Goldcorp sticking to 20-20-20 growth plan

By Peter Kennedy

Goldcorp Inc. [G-TSX, NYSE-GG] said Tuesday January 16 that it is sticking with a plan to increase its annual production by 20% from current levels to 3 million ounces by 2021. Over the same period, the Vancouver-based mining giant also said it hopes to reduce its all-in sustaining costs to US $700 an ounce from US $850 an ounce.

However, the company said the production and cost forecasts exclude potential production from a portfolio of development projects including, Cochenour (Ontario), HG Young (Ontario), Century (Ontario), Nueva Union/Cerro Casale/Caspiche (Chile).

The announcement came after Goldcorp beat expectations by producing 646,000 ounces of gold in the fourth quarter of 2017, a move that brought the company’s total production for the year to 2,569,000 ounces. The all-in sustaining cost in 2017 was US $825 an ounce.

Goldcorp CEO Dave Garofalo said the company hopes to achieve its goal by maximizing the operations that it has built up over the last five years, including the Éléonore Mine in northern Quebec and Cerro Negro Mine in Argentina, while investing in projects like Borden near Timmins, Ontario, and Coffee in the Yukon Territory. (Borden is designed to feed Goldcorp’s existing industrial complex at nearby Porcupine).

By spending about $300 million at the Coffee Project, the company hopes to add about 200,000 ounces of gold production.

Goldcorp has also said it sees the former Cochenour-Willans Mine at Red Lake, Ontario as a potential new production source. The new mine plan is expected to contribute 5,000 to 10,000 ounces in 2018 rising to approximately 30,000 to 50,000 ounces by 2019.

Meanwhile, Garofalo said the reduction in costs will be achieved mainly through economies of scale that the company hopes to achieve by increasing its production. However, the company also plans to drive about $250 million in operating costs out of its global mining business by mid-2018. Some of that reduction has already been achieve via cuts to general and administrative expenses prior to March, 2017.

Garofalo said it is the company’s belief that senior producers can’t hope to produce any more than 4 million ounces of gold annually. Goldcorp’s main competitors, Newmont Mining Corp. [NEM-NYSE] and Barrick Gold Corp. [ABX-TSX, ABX-NYSE], are reducing their annual production to that kind of level, he said. He said his preference would be to see the company’s production coming from as few areas as possible, perhaps six to eight mining districts.

“Why that is important is that if you are producing at that kind of level, you can enjoy economies of scale and a low cost structure, which makes us competitive in the global market place,” Garofalo said.

Meanwhile, Garofalo told the company’s investor day conference that he plans to focus on its existing portfolio rather on growth via mergers and acquisitions.