The commodity that was hit hardest was gold, which fell a record 23% last quarter. This is causing Goldcorp Inc. (USA) (NYSE:GG) to respond with a round of belt-tightening. CEO Chuck Jeannes said in the company’s earnings release: “In response to lower metals prices and resulting lower-than-expected cash flow this year, we have implemented company-wide spending reductions that will help to safeguard our strong financial position while keeping intact the key elements of our industry-leading growth profile.”
The company is cutting $200 million, or about 7% of its $2.8 billion capital budget for 2013. However, that’s not the only place the company is cutting costs. Goldcorp Inc. (USA) (NYSE:GG) is also cutting 10% of its general administrative expenses, which will save the company another $16 million. Finally, its exploration budget is getting the biggest cut as $25 million or 11% is being taken off the top of the company’s previous guidance. This is all in an effort to keep its balance sheet strong after gold prices tumbled last month.
Goldcorp Inc. (USA) (NYSE:GG) is not alone. Teck Resources Ltd (USA) (NYSE:TCK) also came out in its earnings release announcing that it was taking steps to reduce its capital spending in light of market conditions. Specifically, the company is slowing the start of the Quintette mine reopening as well as delaying the development of the Quebrada Phase 2 expansion project, which will shave about $150 million off its $2 billion capital budget. The company is forced to make these changes as the coal and copper it produces fell by 23% and 9%, respectively, in the quarter.
In addition to reducing its capital spending, the company has identified over $250 million that can be cut from its annual operating costs. It’s looking to push that amount to $300 million as it seeks to find more ways to tighten its belt. That’s on top of its plans to slash its exploration spending by 15%. Overall, these moves are designed to enable the company to maintain profitability and balance sheet flexibility amid slumping commodity prices.