Goldcorp Gets Going Once More in Mexico

Gold miner continues fixing its problems as it moves beyond failed acquisition attempt.

May 7, 2014 at 1:00PM

Header

Los Filos project, Mexico. Source: Goldcorp

A few more of these kinds of settlements and Goldcorp (NYSE:GG) will be an ever bigger gold producing juggernaut than it already is. The gold miner announced yesterday that it had reached an accord with the Carrizalillo Ejido at its Los Filos project in Mexico, and all operations are back on track.

Coming as it does after Goldcorp won approval for its El Morro mine to move forward in Chile, but also after losing out on acquiring the Canadian Malartic mine in Quebec, this gives the appearance that the miner is focusing its attention once more on the birds it has in hand instead of those that are still in the bush. With gold pricing still relatively weak that's a smart move, since Goldcorp can't afford to allow too many projects to fly off the rails.

The Los Filos mine in Mexico's Guerrero state suspended operations last month following unsuccessful negotiations with the local ejido, who protested that the project was causing contaminated water supplies and shortages and was responsible for premature births and malformations in newborns. After the ejido went on strike to force Goldcorp to recognize their concerns operations were suspended, and the two sides have been in negotiations since.

The mine produced 94,000 ounces of gold in the fourth quarter of 2013, a 1.3% increase from the year ago period and 28% more than Goldcorp produced in the third quarter. Los Filos produced 332,400 ounces across all of 2013 while directly employing more than 2,600 people from the surrounding communities, with an estimated 10,000 additional jobs created as a result of the mine's presence in the region.

As of the end of last year Los Filos had proven and probable reserves of 7.95 million ounces of gold and 54.52 million ounces of silver, which Goldcorp estimated would allow it to produce 330,000 ounces to 345,000 ounces this year. As a result of the closure, though, Goldcorp says it will now likely come in at the low end of that range, but still reiterated its expectation that it will produce between 2.95 million and 3.10 million ounces of gold in 2014.

Goldcorp's El Morro copper and gold mine holds an estimated 8.4 million ounces of gold and 6.1 billion pounds of copper, of which the miner has a 70% share. It's been an on again, off again project because of opposition from indigenous groups, and just the other day got the green light to begin work once more. That one still has a ways to go, though, as the court decision giving Goldcorp permission to move forward will likely be appealed to the supreme court.

Its massive Penasquito mine was also expected to become Mexico's largest open-pit mine, producing as much as 390,000 ounces of gold last year along with 21 million ounces of silver, 305 million pounds of zinc, and 160 million pounds of lead, but it ran into numerous roadblocks from the local Cerro Gordo Ejido, who successfully stripped Goldcorp of its lease only to have the decision overturned. The miner has since been in negotiations to settle the dispute.

While Goldcorp's assets are generally located in politically stable countries, even their policies can cause planning to go awry, such as the windfall tax Mexico imposed on precious metals miners last year. 40% of its proven and probable reserves are in Mexico, which has the potential to become the most expensive country in which it does business. 

With Los Filos up and running again, however, it will have a solid producer operational that offers the potential for significant new reserves. Although the attempt to acquire the Canadian Malartic mine was an effort to give it additional quality assets in an even more stable region, tending to the base it's already established, ironing out the differences with the locals where there is contention, and keeping its costs low will go a long way toward ensuring Goldcorp remains a premiere gold miner.

Gold is a hedge against big banking, but it has a $20.8 trillion secret up its sleeve
There's a brand-new company that's revolutionizing banking, and is poised to kill the hated traditional brick-and-mortar banks. That's bad for them, but great for investors. And amazingly, despite its rapid growth, this company is still flying under the radar of Wall Street. To learn about about this company, click here to access our new special free report.

Rich Duprey has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers