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Goldcorp's (GG) Cerro Negro Mine Has First Gold Production

Zacks Equity Research

Goldcorp’s ( GG) Cerro Negro mine in Argentina’s Santa Cruz province has achieved first gold production. The gold mine poured the first gold on schedule and within the company’s capital cost guidance range. It is one of Goldcorp’s significant development projects.


The initial dore bar weighing roughly 100 kilograms was produced at the high-grade mine containing an estimated 317 ounces of gold. The milestone was reached safely amid a run of more than 4.1 million man-hours without a lost-time accident. 


Goldcorp’s shares rose roughly 3.5% last Friday to close at $28.20. The stock is up around 32% so far this year. 


The Cerro Negro mine, which Goldcorp acquired in 2010, remains on track for commercial production by the end of 2014. Goldcorp expects the mine to produce between 130,000 and 180,000 ounces of gold this year. Moreover, initial capital costs for the mine have been cut by $100 million and are now forecast to be between $1.6 billion and $1.7 billion. 


Cerro Negro is expected to significantly contribute to Goldcorp's performance in the years ahead. Proven and probable gold mineral reserves for the mine were 5.74 million ounces as of Dec 31, 2013.


Goldcorp’s growth drivers lie in its vast array of development and exploration projects. It has an impressive lineup of such projects.


Apart from Cerro Negro, Goldcorp’s other major development projects include the Eleonore and Cochenour projects in Canada. Eleonore is expected to start production in late 2014 while first gold production from Cochenour is expected to start in fourth-quarter 2014. With these projects at hand, Goldcorp is well placed to deliver on its target of achieving 50% production growth over the next two years.


Goldcorp has the highest leverage to spot gold prices due to its completely unhedged position. It should benefit from facility expansion, cost containment and productivity improvement measures.


Goldcorp is a Zacks Rank #3 (Hold) stock.


Other gold mining companies having favorable Zacks Rank include AngloGold Ashanti Ltd. ( AU), Sibanye Gold Ltd. ( SBGL) and Timmins Gold Corp. ( TGD). All of them hold a Zacks Rank #1 (Strong Buy).

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