TORONTO (Reuters) - Goldcorp Inc (G.TO), Canada's second largest gold producer, booked a lower-than-expected drop in adjusted quarterly profit on Thursday and said improved performance at two key mines positioned it for a strong year.
Goldcorp, which in January slashed its 2013 production forecast and increased development costs at growth projects, said fourth-quarter output benefited from a strong performance at its Penasquito gold mine in Mexico and its Red Lake gold mine in Canada. Both mines had struggled with operational issues earlier in 2012.
The Vancouver-based miner is pushing ahead with three major new mines, a different approach to that of its main rival, Barrick Gold Corp (ABX.TO), which on Thursday booked a multi-billion dollar charge on a growth project and said it has no immediate plans to build any more mines.
Net earnings were $504 million, or 62 cents a share, in the quarter ended December 31, below $405 million, or 50 cents a share, in the year-ago period.
Adjusted to remove one-time items, profit fell to $465 million, or 57 cents a share as costs rose and sales shrank, but the result was still ahead of the average analyst estimate of 54 cents a share, according to Thomson Reuters I/B/E/S.
Goldcorp is planning some $2.8 billion in capital spending in 2013, with about 60 percent of that earmarked for development projects.
"The growth projects continue to advance as expected," Goldcorp chief executive Chuck Jeannes told Reuters. "And I'm very excited about the real growth in cash flow and financial metrics that that will bring us over the coming several years."
The largest investment will be at the Cerro Negro project in Argentina, where capital costs are up nearly 70 percent from a previous company estimate.
Jeannes said he is confident in the update to capital costs the company put out in January, but noted that cost inflation continues to be a concern in the mining industry.
The cost of building mines has skyrocketed in recent years, as soaring metal prices prompted miners to rapidly boost output, leading to a crunch in labor, professional services and building materials.
With capital costs soaring, investors are now demanding companies return more cash to shareholders instead of wasting money on bloated construction budgets.
Goldcorp's fourth quarter gold production rose to 700,400 ounces, up from 687,900 ounces. Sales fell to 645,100 ounces, down from 685,000 ounces, on the timing of shipments, leading to a 5 percent decline in revenue to $1.4 billion.
Cash costs rose 17 percent to $621 an ounce, while the realized gold price inched up just 2 percent to $1,692 an ounce.
Goldcorp, which owns mines throughout the Americas, plans to produce some 2.55 million and 2.80 million ounces in 2013, with cash costs in the range of $700-$750 per ounce. The company hopes to boost output by 70 percent over the next five years.