Goldcorp slashes dividend 60% despite strong Q2 performance
TORONTO (miningweekly.com) – The world’s largest gold miner by market capitalisation Goldcorp on Thursday said it would cut its monthly dividend a share by 60% to $0.02, effective from August 1, despite more than doubling its second-quarter profit.
The TSX- and NYSE-listed miner, which produced gold, silver, copper, lead and zinc from its mines and projects in Canada, the US, Mexico, and Central and South America, had taken several actions to fortify the company’s already strong financial liquidity position in dealing with a falling gold price.
“The recent sale of our 26% interest in Tahoe Resources, the $1-billion expansion of our credit facility and the dividend reduction ensure the company has the financial flexibility to succeed in a volatile gold market,” president and CEO Chuck Jeannes commented.
The company generated free cash flow of $174-million before dividends and $50-million after dividends were paid in the three months ended June.
Goldcorp reported net earnings attributable to shareholders of $392-million, or $0.47 a share, in the quarter, compared with net earnings of $181-million, or $0.22 a share, for the second quarter of 2014.
After removing special items, the company reported an adjusted profit of $65-million, or $0.08 a share, compared with adjusted net earnings of $164-million, or $0.20 a share, a year earlier. The decrease in adjusted net earnings was the result of a lower realised margin on gold and by-product metal sales, owing to lower realised prices, higher production costs associated with the slower ramp-up at Éléonore, in James Bay, Canada, and higher depreciation and depletion expenses.
However, Goldcorp's earnings still beat analyst forecasts by $0.02 a share.
The company reported record second-quarter gold output of 908 000 oz, compared with 648 700 oz in the same period a year earlier.
Higher gold grades at Peñasquito, in Mexico, and a continued strong ramp-up at one of the company’s newest mines Cerro Negro, in Argentina, drove record quarterly gold output and more than offset the slower-than-planned ramp-up at Éléonore. The company’s continued focus on cost efficiency and productivity enhancements along with favourable currency effects continued to push costs lower.
Second-quarter gold sales were 903 000 oz, compared with sales of 639 500 oz, while silver output was 10.4-million ounces compared with nine-million ounces in the previous year's second quarter. The average realised gold price fell 8% year-on-year to $1 189/oz, compounded by lower realised prices for all of its other products.
Goldcorp’s revenue rose only 18% to $1.3-billion.
All-in sustaining costs (AISC) were $846/oz of gold, lower compared with $852/oz in the second quarter of 2014.
Goldcorp expected to continue with its strong performance in the second half of the year, guiding to trend toward the high end of the current full-year range of between 3.3-million ounces and 3.6-million ounces of gold. Further, Goldcorp had also improved its AISC guidance to between $850/oz and $900/oz of gold.
The gold price was trading nearly 0.5% lower on Thursday at $1 088.10/oz, with some analysts forecasting a precipitous price contraction as global economic recovery was starting to gain traction.
The stock had taken a beating since the start of the year, shedding 31.6% in value. On Thursday afternoon, the NYSE-listed stock traded 2.02% lower at $12.62 apiece.
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