Goldcorp Reports Fourth Quarter and Full Year 2016 Results
VANCOUVER, Feb. 15, 2017 /CNW/ - GOLDCORP INC. (TSX: G, NYSE: GG) today reported its fourth quarter and full year 2016 results.
Fourth Quarter Highlights
- Net earnings for the fourth quarter were $101 million, or $0.12 per share, compared to a net loss of $4.3 billion, or loss of $5.14 per share in the fourth quarter of 2015.
- Fourth quarter operating cash flows of $239 million and adjusted operating cash flows(1,2) of $383 million, of which $169 million(1) was used to repay debt, $61 million was used to fund the growth pipeline and $16 million was used to pay dividends. Available liquidity at December 31, 2016 stood at $3.17 billion.
- Gold production of 761,000 ounces at substantially lower all-in sustaining costs(1) ("AISC") of $747 per ounce, compared to 909,000 ounces at AISC of $977 per ounce in the fourth quarter of 2015. Full year 2016 gold production guidance was achieved with AISC at the low end of the Company's guidance.
- Renewed growth strategy projected to achieve a 20% increase in gold production, 20% increase in gold reserves and a 20% reduction in AISC over the next five years. The ramp-up to nameplate capacity at Cerro Negro and Éléonore, a continued focus on productivity and efficiency improvements at the existing camps and advancing the robust project pipeline are expected to position the Company to deliver growth in net asset value per share.
- Identified 60% of the targeted $250 million in sustainable efficiencies; 40% delivered by the end of 2016. The Company is well underway toward achieving its $250 million target sustainable annual savings by 2018.
- Growing net asset value ("NAV") per share through portfolio optimization. Goldcorp continued to deliver on its strategy of growing net asset value by recycling capital into new large-scale camps as the $400 million acquisition of the Coffee Project in the Yukon in July 2016 was followed by the announced sales in January 2017 of the Los Filos mine in Mexico for consideration of $438 million, and the Cerro Blanco project in Guatemala for consideration of $50 million, including contingent consideration.
"In 2016, we undertook a significant restructuring to substantially grow the NAV per share of our company by decentralizing the business to drive accountability down to the mine sites, significantly reducing operating costs, selling non-core assets and reinvesting that capital into a robust internal pipeline and a new geologically prospective mining camp in the Yukon," said David Garofalo, President and Chief Executive Officer. "This culminated in the January 2017 announcement of our ambitious 20/20/20 five year growth program that would see Goldcorp deliver a 20% increase in production, a 20% increase in gold reserves and a 20% decrease in all-in sustaining costs, positioning the company to drive increasing NAV per share."
FINANCIAL AND OPERATING RESULTS REVIEW
|($ millions, except where indicated)||Three months ended December 31||Year ended December 31|
|Gold production1 (ounces)||761,000||909,000||2,873,000||3,464,000|
|Gold sales1 (ounces)||768,000||918,000||2,869,000||3,591,000|
|Operating cash flows||$239||$401||$799||$1,430|
|Adjusted operating cash flows1,2||$383||$504||$1,120||$1,651|
|Net earnings (loss)||$101||$(4,271)||$162||$(4,157)|
|Net earnings (loss) per share||$0.12||$(5.14)||$0.19||$(5.03)|
|By-product cash costs1,4 (per ounce)||$481||$687||$573||$605|
|AISC1,3 (per ounce)||$747||$977||$856||$894|
Net earnings and net earnings per share in the fourth quarter of 2016 and the year ended December 31, 2016 were affected by, among other things, the following non-cash or other items that management believes are not reflective of the performance of the underlying operations (items are denoted as (increases)/decreases to net income and net income per share):
|($ millions, except where indicated)||Three months ended December 31, 2016||Year ended December 31, 2016|
|Pre-tax||After-tax||Per share ($/share)||Pre-tax||After-tax||Per share ($/share)|
|Negative deferred tax effects of foreign exchange on tax assets and liabilities and losses||$ -||$46||$0.05||$ -||$88||$0.10|
|Impairment (reversal) expense, net||$(49)||$(49)||$(0.06)||$(49)||$(49)||$(0.06)|
|Restructuring costs and mine-site severance||$18||$16||$0.02||$63||$47||$0.06|
|Unrealized foreign exchange loss on Argentine peso denominated value added tax receivable||$4||$4||$ -||$26||$26||$0.03|
|Revisions in estimates and liabilities incurred on reclamation and closure cost obligations at inactive and closed sites||$(17)||$(12)||$(0.01)||$(17)||$(11)||$(0.01)|
Total cash costs on a by-product basis for the fourth quarter of 2016 were $481 per ounce, compared to $687 per ounce for the fourth quarter of 2015. AISC for the fourth quarter of 2016 were $747 per ounce, compared to $977 per ounce in the fourth quarter of 2015. The decrease in AISC was primarily due to lower production costs and the favourable impact of the strengthening US dollar against the Argentine and Mexican pesos, partly offset by lower sales volumes at Cerro Negro, Los Filos and Éléonore.
As of December 31, 2016, the Company had total liquidity of approximately $3.17 billion, including $0.2 billion in cash, cash equivalents and short term investments and an undrawn credit facility of $2.97 billion.
PROGRESS TOWARDS DELIVERING $250 MILLION OF SUSTAINABLE ANNUAL EFFICIENCIES
During the fourth quarter of 2016, the Company continued the implementation of its productivity and cost optimization program to deliver $250 million in sustainable annual efficiencies. Reviews completed at Porcupine during the quarter identified $35 million in efficiency improvements and cost reductions, expected to be realized in 2017, resulting from improved development rates and productivity at Hoyle Pond, improved productivity at Hollinger and improved recovery and costs at the mill. Peñasquito is in the early stages of the productivity and cost optimization efforts, but expects to realize approximately $55 million in annual sustainable efficiencies. Potential opportunities at Peñasquito relate to improved mining, processing and overall equipment effectiveness, as well as ongoing cost reductions from major contracts. Red Lake and Éléonore started their productivity and cost optimization improvement programs in the first quarter of 2017 and, along with Cerro Negro and Musselwhite, are expected to attain the balance of the $250 million target by 2018.
Consistent with Goldcorp's focus on profitable ounces and growing net asset value per share, forecast 2017 gold production is expected to be 2.5 million ounces (+/- 5%), in line with previous 2017 guidance provided at the Company's recent Investor Day. AISC are expected to be approximately $850 per ounce(4) (+/- 5%) as the Company continues to realize savings from its $250 million target in annual sustainable efficiencies. The Company's five year growth outlook is focused on growing gold production by 20% to 3 million ounces, reducing AISC by 20% to $700 per ounce and growing gold reserves by 20% to 50 million ounces.
Further details on the 2017 and five year outlook
Peñasquito, Mexico (100%-owned)
Fourth quarter gold production totaled 183,000 ounces at an AISC of $487 per ounce. Production increased compared to the fourth quarter of 2015 as the mine sequenced into the higher grade Phase 5D ore during the fourth quarter of 2016. AISC for the fourth quarter of 2016 were lower than the fourth quarter of 2015 as a result of higher gold production and lower production costs.
Gold production in 2017 is expected to total 410,000 ounces (+/-5%). The decrease compared to 2016 is due to lower grades as the high-grade ore from Phase 5D is expected to be mined by the third quarter of 2017, and more low-grade ore from the stockpiles will be processed during the year. AISC in 2017 is expected to be $825 per ounce (+/-5%). The decrease compared to 2016 is due to productivity improvements that are expected to be partially offset by lower gold production. Sustaining capital is expected to be higher than normal in 2017 as the mine plan requires increased stripping in 2017 compared to 2016 and as the tailings dam is being raised.
Cerro Negro, Argentina (100%-owned)
Fourth quarter gold production totaled 66,000 at an AISC of $1,024 per ounce. Production decreased compared to the fourth quarter of 2015 due to the processing in 2015 of 47,000 tonnes from the stockpile and the 2016 work stoppages. The work stoppages were the result of the workforce reduction that was related to the restructuring process that commenced in the second quarter of 2016. AISC for the fourth quarter of 2016 were higher than the fourth quarter of 2015 due to lower production partially offset by lower production costs.
During the fourth quarter of 2016, the prefeasibility study on the optimal mine design, development execution plan, and production schedule was completed. The plan has development at Mariana Norte continuing to ramp up through 2017 with first ore production expected in 2018. Development of the Emilia vein is expected to begin in the second half of 2017 and is expected to replace production from Eureka in 2019.
Gold production in 2017 is expected to total 410,000 ounces (+/-5%). The increase compared to 2016 is due to the continued ramp up of the mine as development rates improve. The production ramp-up to 4,000 tonnes per day is expected to be achieved during the second half of 2018. AISC for 2017 is expected to be $685 per ounce (+/-5%), similar to 2016, as a result of lower grades and higher sustaining capital offset by continued optimization of the cost structure.
Pueblo Viejo, Dominican Republic (40%-owned)
Fourth quarter gold production totaled 127,000 ounces at an AISC of $311 per ounce. Production increased compared to the fourth quarter of 2015 primarily due to higher throughput as the mill experienced an oxygen plant failure which reduced throughput in the fourth quarter of 2015. AISC for the fourth quarter of 2016 were lower compared to the fourth quarter of 2015 as a result of higher gold production and lower production costs. Lower production costs in the fourth quarter of 2016 were primarily due to the receipt of insurance proceeds related to the oxygen plant failure.
Gold production in 2017 is expected to total 415,000 ounces (+/-5%). The decrease compared to 2016 is due to lower grade. AISC in 2017 is expected to be $530 per ounce (+/-5%). The increase compared to 2016 is due to non-recurring insurance proceeds received in 2016 and higher sustaining capital expenditures.
Red Lake, Ontario (100%-owned)
Fourth quarter gold production totaled 88,000 ounces at an AISC of $932 per ounce. Production was lower compared to the fourth quarter of 2015 due to lower tonnes from the depletion of the Campbell mine as well as a focus on mine development to increase mining front availability. AISC in the fourth quarter were lower than the fourth quarter of 2015 due to lower production costs and lower sustaining capital partially offset by lower gold production.
Gold production in 2017 is expected to total 300,000 ounces (+/-5%). The decrease compared to 2016 is due to lower grades as the High Grade Zone depletes. At Red Lake there are two key growth projects, Cochenour and HG Young, that are advancing through the Company's investment framework and have the potential to provide new sources of ore over the long-term.
AISC in 2017 is expected to be $870 per ounce (+/-5%), comparable to 2016 as lower production is offset by lower operating costs. The site is focused on realizing new cost efficiencies through the rationalization of site infrastructure and other initiatives. The Number One Shaft was placed on care and maintenance in the third quarter of 2016, the Red Lake mill was placed on care and maintenance in the first quarter of 2017 and the Campbell shaft is expected to be placed on care and maintenance in the second quarter of 2017.
Éléonore, Quebec (100%-owned)
Fourth quarter gold production totaled 65,000 ounces at an AISC of $965 per ounce. Production was lower compared to the fourth quarter of 2015 due to lower milled tonnes and lower grade. Lower milled tonnes were the result of the depletion of surface stockpiles in 2015 and lower grades were consistent with the mine plan. AISC for the fourth quarter of 2016 was higher than the fourth quarter of 2015 due to lower production.
Gold production in 2017 is expected to total 315,000 ounces (+/-5%). The increase compared to 2016 is due to the continued ramp up of the mine. The production ramp-up to full capacity is expected to continue into 2018 with the anticipated addition of a fifth production horizon. A life of mine study is underway to determine the sustainable mining rate from the Roberto deposit
AISC in 2017 is expected to be $985 per ounce (+/-5%). While there is expected to be a decrease in operating costs as the mine benefits from a full year of production from the permanent ore handling system, including the production shaft, and efficiencies from higher throughput rates, this is expected to be offset by higher sustaining capital related to the tailings management facility expansion.
Porcupine, Ontario (100%-owned)
Fourth quarter gold production totaled 66,000 ounces at AISC of $985 per ounce. Production was lower compared to the fourth quarter of 2015 due to planned lower production from the depletion of the Dome underground and lower tonnes were milled as depletion of the low grade stockpile was partially offset by the increased production at the Hollinger Open Pit. AISC for the fourth quarter of 2016 were lower compared to the fourth of 2015 due to lower production costs that were partially offset by lower gold production.
Gold production in 2017 is expected to total 285,000 ounces (+/-5%), with AISC expected to be $900 per ounce (+/-5%), consistent with 2016.
Musselwhite, Ontario (100%-owned)
Fourth quarter gold production totaled 75,000 ounces at an AISC of $696 per ounce. Production decreased compared to the fourth quarter of 2015 due to lower head grade and a lower recovery rate. AISC for the fourth quarter were essentially unchanged from the fourth quarter of 2015 due to reduced operating costs, offset by lower gold production.
Gold production in 2017 is expected to total 265,000 ounces (+/-5%), in line with 2016. AISC in 2017 is expected to be $715 per ounce (+/-5%), in line with 2016.
Pyrite Leach (100%-owned)
The Pyrite Leach Project ("PLP"), which is expected to increase gold and silver recovery by treating the zinc tailings before discharge to the tailings storage facility, continued to advance during the fourth quarter of 2016. The project achieved 65% engineering progress by the end of 2016, while procurement activities are well advanced to support execution. Major works contractors are mobilizing on site and construction of permanent facilities has been initiated. The PLP is expected to provide annual incremental production of 100,000 to 140,000 gold ounces and approximately 4-6 million silver ounces, with production commencing in 2019. The capital cost is expected to be $420 million.
As part of the PLP, a carbon pre-flotation facility is being constructed, anticipated to be completed in the second quarter of 2018.
Materials Handling (100%-owned)
The Materials Handling Project, which is expected to result in reduced reliance on truck haulage through the construction of an underground winze and associated infrastructure, progressed during the fourth quarter of 2016. At the end of 2016 approximately 90% of the detailed engineering had been completed. The Materials Handling Project is expected to increase production by approximately 20% and reduce operating costs by approximately 10%. Completion of the project is expected by the first quarter of 2019. The capital cost is expected to be $90 million.
Century Project (100%-owned)
The Century Project is a potential large-scale open pit mine and related processing facility at the Dome mine. A concept study is underway to examine engineering, waste rock management and economics and to evaluate development of an expanded open pit mine and related processing facility. The Company expects the concept study to be completed in the first quarter of 2017 and expects to commence a pre-feasibility study immediately thereafter. In addition to the current mineral resource estimate at the Dome pit, the pre-feasibility study will incorporate a review of additional potential mill feed, including the Pamour Open Pit, which has a current reserve estimate of 1.1 million ounces (31.9 million tonnes at 1.02 grams per tonne) and a measured and indicated resource estimate of 0.7 million ounces (21.7 million tonnes at 1.01 grams per tonne), and the Pamour West Open Pit, which has a current measured and indicated resource estimate of 0.8 million ounces (24.5 million tonnes at 1.00 grams per tonne). The Company is undertaking the necessary work at the Dome open pit with the intention of converting a portion of the measured and indicated mineral resources into an initial mineral reserve and expects that the estimate will be included as part of the Company's June 30, 2017 reserve and resource update.
Borden Project (100%-owned)
The Borden Project is located near Chapleau in Ontario, approximately 160 kilometres west of the Company's Porcupine mine, and comprises 786 square kilometres of claims. All material required permits, including the Advance Exploration permit, have been received to allow for the construction of a ramp into the deposit and the extraction of a 30,000 tonne bulk sample. The ramp design for the purpose of the bulk sample is expected to be sufficient for ultimate mining purposes. The underground platforms developed from the ramp access will further support exploration drilling of a deposit that remains open at depth and laterally. A final feasibility study is expected to occur in the first quarter of 2019 after the completion of a bulk sample. With the expected ramp completion and minimal additional infrastructure required for full scale mining, the Company expects to reach commercial production six months following bulk sample extraction.
Red Lake District
HG Young Project (100%-owned)
The HG Young Project is an exploration discovery in close proximity to the Company's 100%-owned Red Lake mine. During the fourth quarter of 2016 exploration drilling continued with a focus on expanding the current resource and upgrading the structural understanding of the mineralized system. During the first quarter of 2017, the geological interpretation and block models will be updated and used to update the concept study. Assuming a positive business case in the concept study, the Company expects to commence a pre-feasibility study, which currently anticipates a decline from surface providing access to higher confidence areas for further exploration and bulk sampling.
Cochenour Project (100%-owned)
The Cochenour Project combines the existing workings of the historic Cochenour mine with the Bruce Channel gold discovery in the Red Lake camp. A bulk sample from the 3990 and 4060 levels was processed through a sample tower during 2016 to support grade predictability and then during the fourth quarter was processed through the Red Lake Mill where the reconciliation was favourable. The concept study is expected to be completed during the first quarter of 2017 following which a pre-feasibility study is expected to commence. To date the concept study has shown positive economics for a starter mine.
The Company is undertaking the necessary work at Cochenour with the intention of converting a portion of the 0.29 million ounces (0.6 million tonnes at 15.03 grams per tonne) of measured and indicated resources into a mineral reserve and expects that the estimate will be included as part of the Company's June 30, 2017 reserve and resource update. The development access and further geological understanding obtained from a starter mine would be evaluated to support additional development and mining.
Coffee Project (100%-owned)
The Coffee Project is a structurally hosted hydrothermal deposit located approximately 130 kilometres south of the City of Dawson, Yukon. 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.
During the fourth quarter of 2016, activities continued to focus on review and optimization of the feasibility study, planning for upgrades to site infrastructure and First Nation and community consultation. The Environmental Socioeconomic Assessment application is being prepared and is expected to be submitted in the first quarter of 2017. The Company expects permitting and construction to take about four years with commercial production targeted for the first quarter of 2021.
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 2016 financial statements and Management's Discussion and Analysis ("MD&A") report on the Company's website, in the "Investor Resources – Reports & Filings" section under "Annual Reports".
Conference Call and Webcast
|Date:||Thursday, February 16, 2017|
|Time:||10:00 a.m. (PST)|
|Dial-in:||1-800-355-4959 (toll-free) or 1-416-340-2216 (outside Canada and the US)|
|Replay:||1-800-408-3053 (toll-free) or 1-905-694-9451 (outside Canada and the US)|
|Replay end date:||March 19, 2017|
|Replay Passcode:||Conference ID#: 2296992|
A live and archived webcast will also be available at www.goldcorp.com.