Goldcorp Inc. slashed its dividend and lowered its production guidance for the next 3 years on Thursday because the company attempts to maintain a strong balance sheet and faces unexpected problems in an Ontario project.
The stock dropped 13 per cent on Friday in response towards the news, closing at $18.73 in Toronto. It had been the worst performer among people in the Bloomberg Americas Mining Index.
The Vancouver-based mining giant moved from a monthly dividend of 2 US cents a share to some quarterly dividend at the same level, effectively lowering the annual payout by sixty-six per cent. Goldcorp said this lowered dividend still offers a “competitive” yield, while allowing the organization to invest in its growth projects.
One of these growth projects has already been facing major challenges. Goldcorp removed the Cochenour project from its production guidance for the following three years and said the project is re-entering the “advanced exploration” phase.
Cochenour, in Ontario’s Red Lake camp, was supposed to start producing gold this past year. But Goldcorp ran into unexpected geologic issues underground that delayed development. By moving the troubled project completely back to the exploration stage, Goldcorp effectively told the market that there is still lots of work to do.
Another negative surprise was the Los Filos mine in Mexico, where Goldcorp shrunk the mine life because it moved 5.3 million ounces of low-grade material from its reserves.
With Cochenour from production guidance, it wasn’t surprising that the overall forecast dropped. Goldcorp said it expects to create between 2.8 and 3.1 million ounces of gold a year in every of the next three years. Previously, the organization forecast as much as 3.Six million ounces in 2016, up to 3.7 million in 2017, and as much as 3.4 million in 2018.
“As the new production guidance is disappointing, to us it seems grounded the truth is,” TD Securities analyst Greg Barnes said in a note.
For your fourth quarter, Goldcorp reported an adjusted loss US$128 million, or US15 cents a share, plus a monster net loss of US$4.3 billion due to impairments. However, the organization said hello generated free income of US$239 million in Q4 because it produced 909,400 ounces of gold at all-in sustaining costs of US$867 an oz (excluding inventory impairments).
“In annually marked by continued metal price volatility, we achieved three successive quarters of free income generation as a result of continued concentrate on lower costs and higher margins,” leader Chuck Jeannes said in a statement.
Going forward, Goldcorp wishes to boost production through brownfield expansions at several of their mines. The organization said these expansions are low risk and offer high rates of return. Barrick Gold Corp. is undertaking a similar strategy.
Gold prices have rallied so far in 2016, and Goldcorp’s stock prices are up nearly 35 percent. Jeannes said the company is “encouraged” by the rally and is “well positioned for future success.”
This was the last quarterly earnings report Jeannes will oversee as CEO. He is retiring and passing the reins to David Garofalo, who joined the organization from HudBay Minerals Inc. Garofalo gets control as CEO on Monday.
pkoven@postmedia.com
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