| Goldcorp Inc. is finishing construction and anticipates that it will declare commercial production at its Penasquito mine in Mexico soon, the company’s chief executive said Wednesday.  | | Chuck Jeannes | The nearly $1.7 billion project is on schedule and within budget, said Chuck Jeannes, president and chief executive officer of the Vancouver-based company. He described the project as the “key driver” of a current five-year plan by Goldcorp (TSX: G, NYSE: GG) to increase output by 50% or more. “We’re just completing construction and, hopefully within just a matter of days, of declaring commercial production at Penasquito,” said Jeannes said. Under Canadian accounting rules, proceeds from commercial production are included as revenue on a company’s income statement. Prior to this, any start-up production is used to defray the costs of building a mine. Expectations are for the operation, which will be the largest open-pit mine in Mexico, to produce around 180,000 ounces of gold this year. For the life of the mine, Penasquito is expected to average around a half million ounces of gold annually—with more in some years--along with some 30 million ounces of silver, plus lead and zinc. “Like most mines, it takes a while to ramp up to full production,” Jeannes said. “So over the next five years, we’ll see production going from what we guided this year—at 180,000 ounces—to nearly 800,000 ounces in 2014.” 
The processing plant at Goldcorp’s Pensaquito mine As of Dec. 31, gold reserves totaled 17.8 million ounces and silver reserves totaled 1.07 billion ounces. The mine’s expected life is 22 years. Including contractors and construction personnel, as many as 4,500 people have worked at the mine and 2,000 are still working. Once the mine is up and running, the work force will be around 1,500, Jeannes said. Goldcorp’s Web site says the company anticipates increasing its gold output by 57% during a five-year period through 2014. “It is based entirely on projects that are already in construction or nearing production. So it’s a very reasonable and achievable growth profile,” Jeannes said.
Another expansion project is taking place near the Red Lake complex in Ontario. Goldcorp anticipates finishing a study yet this year on reopening and expanding the Cochenour mine a few miles away.
“We don’t have final numbers. We’ll be providing those in a scoping study that is due yet before the end of the year,” Jeannes said. “But we’re looking at 300,000 or so ounces a year from Cochenour to supplement Red Lake production.” Red Lake is expected to provide some 675,000 ounces this year. Plans call for production at Couchenour to begin in 2014. Even while the study is under way, Goldcorp is already developing the infrastructure for Couchenour, Jeannes said. This includes rehabilitating and increasing the size of the old Cochenour shaft that has not been operated since the late 1970s, as well as developing a five-kilometer underground tunnel to the Red Lake mine. Ore will be moved underground and then brought above ground at Red Lake. The other major project under construction is Pueblo Viejo, located in the Dominican Republic, with reserves put at 23.7 million ounces. Goldcorp is a partner with Barrick Gold, which has a 60% interest, in the $3 billion project. Gold output is expected to begin in late 2011. Goldcorp’s Web site says the company’s 40% share of estimated annual gold production in the mine’s first five years is 415,000 to 450,000 ounces. Meanwhile, Goldcorp is working on other projects not included in its five-year plan. This includes Elenore in Quebec, for which an updated feasibility study is expected by the end of the year. “We’re already going forward with the first shaft development there,” Jeannes said. “But we don’t expect to see first production until 2015.” Also, Goldcorp earlier this year bought a 70% interest in the El Morro copper/gold project in Chile. The company is updating a feasibility study, working to secure permits, and anticipates production will start in 2015. Mining Industry Could Face Further Taxation Efforts One of the big issues facing the mining industry will be potential attempts by governments around the world to extract higher taxes and royalties from producers, Jeannes said. Australia attempted to push through a so-called “super tax” this summer. “There is the likelihood we’ll see more of that around the world,” Jeannes said. This especially is the case during a global economic slowdown when many governments are running up spending deficits and looking for new sources of revenue. “We as an industry…tend to stick up above the crowd in terms of the success we’re having financially right now,” Jeannes said. “So we’re an easy target. That’s a trend that is certainly unfortunate, but one that we have to pay attention to.” |