VANCOUVER, July 27, 2016 /CNW/ – GOLDCORP INC. (TSX: G, NYSE: GG) today reported its second quarter 2016 results and a decision to proceed with expansions at both its Peñasquito and Musselwhite mines. 

Second Quarter 2016 Highlights

• Gold production(1) of 613,400 ounces at all-in sustaining costs(1)(3) ("AISC") of $1,067 per ounce, compared to 908,000 ounces at AISC of $853 per ounce in 2015. Lower gold production was expected in the second quarter mainly due to planned lower ore grades, a 10-day mill shutdown for planned maintenance at Peñasquito and the exhaustion of surface stockpiles at Cerro Negro which contributed significantly to mill feed in 2015.  Further, a slower than expected ramp up after the mill shutdown at Peñasquito and the decision to accelerate a large workforce reduction at Cerro Negro had a short-term, negative impact on second quarter gold production.
   
• 2016 guidance reconfirmed for gold production of between 2.8 and 3.1 million ounces, at AISC of between $850 and $925 per ounce.  Production is expected to increase in the third and fourth quarter as the plant at Peñasquito returned to normal operations in July and higher grades are expected from a number of mines. AISC are expected to decrease as a result of higher production.
   
• Approximately 50% of targeted $250 million sustainable annual efficiencies identified. Workforce reductions and other improvement initiatives are underway at Cerro Negro which are expected to deliver approximately $65 millionof annual efficiencies.  Additionally, approximately $55 million in annual administrative cost savings were identified in July and are expected to be fully realized in 2017 as the decentralization of the Company was initiated with a one-third decrease in the number of employees at corporate and regional offices.  The Company is on schedule to achieve its $250 million efficiency target by 2018.
   
• Adjusted operating cash flows(1,2) of $307 million, compared to $523 million in 2015. The decrease in adjusted operating cash flows in the second quarter of 2016 compared to 2015 was primarily due to lower production, partially offset by an increase in the realized gold price.
   
• Net loss of $78 million, or $0.09 per share, compared to net earnings of $392 million, or $0.47 per share, in 2015.  Net earnings in 2015 included non-recurring after-tax gains on the sale of non-core assets of $358 million, or $0.43 per share.  Second quarter 2016 earnings were negatively impacted by lower production, partially offset by an increase in the realized gold price.
   
• Project pipeline advanced:  expansions approved at Peñasquito and Musselwhite; Kaminak Gold acquisition closed and Coffee project acquired.  During the quarter, the Company advanced its project pipeline with the completion of the Hoyle Deep project at Porcupine.  In addition, the Company received Board approval to proceed with the Pyrite Leach Project at Peñasquito ("PLP"), with an expected capital investment of approximately $420 million, and theMaterials Handling Project at Musselwhite, with an expected capital investment of approximately $90 million, each of which are expected to increase gold production commencing in 2019.  The acquisition of Kaminak, and its Coffee project in the Yukon, Canada was completed after quarter end and is expected to provide the Company with a medium-term opportunity for low-cost, high return gold production to complement a robust pipeline of expansion opportunities at existing mines.

"While lower production was expected in the second quarter, the decision to accelerate a significant organizational restructuring had a short-term, negative impact on gold production.  With the decentralization of our business well underway and new mine management installed at the majority of our operations to reflect the new business model,Goldcorp is poised to deliver better gold production and cost performance," said David Garofalo, Goldcorp President and CEO.  "We continued to advance our robust project pipeline with the decision to proceed to construction with high rate of return expansions at our Peñasquito and Musselwhite mines."

ORGANIZATION STRENGTHENED

Going forward, the mine general managers will have much greater accountability for growing the net asset value of their individual businesses. The focus of the corporate office will be to provide oversight and allocate capital.  To those ends, mine management changes were undertaken and the Company reduced the number of employees at the corporate and regional offices by approximately one-third.

As part of the organizational re-design, the Company has strengthened the senior management team with the recruitment of several key individuals.  Paul Harbidge has been appointed Senior Vice-President ("SVP"), Exploration reporting to George Burns, Executive Vice President ("EVP") and Chief Operating Officer.  Paul will be responsible for the development, implementation and management of the global exploration function, within the decentralized model.  Paul brings over 20 years of mining experience to Goldcorp, most recently as head of exploration at Randgold Resources.  Paul holds a Bachelor of Science in Geology from Kingston University in the UK, as well as a Master of Science in Mineral Exploration and Mining Geology from Leicester University in the UK.

Jason Attew has been appointed SVP, Corporate Development & Strategy, reporting to Russell Ball, EVP and Chief Financial Officer ("CFO").  Jason will lead the optimization of the Company's portfolio of assets, while evaluating new opportunities that are consistent with the strategy of increasing net asset value per share.  Jason is a mining and metals banking executive with over 20 years of experience and holds a Bachelor of Science from the University of British Columbia, as well as a Master of Business Administration from Queen's University in Ontario.

Wade Bristol has been appointed SVP, Canada, reporting to George Burns.  Wade joined Goldcorp in July 2014 as the Vice President, Mine Improvement & Support.  Prior to Goldcorp he served in various General Manager capacities forNewmont Mining in North America.  Wade has a Bachelor of Science in Mining Engineering Degree from Montana Tech of the University of Montana.

Steven Thomas has been appointed to the new role of CFO, Canada, reporting to Wade Bristol and David Splett has been appointed to the new role of CFO, Latin America reporting to Joe Dick, SVP, Latin America.  As part of the regional leadership teams, Steven and David will provide financial analysis, interpretation and metrics to facilitate strategic decision making related to the management of the regional businesses.  

Steven brings over 30 years of financial experience, with the last 13 years in the mining industry with De Beers Canada Inc.  Steven holds a Bachelor of Science Joint Honours Degree in Accountancy and Economics from the University of Wales in the UK, and is a Fellow of the Institute of Chartered Accountants.    

David brings with him over 24 years of experience in the resource industry, most recently as VP Finance for Mosaic Corporation.  David holds a Bachelor of Arts, Economics from the University of Regina, a Master of Arts, Management Systems from the University of Hull in the UK, as well as an MBA from Queens University in Ontario and is a Certified Management Accountant.

During the second quarter of 2016, the Company began implementing a company-wide program to optimize all areas ofGoldcorp's business and deliver $250 million in sustainable annual efficiencies by 2018.  Cerro Negro began the implementation of a substantial workforce reduction and along with other improvement initiatives is expected to provide increased efficiencies of approximately $65 million.  In addition, approximately $55 million of administrative cost savings have been identified through the reduction of employees at corporate and regional offices by approximately one-third as part of the broader decentralization effort.  The Company is undertaking a comprehensive optimization effort at each of the mine sites that is expected to allow it to achieve the balance of the $250 million target.

FINANCIAL AND OPERATING RESULTS REVIEW

Net loss and net loss per share in the second quarter of 2016 and the net earnings and net earnings per share in 2015 were affected by, among other things, the following non-cash or other items that management believes are not reflective of the performance of the underlying operations:

Total cash costs on a by-product basis for the second quarter of 2016 were $728 per ounce compared to $547 per ounce for the second quarter of 2015.AISC for the second quarter of 2016 were $1,067 per ounce, compared to $853 per ounce in the second quarter of 2015.  The higher AISC was primarily a result of lower sales volumes at Peñasquito, Cerro Negro and Red Lake, partially offset by lower production costs and the favorable impact of the strengthening US dollar against the Argentine and Mexican pesos and the Canadian dollar. 

As of June 30, 2016, the Company had total liquidity of approximately $3.2 billion, including $0.3 billion in cash, cash equivalents and money market investments and $2.9 billion in available credit.  The Company's $3 billion revolving credit facility was recently extended by a year to June 22, 2021. 

OPERATIONS REVIEW AND GUIDANCE

The Company reconfirmed 2016 gold production guidance between 2.8 and 3.1 million ounces at AISC between $850 and $925 per ounce. Third and fourth quarter production is expected to increase over the second quarter as Peñasquito returns to normal operations after its maintenance shutdown and grades are expected to increase at a number of mine sites.  In addition, AISC are expected to decrease in the third and fourth quarter as compared to the second quarter of 2016 as a result of higher production.

With the approval to proceed to construction of the PLP and the Materials Handling Project, and the addition of theCoffee Project, growth capital for 2016 is expected to increase by approximately $90 – $100 million to approximately $190 – $200 million.   

Peñasquito, Mexico (100%-owned)

Brian Berney has been appointed Mine General Manager at Peñasquito.  Brian has a successful track record of bringing projects to operations and his focus on continuous improvement and safe production will help bring Peñasquito to the next stage of productivity and efficiency.  Brian comes to Goldcorp with broad mining and project development experience in large operations including Teck's Quebrada Blanca mine, leading and participating in Barrick's Pueblo Viejoand Pascua Lama Projects, and leading the Technical Services areas in former Placer Dome operations.  Brian holds a Bachelor's degree in Civil Engineering from the University of Queensland.

Second quarter gold production totaled 36,000 ounces at an AISC of $3,094 per ounce. AISC were significantly higher compared to the second quarter of 2015, primarily as a result of lower gold production and lower by-product revenues.  Production declined compared to the second quarter of 2015 as a result of lower ore grade and recovery from the upper transitional ore and low grade stockpiles in 2016 compared with 2015, when ore was being sourced from the heart of the deposit. Additionally, production declined as a result of a shutdown for 10 days for plant maintenance and a longer than anticipated period to ramp the plant up to full production due to a variety of restart issues. The plant has operated normally in July.

Over the next three years, mining activities in the pit are expected to be focused on lower grade ore in the upper parts of the Peñasco pit while stripping is emphasized to ensure an economically optimal pit shell design to maximize the net asset value of the operation.    By 2019, Peñasquito's gold production is expected to benefit from an improvement in mined grades as it recommences mining higher grades at the bottom of the Peñasco pit and significantly enhanced metallurgical recoveries with the planned completion of the recently approved PLP.  Further information on PLP is described within the 'Project Pipeline Review' below.

At the Northern Well Field project, 15% of the total fresh water production was commissioned by June 30 and the balance is expected to be completed by the end of the third quarter of 2016.    

Cerro Negro, Argentina (100%-owned) 

Vern Baker has been appointed Mine General Manager at Cerro Negro.  Vern has more than 30 years of mining experience, including more than 10 years as Mine General Manager of multiple open pit and underground operations, working for Barrick, Teck and Antofagasta, among others.  Vern holds a Bachelor's degree of Science in Mining Engineering from the Mackay School of Mines at the University of Nevada and an MBA from Stanford University.

Second quarter gold production totaled 86,000 ounces at an AISC of $808 per ounce.  Production decreased compared to the second quarter of 2015 as a result of lower mill tonnage processed due to the exhaustion of surface stockpiles which contributed significantly to mill feed in 2015.  While underground ore production improved from 2015 levels, productivity was negatively affected by a large workforce reduction as part of the restructuring process that commenced during the second quarter.  This reduction resulted in a five-day shutdown of the site in May.   These reductions and other improvement initiatives, which have been undertaken in order to reduce the large labour productivity gap between this mine and the Company's North American operations, are expected to deliver approximately $65 million in annual efficiencies. 

The Marianas Complex Life of Mine Study is progressing and is focused on developing an optimal mine design, development execution plan and production schedule to maximize net asset value for Cerro Negro.  The short-term plan is to enable ore development from Mariana Norte in 2017 to provide a third source of ore which would allow the mill to be operated at its designed capacity of 4,000 tonnes per day in 2018.

During the second quarter of 2016, exploration continued to focus on resource and reserve expansion from surface drilling at the Marianas Complex, with 24,263 metres drilled at the Emilia and Mariana Norte Este B veins. Additional reserve expansion at these two zones has the potential to further enhance the value of synergies being developed by the Marianas Complex Life of Mine Study.

The most significant result received to date at the Emilia Vein, which is interpreted to be a fault offset structure to the east of the Mariana Central mine, was in hole MDD-16041 which intersected 4.66 metres true width at 149.17 g/t Au and 858.2 g/t Ag in a step-out approximately 150 meters to the east of the December 31, 2015 inferred resource boundary.  The most significant result received at Mariana Norte Este B was in hole MDD-16053 which intersected 15.47 metres true width at 31.22 g/t Au and 184.0 g/t Ag, in a step-out approximately 135 metres east of the main December 31, 2015inferred resource body and 100 metres up dip of the nearest hole from the 2015 drilling program.  Both of these holes are noteworthy in that they are step-out holes greater than 100 meters to the east of the December 31, 2015 inferred resource boundaries, represent grade thicknesses in excess of deposit averages, and additional ore grade results have been encountered in nearby holes. 

Pueblo Viejo, Dominican Republic (40%-owned) 

Second quarter gold production totaled 100,000 ounces at an AISC of $587 per ounce.  Gold production increased compared to the second quarter of 2015 primarily due to higher grades.  Silver production increased compared to the second quarter of 2015 primarily due to higher recoveries due to the preg-robbing characteristics of ore processed in 2015.

Éléonore, Quebec (100%-owned)

Second quarter gold production totaled 74,000 ounces at an AISC of $919 per ounce.  Gold production increased compared to the second quarter of 2015 as a result of higher throughput and grades.  AISC decreased as a result of substantially higher production.  Higher tonnes processed were the result of greater tonnes mined as mining continued across four horizons compared to two in the second quarter of 2015.  Higher grades were the result of improved stope designs after accounting for the folding and faulting of the ore body.  The focus continues to be on optimizing stope designs to lower dilution. Work on the production shaft continued and is expected to be fully operational by the end of 2016, which will result in increased efficiencies and reduced operating costs.  

During the second quarter of 2016, exploration drilling was focused on the 494 area (below 650 metres) and tested the deep projection of the south and central portion of the deposit (below 1,000 metres). In the third quarter of 2016, exploration will be focusing on the 494 zone, on the deep projection of the south and central portion of the deposit and on the upper horizons (upper 650 metres).

Red Lake, Ontario (100%-owned)

Bill Gascon has been appointed Mine General Manager at Red Lake.  Bill joined Goldcorp in October 2013 as the Mine General Manager of Musselwhite and under his leadership has significantly improved the profitability of the mine.  He has more than 20 years of underground mining experience.  He originally started his mining career as an underground miner and has progressed through to a senior operational leadership level by taking on roles of increasing scope and responsibility.  Prior to Goldcorp he was the Underground Mine Manager at Barrick's Hemlo Operation. 

Second quarter gold production totaled 73,000 ounces at an AISC of $958 per ounce.   Production decreased compared to the second quarter of 2015 due to lower grades processed and lower mill throughput.  Production from the Upper Red Lake zones continues to increase with the completion of a more efficient material handling system and improved mining efficiencies through the conversion to bulk mining.  As expected, lower grades and lower tonnes from the High Grade Zone and Campbell offset these improvements.  Trade-off studies continued to advance on the rationalization of the infrastructure with results expected by year-end.

During the second quarter of 2016, exploration drilling focused on the R Zone, Upper Red Lake and Far East and HG Young.

Porcupine, Ontario (100%-owned)

Marc Lauzier has been appointed Mine General Manager at Porcupine.  Marc has held roles with increasing responsibility including Manager of Mining at Red Lake and Mine General Manager of Porcupine.  His most recent role atGoldcorp was Vice President, Operational Support, Canada & US.

Second quarter gold production totaled 73,000 ounces at an AISC of $844 per ounce.   Production increased compared to the second quarter of 2015 as a result of higher grades and recoveries, offset by lower tonnes processed.  Grades were positively impacted by increased Hollinger pit material displacing lower grade stockpile material and higher grades from Dome underground.  Lower milled tonnes were due to the longer grinding time required for Hollinger material to optimize recovery as well as lower tonnes from Dome underground.  The Dome underground has deferred closure activities, which were previously scheduled for mid-2016.  With the recent increase in gold prices and operating cost reductions that have resulted in higher margins, the site is determining options to extend mine life.      

The Hoyle Deep project was completed early in the quarter and has allowed for more efficient movement of personnel and material to the lower levels of the mine.  Since completion, travel time has been reduced by two hours per shift, and together with increased production levels in 2016 has resulted in an additional 100 meters of development per month.  Further production increases beyond the current 1,000 tonnes of ore per day are expected as development expands and efficiencies from the new infrastructure are leveraged.

Musselwhite, Ontario (100%-owned)

Peter Gula has been appointed Mine General Manager at Musselwhite.  Peter has over 27 years of mining experience.  He has held a variety of roles increasing in responsibility during his career at Goldcorp.  His most recent role was Operations Manager at Musselwhite.  Peter received a mining diploma from Haileybury School of Mines, holds a Bachelor Degree in Mining Engineering from Laurentian University and is a Professional Engineer of Ontario.

Second quarter gold production totaled 59,000 ounces at an AISC of $721 per ounce.  Production was essentially unchanged compared to the second quarter of 2015.  Following a decision to proceed with the Materials Handling Project, incremental production of approximately 20% is expected beginning in 2019.  Further information on theMaterials Handling Project is described within the 'Project Pipeline Review' below.

PROJECT PIPELINE REVIEW

Peñasquito District

Pyrite Leach Project ("PLP") (100%-owned)

PLP was approved by the Board on July 27 and mobilization will commence in August 2016.  The project is expected to increase overall gold and silver recovery by treating the zinc tailings before discharge to the tailings storage facility. Based on a feasibility study entitled "Feasibility Study Report Peñasquito Metallurgical Enhancement Project" completedDecember 2015 by Fluor Canada Inc. (the "feasibility study"), the PLP is expected to recover approximately 40% of the gold and 48% of the silver currently reporting to the tailings. PLP is expected to add annual incremental production of approximately 100,000 – 140,000 gold ounces and approximately 4.0 – 6.0 million silver ounces.  Commercial production is expected in the first quarter of 2019.    

Based on the feasibility study the project is expected to have an after-tax internal rate of return ("IRR") of approximately 17% at long-term gold and silver prices of $1,250 per ounce and $18.00 per ounce, respectively. Every $100 change in the gold price and $1.50 change in the silver price would impact the project IRR by approximately 2.5%.

The expected capital investment of approximately $420 million will be funded over the next three years in the following amounts:

PLP operating costs are expected to be approximately $1.75 per tonne.  The project has a minimal impact on the site water balance and will not require upgrades to the water supply as the Pyrite Leach processing plant recirculates existing plant processing water.

Camino Rojo (100%-owned)

At Camino Rojo, located approximately 50 kilometres from Peñasquito, the pre-feasibility study on the oxide resource continues to advance and is on track to be completed by the fourth quarter of 2016.

Musselwhite Materials Handling (100%-owned)

The Materials Handling System was approved by the Board on July 27.  Mobilizing a contractor for additional development will commence in August and the winze raisebore construction is expected to commence in December. Currently, mining is at a depth below 1,000 metres under Lake Opapimiskan and the truck haulage distance is 7.5 km to the 400 mL underground crusher.  This growth has resulted in a haul truck fleet size of 17 haul trucks, necessitating a more economical and practical means of transporting ore as the current ventilation system cannot support the additional haul truck fleet required to extend mine life.  The project will enable hoisting of ore through an underground winze and associated infrastructure which will result in reduced reliance on high-cost truck haulage by significantly reducing uphill truck haulage between the winze and underground crushers leading to improved energy efficiency, reduced ventilation requirements, reduced mining costs, enhanced production profile and potential to extend mine life through exploration success. 

Based on an internal study, the project is expected to have an after-tax IRR of approximately 25% (exclusive of resources).

Following completion of the winze, which is expected in the first quarter of 2019, incremental production of approximately 20% is anticipated and operating costs are expected to be reduced by approximately 10% for the life of the mine.  The expected capital investment of approximately $90 million will be funded over the next three years in the following amounts:

Borden (100%-owned)

The Borden project, located 160 kilometres west of Porcupine, has the potential to further enhance the long-term economics of Porcupine.  A pre-feasibility study is underway to determine the optimization of a combined Borden-Porcupine operation and is expected to be completed during the first quarter of 2017.  An advanced exploration permit is expected to be received by late 2016 or early 2017 to allow for the construction of a ramp into the deposit and the extraction of a 30,000 tonne bulk sample, providing an underground platform for exploration drilling on a deposit that remains open at depth and laterally.  Exploration for the second quarter of 2016 continued to focus on discovery of additional resources along strike from the known Borden deposit as well as on high potential targets away from the main ore body, both to the east and northwest to look for new zones in the regional land package. 

Red Lake (100%-owned)

At the HG Young deposit, a high-grade exploration discovery near the Red Lake operation, a concept study is advancing and is expected to be completed in the fourth quarter of 2016.  Assuming a positive business case from the concept study, a pre-feasibility study is expected to commence in the first half of 2017 with a decline from surface that will provide access to the higher confidence areas for further exploration and bulk sampling.  Exploration drilling has focused on increasing the confidence of the continuity of the mineralization and defining the plunge of the mineralization at 14 level.  

At Cochenour, the focus during the second quarter continued on exploration drilling.  Drilling in the core area of the deposit (3,990 foot level) continues to increase data density and is moving to push the known mineralization downward toward the 5320 foot level.  Sill development along the Upper Main Zone commenced on both the 3990 and 4060 foot levels with all the material being stockpiled for processing through a sample tower in the third quarter.  A rigorous face sampling program was initiated this quarter and will allow reconciliation with the mined material.  During the second quarter, one economic test stope was successfully mined on the 5320 level and the results were as expected.  Further drilling, sampling and test mining is expected to be completed by the end of 2016. 

Coffee (100%-owned)

Following the announcement of the closing of the transaction on July 19, 2016, the Company appointed Buddy Crill as Mine General Manager for the Coffee project.  Buddy joined Goldcorp in April 2015 as the Energy Manager for the Latin America region.   In July 2015, he accepted the role of Interim Director of Operations Support for the region to manage business improvement, supply chain, maintenance, and information technology/operations technology functions within the region.  Prior to joining Goldcorp he was with Barrick in a variety of roles, most recently as the Asset Manager at thePueblo Viejo Mine.  Buddy holds a B.S. Electrical Engineering from the University of Idaho.

The Coffee Gold project ("Coffee"), is a structurally hosted hydrothermal deposit located approximately 130 kilometres south of the City of Dawson, Yukon. Coffee is a high-grade, open pit, heap leach mining project located in a top tier mining jurisdiction.  The Coffee land package, comprising over 60,000 hectares, demonstrates potential for near-mine discoveries, with mineralization remaining open along strike and at depth, and the potential for the discovery of a major new mineral system. 

An expanded exploration program will commence in August and the Company expects to invest $15 million in 2016 with a focus on exploration, permitting process, infrastructure upgrades and basic engineering. 

The Company has retained the core team of Kaminak geologists, including members of the initial discovery team to lead exploration activities. The drilling program is expected to follow-up on existing targets peripheral to existing resources and reserves, test potential gaps in the existing resource models and numerous near-surface oxide mineralization targets which have been identified with gold-in-soil anomalies while also investigating the potential for additional high-grade sulphide mineralization at depth. 

The permit application is expected to be submitted to the authorities in the Fall of 2016 based on positive consultations with First Nations.  An Environmental Socioeconomic Assessment (ESA), Water Use License and Quartz Mining License will be permitted simultaneously.  The Company expects permitting and construction activities to take four years with first gold production targeted for the end of 2020.

About Goldcorp

Goldcorp is a senior gold producer focused on responsible mining practices with safe, low-cost production from a high-quality portfolio of mines.  

This release should be read in conjunction with Goldcorp's second quarter 2016 interim consolidated financial statements and Management's Discussion and Analysis ("MD&A") report on the Company's website, in the "Investor Resources – Reports & Filings" section under "Quarterly Reports".

Original Article: http://www.goldcorp.com/English/Investor-Resources/News/News-Details/2016/Goldcorp-Reports-Second-Quarter-2016-Results-Expansions-Approved-at-Peasquito-and-Musselwhite/default.aspx