Goldcorp CEO Discusses Q3 2010 Results - Earnings Call Transcript
Goldcorp Inc (
)
Q3 2010 Earnings Call
October 28, 2010 01:00 pm ET
Executives
Jeff Wilhoit - Vice President of Investor Relations
Chuck Jeannes - President, Chief Executive Officer
Lindsay Hall - Chief Financial Officer
Steve Reid - Chief Operating Officer
Analysts
Tony Lesiak - Macquarie
Jorge Beristain - Deutsche Bank
Patrick Chidley - HSBC
Greg Barnes - TD Newcrest
Anita Soni - Credit Suisse
Steven Butler - Canaccord Genuity
John Bridges - JPMorgan
David Christie - Scotia Capital
Presentation
Operator
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Good day, ladies and gentlemen. Welcome to the Goldcorp Inc 2010 third quarter results conference call for Thursday, October 28, 2010. Please be advised that this call is being recorded.
I would now like to turn the meeting over to Mr. Jeff Wilhoit, Vice President of Investor Relations of Goldcorp. Please go ahead, Mr. Wilhoit.
Jeff Wilhoit
Thank you and welcome to the Goldcorp third quarter 2010 earnings conference call. In the room with me today are Chuck Jeannes, President and Chief Executive Officer; Lindsay Hall, Chief Financial Officer; and Steve Reid, Chief Operating Officer.
For those of you participating on the webcast today, we have included a number of slides to support this morning's discussion. These slides are available on our website at www.goldcorp.com.
As a reminder, we will be discussing forward-looking information that involves unique risks concerning the business, operations, and financial performance and condition of Goldcorp. Forward-looking statements include, but are not limited to, statements with respect to future metal prices, the estimation of mineral reserves and resources, the timing and amounts of estimated future production, cost of production, capital expenditures and cost and timing of the development of new deposits.
Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause the actual results to be materially different from those expressed or implied by such forward-looking statements. Accordingly, you should not place undue reliance on forward-looking statements.
With that, I will now turn the call over to Chuck Jeannes, President and Chief Executive Officer of Goldcorp.
Chuck Jeannes
Thanks, Jeff, and thanks, everyone, for joining us today. As you saw in yesterday's earnings announcement, Goldcorp delivered strong financial results in the third quarter driven by continued high gold prices and our lowest cash costs in over two years.
Cash margins of $979 per ounce of gold drove record cash flow of over $470 million and a 65% increase in earnings. In light of our solid financial position and confidence in our ability to generate strong, sustained cash flows, our board of directors yesterday approved a 100% increase in Goldcorp's dividend to $0.36 per share of $0.03 per month.
We've been anticipating the completion of capital spending and the commencement of cash flow generation of Penasquito for some time. With the successful commencement of commercial operations there during the quarter we're pleased to be able to share the success with our shareholders.
On the production side, another outstanding quarter at Red Lake and generally solid performance throughout the rest of the portfolio offset the impact of heavy rainfall at Los Filos and production weakness at Marigold and Alumbrera.
Overall gold production this quarter was 506,200 ounces at extremely low cash costs of $260 per ounce on a byproduct basis and $429 per ounce on a co-product basis. With just a single month of commercial production in the third quarter, Penasquito managed to steal the spotlight with a very strong start to its life as a commercially producing mine.
The power of Penasquito to positively contribute to our overall financial performance is already evident and Steve and Lindsay will discuss more of the details in a moment.
An important theme in 2010 has been the successful execution of our disciplined portfolio management strategy. Put simply, we continually pursue opportunities to strengthen the overall portfolio through the divestiture of non-core assets and the addition of high-quality gold projects.
We were very successful in this endeavor during the third quarter with the divestitures in the San Dimas mine and our terrain metals investment. In general terms, the cash proceeds from these transactions, as well as the second quarter sale of the Escobal silver deposit, are available to fund most of the cash component of our acquisition of Andean Resources.
That acquisition remains on track for closing in late December. We currently have a team on the ground in Argentina working on transition issues with Andean and preparing to advance the project. We're certainly excited about getting to work on this project, which provides the ability to both enhance our growth in gold production and lower our already low cash cost profile.
As I mentioned earlier, one month of commercial operations at Penasquito contributed significantly to our third quarter performance. Total revenues were over $86 million in the month of September while earnings from operations were over $34 million.
These numbers include the impact of a disproportionately large amount of oxide gold production, which is typically sold later in each quarter. But production of all metals met or exceeded expectations. Cash costs on a byproduct basis were negative $577 per ounce of gold sold for the month of September and $499 per ounce on a co-product basis.
Unit costs for mining, processing and G&A continued to decline according to plan. Construction of the 130,000 ton per day sulfide plant is now essentially complete with mechanical completion of the height and pressure grinding rural circuit and commissioning of that circuit underway. We now continue to ramp up production and we're maintaining our guidance of 180,000 ounces of gold for the year.
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