Goldcorp (GG, Financial) posted an update July 4 on the Materials Handling Project at Musselwhite mine which is located in the northern part of Ontario, Canada.
The Canadian producer is engaged in the upgrade of the infrastructure for the material handling at the Canadian mine.
This substantial improvement in the way the miner handles materials in the underground mine promises an increase in the throughput levels of minerals mined at Musselwhite as well as corrections of inefficiencies and abatement of operating costs.
The construction of a raisebore winze will economically and efficiently improve the material handling infrastructure at 1,200 meters level and beyond.
Thanks to the raisebore winze the ore will be hoisted from a level of 1,250 meters to the exploration ramp level, which is located at a level of 250 meters. The ore mined then will be trucked to a level of 400 meters in the underground mine, where there is the underground crusher and the conveyor for the transportation of the crushed mineral to the surface.
Once the raisebore winze is running at its full capacity rate, it is estimated that 5,000 tonnes of ore per day will be hoisted to the upper 250 meters level. This equals an average of 4,300 tonnes of ore per day.
Since an increased number of 45 tonnes haul trucks will be – otherwise – required to cover a one-way haulage distance of 7.5 kilometers that connects the 1,250 meters level in the underground with the 400 meters level (where the underground crusher and the conveyor are) creating therefore a congestion of trucks on the underground road, the construction of a raisebore winze will require a lower usage of trucks – to nine from 17 – with significant benefits on the mine and company’s economics in terms of reduced operating costs.
The construction of a vertical opening that will connect the deepest level of the ore body with the exploration ramp level, will require less ventilation in the mine and will also reduce the quantity of energy that the miner will otherwise employ to run the haul trucks and the ventilation system.
To improve the materials handling system at Musselwhite, Goldcorp committed itself to a $90 million project. Completion is expected by the end of the first quarter of fiscal 2019.
From this project, the Canadian producer expects a 20% increase in the gold production at Musselwhite mine and a 10% decrease in the operating costs over the entire life of the mine. This is in line with Goldcorp’s strategy to achieve a 20% increase in the production of gold and gold reserves plus a 20% decrease in the all-in sustaining costs (AISC) in four years’ time.
The production of gold from Musselwhite mine accounts for approximately 9% of Goldcorp’s total production and revenue for 7% to 7.5% of the total.
In full fiscal 2016, at Musselwhite mine Goldcorp produced 261,000 ounces of gold and sold 260,000 ounces of the yellow metal that according to an average realized price of gold of $1,234 per ounce, led to revenue coming in at $320.84 million. Goldcorp’s full fiscal 2016 total revenue was $4.374 billion. The AISC per ounce of metal at the Canadian mine was $678 versus a company’s overall AISC of $856 per ounce.
Musselwhite closed the first quarter of fiscal 2017 with a volume of 54,000 ounces of gold produced (8.2% of the company’s total) and 56,000 ounces sold (8.7% of the company’s total) at an AISC of $871 per ounce of metal (+8% from the company’s overall AISC of $800 per ounce, reflecting more costs associated with the materials handling system project at Musselwhite). Revenue from Musselwhite came in at $69 million (7.8% of the company’s total on a GAAP basis and 6.6% of the company’s total adjusted figure).
Goldcorp is trading at $12.85 per share, with a market capitalization of $10.31 billion, a price-book (P/B) ratio of 0.81, a price-sales (P/S) ratio of 2.99 and an EV to EBITDA ratio of 9.26.
The Canadian miner held 41.8 million ounces of gold reserves as of Dec. 31, 2016, for an EVO metric of about $319.86. This is Goldcorp’s enterprise value per ounce nestled in the company’s gold reserves.
Disclosure: I have no positions in Goldcorp.
