UPDATE 2-Goldcorp profit drops more sharply than expected

Thu May 2, 2013 11:00am EDT

* Earnings of $0.31 per share before items miss Wall Street view

* Revenue down 16 percent at $1 billion

* Spending reviewed; company pushes ahead on capital projects

* Shares down 2.1 percent in Toronto

By Julie Gordon

TORONTO, May 2 (Reuters) - Miner Goldcorp Inc said on Thursday that its first-quarter profit dropped by a steeper-than-expected 35 percent as lower metal prices and higher costs outweighed a boost in gold sales.

Shares of the world's largest gold miner by market capitalization fell 2.1 percent to C$28.46 on the Toronto Stock Exchange.

Even though gold prices have plunged recently, the Vancouver-based miner said it was still committed to spending $2.8 billion this year as it brings three new mines into production through 2015.

With those new mines in Canada and Argentina, Goldcorp plans to boost its output by about 50 percent by 2017. That bucks a trend among many of the top gold miners of scrapping new projects to return cash to shareholders.

"Our shareholders can count on continued discipline as we advance our growth strategy and focus on execution and prudent cost management at our mines and projects," Chief Executive Officer Chuck Jeannes said in a statement.

While long-term fundamentals should support a strong gold price, Jeannes said the company had put a "contingency plan" in place to defer spending should market conditions warrant.

The price of gold fell sharply last month to a two-year low of about $1,320 an ounce, but has since recovered to about $1,460. That is still well below Goldcorp's average realized gold price of $1,622 in the first quarter.

With prices volatile, miners are under pressure to bring down operating and capital costs, improve margins and defer nonessential spending.

Barrick Gold Corp, Goldcorp's top Canadian rival, announced a 10 percent cut to its capital spending last week and said it might suspend development of the Pascua-Lama mine it is building on the border of Chile and Argentina.

Top U.S. gold miner Newmont Mining Corp said it was cutting its capital spending for 2013 by about 5 percent as it reported a sharp drop in first-quarter earnings on Monday.

PRODUCTION UP

Goldcorp's production jumped 17 percent to 614,600 ounces in the first quarter, while gold sales were up 9 percent at 595,100 ounces. But lower gold, silver and copper prices weighed on results.

Cash costs on a by-product basis rose sharply to $565 an ounce from $251 on lower by-product metal sales.

All-in cash costs, a new measure adopted by producers to reflect the true cost of producing an ounce of gold, were $1,135 an ounce, above Goldcorp's 2013 target of $1,000 to $1,100.

Goldcorp expects its operating costs to come down throughout the year, as it moves into higher grades at two of its mines and as production ramps up at Pueblo Viejo, its joint venture with Barrick in the Dominican Republic.

The company said a power permit for its Cerro Negro development project in Argentina had come later than expected. That could delay first gold from the mine to the first quarter of 2014 from an earlier target of the end of 2013.

Goldcorp is also building two new projects in Canada. Éléonore is scheduled to start-up in 2014 and Cochenour, in 2015.

At its Penasquito mine in Mexico, the company said it had identified a new source of water that may supply enough to ramp the plant up to full capacity. A water strategy study, due in the first half of 2013, is under way.

First-quarter net income fell to $309 million, or 33 cents a share, from $479 million, or 51 cents a share, a year earlier.

Excluding one-time items, earnings were 31 cents a share. Analysts on average had expected 39 cents, according to Thomson Reuters I/B/E/S.

Revenue fell 16 percent to $1 billion, below Wall Street expectations of $1.34 billion.

Goldcorp maintained its production outlook for 2013.

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