Goldcorps second quarter earnings release, which revealed a dramatic 65% drop in adjusted net earnings to $117 million, is punctuated by references to tanking gold and commodity prices and troubles of operating in this environment.
Goldcorp missed profit estimates by 9 cents, earning $0.23 per share. The major miss was substantiated by a 25% drop in adjusted operating cash flow to $388 million and an 18% decline in revenue to $889 million; analysts expected net sales to come in at $1.15 billion.
Production costs rose 22% to $545 million, the release showed.
Cost pressures have been rising despite falling gold prices, and theres little miners can do but to cut costs elsewhere. Last quarter, Barrick Gold ABX +2.39% maid it painfully clear that miners will face this trend, and Goldcorp reinforced it. Total cash costs by-product, which controls for the sales costs of by-product silver, copper, and other metals, surged 75% to $646 per gold ounce. Total cash costs on a co-product basis, which allocates each of the by-product costs in relation to sales, increased 15% to $713. Goldcorp expects total cash costs of $1,000 to $1,100 per ounce on an all-in sustaining cost basis.
The company managed to increase gold production in the quarter by 12% to 646,000 ounces, but average realized prices slid 12% to $1,414 an ounce. After rallying over the past few weeks, gold was trading around $1,330 an ounce on Thursday. When it comes to silver, not only did realized prices drop a dramatic 30% to $17.01 an ounce, production also slumped 12% to 7.18 million ounces. In terms of copper, production slid 31% to 21.6 million pounds, while realized prices rose 12% to $2.63 a pound.
Management is looking to trim the fat wherever it can to face the challenging environment. It expects capital expenditures to be $200 million less than expected this year, but will still shell out $2.6 billion, while $16 million will be cut from general administrative and exploration expenses. The miner remains 100% unhedged.
Relative to its peers, Goldcorp remains one of the years best performers. The stock fell nearly 25% to Wednesdays close, in-line with gold prices, but remains well above Barrick Gold, Kinross Gold KGC +0.93%, and the broader gold miners ETF. Newmont Miners is the true winner, coming in essentially flat this year.
Agustino Fontevecchia, Forbes Staff
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