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Current Gold Price Environment Good Opportunity For Cost Cutting – Goldcorp CEO

By Alex Létourneau of Kitco News
Monday September 23, 2013 6:20 PM

Denver (Kitco News) - Following gold’s enormous price drop in the second quarter and the subsequent bevy of mining write downs that followed, having a positive outlook of the plunge would be understandably difficult.

However, Chuck Jeannes, president and chief executive officer of Goldcorp Inc. (TSX: G)(NYSE: GG), told Kitco News at the Denver Gold Forum that this current price environment is a good opportunity for the mining giant.

Chuck Jeannes, CEO Goldcorp

“You never want to let a good opportunity go to waste, and the reduction in the gold price has allowed us to go back to our sites and insist on some real discipline in our cost cutting efforts,” Jeannes said. “ I see this as a good opportunity for Goldcorp to focus on the financial discipline and cost cutting – what we call operating for excellence – that were already underway but have become more high-profile in this current price environment.”

Gold prices took a nose dive of 22% in the first six months of 2013, the brunt of it in April and June, severely impacting gold producers in the second quarter. Goldcorp took a loss of $1.93 billion in the quarter, largely in part to a non-cash impairment charge of $1.96 billion on its Mexican-based Peñasquito mine.

Despite the impairment charge, Jeannes is optimistic about Peñasquito’s direction, highlighting the northern well field.

“The big news with Peñasquito is water supply and that’s been a challenge getting enough water to continue the ramp-up we envisioned to 130,000 tons per day, to get up to the full capacity of the plant,” Jeannes said. “And we have now found a new water supply, we’ve approved a construction project to drill that and bring power, and the pipelines to get the water back to the site, which is about 50 kilometers away.”

Jeannes also noted that Peñasquito is on track to meet its production guidance for the year, as well as company-wide production guidance reaching 2.55 million to 2.8 million gold ounces at total cash costs between $1,000 and $1,100.

The company is also seeing the finish line for its Québec-based Éléonore project, which saw some slight delays this summer due to events out of the company’s control.

“We had some challenges with the forest fires where we had to evacuate the project and the two-week construction strike province-wide, and so they basically lost a little over a month,” Jeannes said. “But the team there is excellent and they’ve been delivering this project on time throughout the course of construction.

“Now they’re very focused on making up that month so they can still try and deliver first gold by the end of 2014, and I think they’ll do it,” he added.

Éléonore will work its way up to a production average of 600,000 ounces per year within a few years of its first gold production.

Coming full circle to gold prices, Jeannes believes that long term gold will be higher, based on fundamentals remaining the same. He breaks it down into three points.

“The way Western governments are in deficit spending mode, which eventually is going to have to result in inflation, which will be positive for gold price, Jeannes said. “Second is that central banks continue to buy gold and I can’t envision a scenario where they would go back to more exposure of the US dollar as a reserve currency.

“And third, we’re seeing the rise of the Asian consumer, and that’s a trend that is certainly going to continue,” he said. “They’re buying a lot of physical gold, in record amounts increasing each month and each year.”

To contact me regarding a story or feedback, please follow my Twitter account @alex_letourneau

By Alex Létourneau of Kitco News aletourneau@kitco.com

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
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