Goldcorp: Strength in Latin America; Weakness in Canada

The first quarter earnings at Goldcorp Inc. (GG) beat the street, but that was despite of some very weak results from the Canadian operations. The flagship Red Lake mine produced 128,500 ounces, way down from 179,400 ounces in the same quarter a year ago due to mine sequencing issues. The Porcupine and Musselwhite projects also underperformed.

Nonetheless, Goldcorp maintained its production guidance of 2.6 million ounces of gold for 2008.

"Clearly, to meet guidance, improved Canadian production results will be required," TD Newcrest analyst Greg Barnes wrote in a note to clients.

On the other hand, the Latin American operations had a terrific quarter. Credit Suisse analyst Anita Soni noted that Los Filos/Nukay production of 48,000 ounces was in line her estimates, while El Sauzal (57,000 ounces) and Marlin (70,000 ounces) both exceeded it.

Ms. Soni also noted that cash costs of $240 an ounce were about 7% below her expectations, as lower costs in Latin America more than offset higher costs in Canada.

She wrote:

We expect to see improvement at the Canadian operations over the course of the year as production issues are expected to be resolved [in the second quarter].