(Updated from May 5)NEW YORK ( TheStreet ) -- Goldcorp ( GG), the crème de la crème of gold growth stocks, turned in a strong quarter, but, according to CEO Chuck Jeannes, the results don't mean a dividend hike anytime soon. The gold miner made 50 cents a share, 2 cents above estimates, mainly due to a lower tax rate, produced 637,600 ounces of gold at total cash costs of $188 an ounce and sold 98% of the gold. Revenue grew 69% to $1.2 billion year over year. Operational cash flow popped 108% to $586 million in the same time frame. But quarter-on-quarter, the results were on the light side. Gold sales were down 8% quarter on quarter, due to a slow ramp up at its fledging Penasquito mine, which has 18.6 million ounces in proven and probable gold reserves and 1.1 billion ounces of silver. Silver production was down 17% quarter on quarter at Penasquito, which hurt Goldcorp's ability to sell silver and put the profits towards producing an ounce of gold. Operating cash flow was down 9.3% quarter on quarter, but as a percentage of revenue was relatively the same, and total cash costs rose $24.
Jeannes says the back half of the year will be better for Goldcorp as it is still working out kinks at Penasquito as the company ramps up its sulfide plant.
"We tend to look much longer term at the performance of our mines than on a quarter to quarter basis. Unfortunately that's not the way the market looks." Jeannes says Penasquito production is still on track for the year at 350,000 ounces of gold. Goldcorp must also contend with controversy surrounding its Marlin mine in Guatemala, where gold production was 16% lower than the fourth quarter. This is primarily due to environmental allegations by the American Commission on Human Rights. According to the earnings report, "operations continue normally."
"The market takes 400,000 guidance for the year and divides by four but the mine sequencing is never that simple ...
Goldcorp has effectively hedged oil in North America at $111 a barrel, 70 cents a liter, although Jeannes says it's slightly less than that now, and the Mexican government subsidizes oil costs in the country, which helps costs at Penasquito, where they were negative $1,488 an ounce. The company has said that a 10% increase or decrease in oil prices would equal an $8.5 million increase or decrease in net earnings. Currently oil prices are down 8% in the second-quarter. Analysts aren't calling this a miss. In fact, HSBC upgraded the stock from underweight to neutral and the stock has 18 buy ratings and 4 holds, but it didn't get investor juices flowing. The stock was climbing 1.2% Friday. Deutsche Bank still has a buy rating on the stock based on the company's growth potential, free cash flow and the possibility for a dividend hike. "Despite 2 dividend raises in the past year, Goldcorp's remains low
at 0.8% ... we do not view a 2% target yield as unreasonable in coming years," said Deutsche Bank in a recent note. After Goldcorp's purchase of Andean Resources last year and a growth profile of expanding 60% in five years, it's unlikely that the company will need to spend its extra cash to make an acquisition. Goldcorp has cash and cash equivalents of $1.3 billion and $705 million in long term debt. It's capital expenditures will total $1.8 billion for 2011, and according Jeannes he would rather put the money into growth than dividend payments. Jeannes did say that he would consider a dividend at the end of the year based on free cash flow. It doesn't look like Goldcorp is on the hunt for more acquisitions, either. Barrick Gold ( ABX) recently announced plans to buy Equinox, a copper miner, perhaps the start of a trend of gold miners diversifying heavily into base metals. Jeannes rejected that idea, "we've done deals over the last couple of years that have been consistent with our long term strategy of focusing on gold." Goldcorp has outperformed its peers and earned the reputation of a large cap growth stock, something that is hard to come by. Goldcorp is up 9% year to date while Barrick Gold, Newmont Mining ( NEM) and Kinross Gold ( KGC) are down 11.20%, 11.23%, 20.46%, respectively.
-- Written by Alix Steel in New York. >To contact the writer of this article, click here: Alix Steel. >To follow the writer on Twitter, go to http://twitter.com/adsteel. >To submit a news tip, send an email to: firstname.lastname@example.org.
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