Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

Goldcorp (NYSE:GG)

Q2 2006 Earnings Conference Call

August 10, 2006, 5:00 p.m. EST

Executives:

Ian Telfer, President and Chief Executive Officer

Russell Barwick, Executive Vice President and COO

Analysts:

John Bridges, JP Morgan

Tony Lesiak, UBS

John Mitzak, Shareholder

Tanya Jakusconek, National Bank

John Tumazos, Prudential Equity Group

Steve Gresh, Shareholder

Barry Cooper, CIBC World Markets

Mark Smith, Dundee Securities

David Sullivan, Shareholder

Operator

Good evening, and welcome to the Goldcorp Second Quarter Earnings Conference Call for August 10, 2006. Your host for today will be Ian Telfer. Mr. Telfer, please go ahead.

Ian Telfer, President and Chief Executive Officer

Thank you very much, operator. Welcome everyone to the Goldcorp Second Quarter Earnings Call. Before I start, some of our commentary may contain forward-looking information. Therefore, you are cautioned that our actual results could differ materially from our conclusions or projections. I refer you to the section entitled description of business risk factors in our most recent annual information form available on SEDAR which sets out certain material factors that could cause actual results to differ.

Having said all that, talking about our second quarter just ended, the results were noted about an hour ago, but we had an incredible quarter. Our earnings nearly doubled to $190 million or $0.50 a share compared with $98 million or $0.30 a share a year ago. Adjusted for certain non-cash items net earnings amounted to $136 or $0.36 a share for the quarter.

Cash flows increased 46% to $240 million or $0.63 a share compared with $163 million or $0.50 a share a year ago.

On May 12, we finally closed our agreement with Barrick Gold to acquire Placer Dome Canadian operations and other assets for cash of approximately $1.6 billion. These operations are included in our results for the period May 12 to June 30.

Gold production increased 35% to 378,000 ounces compared to 281,000 a year ago. Gold sales were almost 400,000 ounces compared to 267,000 ounces last year, excluding of course the sale of the gold bullion inventory that took place in the second quarter of 2005. Total cash cost were minus 123 per ounce that of copper and silver credits compared to $52 a year ago. We paid dividends during the quarter of $17.4 million and on June 9, we closed our early warrant exercise transaction and received $455 million which we used to repay some of the debt taken down as part of the Placer Dome assets.

The average price of gold we received this quarter was $620 earnings compared $430 a year ago. Earnings from operations jumped from $162 million to $225 million. So, earnings per share basic was $0.30, up to $0.50 diluted what was $0.28 up to $0.49. Cash and cash equivalents at the end of the year a year ago were $420 million, at the end of June this year $265 million and the drop there, of course, we took a fair bit of our cash and used it to make the Placer acquisition.

To talk about the operations now, Red Lake produced 167,000 ounces of gold for the quarter, that’s for the whole quarter, 114,000 of which came from Red Lake and 53,000 from the Campbell Mine. So, we will refer to these both entities now as Red Lake and as you would expect with the combined entity the cash cost will go up because the Campbell cost was quite a bit higher than the Red Lake cost. This production level reflects more ore grade at Red Lake and a realignment of the overall mining plan and sequence. This was done in order to allow significant new development at depth in support of the shaft and to accommodate the integration of the Red Lake and Campbell operations. The Canadian dollar was also 11% stronger and also had an impact on our cost. So, as a result, cash costs were $180 per ounce for the quarter.

Previously, the company had adopted a policy of holding back on sale of 1/3 of mine production, this was continued last year and 275,000 ounces were sold in the second quarter of last year. The expansion projects project well during the quarter as development work required to connect the shaft to the existing mine moved ahead. Shaft sinking was successfully deepened by 109 meters to bring it to 1672 meters. This was slightly ahead of expectation. The expanded mills expected to be ready for operation in mid 2007 and the expansion project including the shaft is on track for completion in late 2007. Integration activities at Red Lake continue during the quarter including the implementation synergy to modifying the organizational structure, optimizing the existing work forces, reviewing the short and long term mine plans, the best advancing underground development, etc. Work also continued on completing a physical service road connecting and established a combined IT and communications connections between the two mines.

Priority development is being driven from each mine to establish an underground connection between the two mines for the first time located at 34 and 36 levels. This historic will occur during the third when ore from Red Lake will be transported to the Campbell shaft and treated in the Campbell plant. This will represent very first major synergy between the two mines and is the first of many steps to be taken.

Looking at Porcupine, Porcupine produced 41,000 ounces in the quarter which is an improvement over the first quarter due to more selective mining in the pit. Gold production in the second quarter was lower than a year before due to a transition from the higher grade to the lower grade ore.

Second quarter cash costs were $344, an improvement over the first quarter of the year but again higher than a year before. Overburden stripping at stage 2 Pamour is scheduled to begin in the third quarter now and the fact the overlying public highway has been relocated resulting in access to further ore zones. So, we expect improved production at Porcupine for the second half of the year. First half production was about 73,000 ounces. We expect that to be increased by 20% in the second half and be approximately 87,000 ounces. So, we expect improvements there. We’re already seeing signs of it.

Turning to Musselwhite, grade improved 20% in the second quarter compared to the first. Production was 37,000 ounces at a cash cost of 375 which was slightly lower than the first quarter. The mine has incurred a higher than anticipated backfill due to rescheduling of the mining sequence. Backfill is expected to be reduced significantly for the remainder of the year. Exploration results continue to be excellent in and around the mine and we are very excited about the possibility for Musselwhite going forward based on these results.

Looking at Alumbrera, Alumbrera had an incredible quarter. It produced 68,000 ounces of gold and 41 million pounds of copper and sales were higher than that due to the difference between production and sales. The capital expansion of the concentrator to 40 million tons per annum continues on schedule. The sustainable development program underway contributes to the development the community, etc. getting very positive results and we’re constructing two technical schools in the area and the reconstruction of hospitals in Tucuman.

Earlier this month, Alumbrera announced an increase of more than 10% in all reserves, an ongoing order delineation drilling program in the Alumbrera pit undertaken both within the existing ore envelope and for extensions at depth, has confirmed 40 million tons, our shares 15 million tons of additional reserves. The mine plan was re-optimized based on the new geological model with the additional mineralization and together with improved final pit slope angles. This equates to an additional 265 million pounds of copper. Our share is just about 100 million pounds and our share of the additional gold of 150,000 ounces, but probably more important it extends the life of this mine now to at least 2016. So, we’re very, very excited about that addition to the reserve.

Luismin continued to achieve record production levels during the quarter. They’ve got increased mill throughput and higher than expected grades. They produced 54,000 ounces of gold, an increase of 28% over the 42,000 ounces last year. In addition, they produced 2.4 million ounces of silver, 21% higher than the 1.9 million ounces produced a year ago. Cash costs were $109 per ounce or 5% lower than a year ago.

At the Nukay mine adjacent to the Los Filos project, an extensive exploration project continues to achieve positive results with higher grade underground ore being delineated.

Turning to Amapari, although ore processing improved significantly from the previous quarter and productivity improvements to crushing and stacking, we’re still being challenged at this operation. Gold production was negatively impacted by a lower than planned gold grade. Gold recoveries from the leach pads while improving slightly from the previous quarter were lower than expected. Optimization of the ADR plant carbon handling system and the leach pad irrigation systems are continuing as well as modifications to reagent use and ore stacking sequences in order to improve on leach pad gold recovery performance.

Total cash cost for the quarter was $572 per once, negatively impacted by the lower grades and recoveries. Cost reduction programs have been implemented including a 10% reduction in the total site force, determination and re-negotiation up numerous services and supply contracts and the re-optimization of the mine plant.

During the second quarter, heap leach inventory was written down by $2 million to the net realizable value. Exploration programs were accelerated on a number projects with 7000 meters of drilling and 4000 meters of geophysical surveys completed during the quarter.

The company is expecting 41,000 ounces from Amapari for the last six months of the year for a total of 80,000 for the year. This project has proved to be a challenge and we’re taking all necessary steps to make improvement. The mine is located in a prolific gold area and exploration is being accelerated to access additional ore. While recoveries are still not satisfactory, they are rising slowly as experience is gained and changes are made. We are committed to optimizing all aspects of this project going forward.

Turning to La Coipa, La Coipa produced 16,000 ounces of gold and 800,000 ounces of silver during the second quarter, an increase of 24% in the silver from the year before. The newly pre-stripped Puren pit began production one month earlier than planned with the first ore being fed to the mill in June. Tons of milled were lowered this quarter due to start of the treatment of Puren ore feed. Over the coming period, Puren will contribute to a higher silver grade for the mill. Puren pit is continued in a stand alone joint venture with Codelco. The La Coipa mine is the project manager and holds 65% of the equity. Cash costs were $44 per ounce, mainly due to higher silver byproduct sales. La Coipa is continuing its strategic exploration on known anomalies within trucking distance of the mill.

Peak Mine producer sold 26,000 ounces of gold compared with 27,000 ounces the quarter before. Copper sales have been rising steadily which have helped the cost. The cash cost from the first quarter and the second quarter are virtually flat at about $193. The recoveries continue to improve and we expect similar production for the remainder of the year.

Wharf Mine produced 15,000 ounces of gold compared with 16,000 ounces a year ago. Cash cost were $343 compared to $291 primarily as a result of lower gold sales and the build up of gold in leach solutions.

Silver Wheaton reported they had a very successful quarter. We own 62% of it. During the quarter, Silver Wheaton closed at $200 million public offering, 17 million shares at $12. As a result of this dilution, in our interest, it gave rise to a non-taxable dilution gain of $61 million that was recognized in the earnings in three months ending June 30.

In the Los Filos project, during the first quarter the feasibility study was completed at a combined Los Filos and Bermejal deposits as a twin open pit operation with a single heap leach pad facility. The combined deposits will be referred to as the Los Filos project going forward. The mine reserve and resources total over 5 million ounces with 4.5 million ounces improvement in probable reserves. Project construction has progressed well and remains on schedule to be completed by the end of 2006 with commercial production plans to start in the second quarter of 2007. Commercial production for 2007 is expected to be 2000 ounces full rising to 350,000 in 2008. Basic support infrastructure works are complete with the main access road and the main substation already servicing project activities. The water supply system is also servicing project activities at partial capacity, etc.

At Pueblo Viejo, Goldcorp finalized the shareholder’s agreement with Barrick and we are the 40% owner with Barrick a 60% owner and projector operator. Barrick continued to update the feasibility analysis prepared by Placer Dome and is expected to report on this project in the fourth quarter.

The Éléonore project, our exploration project. The primary focus has been to confirm earlier Virginia exploration work including the confirmation of the continuity of Roberto Zone mineralization over closer spaced intervals. The extensive infill programs on April 1 include 76 drill holes for 31 km of drilling as confirmed these items. The priority on the property is to continue the drill program to allow the start of engineering scoping studies planned for late in 2006. The ongoing exploration and drilling program will primarily concentrate on three themes; continuing the confirmatory drilling already in progress, exploring the strike extent of the ore body at both ends, and exploring the depth potential of the Roberto Zone.

Today, drilling has been limited to 900 meters of vertical depth. New drills with the capability of 2000 meters will commence work this quarter. We are very excited about these drill results. So far they’ve confirmed and in some areas exceeded our expectations. Drilling will pick up this winter as ice affords better drill locations on this project. A resource estimate should be available in the first half of 2007. We continue to believe this is a new gold district and Éléonore is the first of many discoveries.

On the expense side, you can all see it in the document there. Depreciation and depletion increased to $73 million from $40 million, again this is due to the acquisition of the Placer assets and the fair value allocation of a price to these new sets, one would expect it to be higher. Corporate admin. increased to $10 million from $7 million and again due to increased corporate activity.

On the other income and expense the items mentioned, we now have interest expense of $12 million. We had a stock option expense of $6 million. We had a non-hedge derivative loss on copper hedging of $12 million and then we had the already mentioned dilution gain of $61 million. So, in other we earned $37 million in this quarter due to that.

Just a comment on income and mining taxes, our income tax rate this quarter was approximately 31% which is lower than a year ago when it was 36%. The lower effective tax rate is reflective of a higher proportion of our earnings being realized from the non-Canadian assets which have a lower effective tax rate.

Before taking questions, I’d like to thank all those responsible for the successes of the company over the past six months. The acquisition o Éléonore and the acquisition of the Placer assets is an incredible achievement and the Goldcorp management and employees deserve a great deal of thanks. As we look forward to the future while we still certainly have some work to do at Amapari, we are thrilled by the results at Éléonore. We’re extremely happy with the Placer assets and the excellent management team that have now joined Goldcorp. We’re very excited about the start up of Los Filos only five months away which will be the largest gold project in Mexico. We look forward to getting started on Pueblo Viejo and we should hear more about that in a few months. And we are itching to get in and make some improvements to all of our new properties. We think there is a lot we can do and we can’t wait to get started.

We are very advanced in the integration of Campbell, Red Lake and will be able to give more clarity as to what we expect the savings to be later this quarter. We had expected to be a 2 million ounce producer at this point in our life and we are now getting guidance for the second half of 2006 of 950,000. So, we’re very, very close to our goal, just sigh of our goal. It’s been an incredible six months. We can’t wait for the next six months to start. And with that, Operator, I’d like to open up for questions.

Question-and-Answer Session

Operator

Thank you. We will now take questions from the fellows online. If you have any questions, please press * and 1 on your telephone keypad. If you’re using a speaker phone, please lift the handset and then press * and 1. If at any time you wish to cancel your question, please press the # sign. Please press * and 1 at this time if you have a question. There will be a brief pause while the participants register for questions. Thank you for your patience. The first question is from John Bridges.

John Bridges, JP Morgan

Hi, good evening Ian and everybody, congratulations on the result. I wondered, do you have the strip ratio on this edition to Alumbrera, the new reserves?

Ian Telfer, President and Chief Executive Officer

John, similar to the rest of the pit basically, approximately 2:1.

John Bridges, JP Morgan

Okay, but if you’re going deeper wouldn’t that be picking up the biggest pit ratio?

Russell Barwick, Executive Vice President and COO

What we’re doing, John, is a lot of this drilling is turning waste into ore with better definition of depth, so we’re not actually pulling the pit sites.

John Bridges, JP Morgan

Is there a higher copper crest allowing you to go to a lower level?

Russell Barwick, Executive Vice President and COO

Marginally, but we’re also doing a lot of geotech work which is improving the wall angles we can handle as well.

John Bridges, JP Morgan

Okay, great. Could you give us just a sense as to your sort of positives and negatives on the projects you picked from Placer?

Ian Telfer, President and Chief Executive Officer

Well, I guess we haven’t had the wound ups of any negatives yet. So far it’s been extremely positive. As I mentioned, we’re thrilled with the team that came with the projects. We’re very excited about the exploration potential and some of the early results at Musselwhite. We’re very excited about the exploration potential and some of the results at Porcupine. Porcupine went through a low-grade period this spring, but it’s now moved to highway and moved into the higher grade part of the pit, so their production will pick up for the second half of the year, so far no stoppers there. And with the gold price going up and our partner up there having a little more available capital, we’re expanding the exploration around Hoyle Pond, and again we’re very excited about what we see there. And the Campbell/Red Lake combination so far is working fabulously. As I say, we’ll start moving ore from Red Lake to Campbell this quarter and the workforce has come together very well. We split the senior jobs pretty evenly between Placer and Goldcorp people, and that’s been very well received. I guess the smallest one and the one that has the least impact is La Coipa, and they do have some great opportunities down there that could dramatically increase the life of the mine, but it’s too early to say whether that will go ahead. But I’d say, John, so far no disappointment. I guess the last one which we didn’t mention was Mount Milligan, which of course everyone valued at zero but is now trading publicly with a value of about $300 million. So that was certainly a bonus for us. That represents about 20% of what we paid for all the Placer assets, so we’re very pleased with that transaction.

John Bridges, JP Morgan

Okay, the opportunities in La Coipa, could you mention one or two?

Ian Telfer, President and Chief Executive Officer

Well, I’m certainly not an expert on it, but my understanding is that in the past the exploration had been limited to the properties already owned or under the control of Placer, and more recently now with the approval of Kinross we’ve moved out and we’re looking at opportunities where we do not necessarily own the property. So, we’re looking at areas where people suspected there might be mineralization but no one had checked. It’s in a couple of those areas that looks interesting, it’s very early stages, but if a few things worked out it could dramatically increase the mine life.

John Bridges, JP Morgan

Okay, thanks Ian, good luck.

Operator

Thank you. The next question is from Tony Lesiak; please go ahead.

Tony Lesiak, UBS

Hi Ian, I was hoping you could give us a breakdown by operation, how you get the 950,000 ounces for the second half?

Ian Telfer, President and Chief Executive Officer

I thought you’d ask that. I’ll give these out for everybody. For the second half of the year Red Lake which is now both combined is 425,000; Porcupine 87,000; Musselwhite 89,000; Luismin 76,000; Amapari 41,000; Peak 70,000; Alumbrera 109,000; La Coipa 21,000; and Wharf 40,000.

Tony Lesiak, UBS

Can you mention La Coipa, I couldn’t write that down?

Ian Telfer, President and Chief Executive Officer

21,000.

Tony Lesiak, UBS

Okay, given the problems at Amapari, what kind of numbers should we be looking at in 2007 and 2008, or is it just too early to tell?

Ian Telfer, President and Chief Executive Officer

It’s too early to tell.

Tony Lesiak, UBS

When do think you might know?

Ian Telfer, President and Chief Executive Officer

Certainly by the end of the year we’ll have a better idea, but it’s just coming into the real dry season now. They made a lot of improvements. We remain optimistic, but it’s too early to tell at this point in time. Yeah, by the end of the year we’ll certainly be able to give guidance going forward as to how it looks.

Tony Lesiak, UBS

Originally when you embarked on the Placer transaction, you mentioned potential of $30 odd million, can you elaborate on that, where you think you might get to and the timing?

Ian Telfer, President and Chief Executive Officer

Well, we certainly we think our $30 million or $40 million numbers are very achievable numbers, and the most obvious first source of that is in the sort of early stage attrition that comes when you put two companies together, and in that respect we’re probably realizing the first $10 million as we speak just having put them together, and we expect that process will continue, so that number will go up. The other ones will be of course filling the excess capacity at Campbell from Red Lake; that’s an obvious one. But again, we’ve got a number of studies underway; I think there are 30 different studies going on at Red Lake now looking at exploration, materials, handling, safety, employment, transportation, purchasing, etc. all the mine plants and how can we do things differently now that these two properties have been put together. We expect those reports to start coming in the fourth quarter and then we’ll be able to give you a clear handle on exactly where we expect to pick up the savings, but there’s no doubt in our mind that we’ll get to that number.

Tony Lesiak, UBS

Okay, and can you just lastly just comment on the rationale for the copper hedge?

Ian Telfer, President and Chief Executive Officer

Yeah, obviously it’s a byproduct for us and it’s not our main business. So, with the copper price as high as it was and looking at the ability to hedge, we determined that we would hedge part of our production for ’07 and a little bit of our production for ’08. Part of it was experimental just to see how it would work, so we’ve done about 46% of our ’07 production and 20% of our ’08 production and we would never do more than half of a year’s production and we probably won’t go out more than two years, because the back gradation is so steep. We’re still very bullish on the price of copper, but we put this in place. What it does do is there are number of economists out there that are calling for copper to go down to $1.25 next year. So, with this hedging they’ll obviously have to plug in a different number for half of our production.

Tony Lesiak, UBS

Thanks so much, Ian.

Operator

Thank you. The next question is from John Mitzak, please go ahead.

John Mitzak, Shareholder

Thank you. My question is about those options that you let the Madison’s redeem, and I think that Goldcorp certainly did because the stock went from $40 down to $28, I’d like to know if you’re still issuing options and why you didn’t sell more stock for around $40?

Ian Telfer, President and Chief Executive Officer

I’m not exactly sure how to answer that, but we use options to incentivize, attract, and retain employees, we’ve given them on an annual basis at whatever the price of the stock is at the time and just like you I don’t know whether the stock is going to be higher or lower tomorrow. So, I don’t really have a further comment on that.

John Mitzak, Shareholder

The stocks that were bought, did they end up being sold on the open market?

Ian Telfer, President and Chief Executive Officer

I would expect so.

John Mitzak, Shareholder

That’s why the stock went from $40 to $28?

Ian Telfer, President and Chief Executive Officer

Thank you very much, operator next question.

Operator

Thank you the next question is from Tanya Jakusconek; please go ahead.

Tanya Jakusconek, National Bank

Congratulations on a nice quarter. Just two quick questions; first is San Dimas. In the press release you mentioned that you got some good high-grade intercepts wider and richer realization there at depth, could you give us some color on that and what kind of results you have?

Russell Barwick, Executive Vice President and COO

Higher than what’s average down there and you’re familiar with the sort of grades we get from San Dimas, and when we say wide of 1 or 2 meters it is wider than your standard sort of range but bulkier.

Ian Telfer, President and Chief Executive Officer

Again, nothing dramatic but just slightly higher and slightly wider as Russ says, so I really can’t add anymore to it than that.

Tanya Jakusconek, National Bank

Okay, the other question is regarding the CapEx, you were mentioning $209 for the remainder of the year, can you just give us a split for that?

Ian Telfer, President and Chief Executive Officer

It is $60 million at Red Lake, $30 million at San Dimas, $80 million at Los Filos, $12 million at Porcupine, and then the rest are small $6 million at La Coipa, $6 million at Musselwhite, $6 million at Peak, you know little ones like that.

Tanya Jakusconek, National Bank

Okay, thanks.

Operator

Thank you, the next question is from John Tumazos; please go ahead.

John Tumazos, Prudential Equity Group

Congratulations on everything. Just to draw a comparison, well the difference in scale. Barrick announced about a week ago they were going to drill 80 kilometers more into Donlin Creek to try to complete that feasibility study and improve the reserve. How much drilling will you do in Éléonore for the resource statement in the first half of next year, and how much more drilling do you plan when you start to get a little further into reserves?

Ian Telfer, President and Chief Executive Officer

John, I don’t have the exact number but it will certainly be tens of kilometers before we do our resource statement. Since April we’ve drilled 30 kilometers and as I say a lot of the best access points of this ore body are done from the ice so we will be doing a lot of it this winter and who knows we may get to 80 kilometers.

John Tumazos, Prudential Equity Group

How many rigs do you have running?

Ian Telfer, President and Chief Executive Officer

Five.

John Tumazos, Prudential Equity Group

Thank you.

Operator

The next question is from Steve Gresh; please go ahead.

Steve Gresh, Shareholder

Does management have any expectations on what the future price of gold will be, and if so can you tell what those are in the next one or two years? And the second part of the question is, production increased significantly, will management re-implement the retention of some percentage of the production for sale at a future date?

Ian Telfer, President and Chief Executive Officer

In the order you ask it, we are very bullish on the price of gold as a management group. We see mine supply declining, we see central bank sales flat or some central banks even buying gold back, we see the economies of India and China very strong, continuing to take a lot of the uptake from the mines, and we still believe the U.S. Dollar will weaken before it strengthens. So that combination leads us to think the price will go a little higher. I don’t want to put a price on it but it could certainly go up $200 from here over the next two years without any trouble. As far as stock piling the gold, it’s not a policy that we’re considering at this time. As you know, we’ve been very active in the acquisition market, so we’ve taken on some debt to do that and certainly as long as we have any debt outstanding we wouldn’t be hoarding gold, we’d be selling gold to that market and repaying our debts. The other challenge with stock piling the gold is what happened to Goldcorp if you look back at it. Because you stock pile the gold and you’re not selling it, you can’t count is in your revenues, you can’t count it in your sales, it never makes it into your financial statements, so the majority of the market would ignore that gold even though it was produced and sitting in the vault. Then, when Goldcorp sold it in the third or fourth quarter of 2005, because it was an unusual event, the market tended to ignore it then. So, when we look back at the stock performance and the market reaction it was our view that what they gained in the gold price — and they gained a little, that was for sure — but it didn’t seem to impress the market very much. So, as I say, as long as we’re out there acquiring things it’s not a policy we’ll be putting in place.

Steve Gresh, Shareholder

Thank you.

Operator

Thank you. Once again please press * and 1 if you have any questions or comments. The next question is from Barry Cooper, please go ahead.

Barry Cooper, CIBC World Markets

Good day. I’m just wondering if you could elaborate a bit on your long-term investments in the cash flow statement there of $23 million for the quarter.

Ian Telfer, President and Chief Executive Officer

I think the majority of that was taking some of the shares that Placer had held and then splitting them up with Barrick. I don’t have anything more to say about it than that.

Barry Cooper, CIBC World Markets

So, this would be an additional payment to the $1.6 billion there, is that right?

Ian Telfer, President and Chief Executive Officer

No that would be part of it.

Barry Cooper, CIBC World Markets

Okay, then the other question I had related to La Coipa, there was quite a difference between the last six weeks and the total quarter in terms of the operating profits, I assume that has to do with the mix of gold and silver, what exactly gold and silver mix are you planning for the last half of the year there?

Russell Barwick, Executive Vice President and COO

The reason for the big difference is Puren kicked in halfway through the quarter and Puren is high in silver, and the guys will be adjusting the blend of ore from the different pits as we move forward based on scheduling, so it’s going to bounce around a fair bit; it won’t be all that consistent, but at times we will be getting substantial silver credits.

Barry Cooper, CIBC World Markets

Are you sure on that because it shows the full quarter as being at 44 and the last six weeks as being at 197, which suggests that you weren’t getting the silver credits in the last six weeks?

Russell Barwick, Executive Vice President and COO

We’ll have to get back to you on that Barry.

Barry Cooper, CIBC World Markets

Okay, on Amapari, in terms of the delay in the heap leaching and their recoveries, what does that mean with respect to the on and off pads there, is there an alternative where you could go to something other than on/off pads?

Ian Telfer, President and Chief Executive Officer

As you can imagine we’re looking at everything including things like washing plants. We’re looking at the heaps at different heights, we’ve made a lot of improvements to the agglomeration process which was one of our biggest challenges, and we’ve changed the whole irrigation system. So, we’re doing a number of things and testing different things. My understanding anyway is the on off part of these pads is not the challenge. The challenge is in the processing, getting the ore ready to receive the solutions, and then getting the solutions to be in contact with as much gold as possible.

Barry Cooper, CIBC World Markets

Has there been anything pulled off the on-off pad yet?

Russell Barwick, Executive Vice President and COO

Yes, several of the pads have been stripped and put on the dump, Barry.

Barry Cooper, CIBC World Markets

Okay, thanks a lot.

Operator

Thank you. The next question is from Mark Smith, please go ahead.

Mark Smith, Dundee Securities

I just want to follow up on Tony’s first question where you gave the second half production for the various operations, can we have the next column with the second half cost?

Ian Telfer, President and Chief Executive Officer

Again these are estimates -- Red Lake 185, Porcupine 370, Musselwhite 380, Luismin 110, Amapari 540, Peak 220, Alumbrera (minus)1000, La Coipa 290, and Wharf 320. Average is 80.

Mark Smith, Dundee Securities

Thank you very much.

Operator

Thanks. The next question is from David Sullivan; please go ahead.

David Sullivan, Shareholder

We’ve had a bunch of specific questions so far, how about a couple of general ones, what do you see as the political and labor risk going forward?

Ian Telfer, President and Chief Executive Officer

Political risk wise, our political risk profile we’re quite comfortable with. Being mainly in Canada and Mexico we think those are two great places to be in, and then Brazil and Chile and Argentina have so far treated us very, very well. So, politically we don’t have concerns in any of those areas. Labor wise, there’s no doubt the mining industry is booming. It hasn’t attracted a lot of geologists and engineers for the past 10 years, so there is a squeeze on qualified laborers and qualified management all around the world, and we’re certainly feeling that.

David Sullivan, Shareholder

Thank you.

Operator

Thank you. There are no further questions registered at this time. I would now like to turn the meeting back over to Mr., Telfer

Ian Telfer, President and Chief Executive Officer

All right, thank you everyone for tuning in. We had an incredible quarter, record earnings, record cash flows, and the cash flows for the quarter if you noticed were almost $0.25 billion. If we could do that every quarter it would be $1 billion, so it’s working out extremely well for us. Here’s to higher gold prices, higher silver prices, and higher copper prices. Take care everyone.

Operator

Thank you. The conference has now ended. Please disconnect your lines at this time. Thank you for participation and have a nice day.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Goldcorp Q2 2006 Earnings Conference Call Transcript (GG)
This Transcript
All Transcripts