(Kitco News) - Goldcorp Inc. (TSX: G, NYSE: GG) looks to increase its gold production in the fourth quarter as output continues to ramp up at its still-new Penasquito mine in Mexico, production in Guatemala remains strong and mining at Red Lake in Canada starts shifting back away from lower-ore-grade areas, says the company’s chief executive officer.

Penasquito is also projected to provide so much silver output that by next year, Goldcorp may well be one of the world’s top few silver-producing companies, said Chuck Jeannes, president and chief executive officer. Goldcorp released a third-quarter earnings report last week that included record adjusted net earnings of $459 million, or 57 cents a share, that were well up from $244 million, or 33 cents, in the year-ago period. Gold sales of 571,500 ounces were up only modestly from 567,500 in the year-ago quarter. However,

Goldcorp—like other mining companies—got a boost from strong prices, with Goldcorp reporting an average realized gold price of $1,719 an ounce that was an increase of 39% from the third quarter of 2010.

Meanwhile, the company said in a news release that it expects substantially increased production in the fourth quarter. Jeannes elaborated on those production figures in an interview with Kitco News.

“Our production tends to always be back-end loaded,” he said. “We tend to produce more in the fourth quarter than we do in the first quarter. And this year is no different.”

The company’s earnings report said it remains on track to achieve full-year output of 2.5 million to 2.55 million ounces. Based on output for the year to date, this means fourth-quarter production would have to be some 675,000 ounces.

“The growth comes primarily from continued increases in production at Penasquito in Mexico,” Jeannes said. “And we’ve been growing production substantially at the Marlin mine in Guatemala.”

The Penasquito mine went into commercial production last year. The mine produced 55,800 ounces of gold and 4,203,200 ounces of silver in the third quarter. Goldcorp said there was lower production in July and August as sulphide-plant modifications and tests were completed, then normal operating conditions occurred in September, leading to record weekly and month plant throughout in excess of 100,000 tons of ore per day. Progress continues on a supplemental ore feed system, with the project is on track for completion by year-end and 130,000-ton-per-day throughput expected by the end of the first quarter of 2012.

The Marlin mine produced quarterly record output of 95,000 ounces of gold and 2,291,100 ounces of silver in the July-September period, fueled by higher ore grades and tons of ore milled. However, while output on the Marlin mine is expected to be strong in the fourth quarter, the pace will not be sustained.

“We’re going to reach the bottom of the open pit and go to purely underground mining going forward next year,” Jeannes said. “But Penasquito will continue to grow significantly over the next couple of years as we get into the better-grade portions of the deposit.”

Overall third-quarter gold output was lower than what might normally be the case because Goldcorp was mining in a lower-grade area in Canada’s Red Lake area, Jeannes said. “But that will turn around in the fourth quarter.”

Goldcorp To Become Major Silver Producer As Penasquito Ramps Up

Goldcorp’s Web site said Penasquito’s annual production is expected to average some 500,000 ounce of gold and 28 million ounces of silver over a 22-year mine life.

“That ramps up as we get into the better parts of the ore body,” Jeannes said. “We’re looking at over 400,000 ounces (of gold) in 2012, and we actually have some years (projected in the future) at over 600,000 ounces in 2014 and 2015 when we’re in the best areas of the ore body.”

Further, ramp-up at Penasquito should vault Goldcorp all the way to the world’s third-largest silver-producing company by next year, when also adding in output of a few million ounces per year from Marlin in Guatemala, Jeannes said.

“We are becoming a very significant silver producer,” Jeannes said.

Goldcorp’s by-product mining output of silver already is up sharply from a year ago. Third-quarter production was 6,494,300 ounces, compared to 2,941,200 in the year-ago period.

Goldcorp Sees Gold Production Rising Some 60% By 2015

Goldcorp anticipates having annual gold output of some 4 million ounces by 2015, which would be roughly 60% growth from the projected output this year, Jeannes said. “We’re very busy building mines.”

Goldcorp owns a share of the Pueblo Viejo mine in the Dominican Republic, with Barrick Gold the majority stakeholder. Construction on this mine is more than 75% complete and it is expected to begin producing around mid-2012. Goldcorp’s share of annual output in the first five full years of operation is expected to average 415,000 to 450,000 ounces.

Goldcorp anticipates a 2013 start of production at its Cerro Negro mine in Argentina, Jeannes said. The company expects to obtain permits to start plant construction during the current quarter.

Production at two more mines is expected to begin in 2014 – Eleonore in Quebec and Cochenour in the Red Lake area of Ontario.

Eleonore is projected to produce more than 600,000 ounces annually from underground. “Technically, we’re just building the exploration shaft and exploration decline, but we expect to receive permits to start plant construction this quarter,” Jeannes said.

Goldcorp is widening and deepening an existing shaft at the old Cochenour mine, as well as driving a drift, or underground tunnel, to the Red Lake mine. “The beauty of Cochenour is that we don’t need to build a new mill, because we already have mill capacity at Red Lake,” Jeannes said. “The Campbell mill will take the ore from Cochenour.”

No ‘Material Effect’ Anticipated From Argentine Decree

The Goldcorp CEO said the company anticipates little impact from a recent decree from the Argentine government requiring energy and mining companies to keep export revenue in the country.

“The reason for that is for the next couple of years, as we’re building Cerro Negro, we’re bringing dollars into Argentina anyway,” Jeannes said. “So the obligation to repatriate funds is not going to change what we’re already doing – bringing funds into the country.

“Beyond that point, when we start producing net profits from Cerro Negro, the impact will be that we are required to repatriate the proceeds from sale of our product and pay a 0.6% transaction fee when we do that. And then when we declare a dividend and move those funds back off shore and out of Argentina, there is another 0.6% transaction fee.”

The impact effectively amounts to a 1.2% tax or increased cost of doing business in Argentina. “That is not material to our company,” Jeannes said.

Likewise, he does not see this as a major headache industry-wide.

“I don’t think this is a change that is material enough to modify investment plans in Argentina by the industry as a whole,” he said.

By Allen Sykora of Kitco News; asykora@kitco.com

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Chuck Jeannes
Goldcorp President and CEO Chuck Jeannes: "We’re very busy building mines."