Goldcorp just announced that it has suspended its operations at El Sauzal as a safety precaution.
I did not anticipate this in my February article.
Investors shouldn't be alarmed as this is the company's least valuable mine that is set to stop producing within a year.
Goldcorp (NYSE:GG) just announced that there is movement at the high wall slope of the Trini pit at its El Sauzal Mine in Chihuahua, Mexico. As a safety precaution, the company decided to suspend its operations here in order to allow technicians to look it over and assure employee safety.
The shut-down will, of course, impact gold production, but considering Goldcorp produces over 3 million ounces of gold annually, and considering that El Sauzal has only produced 37,000 ounces this year and that it is expected to produce less than 100,000 ounces going forward before the project shuts down, this is not a big deal. More importantly, it shows Goldcorp's preemptive approach to employee safety, which saves lives while creating goodwill with employees and regulators. It can also save money: for instance Gold Fields (NYSE:GFI) saw production decline and costs rise at its South Deep project in South Africa in part because the mine suffered two fatalities in Q2.
Goldcorp has done an excellent job at keeping its employees safe. More generally, as I argued in February, it has also been increasing production while cutting costs. This has made it the most valuable gold miner by market capitalization even though there are companies that produce more gold. The stock is richly valued right now because management has done such an excellent job, and I would hold back for now regardless of how the El Sauzal situation is resolved.