In a Sept. 19 research note, analyst Andrew Kaip with BMO Capital Markets wrote "overall impressions were positive" from a site visit with management to Goldcorp Inc.'s (G:TSX; GG:NYSE) Éléonore mine.
Kaip summarized the areas of progress at Éléonore.
1. Processing rates are increasing. Goldcorp has been slowly achieving this since it completed access in Q2/18 to the fifth mining level. This progression should "set the stage for a strong finish to 2018," Kaip indicated. The processing rate at Éléonore, now at about 6,000 pounds per day (6 Ktpd), should surpass that by Q4/18.
2. Production is on the rise. Based on a 6–7 Ktpd processing rate, 2019 production should be in the 400 Koz range. The mine produced 152,000 ounces (152 Koz) of gold in H1/18, and BMO forecasts it will produce 357 Koz in H2/18, a total of 509 Koz for the full year. In comparison, Goldcorp is guiding for 2018 production of 360 Koz.
3. Improving processing and mining rates should lower costs. Goldcorp aims to reduce site costs, over the long term, to $110–120 per ton ($110–120/ton) from $148/ton in Q2/18. The goals for specific costs are $55–60/ton for mining, $30–35/ton for processing and $25/ton for general and administrative expenses.
4. The materials handling project is underway. These upgrades to the 1140 level will allow for the transfer of ore from the lower part of the mine to the surface. Goldcorp intends to finish building the loading pockets and related infrastructure in Q1/20.
5. Current initiatives should improve gold recovery by 0.85%. Those include plant modifications to "reduce corrosion and improve availability of the Isamill" and Isamill cooling. In addition, Kaip pointed out, the mill could be further optimized.
6. Éléonore's 2019 and 2020 budgets should be around 2018's $40 million. This is the case, noted Kaip, because "development of the lower mine continues to be a priority."
BMO has a Market Perform rating and a $16 per share target price on Goldcorp, whose current share price is around $10.64.
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Disclosures from BMO Capital Markets, Goldcorp, Sept. 19, 2018
IMPORTANT DISCLOSURES
Analyst's Certification
I, Andrew Kaip, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.
Analysts who prepared this report are compensated based upon (among other factors) the overall profitability of BMO Capital Markets and their affiliates, which includes the overall profitability of investment banking services. Compensation for research is based on effectiveness in generating new ideas and in communication of ideas to clients, performance of recommendations, accuracy of earnings estimates, and service to clients.
Analysts employed by BMO Nesbitt Burns Inc. and/or BMO Capital Markets Limited are not registered as research analysts with FINRA. These analysts may not be associated persons of BMO Capital Markets Corp. and therefore may not be subject to the FINRA Rule 2241 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.
Company Specific Disclosures
Disclosure 5: BMO Capital Markets or an affiliate received compensation for products or services other than investment banking services within the past 12 months from Goldcorp.
Disclosure 6C: Goldcorp is a client (or was a client) of BMO Nesbitt Burns Inc., BMO Capital Markets Corp., BMO Capital Markets Limited or an affiliate within the past 12 months: C) Non-Securities Related Services.
Disclosure 8A: BMO Capital Markets or an affiliate has a financial interest in 1% or more of any class of the equity securities of Goldcorp.
Disclosure 8C: BMO Capital Markets or an affiliate has a financial interest in 0.5% or more in the issued share capital of Goldcorp.
Disclosure 9B: BMO Capital Markets makes a market in Goldcorp in United States.
Disclosure 16: A research analyst has extensively viewed the material operations of Goldcorp.
Disclosure 17: Goldcorp has paid or reimbursed some or all of the research analyst's travel expenses.
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