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Goldcorp (NYSE:GG)

Q3 2006 Earnings Call

November 15, 2006 11:00 am ET

Executives

Ian Telfer - Chairman

Kevin McArthur - President and CEO

Analysts

John Bridges – JP Morgan

Tony Lesiak - UBS

Andrew O'Connor - Wells Capital Management

Jason Reynolds - Private Investor

Murray Ratton - Private Investor

Susan Muir - National Bank Financial

Mike Jalonen - Merrill Lynch

Cosmo Chu - CIBC World Markets

Larry Strauss - GMP Securities

Presentation

Operator

Good morning and welcome to the Goldcorp third quarter earnings conference call for November 15, 2006. Your host for today will be Ian Telfer. Mr. Telfer, please go ahead.

Ian Telfer

Thank you, operator and welcome to the Goldcorp third quarter 2006 earnings conference call. Before I go ahead, the lawyers have informed me that I should go through this forward-looking statements paragraph.

This conference call contains forward-looking statements 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; the cost of production; capital expenditures; costs and timing of the development of new deposits; and permitting timelines. 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 statements. Accordingly, you should not place undue reliance on forward-looking statements.

Turning to the quarter, clearly the defining moment of Goldcorp's third quarter was our announcement of a $20 billion merger with Glamis Gold. We are very pleased that we were able to complete this transaction on November 4, within a couple of months of the original announcement, despite various hurdles along the way. This transaction immediately doubles our gold reserves and resources, and solidifies our leadership position in the Americas.

Now to our third quarter results, which for the first time we are including a full quarter of the operating results from the Placer Dome mines. Net earnings were $59.5 million, or $0.14 a share compared to $56 million, or $0.17 a share in 2005. However, during the quarter, we incurred $32 million of non-cash losses from copper hedges, declines in marketable securities, and an exchange loss on the revaluation of future income tax liabilities. Adjusted for these items, net earnings amounted to $91.5 million or $0.22 per share for the quarter. Operating cash flows increased 161% to $221 million or $0.53 a share compared to $85 million or $0.25 a share a year ago.

Gold production increased 52% to 432,000 ounces, the highest quarterly production on record, compared with 284,000 ounces in 2005. Gold sales were 421,000 ounces compared with 277,000 ounces in '05. Total cash costs were $84 per ounce, net of byproduct credits, compared to $9 an ounce in '05.

When we compare our results to the second quarter of '06, we see a large impact due to lower copper sales, so we are now comparing Q3 '06 to Q2 '06. Adjusted earnings amounted to $91 million for the quarter compared to earnings of $137 million in the second quarter of this year, primarily due to lower copper sales volumes -- we sold 33 million pounds compared to 48 million pounds in Q2 -- and lower copper realized prices and timing differences between production and sales.

Copper sales volumes were lower in the third quarter due to lower production at Alumbrera -- 36 million versus 42 million pounds -- on lower grades, which were expected as part of the mine plan; and due to the fact that the Peak was unable to ship any gold copper concentrate due to high moisture content. Peak should be able to sell this concentrate in Q4.

Despite lower copper sales, operating cash flows remained very strong at $221 million in the quarter compared to $240 million in the second quarter of this year, and gold production increased to 432,000 from 379,000 in the second quarter of this year. Gold sales were 421,000 compared to 398,000 and cash costs were $84 compared to minus $23, mainly due to lower copper byproduct revenue.

When we compare our adjusted earnings of $91 million with consensus estimates of approximately $125 million, the $33 million shortfall is primarily composed of a 40,000 ounce shortfall in gold production and a 10,000 ounce shortfall in the timing of gold sales -- that would give an impact of approximately $21 million -- and 5 million pounds of copper shortfall and timing of copper sales, about a $12.5 million impact. So this accounts for the difference between what expectations were and what we realized. So clearly, the challenge for us -- the timing is something that will correct itself -- but the 40,000 ounce shortfall in gold production is the issue we will be addressing.

Copper production for the fourth quarter is expected to be in line with third quarter, both of which are on target with our expectations that copper grades would decrease at Alumbrera during the second half of the year.

Cash and cash equivalents at September 30 were $342 million, up from $265 million in June, due to strong operating cash flows of $220 million, less investments in mining properties of $122 million and dividends paid during the quarter of $19 million.

Turning to the operations, Red Lake gold mines produced 156,000 ounces of gold at a cash cost of $214 per ounce. This result was lower than historical results due to continued lower grades. Red Lake's results were approximately 50,000 ounces short of our guidance given in August. We expect improvements in Q4 results to between 180,000 and 190,000 ounces and continued improvements beyond.

Despite the short-term setbacks in productions, we have made significant strides to integrating the Campbell and Red Lake complexes, including connecting the two sides with two ore passes and almost completion of a third. This connection has allowed excess capacity at the Campbell mill complex to be better utilized. This and other connections will provide exploration platforms to explore the boundary areas between the two properties. Exploration results from recent drilling in this area have been very encouraging, with a number of high grade intersections. Other high grade exploration results have been generated from Deep Campbell, providing ongoing drilling priority in the area.

Just a comment on the integration and how well it is going. Since the deal closed, we now have one management team, one phone system, one ERP system and no boundaries with internal roads connecting both sides. We have an interconnected computer network. We have a single exploration program. We have a single mine planning system and one mine plan. As I mentioned, we have now two and almost three cuts between the two operations, so we can move ore across, we have set our exploration priorities, and we have 19 drill rigs on the property.

As far as the synergies that we talked about early in the year, up to the present time from workforce integration we're saving $15 million a year; from treating our gold concentrate on site rather than shipping it to Nevada, we're saving $3 million a year; and we are already realizing $2 million a year from warehouse integration efficiencies. Going forward, we still expect to save $5 million on supply contract integrations and another $12 million from efficiencies once we get all the shafts moving forward. So we are very, very pleased with how that is going. This cost savings that we thought we would achieve here, we are getting very close to that number.

Turning to Porcupine and Musselwhite, we're pleased with the performance of both mines, where production has increased now for three consecutive quarters with a corresponding decrease in cash costs. For the month of October, production at Porcupine was consistent with Q3, and Musselwhite showed continued improvement. Both mines are expected to meet our guidance targets for the fourth quarter. Following the end of this, I will give out what our guidance per mine is for those analysts out there.

The gold production at Porcupine increased to 44,000 ounces for the quarter as a result of more selective mining at the Pamour mine pit and production from the Dome underground operation. Gold production in the quarter was also positively impacted by higher realized grades from the Pamour pit and Dome underground and high recoveries than achieved in the full second quarter. Cash costs decreased to $337 from $361, and prior to that, they were over $400. So we're making progress there. Exploration work has been particularly successful on three fronts, including Pamour, Hollinger and Hoyle Pond.

Diamond drilling has successfully defined new resources, Pamour North contact immediately north of the existing pit. These resources are anticipated to be converted to reserves by year end that will provide an alternative source of higher grade ore. Exploration drilling on the Hollinger project has been accelerated, with five surface diamond drills operating, with an objective of calculating a new resource estimate by year end.

Gold production at Musselwhite for the third quarter was almost 40,000 ounces, an increase of 5% over the second quarter, mainly related to mining ore from higher grade zones. However, tons processed were lower than expected, due to a combination of high backfill requirements, lower than planned equipment availability, and some power interruptions. But we are pleased with the exploration results at Musselwhite during the quarter. Initial results are encouraging and have confirmed the presence of gold mineralization well north along strike of the existing mine. Exploration work is also continuing below the current mining operations, which have provided excellent results to date.

At Alumbrera, operating results continue to be strong, with 65,000 gold ounces produced during the quarter, compared to 69,000 in the second quarter, due to slightly lower grades. These grades are expected to decline slightly in Q4. Copper production for the quarter was 36 million pounds compared to 42 million pounds, as we mentioned, in the second quarter of this year.

Timing of gold and copper sales was approximately 10% below production, having an approximately $8 million impact on our earnings for the quarter. This compares to second quarter, where there was a 10% higher sales than production. So we got hit both ways on that. These missed sales from Q3 will come through in Q4.

Another significant impact on earnings was due to the smaller increase in copper spot prices during the quarter as compared to Q1 and Q2, which reduced the impact of price adjustments on provisional concentrate sales. So this is the value we get after we have delivered copper, but before it is priced. We have been achieving those in the past, which have helped our earnings, while there was a much smaller impact this quarter; the spot price was $348 and the average price we realized was $370. Cash costs at Alumbrera were minus $1,000 primarily as a result of lower copper sales volumes, as described.

As disclosed earlier, Alumbrera is now subject to the YMAD royalty, which is calculated at 20% of net proceeds, which approximates EBITDA less capital expenditures and working capital adjustments. One of the challenges with this royalty is it can have a disproportional effect quarter over quarter. If cash builds up at Alumbrera, the royalty is not due and payable until the cash is paid out to shareholders. So we may get swings in cash flow from that royalty. Finally, the planned expansion at Alumbrera to a 40 million ton per annum capacity progressed very well during the quarter, and commissioning is expected to be on schedule in December 2006.

Luismin achieved yet another record gold production level due to record ore tons milled in the third quarter of 2006 and continuing strong grades. In addition, 2.2 million ounces of silver were produced, 11% more than the corresponding period in 2005. Cash costs of $132 per ounce were higher than the $109 in the second quarter due to an 11% reduction in byproduct silver sales. Base costs have increased by approximately 10% year over year, due to cost pressures in labor and consumables. We're pleased with the ongoing exploration at Luismin and expect a strong increase in year end reserves and resources.

At Peak, production was 23,000 ounces for the quarter; however, gold sales were only 13,000 ounces due to unusually wet winter conditions, which required a longer drying period for the copper gold concentrate. Consequently, there remained approximately 15,000 ounces of gold and 550 tons of copper unsold at quarter end. The fourth quarter will see much-improved results, with higher tons and grade being mined from ore, which was scheduled earlier this year. In fact, October gold production was significantly higher at 17,000 ounces just for this single month.

During the third quarter of 2006, the Amapari mine produced 17,000 ounces of gold and sold 18,000 ounces. Gold production was impacted by lower than planned grades, lower volumes of ore placed on the leach pads. Retrofits to the carbon plant handling system and to the leach pad irrigation systems were completed in the third quarter, as well as the optimization of reagent use and ore stacking sequences in order to improve on leach pad gold recovery performance.

Gold recoveries, which are only calculated on fully reclaimed pads, decreased from the previous quarter due to the impact of the wet season affecting agglomeration and pad irrigation. This ore was leached before the improvements were made. From recent results, we are now seeing improvements from all the changes that were made during the quarter, and we can see that recoveries are picking up. Total cash costs for the quarter were $593 per ounce, due to lower than planned head grades and process rates. Cost reduction programs continued and are anticipated to positively impact costs in the fourth quarter.

Exploration work continued in a number of projects. Diamond drilling at Ville de Mayo has continued with encouraging results and a small but high grade ore volume has been delineated to date. We are currently reviewing the long-term valuation of Amapari through additional geological reviews and the incorporation of the 2006 reserve and resource figure expected by year end. This exercise will be completed during Q4; however, at the present time there is insufficient information to make a decision at this time.

La Coipa gold production was lower at 12,000 ounces due to lower grades. However, silver production increased to almost 900,000 ounces. La Coipa production went through an adjustment during the quarter as production shifted from La Coipa Norte pit to the lower-grade silver Puren pit. The Puren pit is contained in a stand-alone joint venture with Codelco, where the La Coipa mine is the project manager with a 65% equity interest.

Wharf had an excellent quarter, producing 20,000 ounces of gold at a cash cost of $354. They've done a great job of maximizing the life of the mine while at the same time preparing the mine for eventual closure and reclamation. Overall, our operations are working hard to contain the cost pressures that our industry is experiencing, particularly in the areas of labor and certain consumables such as reagents, tires and energy. We will continue these efforts as we go forward.

Silver Wheaton had sales of 3.5 million ounces of silver for the third quarter, including 1 million ounces from the Yauliyacu mine silver stream acquired in March of this year. We're very pleased with Silver Wheaton's performance and expect it to continue through the rest of the year.

Turning to our development projects, Los Filos construction progressed well during the quarter, although heavy rainfalls pushed some civil works into the fourth quarter. Pre-stripping of both Los Filos and Bermejal pits is on schedule, and overall mining productivity continues to increase. All of the mine and process equipment is either already on site or scheduled to arrive as planned. All permits required for construction and operations have been granted or will be granted in Q4.

At Pueblo Viejo project, Barrick, who is the 60% owner and operator, continued to update the feasibility analysis prepared by Placer Dome and review other work completed on the project. During the quarter, a 10,000 meter follow-up exploration drill program was approved and initiated. The objective of this program is to confirm continuity of the new mineralization defined this year and add mineralized resources to the project.

At Eleonore, the priority on the property is to continue the drill program while supporting the engineering scoping studies recently initiated. The ongoing exploration and drilling program is primarily concentrating on three themes: continuation with 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. Until early August, we were limited to 900 meters in vertical depth. Since then, we can now get down to 2,000 meters, so we will be taking advantage of that. Construction of an airstrip and access road is expected to take place during 2007 and 2008. We expect to publish a resource estimate on Eleonore early in 2007.

Turning to other items, depreciation and depletion during the quarter was $78 million, up from $73 million in the second quarter, due to the Placer assets; and up from $29 million in the third quarter of the year before, due to the finalization of the Wheaton River purchase price allocation, which did not occur until year end 2005.

General and administration increased to $13 million from $10 million due to increased corporate activity and the cost increases relating to Sarbanes-Oxley. Stock option expense increased to $7 million from $6 million during the second quarter, due to the inclusion of expense on the books of Terrane Metals, the firm to which we transferred the Mount Milligan property. Because we consolidated their results, it flowed through our financial statements.

Exploration expense increased to $10 million compared to $6 million in the second quarter and $2.5 million from the year before, due to increased investments in Mexico, as well as exploration on the assets acquired as part of the Placer acquisition.

Other income and expense, the most significant item was an increase in the loss with respect to our copper derivatives, which do not qualify for hedge accounting treatment. The loss for the quarter was $20 million, and with continued volatility in copper prices we expect this figure to fluctuate. We'll begin to deliver into these contracts in 2007 and 2008.

Loss on foreign exchange was $10 million, related mostly to non-cash foreign exchange calculations on future income tax liabilities primarily related to the large future tax bumps that have been recorded as required under purchase price accounting. During the quarter, the impact was primarily from the strengthening Mexican peso; however, we can expect future impacts, particularly from Canadian dollar and Mexican peso fluctuations. The Company also incurred $14 million in interest expense due to a full quarter of debt outstanding of $850 million. A loss on marketable securities was recorded of $7 million due to lower gold equity values at September 30.

Results this quarter were negatively impacted by $32 million in non-cash items relating to copper derivatives, foreign exchange and future income tax liabilities and marketable securities declines. Adjusting for these items, earnings of $91 million are below our plan due to somewhat longer than anticipated timeframe to take full advantage of the Red Lake gold mine integration. We are confident at the end the result of this integration will meet our market expectations. We're very excited about our recent closing on the Glamis acquisition and the incredible pipeline of growth that we have in projects throughout the Americas.

This of course will be my last conference call in the position of President and CEO of Goldcorp. It has been an incredible five years with Wheaton River and Goldcorp and we expect even better things over the next five years. I look forward to being very active in my role as Chairman, and I am looking forward to working closely with Kevin McArthur and his team.

I would like to take this opportunity to thank the departing directors of both Glamis and Goldcorp for their hard work and dedication. I would especially like to thank the employees of both Glamis and Goldcorp for their unbelievable hard work in building what is now the truly world's premier gold mining company.

Most of all, I would like to thank our shareholders, who have stuck by our Company and the vision we have had to build Goldcorp into not only what it is today, but also what it will be tomorrow. Stick around; the fun isn't over yet. I'd also like to thanks Doug Holtby, who is stepping aside as Chairman of Goldcorp, to allow me to move into that role. Doug did a great job for us in the period of time he held that position, and we owe him a great deal of gratitude.

So at this point, I believe Kevin McArthur is on the line. I would like to turn it over to Kevin and maybe have him say a few words, and then following that, we will open it up to questions. Thank you very much.

Kevin McArthur

Ian, thanks very much and thank you all for attending I guess the first conference call of the new Goldcorp. Just some quick comments and then over to Q&A. Speaking for all of the Glamis team, I can say we're all very excited about looking forward to this new challenge. I think Ian mentioned this, we are combining the teams that delivered the most shareholder value over the last five years. I believe that we can continue this culture of accomplishment. It is not without its challenges. I've got a list of priorities. I've just written a few notes here.

First, set the organization of the future for Goldcorp. This is now underway, including the very important tasks of combining our head offices into the Vancouver office, combining our Mexico teams and ensuring that the best of our corporate cultures move forward.

Second, make sure that our underperforming assets get turned around and to set appropriate targets for 2007, and to achieve these targets. You'll hear more about this in December, when we update our 2007 budget for The Street.

Third, complete the Red Lake integration process in a way that maximizes shareholder value. Ian mentioned it. This is slow. I recognize a certain amount of impatience is certainly there on The Street. But this Red Lake mine, it may outlive all of our careers, and I want to make sure that it is done correctly.

Fourth, to hit our targets with our new projects. First, of course, as Ian mentioned, comes Los Filos in Mexico next year, further exploration results from Penasquito, then start-up of construction in the second half, and later, Eleonore, the same thing in Quebec, just a little bit later. This is a lot of work, and from where I sit, this Company is certainly up to the challenges. So thank you once again for attending this call. I look forward to our December tour of Penasquito, and then of course our reporting to you all in the new year on our fourth quarter.

So having said all that, I believe that I will turn it back to Ian for any comments you may have, Ian, and then on to Q&A.

Ian Telfer

Thank you very much, Kevin. I'll just echo what Kevin said, is we are all very excited about going forward. At neither Wheaton River or Glamis or Goldcorp did we ever expect we would end up with a company that looks like this one. As Kevin said, not only did both companies have a great past, we think we have got a fantastic future.

So with that, operator, I will open it up to questions.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from John Bridges – JP Morgan.

John Bridges - JP Morgan

Ian and Kevin, congratulations to you both on putting this together. You mentioned a run rate of sort of 180,000, 190,000 ounces per quarter at Red Lake, which seems to be 720,000 to 760,000. Is that a fair number again for 2007?

Ian Telfer

It is Ian here. Just wait a couple of weeks and we are going to give you guidance going forward for the whole year. I don't want to comment on it one way or the other. But just give us a couple of weeks and we will give you a harder number.

John Bridges - JP Morgan

You did in the presentation talk about doing something to the resource base at Campbell. Could you fill us in a little bit on that?

Ian Telfer

Essentially, when we acquired the Placer assets, of course, as it was hostile, we didn't get to do any of our own due diligence and so we took all the numbers at face value. Then in looking more closely at the way they were calculating the reserves and resource at Campbell, in our view, they were using a cutoff grade that was sub-economic. So therefore, we will have to make an adjustment to the resources. It won't affect reserves, but it will affect the resources.

In the scheme of things, we don't expect it to be material. These are the numbers that they had at the end of 2005. We have had additional drilling there this year, so the year end number will be a compilation of what they had less what we've taken off as sub-economic, plus what was found during the year. So that will come out with the rest of the reserves and resources. But it won't be material.

John Bridges - JP Morgan

Amapari, the text there sounds a little bit like a writedown. Is that possible?

Ian Telfer

We are in the process of looking at the ongoing exploration results. Some of the improvements we are starting to see in the production and the project in its totality. So it is too early to say. With these mining projects, you do have to give them time. I guess our best example is Alumbrera, which for many years looked tough, and then all of a sudden turned into a fabulous project. So we are not in a rush to a decision here. So we are going to take a look at all the facts and then we will decide what to do going forward.

John Bridges - JP Morgan

Thanks a lot. Good luck, guys.

Operator

Your next question comes from Tony Lesiak - UBS.

Tony Lesiak - UBS

Good morning. First of all, congratulations on the combination. Ian or Kevin, can you comment maybe a little further on Amapari? What options are you looking at here? Are we talking closure, a milling scenario, dedicated heaps, more capital? Maybe just give us a little more specifics.

Ian Telfer

Well, we're first assessing what we've got now, and then we're looking at some of the alternatives going forward. Certainly, yes, one of them is milling, and looking at the reserve base we have and what we expect coming in the future and making a determination as to the economic viability of that. So that is a big part of the process.

But there is no consideration of closure, I can assure you of that. But we are looking at all the other alternatives to turn it into a more viable project than it is operating at right now.

Tony Lesiak - UBS

And the timeline for the making a decision?

Ian Telfer

We will certainly be able to say something before we put out our fourth quarter results.

Tony Lesiak - UBS

I am a little confused on the Campbell inferred resource statement that you made. If I look at the resource, it is actually higher grade than the reserve. It is running at about 11.5 grams. So I'm just wondering why using a lower cutoff would put some of those ounces at risk.

Unidentified Corporate Representative

The resource is also based on the density of drilling, too. So that is going to have an impact. You could have a resource that is higher grade than reserves at times. It just depends on the compilation of the data.

Tony Lesiak - UBS

Either way, you are suggesting it's not material anyway, given all the drilling you've done this year?

Ian Telfer

That is correct.

Tony Lesiak - UBS

You have indicated that the shaft is going to be ready a little earlier than expected, closer to mid-year. Does that mean that you're going to be looking at bringing out higher quantities of the high grade from Red Lake for milling at the Campbell side, potentially increasing production starting mid-next year?

Ian Telfer

Well, we are reluctant to get too far ahead of ourselves on that, Tony. As we say, we will give you guidance in a couple of weeks. And that guidance will reflect what we expect will happen with the timing of that shaft. But yes, you are right, it has picked up its pace. It has gotten a little ahead of the revised schedule. We are very pleased with that. It's almost at its full depth. So yes, it is all good news on both the expansion of the surface plan and of the shaft. But I'm not going to get ahead of Kevin on this one.

Tony Lesiak - UBS

Finally, just on the exploration budget this year, next year, and maybe comment on the SG&A.

Ian Telfer

The SG&A, I don't expect, is going to get any more expensive than it is. We don't expect the level of corporate activity to be anywhere near what it has been over the past 12 months. So we don't expect that to increase. We hope we are going to be able to cut it back a little bit, especially with combining with the Glamis offices in Mexico.

And on the exploration side, again, I am going to defer that one to you. We will get you something possibly when we give out the guidance for the year.

Operator

Your next question comes from Andrew O'Connor - Wells Capital.

Andrew O’Connor - Wells Capital

Any progress at Penasquito that you might be able to comment on today, Kevin? Permitting, mine planning, or in particular, development drilling? Thanks so much.

Kevin McArthur

Andy, thanks. Really no comments at this point in time. We've got our analyst tour scheduled there for December 6 and 7. While we won't be updating resources, we will be putting out new information on some drilling just prior to that tour so that we don't have any FD issues. So until then, no, nothing. You will see that in early December.

Andrew O’Connor - Wells Capital

Thanks.

Operator

Your next question comes from Jason Reynolds - private investor.

Jason Reynolds - Private Investor

I have two quick questions, gentlemen. The reason, I think, we shareholders invested so heavily into Goldcorp and even Glamis was the lack of hedging. So I really think I speak for all the shareholders in that we'd like to see all those hedges, copper hedges, close down as quickly as possible. It's really disappointing that you even ventured into that kind of toxic game.

Secondly, any decision on when the silver will be moved to Silver Wheaton from the Glamis assets? Those are my questions.

Ian Telfer

Sure, thank you. Well, I will take them in the order you asked them. On the copper hedging side, I would have to say of all the shareholders we've talked to, you would be in the minority of our shareholders. Most of our shareholders are very pleased that we've hedged some copper at these types of prices. They see our main business as gold. Most analysts have the copper price coming down over the next two or three years, so we thought it was very prudent, as did our friends at Barrick, to hedge some of the copper. So the volatility, you can't do anything about. It's not really costing us anything because we haven't closed out the hedges. So we haven't lost any money yet. But anyway, I take your comments. I'm sure you do represent some of the shareholders. But we just let you know that it is possible we may hedge some additional copper going forward.

On the second one, as far as Penasquito silver to Silver Wheaton, again, this is something we said we will look into in time. With the closing of the deal we haven't even gotten our minds around to it yet. But it is something we will look into. If we can come to an arrangement that is positive for both companies, we'd look forward to try to do something with our friends at Silver Wheaton.

Operator

Your next question comes from Murray Ratton - private investor.

Murray Ratton - Private Investor

Hello, gentlemen. I am a private investor with Goldcorp, have been since the early days, going back to Wheaton River Minerals and now with Glamis and Goldcorp. My question is this: with the dilution of shares upon the Glamis/Goldcorp merger, how will that play out in the near future for shareholders insofar as earnings are concerned?

Ian Telfer

It is Ian. I will take that one. Well, in the short term, the earnings per share will be less in the new Goldcorp than they would have been in the old Goldcorp, and the cash flow per share will be less. But that lasts, depending on your metal prices, for three or four years. After that, it will be higher. So the choice you have when you are making these types of acquisitions is what are you willing to sacrifice in the present for a stronger future? That was the decision we made with Glamis.

When you get out further, the earnings and cash flow are significantly stronger as Penasquito comes on and so that is the impact of this type of an acquisition when you use shares.

The other side of it is immediately, though, the reserves and resources behind these Goldcorp shares has increased. And so therefore, what is actually in the ground, you have more of that supporting your share going forward. So that was the tradeoff we made. From the pronouncement from many of the analysts, they agree with our decision. And it is very interesting in spite of the fact there will be lower earnings and cash flow per share, a number of the analyst reports have come out and their targets for Goldcorp are higher now than they were before the acquisition. So we feel that they are in agreement with our decision. But thanks for your question.

Murray Ratton - Private Investor

I have one other question. Regarding the price of gold, with the trend of the gold market going up, is it safe to assume that Mr. Telfer's idea was to have these assets in the ground firmly for Goldcorp so that as the POG ascends into the coming year or two years or three years, that you would be safely set up in what is called the catbird seat. Am I correct in saying that?

Ian Telfer

Absolutely correct. No, you are right. We acquired the assets at today's gold price. We are very bullish on the price of gold going forward, and you are right; the value of everything that we've put together with Glamis and Goldcorp we believe will be worth significantly more as the price of gold continues to go up.

Operator

Your next question comes from Susan Muir - National Bank Financial.

Susan Muir - National Bank Financial

Just for Q4, for our models, from an accounting perspective, should we be modeling roughly two months of the Glamis assets or starting these at year end? Secondly, just wondering if you expect the goodwill allocations will be finalized with your year end financials?

Ian Telfer

The first question, yes, you can take two months of the Glamis assets. The goodwill allocation will not be final by our year end financials.

Susan Muir - National Bank Financial

Do you have a rough estimate for a timeline for that?

Ian Telfer

Middle of the year, probably.

Operator

Your next question comes from Mike Jalonen - Merrill Lynch.

Mike Jalonen - Merrill Lynch

You had mentioned earlier you were going to give us the fourth quarter production forecasts for the mines. Did I mishear you, or? I was just wondering if you had those?

Ian Telfer

Didn't you hear it, Mike?

Mike Jalonen - Merrill Lynch

I guess I am deaf.

Ian Telfer

I will give them to you right now. I'll just read them down. I am not giving anything on costs, but I will just give you the expected production in the fourth quarter of each mine.

As I said before, Red Lake, between 180 and 190; Porcupine, 44; Musselwhite, 43; Luismin, 50; Amapari, 20; Peak, 36; Alumbrera, 46; La Coipa, 9; and Wharf, 20. And that should get you to around 450,000 or a little higher than that, ounces for the quarter.

Operator

(Operator Instructions) Your next question comes from Cosmo Chu - CIBC World Markets.

Cosmo Chu - CIBC World Markets

Can you give me a sense as to the grades coming from the old Red Lake and old Campbell mine separately for Q3?

Ian Telfer

Just a second. I haven't got it right in front of me. I just don't have the historical data in front of me for Campbell. I'm not going to be able to help you. But if you want to give us a call offline, we can get that information for you.

Cosmo Chu - CIBC World Markets

How much was the payment for YMAT in Q3 in terms of dollars?

Ian Telfer

$17 million. That is our share.

Operator

Your next question comes from Larry Strauss - GMP Securities.

Larry Strauss - GMP Securities

Congratulations on the merger. Dynatec and yourselves are operating respectively the Red Lake side and the Campbell side of the mine. It that situation going to persist, or are you going to rationalize something there?

Ian Telfer

It is Ian here. Certainly, we are very pleased with our relationship with Dynatec on the Red Lake side. So at the present time, we have no plans to alter that. And at the same time, with the owner-operator employees on the Campbell side, that has also worked very well. During this integration process, of course, there has been a mix of everything and it is going extremely well. So we have no plans at this time to change the system. It is working well for both sides. And so no decision.

Larry Strauss - GMP Securities

So you don't feel as if that is hampering the integration one way or the other?

Ian Telfer

Not at all.

Operator

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

Ian Telfer

Thank you, operator. Thank you, everyone. Appreciate your interest, appreciate your questions. As we said, we're all looking forward to the new Goldcorp going forward. On the next call, it will be Mr. Kevin McArthur. So thank you, everyone and take care. Have a good day. Good bye.

Operator

Thank you. The conference has now ended.

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Source: Goldcorp Q3 2006 Earnings Call Transcript
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