Goldcorp 2015 objectives

Goldcorp 2015 objectives. The big one in my opinion for investors is delivering free cash flow. (Image: Goldcorp)

Gold is down close to $25 in early trading this morning to $1180.56 per ounce  following the FOMC minutes of yesterday and a positive US jobless claims report this morning.

Copper and base metals are all doing well though with copper hitting a year to date high of $2.84.

Goldcorp - (G:TSX) - Goldcorp has releases first quarter number this morning. Adjusted revenues came in at $1.27 billion with adjusted net earnings of only $12 million (1 cent per share). Gold production was 724,800 ounces with sales of 827,500 ounces. A weak quarter overall from Goldcorp failing to meet expectations of analysts.

The decrease in adjusted net earnings was a result of:

  • lower realized margin on gold sales;
  • higher depreciation and depletion expense;
  • higher effective tax rates.

"We are pleased to begin 2015 with strong cash flow performance," said Chuck Jeannes, Goldcorp President and Chief Executive Officer. "Our primary focus in 2015 is on safely executing our plans and forecasts. Delivering on those expectations, coupled with significantly lower capital spending compared to prior years, positions Goldcorp for a sustained period of strong cash flow. This financial strength provides Goldcorp the flexibility to fund the next generation of growth projects. Growing gold reserves is also a key priority in 2015, and positive exploration results at many of our operations, including Cerro Negro in Argentina and the HG Young discovery at Red Lake, support the potential for success in this objective."

Goldcorp has just reached commercial production at two large mines Cerro Negro (Jan 1,2015) and Éléonore (April 1,2015).

Éléonore in Quebec produced 32,500 ounces in the quarter and did have some ramp up issues that have been solved. Positive news that the Éléonore Crown Pillar can be mined earlier than anticipated and Goldcorp is already working on a pre-feasibility study. The study is due out by the end of 2015.

Cerro Negro in Argentina produced 92,600 ounces in the quarter at an all in sustaining cost of $704 per ounce. The mine was hooked up to the national power grid on February 2nd.

Goldcorp is set up to enter a period of growth and should generate strong cash flow in the remainder of 2015 as new mines ramp up.  Guidance was maintained at between 3.3- 3.6 million ounces. With only 724,800 ounces produced in the first quarter Goldcorp is on pace for 2,899,200 ounces so investors can expect production to increase in the upcoming quarters.

Goldcorp joins the list of gold companies who have reported disappointing quarters including Barrick, Yamana Gold, and Detour Gold. The lone bright spot so far in my opinion has been Agnico Eagle Mines.

As far as acquisitions go Goldcorp is always looking and completed the transaction with Probe Mines in the quarter. As operations ramp up as expected and if free cash flow can occur I would expect more activity from Goldcorp on this front. I would prefer to see them buy producing assets one that I have mentioned before is Detour Gold.  Detour is still having issues and Goldcorp could be waiting to see these issues solved.

Shares are off nearly 5.5% on the quarter results and today's drop in the gold price.

Goldcorp 5 year chart

A 5 year chart of Goldcorp. Pretty ugly. (Image: Stockcharts.com)

Read: Goldcorp Reports First Quarter Results; Annual Guidance Reconfirmed

Related: Goldcorp Chairman Ian Telfer: 2015 Canadian Mining Hall of Fame Interview or Goldcorp's next takeout

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This is not investment advice. All facts are to be checked and verified by reader. As always please do your own due diligence.