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Executives

Jeff Wilhoit – VP, IR

Chuck Jeannes – President and CEO

Steve Reid – EVP and COO

Lindsay Hall – EVP and CFO

Analysts

John Tumazos – John Tumazos Very Independent Research

Greg Barnes – TD Newcrest

David Haughton – BMO Capital Markets

Anita Soni – Credit Suisse

Barry Cooper – CIBC

Patrick Chidley – Barnard Jacobs Mellet

Steve Butler – Canaccord Adams

David Christie – Scotia Capital

Goldcorp Inc. (GG) Q1 2010 Earnings Call Transcript April 29, 2010 1:00 PM ET

Operator

Good morning, ladies and gentlemen. Welcome to the Goldcorp Inc. 2010 first quarter results conference call for Thursday, April 29, 2010. Please be advised this call is being recorded. I would now like to turn the meeting over to Mr. Jeff Wilhoit, Vice President, Investor Relations of Goldcorp. Please go ahead, Mr. Wilhoit.

Jeff Wilhoit

Thank you and welcome everyone to the Goldcorp First Quarter 2010 Earnings Conference Call. In the room with me are Chuck Jeannes, President and Chief Executive Officer, Lindsey Hall, Chief Financial Officer, and Steve Reid, Chief Operating Officer.

For those of you participating on the webcast we’ve included a number of slides to support today’s discussion. These slides are available on our Web site at www.goldcorp.com

As a reminder, we’ll be discussing forward-looking information that involves unique risks concerning the business, operations and financial performance and condition of Goldcorp. Forward-looking statements include but are not limited to statements with respect to future metal prices, the estimation of mineral reserves and resources, the timing and amount of estimated future production, cost of production, capital expenditures, and costs and timing of the development of new deposits.

Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause the actual results to be materially different from those expressed or implied by such forward-looking statements. Accordingly, you should not place under reliance on forward-looking statements.

With that, I will now turn the call over to Chuck Jeannes, President and CEO of Goldcorp.

Chuck Jeannes

Thanks, Jeff, and thanks everyone for joining us today. After an excellent 2009 (inaudible) Goldcorp deliver on guidance and execute the plan. We are pleased to be after a strong start in 2010. Gold production in the first quarter totaled 625,000 ounces, that is total by product cash cost of 325 per ounce.

Strong realized gold and copper prices led to a 20% increase in revenues compared to last year. But the timing of sales was impacted by a brief work stoppage at the port that Alumbrera uses the ship concentrates as well as the build-up in gold inventory of Red Lake at the end of the third quarter. These situations have already been resolved and the unsold inventory will be reflected in revenues in the second quarter.

In yesterday’s news release we highlighted strong contributions from Red Lake and Los Filos in the first quarter. At Red Lake we made substantial progress on our fill the mill strategy aimed at utilizing existing knowing capacity. A 12% increase in ore tonnage milled resulted in an all-time throughput record at Red Lake driven by additional mill fee from the sulphide zones.

Los Filos in Mexico continue to hit its stride with goal production achieving a new quarterly record then. The on-time start-up of the new crushing and agglomeration plant in the first quarter will contribute to a strong production profile over the balance of 2010 and Los Filos is expected to be Mexico’s largest producing mine this year.

Our strong start to the year also included a very successful first quarter of operational production at Peñasquito. As we reported earlier this month, mining rates, no throughput, grades, recoveries and concentrate quality all met or exceeded expectations and Steve will cover the details in a moment.

We also closed the two previously announced M&A transactions in the first quarter that stand ready to help sustain our growth profile beyond 2014. High quality team is assembling at the El Morro copper gold project in Chile and initial planning and development activities are well underway.

The Camino Rojo project near our Peñasquito mine triples our land position in the heart of this respective region and provides an opportunity for future low cost production that can substantially supplement core production from Peñasquito.

In March, Goldcorp was pleased to host key government dignitaries and hundreds of honored guests at Peñasquito’s formal inauguration. The President of Mexico Felipe Calderón attended and spoke at length in support of Peñasquito as a key driver of employment, investment and opportunity for the entire country. While the Governor of Zacatecas, Amalia Garcia, reiterated her longstanding support for the mine. This level of support and partnership is the result of our track record of operating responsibly. Not just Peñasquito but at all of our operations throughout the Americas.

Some of you on the call today were able to get a firsthand look at the successful start and tremendous future in store at these world-class operations during a safe tour held earlier this month. Progress continues according to plan as the mine is both feeding the Line 1 processing facility and exposing ore for the start-up of Line 2.

We remain on schedule and on budget for the completion of Line 2 and then the declaration of commercial production in the third quarter. Initial construction of Peñasquito will be complete this year and we’re all looking forward to the strong and growing cash flows that this mine will be producing.

This is a familiar slide that many of you are seeing in one I continue to include in our updates because it clearly illustrates the construction and ramp up that has remained on schedule from the outset in Peñasquito. This is a testament to core strength of Gold Corp, building large mines on schedule and on budget, needs the skills that will service well as we turn to development of our next generation of growth projects.

Advancing the next phase of project is a key focus for us in the balance of this year. I’d mentioned Camino Rojo and El Morro and Steve will discuss in further detail the impressive progress we made both on our near-term growth projects like Noche Buena near Peñasquito, Cochenour and Red Lake and Eleonore in Quebec as well as important enhancements we’re making to position our existing mines for long-term success.

Our positive start in the first quarter has positioned Gold Corp to meet our previously issued guidance for 2010. One slight change is that with the completion of the El Morro and Camino Rojo acquisitions, we’ve increased our capital expenditure budgets of $1.56 billion for the year.

As Lindsay will discuss further Goldcorp’s balance sheet remains very strong when coupled with expected accelerating cash flows we’re well positioned to aggressively pursue our growth programs.

We are also pleased to report yesterday as (inaudible) that the $1 billion project financing for Pueblo Viejo in the Dominican Republic has been completed with 400 million of that to our accounts.

With our share of expected gold production well over 400,000 ounces per year in the first five years of production PV will be an important driver of our growth profile and we’re pleased with the continued progress the joint venture team is making there.

So looking forward Goldcorp remains on track for guidance of full year production at 2.6 million ounces at $350 an ounce, the first step in a five year growth plan in which we see not only production growth of over 50%, but also a trend lower in our cash costs, as low costs production from Peñasquito fully kicks in.

As well we continue to make great progress towards sustaining that growth profile beyond 2014, while always seeking to simplify the company and strengthen the overall portfolio. We look forward to sharing our progress in those areas throughout the balance of the year.

On a final note we remain very bullish on the gold price. You heard me say before that we’re managing the business for the long-term and so we focus on the longer-term trends in the gold market. In that regard we think the supply and demand fundamentals remain very positive. With future mine supply expected to be continued to decrease coupled with dramatically increased investment demand on the other side of the equation.

But I’d also highlight some very positive information that we’ve seen just recently. First, as expected, based on historical data, we saw jewelry demand finally reverse its recent trend in pick up in the first quarter, particularly, in India, as consumers appear to have reached a level of comfort with the gold price at over $1100 an ounce.

Second, just this week, we saw gold decouple from a trading relationship of the U.S. dollar in reaction to pressure on the euro due to the situation in Greece. So in the play to safety from the euro investors chose gold.

Too often market commentators treat the gold price as a simple inverse call on the dollar, but I think this week’s move shows the gold is truly an alternative currency that provides protection against weakness in all paper currencies, not just the U.S. dollar. Certainly, we see both of these recent data points as additional reasons for a very positive view of the gold price over time.

And with that I’ll now turn it over to Steve Reid for a review of the operations. Steve?

Steve Reid

Thank you, Chuck. As Chuck mentioned we got off to a solid start with strong performances in most of the mines. Clearly, the primary news of the quarter was the first production results and continued progress at Peñasquito. We’re also pleased to ignite progress on a number of important plant and projects which I’ll discuss in a moment.

Supporting these advances the results of the Cornerstone mines of Red Lake, Marlin and Los Filos, were all indicative of the attention to desell and focus that our teams have been working on for some time. And as safety record is maintained it’s now multi-year continuous improvement.

Starting with Peñasquito we’ve mentioned a successful achievement of key performance indicators in the first quarter, including mining rates, throughput, price, concentrate, quality and recovery. These positive trends continue into the second quarter. We remain on schedule with the start up of Line 2 where precommissioning tests are already underway, including the first (inaudible) Line 2 ball mills earlier in April and running water through the flotation circuit very recently.

We expect mechanical completion and the declaration of commercial production in the third quarter. The high pressure grinding roll circuit is targeted to completion by the end of the year. And this is a final step in allowing us to bring Peñasquito to full production capacity of 130,000 tons per day in early 2011.

We also previously announced the adoption of in-field crushing and conveyor in order to further enhance the robust economics of Peñasquito over its mine lot. This is expected to provide saving and sustaining capital of $35 million and operating expenditure of about $160 million compared to conventional truck-only haulage. Upfront capital for this project is anticipated to be approximately $155 million with $10 million spent during 2010. We’re scheduling to have this system operating during 2013.

With an eye toward long-term regional expansion of Peñasquito we completed the acquisition of Camino Rojo in the first quarter. We will soon be commencing in April in two physical programs as progress continues on developing and integrating Camino Rojo’s formally announced gold resource and great exploration potential with the growing Noche Buena project.

We aim to have an internal feasibility study completed on Noche Buena before the end of the year which together with Camino Rojo we believe should form the basis of potentially significant sources of satellite production to enhance our overall production portfolio of Peñasquito over the long-term. Both assets continue to exhibit potential for large sulphide systems at depth.

For the first quarter gold production at Peñasquito totaled 30,700 ounces. Gold production is expected to ramp up throughout 2010 on track to what our previously issued 2010 guidance of 180,000 ounces as the proportion of higher quality sulphide ore increases with production from Line 2.

Our mining operations continued its strong production components, exposing over ahead of Line 2’s introduction. Average mining rate exceeded 500,000 tons per day for the quarter with recent peak daily rate to an excess of 700,000 tons. As substantial over stockpiles we will provide additional flexibility during the commissioning of Line 2.

Since reaching steady state operational production at the beginning of the year Line 1 is now operating new design capacity of 50,000 tons per day. In January, we averaged approximately 24,000 tons per day and increased to an average of 46,000 tons per day throughout March. The peak first quarter daily throughput of 59,700 tons was achieved on March 30th.

The quality of our concentrate and the recoveries we’ve experienced sustain as we expected and the detailed results have been reported and are available on the Web site. I think bottom-line this will ore floats very well.

Both lead and zinc concentrates have been routinely dispatched through our smelter customers. And just to finish off with Peñasquito here is a recent photograph showing Line 2 on the right hand side identical to Line 1 and almost completed.

Record quarterly gold production of 72,100 ounces at Los Filos in the first quarter helped add to our accelerating growth chain underway in Mexico. On top of solid production the crushing and agglomeration plant designed to treat higher grade ore was commissioned during the first quarter.

Throughput rates for this facility are expected to ramp up to the design level of the 11,000 tons per day over the next several months. And I’m very happy that we’re beginning to see the true potential of Los Filos.

At Cochenour the achievement of our shaft dewatering target level of 2200 feet earlier this year has enabled us to commence in-field drilling of the upper portions of the deposits. Working towards the gold reserves by the end of the year and to exploring defines the gap zone between Cochenour and the deeper Bruce Channel deposit.

Construction has also begun on the five kilometer high speed haulage drift on the 5400 foot level that will connect the Cochenour shaft with the Red Lake mine. Today, we completed more than 1500 feet of critical pipe development. And overall, we expect this project will take approximately three years to complete. We’re eagerly anticipating the opportunity to explore the areas of becoming accessible as a result of this five kilometer drive.

Since announcing the details of the prefeasibility study of the Eleonore last quarter we have now commenced the sinking of the 725 metre deep exploration shaft which will enable us to further define the ore body.

We have also continued exploration drilling, focusing on identifying and defining new ore zones within the hanging walls stratigraphy close to the proposed infrastructure .And we continue to work on updating the prefeasibility study so that we are able to make a construction decision by the end of the year.

Those on the call here is a recent photograph of the shaft collar work in progress which we have now advanced to a depth of 10 meters. This collaring work will recede to a depth of 40 meters where we expect to switch the full place sinking during the fourth quarter of this year.

And with that I’ll now turn things over to Lindsay for the financial highlights.

Lindsay Hall

Thanks, Steve. As you heard from Steve regarding operations, the first quarter production numbers for all our commodities met or exceeded our expectations. Although at a couple mines, Alumbrera and Red Lake, we did have production we normally would sell being retained as inventory over the quarter-end.

Financially, the first quarter was more of what we achieved throughout 2009, capturing over 70% of the gold price and margin, resulting in over 300 million of cash flows for the quarter. Those cash flows funded capital investments of 318 million we made in our mines and projects for the quarter.

With capital spend to build Peñasquito essentially complete and the recent announcement of the Pueblo Viejo facility, in that project we’ve essentially completed the funding of some 2.8 billion of capital in two projects.

With funding complete and cash flows from Peñasquito increasing each quarter as the mine ramps up we remain confident in our ability to internally generate the cash flows necessary to fund the building of new mines such as Eleonore and El Morro which is consistent with our disciplined financial approach at Goldcorp.

Turning to the financial results for the first quarter, which also met our expectations, we reported revenues of 750 million, with over 85% of those revenues, coming from precious metals. We sold 569,000 ounces of gold at an average price of $1,110, having an average cash cost of $325 per ounce on a byproduct basis realizing a per ounce cash margin of $785.

Cash costs on a byproduct basis was $36 higher compared to the previous quarter of $289 per ounce, primarily as a result of lower byproduct credits on copper revenues and the inclusion of the Alumbrera export retention tax in cash costs whereas last year we excluded these costs. Cash costs on a co-product basis were similar in both periods.

Our adjusted earnings amounted to $163 million or $0.22 per share. The calculated invested earnings we have added back to the reported loss of $52 million, the non-cash foreign exchange loss of $212 million. 80% of which is attributable to the strengthening of the Mexican Peso compared to the U.S. Dollar.

Consistent with our practice in previous quarters, we do not make any adjustments for the non-cash stock option expense, which amounted to some 10.3 million. The provisional pricing impact related to our copper sales was a positive 6 million for the quarter. For the next quarter we have about 41 million pounds of copper priced at $3.53 per pound which is subject to provisional pricing.

In note nine, to our financial statements, details of our hedging position as at March 31, are provided. For foreign currency, heating, oil and copper contract we have approximately 30% of our estimated remaining 2010 copper production protected at 3.15 per pound, which for the most part get called away at $3.55 per pound.

Lastly, in arriving at earnings, our overall effective tax rate for the quarter was 29%, which is in line with our guidance for the whole year of 32%. We have accrued in our income tax provision approximately $110 million, representing almost the entire amount of cash taxes we expect to pay in respect of our Canadian mines for the year.

As we’ve previously noted the first quarter featured a very successful operational start at our Peñasquito mine in Mexico with key performance measures either meeting or exceeding expectations.

Including in our Peñasquito MD&A is disclosure with respect to production volumes for gold, silver, lead and zinc and cost metrics associated with mining and processing activities as well as offsite costs all of which were in line with our expectations during the ramp up phase.

We ended the quarter with cash and cash equivalents on hand of some $393 million. 450 million drawn on the 1.5 billion revolving credit facility and 862 million of convertible debt outstanding.

A Couple days ago Goldcorp with Barrick, the project operator of Pueblo Viejo closed a 1 billion project financing that will fund our remaining portion of capital expenditures for the project.

We have one of the strongest balance sheets in the precious metals business and we remain committed to making disciplined decision when financing our growth opportunities. This disciplined approach afforded us the necessary flexibility during the first quarter to acquire our two newest growth project, the 70% interest in El Morro and the Camino Rojo property in Mexico for cash totaling $795 million.

In summary, the first quarter of 2010 has been very successful quarter both operationally and financially.

And with that I’ll turn it back to the operator and we’re ready to take questions.

Question-and-Answer Session

Operator

Thank you, Mr. Hall. (Operator instructions). Our first question is from John Tumazos with John Tumazos Very Independent Research. Please go ahead.

John Tumazos – John Tumazos Very Independent Research

Congratulations on all the progress, all the growth projects, all the different balls in the air. How much more manpower capacity do you think you have in the various skill sets evaluation, engineering, metallurgy, etc., to undertake more acquisitions and if you were given the opportunity to grow even faster?

Chuck Jeannes

Well, first, John, thanks, we appreciate the support. Yes, this is something that Steve obviously has been working on a lot with his team and Barry Olson, who you know, is our Vice President of Project Development. And one of the benefits that we have is that we have a team that has been very successful in developing Peñasquito from a construction sense that is largely completing that work and looking for its next challenge. And we also have growth at places like Cochenour that relies largely on the existing Red Lake team, Eleonore, where we had a team in place for several years now and continue to staff that up incrementally. So it’s not as though there’s a mad rush to go out and as people has been done on a pretty regular and measured basis.

And so we have as you know 50% growth profile over the next five years, already built in, beyond that, we’re looking at developing Cochenour and Eleonore and El Morro, Noche Buena, Camino Rojo, all things that are not yet included for the most part in that five year growth plan. So the plate’s pretty full right now. I won’t say that we don’t look at additional acquisitions. Of course, we always do. But we’re certainly in no rush to get out there and do something new we can be very selective and I think opportunistic.

John Tumazos – John Tumazos Very Independent Research

Looking at the projects on the table and the existing mines, in several years, there could be as many as 20 different producing units in Goldcorp. Are you comfortable with having that many locations as you reach the 4 million ounces?

Chuck Jeannes

I guess I would challenge your numbers a bit. I don’t think we would get that high even with all the things that just led to so many of them, like Noche Buena and Camino Rojo are essentially satellites of Peñasquito, Cochenour is just an add on to Red Lake. So we’re really talking about adding Eleonore and El Morro. But your point is a good one. And with all due respect to my former colleagues that at Placer Dome heard me say before that we don’t want to become the next Placer, we don’t want to have 16 or 18 mines spread around the world with a few cornerstone operations. Our strategy is instead to focus on those cornerstones and try to develop these larger longer life high quality robust deposits like the Red Lake and the Peñasquito’s and the Pueblo Viejo and focus on those. So I think you should continue to look for us to move in that direction.

John Tumazos – John Tumazos Very Independent Research

Thank you.

Chuck Jeannes

You bet.

Operator

The next question is from Greg Barnes of TD Newcrest. Please go ahead.

Greg Barnes – TD Newcrest

Thank you. The question is for Steve. At Los Filos, it seems to have settled down. You’ve got the agglomeration plan up and running now. Where do you think recoveries track, production tracks over the next year or two?

Steve Reid

Yes, I think we’re looking for growth, you know that our guidance for this year is 300,000 ounces from Filos, up from the 240,000 I think it was of last year. So as I said, very happy that we’re seeing the potential of Filos now. Can we go significantly beyond that? We haven’t indicated that really much at this point. But yes, we’re looking for boost and recovery. And that’s what this question of agglomeration does for us.

Greg Barnes – TD Newcrest

So, you’re at 42% in Q1. Where do you see recoveries going? When you get to steady state?

Steve Reid

Yes, those recoveries as you know are a function of some stuff that went on the pad very recently and has almost no recovery with other that’s been there for a long time and has significant out. A steady state longer-term without crushing is 55% but the rationale beyond our crushing and agglomeration plant is that by crushing the higher grade material we can take the recovery for that component of the material from 55% up to 72% by that crushing.

Greg Barnes – TD Newcrest

And how much of that material is there going to be being loaded on the pad as a percentage of the total?

Steve Reid

In real numbers we’re looking for 4 million tons per year versus the 20 million tons per year of the other run of mine material.

Greg Barnes – TD Newcrest

Okay, good. Thanks, Steve.

Chuck Jeannes

Hey, Greg –

Operator

Thank you.

Chuck Jeannes

Sorry, I was just going to add to, Greg, the other part of the story of Los Filos is the exploration and you’ll recall that we had a strong reserve increase there this year and our year end numbers and we continue to see good success at exploration in the 4P area, Los Filos. So it’s really developing in kind of all respect into a mine that is one of those cornerstone operations that I was just talking about it. It’s got a great future.

Greg Barnes – TD Newcrest

Great. Thanks, Chuck.

Operator

Thank you. The next question is from David Haughton with BMO Capital Markets. Please go ahead.

David Haughton – BMO Capital Markets

Yes, good afternoon, and thank you for the presentation. Quite a few moving parts in the update here, but I'll just focus in on Red Lake. I noticed that you've got the connecting drift at the 45th level. And I'm just wondering what kind of benefits we can see from that operationally and production wise?

Steve Reid

Yes, I think, David, at this point in time that connection is 45 is the extension of the 4199. So we came off 41 at the Campbell side, came across position that’s also above the high grade zone to drill down into it. That was the primary purpose. Having looked at things within assist there are now potential flexibilities we can build in by moving equipment between the mines, ventilation we’ve always been very cautious so because to link the two mines which you had independent systems but we now think we can do that and we get those sort of efficiencies. There are several. At this point we haven’t been incredibly explosive about what we’ll get but there is no question that we’ll build this flexibility and we’re looking for an all sorts of support areas rather than initial immediate production.

David Haughton – BMO Capital Markets

All right. I also noticed basically, in the same paragraph, that you've started drilling to test the open pit resource. When would we start to see results from that? And then taking it a step further, when would you have a timeframe for a decision as to whether that's a go or not?

Steve Reid

We’re basically looking at having more solid information before the end of the year. In terms of whether that will be enough information to make a categorical decision we’re not sure until we see what that information is. But we certainly looking to be more concrete than we’ve been able to be today by the end of the year.

David Haughton – BMO Capital Markets

Okay, thank you. And just finally, Alumbrera deferral of sales, are you confident that we'll see those going out during the course of this quarter?

Steve Reid

My understanding is that already gone.

David Haughton – BMO Capital Markets

Okay, great. That's it for me. Thank you.

Operator

Thank you. The next question is from Anita Soni with Credit Suisse. Please go ahead.

Anita Soni – Credit Suisse

Good afternoon, Chuck and Steve. Just a couple of questions with respect to Los Filos. So the run rate in terms of throughput are we still looking at 24 million tons total or is that slightly higher? You see your run rate during quarter annualizing about 28 million tons.

Steve Reid

24 million tons generically is the number that we’re looking at. And as I said it’s roughly 20 million tons run of mine material from the two pits and the increment the 11,000 tons a day or 4 million tons is the high grade material. Both combination from underground and the high of rate increment, and of course, it’s only plus one gram a ton, but this plus one gram of the both fields.

Anita Soni – Credit Suisse

And then when I just do the math on the 42% recovery rates and what you've put in terms of grade and throughput I get to about 55,000 ounces. Is that extra 15 from Neukai [ph] or to get the 72,000 ounces for the quarter?

Steve Reid

Sorry, to get which 20 –?

Anita Soni – Credit Suisse

The 72,000 ounces that you got for the quarter. I’m just wondering, maybe we could take that offline just to reconcile. How much was from Neukai I guess is my question?

Steve Reid

Okay. Now the short answer is that almost none was from Neukai because we had the Neukai plant now closed since the third quarter of last year. And what we’ve been doing is stockpiling that underground ore. I think where your difference is coming is as I mentioned that 42% recovery is not the incremental recovery in the quarter, it’s the cumulative recovery of the entire pad at this point in time where we’re expecting a 55% recovery. And I think if you use 55% you will be closer to the number.

Anita Soni – Credit Suisse

Okay. And then just with respect to San Dimas, the throughput is slightly down. I'm just wondering if that you expect that to return to normalized levels. 145,000 tons that you had in the –?

Steve Reid

At this stage shorter-term issues we actually during the quarter just sort of little less or in the development that we draw, shorter-term thing nothing significant in the longer-term.

Anita Soni – Credit Suisse

And then at Peñasquito, the unit costs you provided, could I just get the actual tons that you moved? I just wanted to know what the denominator was when you’re providing the units in terms of dollars per ton?

Steve Reid

43 million tons.

Chuck Jeannes

Do you want them all, Anita or–?

Anita Soni – Credit Suisse

No, no, I just want to be able to like multiply backwards to figure out what the actual dollar amount was for each one of those unit costs that you guys provided. And I think that’s about it. Thank you.

Chuck Jeannes

Thanks, Anita.

Operator

Thank you. The next question is from Barry Cooper with CIBC. Please go ahead.

Barry Cooper – CIBC

Hey, good day, everyone. Steve, just wondering at Musselwhite, grade was up, but costs were up, and I'm wondering if there is a marked difference in the cost per ton coming from the PQ deeps there relative to the rest of the mine. Is there quite a difference or is it fairly uniform on a cost per ton no matter where you're mining?

Steve Reid

Again, there’s nothing there other than that it’s the deepest part of the mine. Because from that point alone yes it is. We’ve built fair chunk of flexibility and we focus on that area, but other than that being deeper it’s nothing tricky of that geometry or mine method or any of those other things except we’re going.

Barry Cooper – CIBC

Yes, I was wondering if there was a different mining method or something there, such that as you get more and more ore coming from that area, in those deeper areas, whether we should anticipate higher cost per ton or markedly higher cost per ton or whether more or less going to be the same throughout the mine as an overall average?

Steve Reid

It doesn’t relate to method or anything like that. In a lot of cases here what you’re seeing is changes in the amount of development which is done as these new areas are set up.

Barry Cooper – CIBC

Okay, thanks. Then, for Lindsay, because I don’t think he is working hard enough today.

Lindsay Hall

Thank you, Barry.

Barry Cooper – CIBC

Just wondering what should we read into the situation here where you really only took out $1.03 billion for the loan for PV whereas I thought it was going to be quite a bit higher. What was the rationale for the lower amount? Is there something that we should read into that or just what is the situation there?

Lindsay Hall

Yes, Barry, just clarify for me, I’m not sure I follow; this is Pueblo data that you’re talking about –?

Barry Cooper – CIBC

Yes, I thought originally and maybe this is our personal conversation or whatever, but I thought the amount was $1.5 billion.

Lindsay Hall

Yes, I think it was always a billion. As you know Barrick’s driving it very, I think we’re always targeting 1 billion so, I never thought we’re going to raise that much more as to do with how much debt we can put down there on the agreement with the Dominican Republic government and what not. That hasn’t changed.

Barry Cooper – CIBC

And that’s why I was wondering whether there had been something there that had caused either the banks or whatever to say, okay, well that’s the cap, but maybe I was just mistaken that $1.5 billion was the figure that was talked about. Admittedly, I thought it was a couple of years ago.

Lindsay Hall

Very, very from my perspective, it’s always been a billion. I haven’t heard a number that’s different that over the last two years that this has been worked on.

Barry Cooper – CIBC

Okay, good enough. Might have been your predecessor.

Lindsay Hall

Perhaps.

Barry Cooper – CIBC

Okay, thanks a lot then.

Lindsay Hall

Thanks, Barry.

Operator

Thank you. The next question is from Patrick Chidley with Barnard Jacobs Mellet. Please go ahead.

Patrick Chidley – Barnard Jacobs Mellet

Hi, everybody. Just got a quick question on Eleonore. I wonder if you could just quickly sort of go over a bit more detail about how you’re seeing the schedule on that going over the next few years? It seems as if you should be obviously finished with the exploration shaft 2012. And you're talking about a construction decision by the end of this year. I'm wondering what sort of construction would that sort of mean and what position would you be in at the end of 2012 in terms of perhaps having a plant and being able to actually process some initial ore between 2012 and 2015?

Chuck Jeannes

Patrick, this is Chuck. I’ll let Steve answer the details, but I’ll just refer you back to our year-end release where we talked about the initial results from our prefeasibility study at Eleonore. And in that release we said that we did not anticipate initial production before 2015 so that gives you a general sense of the schedule and as I’ve said our plus 50% growth profile that 3.8 million ounces does not include any contribution from Eleonore at this point. So with that I’ll pass it over to Steve.

Steve Reid

I think just to add on, Patrick; we said, okay, make a decision by the end of this year, as I mentioned before there’s not a single silver bullet thing that we’re looking for the changes anything we had in the prefeas. We’re looking at numerous areas and to see if we can enhance whole lot of things. As Chuck mentioned we’re currently looking for first gold about 2015. We’ve been moving fairly methodically in terms of having power on to the project and that’s been a multiyear progress and we’re expecting to have cal there for the third quarter of this year, which then obviously facilitates very efficient construction unlike some where we’d have to do with diesel power and finish the construction of the exploration shaft about near the end of 2012. So all of those things are designed to kind of hit that first number around 2015 if we can.

Patrick Chidley – Barnard Jacobs Mellet

Will the exploration shaft be sort of sized big enough to and actually provide a fair bit of production given the grades are particularly high?

Steve Reid

At this point we’re not planning on that. We have sized it for flexibility clearly but it’s designed for it, it can be incorporated into the longer-term plan of prep really whatever that is.

Patrick Chidley – Barnard Jacobs Mellet

Okay, so production decision by the end of this year is kind of still going to be subject to exploration results really over the course of the next three years or four years?

Steve Reid

No, I don’t think so. Our issue is that and we said several times some of the better grade is deeper within the mine and we’ve certainly chased that up. It’s become inefficient to chase all of that from the surface. That’s one of the primary drivers for the exploration job. But additionally, what we’ve said is that our exploration now is partly in-filling the ore body but it’s also looking at things in the hanging wall that are closer to the surface and that’s going to help us bring production forward. So it’s a dual focus in the current drilling that we’re doing from surface which ultimately we want to enhance by doing from underground as well.

Patrick Chidley – Barnard Jacobs Mellet

Okay, but we mustn't read anything into a production decision by the end of the year kind of thing and maybe changing what you said earlier about the 2015 first production, maybe moving it forward.

Chuck Jeannes

I wouldn’t build anything in before that, Patrick. We’ll make a production decision by the end of the year and then get busy but as you know it’ll take couple years to get the plan built and to get the first production in 2015 I think is the reasonable estimation at this point. Now, those things are all being tied down in this additional feasibility work we’re doing and we’ll have all that additional information for you at year-end.

Patrick Chidley – Barnard Jacobs Mellet

Okay, great. Thanks for your answers. Okay, cheers.

Chuck Jeannes

Thanks, Patrick.

Operator

Thank you. The next question is from Steve Butler with Canaccord Adams. Please go ahead.

Steve Butler – Canaccord Adams

Okay. Just seem to be Canaccord Genuity. A question for you just harp on Los Filos, Steve, was the crusher agglomerator circuit working at full rate or only partially throughout the quarter?

Steve Reid

No, it was on the partial during the quarter and in fact it only started in I forget the date exactly but mid February roughly. So in terms of contribution to actual production bearing in line we’ve got a crusher at agglomerator put on the pad and then begin to leach it was effectively nothing.

Steve Butler – Canaccord Adams

Right, and what’s the curve again? Remind me at Los Filos the curve, which curve?

Steve Reid

I don’t have a whole curve in front of me. Sorry, but 55% for the run of mine is the (inaudible) and 72% is the increment by crushing the material and just exposing the surface area.

Steve Butler – Canaccord Adams

Steve, initial gold resource by year-end at Cochenour, which I assume is Cochenour/Bruce Channel. What level of drilling is required to sort of book this resource, I assume into initially inferred and do you have confidence in being able to do that amount of activity and I guess maybe it’s assisted by working underground and from surface too, is that correct?

Steve Reid

It’s primarily driven underground because we’re trying to hook into the top part of the Bruce Channel, ore body to generate this resource. You’re right. It is a complex and it is working off a tight schedule because we’re currently underground at portion we’re having what the water level down. But basically around the start of the fourth quarter we need to retreat and get out of that as we start the shaft expansion exercise. So we only have the window between now and then.

Roughly, we’re expecting 12,000 meters to 15,000 meters of drilling. But we actually need to do a little bit of development underground at Cochenour as well in the meantime to get a set up in the optimal location to do that drilling for the top of the ore body. It was a top of what was defined as the previous ore body because we actually believe we’re going to fill in the gap between what is currently known as Cochenour and what’s currently known as Bruce Channel.

Steve Butler – Canaccord Adams

Okay. Lastly, Red Lake, I think was, correct me if I’m wrong, barely a quarterly production record, I think the last quarter near this level was Q4 of '08 at least in my data here. It’s a good quarter at Red Lake on the production ramp up but still a ways to go towards 3,000-odd tons per day. What’s the key items that can get you there to that higher level of intended ultimate throughput at least as we know it today?

Steve Reid

I would tell you we’re not going to say that one single thing is done. Our approach this year has been to add incremental throughput. We’ve added additional material from the sulphide zone of about 300,000 tons per day. We’re currently opening up the Far East zone to see if we can add a little more still. And as we said we’re focusing on filling the mill strategy to get to that 300,000 tons a day. And as one of the earlier questions mentioned we’re going to connect to two mines provides us mobility of equipment flexibility, manpower flexibility, we’re providing facilities closer to the shaft to get more efficient in that way. It’s just really an attention to detail. There’s going to be no single thing that we just suddenly invent to up throughput.

Steve Butler – Canaccord Adams

Okay, Steve. Thanks, guys.

Steve Reid

Thanks, Steve.

Operator

Thank you. The next question is from David Christie with Scotia Capital. Please go ahead.

David Christie – Scotia Capital

Hi, guys. Just a follow on with Steve’s questions on Red Lake there. Just on the haulage capacity there, could you remind me what it is?

Steve Reid

Sorry, this is hoisting capacity –?

David Christie – Scotia Capital

Hoisting sorry, apology.

Steve Reid

It’s well in excess of what remaining and processing are. We have about 5000 tons a day from the number three shaft. And then on the Campbell side we have something similar from the reach shaft. So very, very significant hoisting capacity in advance of that mining approaches and capacity.

David Christie – Scotia Capital

And what are you hoisting right now, total waste and everything?

Steve Reid

It’s about 3500 or there about, it’s our focus clearly north and not significant quantities of waste.

David Christie – Scotia Capital

Okay. So how much more sulphides could you access if you wanted to?

Steve Reid

Around the ore bodies we actually have quite a lot physically in the upper levels about the 30. Can we access it set it up develop it, etc.? I guess that’s why I said we now looking for some quick introduction of those. We’re drilling in numerous areas. We’re advancing them, but our plan so far is to add 300 to 400 tons per day. If we can make it more we will, but as I’ve said many times we’re only going to do this as incremental seed to what is the bulk of the seed from the high grade zone.

David Christie – Scotia Capital

Sure. But I would have guessed that per ton cost on the sulphides is probably lower because it's wider and sort of bigger stopes kind of stuff, isn't it?

Steve Reid

That’s correct.

David Christie – Scotia Capital

What is the difference on the cost side, can you give me that?

Steve Reid

In round numbers, it’s something like $200 a ton for the narrow high grade material and let’s say $100 ton or $50 a ton on the (inaudible).

David Christie – Scotia Capital

Significant. Thank you. That’s great.

Chuck Jeannes

Thanks, Dave.

Operator

Thank you. There are no further questions registered at this time. I would now (inaudible) back over to Mr. Jeannes.

Chuck Jeannes

Okay. Thanks, operator, and thanks everyone again for being here with us today. We look forward to seeing many of you over the next month as we hold our Annual General Meeting and Investor Day in May. And otherwise we’ll talk to you at the end of the next quarter. Good bye.

Operator

Thank you. The conference has now ended. Please disconnect your lines and thank you for your participation.

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Source: Goldcorp Inc. Q1 2010 Earnings Call Transcript
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