What happened?
Building on the 15% gain the company enjoyed through 2016, Goldcorp (GG), an industry leader in gold mining, celebrated an auspicious start to the new year, as shares rose 15% in January.
So what?
Demonstrating its strategy of divesting non-core assets in pursuit of increasing its net asset value per share, Goldcorp announced the sale of two mines in January. First, the company reported its entrance into an agreement to sell its 100% interest in the Cerro Blanco gold-silver project in Guatemala. Goldcorp will receive consideration of $18 million in cash at closing and a 1% net smelter return royalty on production; moreover, the company will receive an additional $15 million in cash when commercial production begins at Cerro Blanco.
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Besides the sale of Cerro Blanco, the company announced its intent to sell its Los Filos mine in Mexico for consideration of $438 million. Among other things, Goldcorp will receive $279 million in cash and tax receivables of $88 million. Like Cerro Blanco, the sale of the Los Filos mine is expected to occur in the first quarter of 2017.
In addition to the news of the company's execution of its strategy to streamline its portfolio, Goldcorp investors appreciated management's report of preliminary gold production results for the fourth quarter of 2016 and the whole fiscal year. Meeting its guidance, the company expects to report gold production of 761,000 ounces for Q4 and 2.87 million ounces for fiscal 2016. The company also expects to report all-in sustaining costs (AISC) for fiscal 2016 at the low end of its guidance range of $850 to $925 per gold ounce.
Looking at the year ahead, management forecast gold production -- accounting for the sale of the Los Filos mine -- to total between and 2.38 million and 2.625 million ounces for fiscal 2017; AISC are expected to total between $810 and $893 per gold ounce.
Now what?
Should Goldcorp continue to execute its strategy of optimizing its portfolio, investors can expect to see more divestitures in the near future. At the same time, the company is pursuing expansion projects at its core mines, which, according to management, will help it achieve its five-year targets: an approximately 20% increase in gold production to 3 million ounces, an approximately 20% increase in gold reserves to 50 million ounces, and an approximately 20% decrease in AISC to $700 per gold ounce.
According to management, the company's future success doesn't solely rely on the expansion projects; the gold production estimate of 3 million ounces doesn't include the Cochenour and HG Young projects in the Red Lake Camp, the Century project in the Porcupine Camp, and the NuevaUnion project in Chile.
