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Tuesday, January 22nd, 2019 - Buy Gold - Bringing you trusted gold news and gold investing information since 2006

Goldcorp: Great 2010 and Even Better 2011

Goldcorp (GG) recently released fourth quarter and full year 2010 numbers which were outstanding on all fronts.

Fourth quarter gold production reached 689,600 ounces at a by-product cash cost of $164 per ounce, as revenues increased by 70% to $1.3 billion. For 2010, gold production increased to 2.52 million ounces of gold at a cost of $274 per ounce, with revenues increasing by 40% to $3.8 billion. Net income increased to $1. 6 billion and cash flows from continuing operations rose to $1.7 billion.

Proven & Probable (P&P) gold reserves increased by 23% to 60 billion ounces of gold during 2010. The balance sheet is in exceptional shape as evidenced by Goldcorp’s decision to raise the dividend by 11% after doubling the dividend in October of 2010.

For 2011, gold production is expected to increase to between 2.65 and 2.75 ounces with cash costs expected to be in the range of $280-320 per ounce on a byproduct basis.

During 2010, Goldcorp completed a number of transactions to streamline and expand its portfolio book. Goldcorp’s interests in Osisko Mining (OSKFF.PK), Terrane Metals Corp., the San Dimas mine (associated Silver Wheaton (SLW) contract), and the Escobal silver projects were disposed while completing the Canplats Resources and Andean Resources purchases and the acquisition of a 70% interest in the El Morro project.

Penasquito, expected to be the crown jewel in Goldcorp’s portfolio, achieved commercial production in 2010 with 53,900 ounce of gold, 4.6 million ounces of silver, 34.4 million pounds of lead, and 54.2 million pounds of zinc being produced. Cash costs for the fourth quarter of 2010 were $164 per ounce, net of byproduct credits.

As Penasquito ramps up to full production in 2011, it is estimated that 350,000 ounces of gold will be produced.

At the Red Lake mine in Canada, 703,000 ounces of gold were produced in 2010, an increase of 13% over 2009. For 2011, production is expected to slip to 665,000 ounces as lower grade ores are mined. Red Lake is currently being expanded, with the connection to the Campbell complex nearly complete. Future expansion will entail bringing the Cochenour project into production in 2014.

Production at Cochenour is expected to be between 250-275,000 ounces per year over the 20-year mine life. The initial capital cost is expected to be $420 million, with production expected to begin in the fourth quarter of 2014. Infill drilling will continue at Cochenour with the deposit still open at depth.

The Eleonore project in Quebec is advancing, with Goldcorp recently signing a long-term Collaboration Agreement with the Cree Nation of Wemindji allowing for the mine to go forward.

Production is estimated at 600,000 ounces per year over a 15-year mine life at average costs less than $400 per ounce. The construction permit is expected mid-2011 with gold production slated for the fourth quarter of 2014. Capex is expected to total $1.4 billion.

Eleonore will employ a dual mine concept with two camps exploiting the deposit from above and below.

Goldcorp has a solid strategy of acquiring large gold deposits, exploiting them, then acquiring surrounding deposits in order to increase mine life. This allows Goldcorp to extract as much value from a mining camp as possible, allowing for a longer camp life.

Focusing on major projects with long mine lives allows Goldcorp to reinvest the cash flow internally, bringing new mines online, and acquire new deposits without fear of dilution and return capital to shareholders.

With the questions surrounding the buildout of Penasquito answered, Goldcorp is set to build upon the significant growth in 2010 and should be the starting point for people investing in gold stocks.

Technically, we are in an overbought condition and investors would be well advised to buy on a pullback.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

The original article is published at

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