. The company has been shedding off a few non core assets recently as it tries to beef up its core portfolio of projects. Red Lake and Penasquito will be the centerpiece of Goldcorps production profile. Penasquito is still ramping up so its full production capability won't be realized for a few more quarters.
Pueblo Viejo will be another huge mine for Goldcorp. Not only will it boost production for the company by 450,000 oz per year, but it will also have a cash cost of under $300 per oz, which will allow Goldcorp to continue to be an extremely low cost gold producer.
The growth doesn't stop once they reach 3.8 million oz in 2014, as several other projects like El Morro and Éléonore will be close to production by then.
Goldcorp is the second largest gold producer by market cap, so this is not a company that is going to triple if the price of gold stays around these levels. However, it has a very strong portfolio of assets, and it could be considered a "core" holding for investors.
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almamor
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