Goldcorp slashes dividend 60%
CEO optimistic despite rough gold market
Goldcorp Inc. has slashed its dividend 60 per cent to maintain financial strength in a brutal gold market.
The Vancouver-based mining giant announced on Thursday that the monthly payout has been cut to US2 cents a share, down from US5 cents. The move will save the company almost US$300 million a year.
The gold price has been in a terrible slump in July, dropping below $1,100 (all figures U.S.) an ounce for the first time since early 2010. Gold miners are scrambling to find ways to cut costs and reduce spending, and there has been speculation among investors that Goldcorp could reduce, or even eliminate, the dividend. The company decided to cut the dividend, even though it has a strong balance sheet compared with many of its peers.
Goldcorp also reported solid second-quarter earnings on Thursday. Adjusted net income came in at $65 million, or eight cents a share, which was a penny better than the average analyst estimate.
Gold production jumped 40 per cent year-over-year to 908,000 ounces, as the new Cerro Negro mine in Argentina ramped up production and the Penasquito mine in Mexico performed well. All-in sustaining costs were $846 an ounce, a slight reduction from $852 in the second quarter of 2014. Goldcorp also reduced its all-in sustaining cost guidance for the year to a range of $850 to $900 an ounce (compared with a prior range of $875 to $950).
“Goldcorp’s excellent secondquarter results underscore the growing strength and quality of our mine portfolio,” chief executive Chuck Jeannes said in a statement.
“Higher gold grades at Penasquito and a continued strong ramp-up at Cerro Negro drove record quarterly gold production and more than offset the slower-than-planned ramp-up at Eleonore (in Quebec).”
Eleonore has been a disappointment so far, as the company has faced a number of startup problems that are taking time to overcome. Goldcorp reduced its expectations for the mine this year, saying production will be at or below the low end of the previous guidance range of 290,000 to 330,000 ounces.
In addition to the dividend cut, Goldcorp has taken a couple of other measures in recent weeks to improve its liquidity: it sold its stake in Tahoe Resources Inc. for nearly $1 billion, and expanded a credit facility by $1 billion.
Jeannes stressed that these moves ensure Goldcorp can succeed in a volatile gold market.