Goldcorp writes down $2.3-bn on Argentine mine

20 February 2015

Just a day after the world's biggest gold producer Canada's Barrick Gold Corp took a hefty impairment charge of $2.8 billion, another gold mining giant Goldcorp Inc said yesterday that it is writing down $2.3 billion in the fourth quarter on its Argentine operations.

Vancouver-based Goldcorp's Cerro Negro mining operation in Argentina has been affected by the political and economic issues in the country as well as declining exploration activities as the gold mining industry is struggling with weak prices for the precious metal.

Gold prices have dived from their 2011 highs of around $1900 an ounce to $1200 level.

For the December quarter, the company reported a net loss of $2.4 billion, up from $1.1 billion loss reported a year ago.

Adjusted profit was $55 million, which was well below analysts' estimate of around $94 million.

The company also slashed its reserves by about 8 per cent as a result of inadequate exploration in its Cerro Negro mine.

Nevertheless, the miner reported record production of 2.87 million ounces in 2014.

''Expected production growth of an additional 20 per cent in 2015, coupled with rapidly declining capital expenditures provides a clear path to achieving significant free cash flow this year,'' Goldcorp chief executive Chuck Jeannes said.

Despite the overall loss, Goldcorp is in a comparatively better financial position than its peers due to the company's lower debt profile and stronger balance sheet.

Recently, Goldcorp struck deal to buy junior miner Probe Mines for $526 million, a demonstration of its financial position and interest in acquisitions.

Toronto-based Barrick Gold's $2.85-billion impairment is primarily on account of the $930 million on its Lumwana copper mine in Zambia and $778 million on its Cerro Casale project in Chile, one of the world's largest undeveloped gold-copper deposits, and some other assets.

The Lumwana operation was shut down due to a royalty hike by the government.

The miner is on the course of implementing a leaner model which gives more autonomy to its units and more powers to its managers, besides planning to reduce its headquarter jobs by about a half.

The company plans to reduce its debt by at least $3 billion this year through the sale of some of its Asia-Pacific assets in order to improve its balance sheet.

The miner plans to sell its large Porgera mine in Papua New Guinea and also the much smaller Cowal mine in Australia.

''Prudent financial management was a bedrock principle of the company. Our current level of debt is inconsistent with that principle and the inconsistency is reflected in the company's share price,'' Barrick said.

Excluding the writedowns, Barrick's adjusted earnings was $174 million, which was above analysts' forecasts.

The company targets 6.2-6.6 million ounces of gold mining this year and said that production will be maintained above the 6 million ounce mark in the subsequent two years.

Its prolific Pascua - Lama project in the Chile-Argentine border is suspended due to environmental issues.

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