VANCOUVER - Goldcorp Inc. says it's looking to improve efficiency at its Penasquito mine in Mexico, after falling gold prices forced the company to write down the project's value and led to a US$1.93-billion net loss in the second quarter.
"We are aggressively targeting efficiency improvements and cost reductions at Penasquito," George Burns, the company's executive vice-president and chief operating officer, told analysts during a conference call Thursday.
"Overall Penasquito can operate much better, and it will."
Burns said the company (TSX:G) has already boosted the efficiency of its blasting, truckloading and excavation activities at the mine.
"We expect these and other productivities to yield significant reductions in our mining costs over time," he said.
The gold miner said it would have been profitable in the second quarter if falling gold prices hadn't forced it to reassess Penasquito's exploration potential and take an after-tax charge of $1.96 billion.
Goldcorp, which keeps its books in U.S. dollars, said its net loss for the quarter ended June 30 amounted to US$2.38 per diluted share, compared with a profit of $268 million, or 26 cents per diluted share, a year ago.
Revenue slipped to $889 million from $1.08 billion in the second quarter of 2012.
However, excluding the writedown and other one-time charges, Goldcorp reported an adjusted profit of $117 million, or 14 cents per share, compared with $332 million, or 41 cents per share, a year ago.
Analysts had been expecting Goldcorp to report 21 cents per share of adjusted earnings, according to estimates compiled by Thomson Reuters.
The writedown at Penasquito also follows a recent ruling by an agrarian court in Mexico regarding a land rights dispute at the project that nullified Goldcorp's lease on 600 hectares of land at the project.
Goldcorp has said a challenge has been filed with the First District Court in Zacatecas that resulted in the temporary suspension of the agrarian court ruling.
The company said the mine continues to be "a key driver of our long-term financial performance."
"This charge simply aligns the carrying value of the asset, which was established over seven years ago, with the current market environment for exploration properties in the gold industry," Goldcorp president and chief executive Chuck Jeannes said in a statement.
Goldcorp's earnings were also hurt by the fact that most of its production was near the end of the quarter, when metal prices had fallen.
"Our inability to capture the higher gold and silver prices at the beginning of the quarter was a disappointment," chief financial officer Lindsay Hall told analysts.
"For the quarter, almost half of our gold and silver was sold in June, which coincided with the steep decline in prices, and resulted in a significant difference between our realized prices and the average spot prices for the quarter."
During the quarter, Goldcorp produced 646,000 ounces of gold, up from 578,600 ounces a year ago.
Gold sales totalled 624,300 ounces at an average realized price of $1,358 per ounce compared with 532,000 ounces at $1,596 in the second quarter of 2012.
The gold producer, which has operations in Canada, the U.S., Mexico and Central and South America, said it will be tightly managing its costs in the coming quarters and will be deferring some non-critical expenses until 2014 or 2015.
"While this downturn has been painful, the changes that we are making in response to that will result in Goldcorp being an even stronger company going forward that is very well positioned for long-term success," said Jeannes.
"So we look forward to taking on these challenges that we face and turning them into opportunities."