Goldcorp Inc. (GG, Financial) released its operating and financial results for the third quarter of 2017 after market close on Oct. 25.
The Canadian gold producer posted earnings per share of 13 cents, or $111 million, a substantial increase from EPS of seven cents, or $59 million, in the year-ago quarter. The hefty 88% increase in net income was due to higher earnings from its Peñasquito asset, a higher recovery from its income tax and the impact of “the company’s initiative to realize $250 million of sustainable annual efficiencies."
Due to lower sales volumes and average prices of gold and silver, the company reported $866 million in revenue, which beat expectations of $854.03 million but declined 5.4% from the prior-year quarter.
During the quarter, the company produced 606,000 ounces of gold, an 11.7% decrease year over year, at an all-in sustaining cost (AISC) of $827 per ounce of gold, up from an AISC of $812 per ounce in the comparable quarter of 2016.
The miner produced 633,000 ounces of gold during the quarter, an 11.5% year-over-year decrease.
From the sale of one ounce of gold, the company realized an average price of $1,287 for the quarter. The average realized gold price per ounce was $1,333 in the third quarter of 2016.
When considering the attributable share of revenues from associates of the company, gold sales make up 90% of Goldcorp's total quarterly revenue.
But when this metric is excluded, gold production and sales accounted for 72.5% of Goldcorp’s total third-quarter revenue. Silver accounted for 10.4% and other base metals accounted for 17.1%.
President and CEO David Garofalo commented on the company's performance:
"We have delivered another quarter of on target gold production at low costs, led by strong operating performance at Peñasquito and Cerro Negro. The success of our efficiency program is evident in continued low operating costs and an expanded margin per ounce of gold produced.
With the optimization of our portfolio now complete, we have a full and robust pipeline of development projects poised to deliver value growth in the short, medium and long-term."
Adjusted cash flow from operations declined year over year. The company generated adjusted cash flow of $308 million from operations, down from $401 million in the prior-year quarter. The company spent $291 million on capital expenditures, of which 49% was invested in sustaining capital and the remaining 51% was invested in growth.
Goldcorp closed the quarter with $155 million in cash on hand and securities. The miner also has a $3 billion line of available credit, while total debt amounted to $2.083 billion.
For fiscal 2017, the miner guides production between 2.735 million and 2.625 million ounces of gold. This is unchanged from the previous guidance. The AISC is expected to be $825 per ounce of gold sold.
On Oct. 26, the Canadian miner announced a 26% increase in its mineral resources of proven and probable gold reserves to 53.5 million ounces.
The company says it is on track in regard to its 20/20/20 growth strategy, which should deliver an improved average gold grade for its reserves. The latter will also contribute to the enhancement of the company's gold margin yield.
Goldcorp is currently trading around $12.92 per share with a market capitalization of $11.25 billion, a price-book (P/B) ratio of 0.77, a price-sales (P/S) ratio of 2.95, a price-earnings (P/E) ratio of 22.42 and an EV/Ebitda ratio of 8.60.
The analysts' average target price per share is $16.99, which represents a 31.5% upside from the current market value.
The current recommendation rating is 2.5 out of 5.
Disclosure: I do not have any positions in Goldcorp Inc.
