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Market: TSX, NYSE
Sector: Gold Mining
Epic: TSX:G
News: Latest news
Web Site: Goldcorp
Other Articles: 18-02-201010-02-201021-01-2010

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Goldcorp

Goldcorp

Goldcorp is one of the world's largest gold mining companies employing more than 9,000 people worldwide. Goldcorp has 16 operations and development projects focused throughout the Americas with over 70% of reserves in NAFTA countries.  

Thursday, January 21, 2010

Goldcorp CEO believes combination of new discoveries and management of current assets key to future success

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By Geoff Candy, Mineweb.com

While growth is the single most important factor in creating and sustaining long term shareholder value according to Goldcorp CEO, Chuck Jeannes, he adds that "The problem" facing the company currently is, "how do you prevent Goldcorp from becoming so big that it is almost impossible to find enough new projects to sustain production levels?"

Speaking at the AME BC Exploration Roundup, Jeannes said that this problem is one that gets discussed at length and, with plans to grow production from its current 2.4m oz to 3.8m oz by 2014, it is a question that is only going to get more relevant.

According to Jeannes, the way to do this is not only to discover new reserves, although this is of crucial importance, but also one needs to balance the discovery of new projects with the management of the existing portfolio.

"At the same time that we are adding high quality new projects we also have to be look at disposing those assets that are no longer core. We will continue to look to manage the portfolio to ensure we are adding value rather than just ounces."

In order to do this, he says, the first thing to think of is how to replace one's existing reserves, something which he says, Goldcorp has been rather good at - primarily because it has been able to extend the life of a number of its existing projects.

"Adding ounces to existing projects may not be as sexy as greenfield exploration but, it is crucial to long-term, sustainable growth. If you can add ounces to a project where you have much of the infrastructure in place already it is a great deal more cost effective and quicker, he says.

He adds that in order to do this the company has to invest and be willing to spend in both dollar and people terms. And, it is important to have good people at your existing sites rather than just out exploring for new projects.

In terms of finding new projects, Jeannes says he believes that one should be flexible enough to look for both acquisitions and greenfield opportunities.

"You have to have an appropriate mix of exploration and acquisition to be sustainable, there are examples of companies doing only one or the other that have just not survived. I think the right mix is important, but even more so, you need to be able to move from one to the other when opportunities present themselves, because they seldom fit your plan completely."

And, he adds, if you find an opportunity that fits your requirements, you have to be able to move aggresively to ensure you secure it because such opportunities do not come around all the time.

From Goldcorp's point of view, Jeannes was at pains to point out that the group is currently well poised, saying it should replace its reserves for the 2009 year and is well set to grow production at a number of its operations including Penasquito and Red Lake.

But, he adds, going forward the group should not be afraid to add some base metals to the portfolio if the project makes sense.

 "It could be kept below 30% where it is manageable, but one of the ways to look to do grow out production is to supplement with base metals.

"We have historically made great cashflows from copper in Argentina and, he points out that the group has contracted to take on a pretty healthy chunk of copper in the El Morro project.

"Such income would lead to a jump in net asset value, which turns into increased NAV per share and that would ultimately be reflected in the share price.

Asked about the El Morro project and the lawsuit surrounding it, he admitted that he couldn't say too much but added, "We are pretty confident we have done things in the right way, in our idea, we believe that New Gold had the right to maximize their value for shareholders. And, if you look at the intention of the parties and if you look at custom in the industry we are going to be surprised to find that such rights of first refusal are only granted if you have the cash in your pocket."

In closing, Jeannes said that Goldcorp is well poised to meet its production goals, it has a good pipeline of early projects and solid existing projects. But, he said the future of the gold industry is down to the explorers and, urged those in the room to continue to seek out new projects and, couldn't help himself when he said, "If you find anything let us know and we will be happy to work something out and, if we do set up a joint venture, I promise if you try to exercise the right of first refusal we will let you."

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