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Goldcorp Inc. today reported record results for the year 1994:
Earnings for 1994 were $30.6 million, or $1.11 per share ($1.07 per share fully diluted) on revenues of $140.9 million. In 1993, earnings were $13.9 million, or 80 cents per share, on revenues of $119.2 million.
Earnings for the fourth quarter of 1994 were $1.9 million, or six cents per share, on revenues of $34.3 million. For the same period in 1993, earnings were $3.3 million, or 19 cents per share, on revenues of $32.5 million.
Cash flow from operations in 1994 was $35.6 million, or $1.29 per share ($1.24 per share fully diluted). In 1993, cash flow from operations was $25.7 million, or $1.47 per share. For the fourth quarter of 1994, cash flow from operations was $5.7 million, or 18 cents per share, compared to $8.6 million, or 49 cents per share, for the same period in 1993.
The 1994 results reflect the Reorganization, effective March 31, 1994, between Goldcorp and its affiliated companies, which resulted in the elimination of the minority interest in Dickenson Mines Limited and the extinguishment of the investment management agreement between Goldcorp and CSA Management Limited. The Reorganization principally involved combining the financial assets of Goldcorp with the operating assets of Dickenson and CSA's Goldcorp-related assets.
Other factors contributing to the improved results in 1994 were a 5% increase in the quantity of gold sold, a 16% increase in the realized gold price per ounce sold and a non-recurring after-tax gain of $20.2 million (70 cents per share fully diluted) realized on the sale of substantially all of the Company's investment in shares of Orvana Minerals Corporation.
Goldcorp's hedging program, conducted mainly through forward sales, enhanced revenues in 1994 and 1993. Gold sales in 1994 were 204,294 ounces at an average realized price of $545 (US$399) per ounce, compared to 194,169 ounces at an average realized price of $469 (US$364) per ounce in 1993. During 1994, the average market price for gold was $524 (US$384) per ounce, compared to $464 (US$360) per ounce in 1993. The Company intends to resume its gold hedging program at a price level it deems appropriate.
Gold Mining Operations
Operating profit in 1994 from gold mining operations increased by 45% to $19.2 million on revenues of $111.4 million, compared to $13.3 million on revenues of $91.4 million in 1993. Operating cash flow from gold mining operations (before changes in non-cash working capital) increased by 40% to $36.4 million, from $25.9 million in 1993.
Total gold production from the Red Lake Mine, the Wharf Mine and the Golden Reward Mine increased by 6% to 223,338 ounces from 211,539 ounces in 1993. Goldcorp's share of gold production in 1994 increased by 27% to 127,136 ounces from 99,981 ounces in 1993, largely due to a reduction in minority interest resulting from the Reorganization.
The average cash production cost per ounce in 1994 was $334 (US$244), compared to $312 (US$242) per ounce in 1993. Including cash production cost, royalties, severance taxes and non-cash costs, the total average cost was $436 (US$319) in 1994, compared to $404 (US$313) in 1993. Overall, the higher cash production cost at the Red Lake Mine more than offset cost reductions at the Golden Reward Mine.
The estimated total gold production from the Company's three gold mines is 202,000 ounces in 1995, of which Goldcorp's share is 117,000 ounces. The estimated average cash production cost is $312 (US$231) per ounce and average total cost is $435 (US$322) per ounce.
Red Lake Mine
In 1994, the Red Lake Mine recorded an operating profit of $4 million, compared to $4.7 million in 1993. Operating cash flow in 1994 was $5.2 million, compared to $5.4 million in 1993.
The mill throughput during 1994 was 318,000 tons of ore with an average head grade of 0.25 ounces of gold per ton and an average recovery rate of 81.4%. By comparison, in 1993, mill throughput was 335,000 tons of ore with an average head grade of 0.27 ounces of gold per ton and an average recovery rate of 80.3%. Consequently, gold production declined to 65,500 ounces in 1994 from 73,609 ounces in 1993. The cash production cost in 1994 was $444 (US$325) per ounce, compared to $386 (US$299) per ounce in 1993. The total cost in 1994, including cash production cost and non-cash costs, was $478 (US$350), compared to $413 (US$320) per ounce in 1993.
The lower throughput in 1994 resulted from the decision, early in the year, to reduce the number of stopes available for mining, in order to increase the rate of mine development. The higher level of mine development also partly contributed to the increase in unit cost in 1994. During 1994, underground development increased by 66% to 13,860 feet, from 8,360 feet in 1993, while underground diamond drilling increased by 35% to 110,000 feet, from 81,200 feet in 1993.
Stoping will continue throughout the mine, as numerous small, higher grade zones in the upper levels remain to be mined. In order to meet the longer term objectives of the mine, it is necessary to better define the ore reserve base prior to stoping. Approximately 130,000 feet of development drilling is planned over the next two years at a cost of $4 million. In addition, 15,000 feet of underground development is planned for 1995 above the 30 Level.
The Company has commenced a $6 million exploration program at the mine, which will include 200,000 feet of diamond drilling over the next two years. This program will be conducted between the 30 and 38 Levels and is the continuation of exploration drilling initiated in 1993 between the 30 and 34 Levels. Initial exploration results show strong continuity of gold bearing structures from the 30 and 34 Levels. Several good intersections have been encountered, which indicate that the mineralized structure around the 30 Level in the current mining area extends down to the 34 Level, and potentially deeper. Cross-cuts and drill stations are being developed in order to continue the drilling of mineralized zones. The Number Two Shaft, with 150 feet of vertical footage per level, provides access to these areas.
In order to facilitate this significant increase in development and exploration, the production rate is being reduced from 1,000 tons to 650 tons per day, which will result in budgeted gold output of 50,000 ounces in 1995, compared to 65,500 ounces produced in 1994. The workforce at the mine has consequently been reduced from 283 employees to 234 in February 1995. The 1995 budgeted cash production cost is $410 (US$305) per ounce and the total cost is $460 (US$340) per ounce.
The planned capital expenditures for the mine during 1995 are $8 million, comprising $2 million for equipment and $6 million for exploration and development expenditures.
Wharf Mine
In 1994, the Company recorded an operating profit of $16.3 million from the Wharf Mine, a 47% increase from $11.1 million a year earlier. The operating cash flow of $26.1 million in 1994 was 31% higher than the $19.9 million recorded in 1993.
The cash production cost of $266 (US$195) per ounce in 1994 was higher than $232 (US$180) per ounce in 1993, due to a lower grade of ore processed and a higher stripping ratio. The total cost per ounce was $395 (US$289) in 1994, compared to $357 (US$277) in 1993. During 1994, the quantity of ore processed increased to 4.4 million tons with an average grade of 0.030 ounces of gold per ton, compared to 4 million tons with an average grade of 0.033 ounces of gold per ton in 1993.
In 1995, the mine plans to process 4.3 million tons of ore, with an average grade of 0.029 ounces of gold per ton. The estimated gold production is 103,000 ounces at a cash production cost of $263 (US$195) per ounce and at a total cost of $397 (US$294) per ounce.
The 1995 planned capital expenditures include $1 million for equipment replacement, with a further $3.5 million for exploration and development.
Golden Reward Mine
In 1994, Goldcorp recorded an unexpected operating loss of $1 million from the Golden Reward Mine, compared to an operating loss of $2.5 million in 1993. The mine continued, however, to generate a positive operating cash flow in 1994, of which Goldcorp's recorded share increased significantly to $5.1 million from $0.6 million in 1993.
During the second half of 1994, shallow surface cracks appeared on the walls of East Liberty Pit. These cracks were not adverse to continued mining. However, a 100-year record rain storm in October caused additional surface cracks and exacerbated those that already existed. The occurrence of these cracks jeopardized the stability of the East Liberty Pit walls.
Mining at East Liberty Pit was discontinued and backfilling of the pit has stabilized the walls. As a consequence, permitted contained gold reserves have been reduced by approximately 170,000 ounces (Goldcorp's share was 102,000 ounces). Accordingly, Goldcorp recorded a charge of $1.8 million against its share of earnings from the Golden Reward Mine, which is attributable to its share of affected reserves.
In 1994, gold production at the Golden Reward Mine increased by 48% to 52,556 ounces, from 35,549 ounces in 1993 (Goldcorp's share of production was 31,534 ounces and 21,329 ounces, respectively). The 1994 cash production cost of $332 (US$243) per ounce was 23% lower than the $430 (US$333) per ounce in 1993. The total cost per ounce in 1994 was $491 (US$359), compared to $591 (US$458) in 1993. Cost savings from the purchase of the life-of-mine mining contract from the mining contractor in 1993 and a higher grade of ore processed resulted in higher production and a lower cost per ounce in 1994. During 1994, the quantity of ore processed increased to 1.8 million tons with an average grade of 0.040 ounces of gold per ton, compared to 1.5 million tons with an average grade of 0.033 ounces of gold per ton in 1993.
For 1995, the Golden Reward Mine is expected to break even and generate an operating cash flow at the same level as 1994, based on the gold price of US$375 per ounce. The 1995 budgeted gold production is 48,000 ounces (Goldcorp's share is 29,000 ounces) at a cash production cost of $304 (US$225) per ounce and a total cost of $521 (US$386) per ounce. The throughput planned in 1995 is 1.7 million tons of ore with an average grade of 0.038 ounces of gold per ton.
Expenditures of $4.3 million (Goldcorp's share is $2.6 million) are planned for 1995, mainly for mine development and definition drilling.
Clinton Project
The Clinton Project, adjoining the east side of the currently permitted Wharf Mine, has estimated contained gold reserves of one million ounces, all of which are amenable to open pit mining. Work on the permit applications for development of the project is expected to be completed in late 1996. The proximity of the Clinton Project to existing treatment and mining facilities will be beneficial to the future development of this deposit.
Industrial Mineral Operations
In 1994, combined revenues from Havelock Lime and Saskatchewan Minerals increased by 6% to $29.5 million from $27.8 million in 1993. Operating profit was $6.5 million in 1994, compared to $7.1 million in 1993. Operating cash flow was $8.6 million in 1994, compared to $9.1 million in 1993.
The industrial mineral operations benefitted from the weak Canadian dollar as 64% of 1994 revenues was from export sales of industrial mineral products. This favourable factor, however, was more than offset by higher operating costs, which resulted in lower operating profit and cash flow in 1994.
Sales forecasts for processed sodium sulphate and lime products for 1995 are consistent with 1994 levels.
Investment Portfolio
The strong market for gold bullion and gold related securities that began in early 1993 and ended in the first half of 1994 allowed Goldcorp the opportunity to realize substantial gains on its investments in certain gold securities, particularly during 1994.
During 1994, the Company realized pre- tax gains of $39 million ($21.7 million after tax), consisting of a gain of $36.3 million on the sale of 6,090,000 shares of Orvana Minerals Corporation and $2.7 million on the sale of other investments. In 1993, pre-tax net gains were $11.5 million.
At December 31, 1994, the Company's remaining investment portfolio in gold securities had an aggregate market value of $25.4 million, which exceeded the carrying book value by 51%, or $8.6 million. These holdings remain as available sources of additional capital for future mine expansion and joint venture opportunities.
Reserves
At December 31, 1994, the aggregate contained gold reserves at the Red Lake Mine, the Wharf Mine and the Golden Reward Mine was 3,487,000 ounces, compared to a total of 4,058,000 ounces in 1993.
At December 31, 1994, Goldcorp's share of the estimated contained gold reserves from the Red Lake Mine, the Wharf Mine and the Golden Reward Mine was 2,222,000 ounces. These reserves include permitted reserves of 1,612,000 ounces and 610,000 ounces of unpermitted reserves. A gold price of US$375 per ounce was used to calculate these reserves.
Goldcorp's share of total gold reserves at December 31, 1994 increased by 22% from 1,823,000 at December 31, 1993, principally as a result of the merger of Goldcorp and Dickenson Mines in March 1994 and the accompanying reduction in minority interests in the reserves.
Included in this news release are a summary of 1994 consolidated results, a summary of gold reserves and condensed consolidated financial statements for 1994.
For further information, please contact:
Rolando C. Francisco
Senior Vice President and
Chief Financial Officer
(416) 865-0326
Stock Symbols:
TSE ("G.A", "G.B")
ME ("G.A", "G.B")
AMEX ("GDL.A", "GDL.B")
As at December 31, 1994 As at December 31, 1993 Tons Grade Contained Tons Grade Contained of ore per ton ounces gold of ore per ton ounces gold (millions) (thousands) (millions) (thousands) Red Lake Mine Proven 1.10 0.320 352 1.26 0.320 403 Probable 1.48 0.300 444 1.70 0.300 510 Possible 1.00 0.340 340 1.00 0.290 290 3.58 1,136 3.96 1,203 Wharf Mine Proven 25.30 0.028 708 26.20 0.029 760 Probable 2.40 0.024 58 2.40 0.023 55 Possible 3.00 0.026 78 4.60 0.024 110 30.70 844 33.20 925 Golden Reward Mine Proven 2.79 0.038 106 5.74 0.042 241 Probable 0.20 0.028 6 0.93 0.057 53 Possible 1.00 0.057 57 2.49 0.041 102 3.99 169 9.16 396 Total Permitted Gold Reserves 2,149 2,524 Goldcorp's Share of Permitted Gold Reserves Red Lake Mine (1994 - 100%; 1993 - 69.3%) 1,136 834 Wharf Mine (1994 - 50.3%; 1993 - 39.6%) 425 364 Golden Reward Mine (1994 - 30.2%; 1993 - 23.7%) 51 93 Total 1,612 1,291
As at December 31, 1994 As at December 31, 1993 Tons Grade Contained Tons Grade Contained of ore per ton ounces gold of ore per ton ounces of gold (millions) (thousands) (millions) (thousands) Wharf Mine (Clinton Project) Proven 25.00 0.030 750 23.60 0.032 755 Probable 4.60 0.020 92 4.20 0.019 80 Possible 6.70 0.027 181 9.80 0.024 235 36.30 1,023 37.60 1,070 Golden Reward Mine Proven 4.11 0.040 164 3.22 0.041 132 Probable 0.12 0.024 3 0.28 0.036 10 Possible 3.70 0.040 148 7.49 0.043 322 7.93 315 10.99 464 Total Unpermitted Gold Reserves 1,338 1,534 Goldcorp's Share of Unpermitted Gold Reserves Wharf Mine (1994 - 50.3%; 1993 - 39.6%) 515 422 Golden Reward Mine (1994 - 30.2%; 1993 - 23.7%) 95 110 Total 610 532
Three months ended Year ended December 31, December 31, 1994 1993 1994 1993 Financial Results (in thousands of Canadian dollars except per share amounts) Revenues $ 34,295 $ 32,549 $140,943 $119,167 Earnings from operations 4,272 5,154 20,403 13,165 Earnings for the period 1,938 3,333 30,587 13,885 Cash flow from operations 5,701 8,550 35,561 25,658 Earnings per share Basic 0.06 0.19 1.11 0.80 Fully diluted 0.06 0.19 1.07 0.80 Cash flow per share from operations Basic 0.18 0.49 1.29 1.47 Fully diluted 0.18 0.49 1.24 1.47 Weighted Average Number of Shares Outstanding (in thousands) Basic 31,110 17,412 27,667 17,418 Fully diluted 31,356 17,412 28,980 17,418 Gold Production (ounces) Red Lake Mine 16,213 18,872 65,500 73,609 Wharf Mine 26,507 28,127 105,282 102,381 Golden Reward Mine 11,721 10,700 52,556 35,549 54,441 57,699 223,338 211,539 Goldcorp's Share of Production 33,080 26,619 127,136 99,981 Average Cost Per Ounce of Gold Sold (U.S. dollars) Cash production cost $264 $235 $244 $242 Royalties and severance taxes 12 16 17 15 Non-cash costs 66 60 58 56 $342 $311 $319 $313
As at December 31, 1994 1993 Condensed Balance Sheets Current assets $ 137,443 $ 99,163 Mining interests, net 166,406 158,085 Deposits for reclamation costs 3,202 3,019 Other assets 4,456 7,471 $ 311,507 $ 267,738 Current liabilities $ 46,871 $ 40,620 Long-term debt 26,479 39,848 Provision for reclamation costs and other liabilities 1,801 1,476 Deferred income taxes 8,969 2,873 Minority interest 42,078 58,174 Shareholders' equity 185,309 124,747 $ 311,507 $ 267,738 Year Ended December 31, 1994 1993 Condensed Statements of Earnings Revenues $ 140,943 $ 119,167 Expenses 120,540 106,002 Earnings from operations 20,403 13,165 Other income, net 42,456 11,096 Earnings before taxes and minority interest 62,859 24,261 Income and mining taxes 24,645 4,665 Earnings before minority interest 38,214 19,596 Minority interest (7,627) (5,711) Earnings for the year $ 30,587 $ 13,885 Condensed Statements of Cash Flows Net cash provided by operating activities $ 35,561 $ 25,658 Net cash provided by (used in) investing activities (7,755) 12,260 Net cash provided by (used in) financing activities 11,366 (11,889) Effect of exchange rate changes on cash 1,224 544 Increase in cash and short-term investments 40,396 26,573 Cash and short-term investments at beginning of year 49,812 23,239 Cash and short-term investments at end of year $ 90,208 $ 49,812