Goldcorp Dives After Lowering 2012 Guidance

Out of Vancouver, British Columbia, late  Tuesday came Goldcorp’s (GG) quarterly gold production update and a sharply lowered guidance on the rest of 2012. The news was received with a thud on the market, as Goldcorp’s stock has plunged more than 9 percent intraday Wednesday to just more than $33 per share.

The company posted a 10 percent increase in gold production in Q2 of 2012 over Q1, but the overall productioon guidance for the year was reduced from 2.6 million ounces to about 2.4 million ounces.  Lower production then means a reported cash cost of about $310-$340 per ounce, up from the previous $250-$275 per ounce.

The company blames increased seismic activity and rock de-stressing concerns at its Red Lake mine and a water shortage at Peñasquito mine for the reduced production for the remainder of the year.

“We are disappointed with reducing production guidance due to operational issues at our two most important mines,” said Chuck Jeannes, Goldcorp president and CEO in a release.   “AtRed Lake, we look forward to the resumption of mining in areas of the High Grade Zone that have been inaccessible due to de-stressing activities, but grade inconsistencies in the Footwall Zoneexperienced in the first six months of 2012 necessitate a conservative approach with regard to forecasting production during the second half of the year.   At Peñasquito, the team is assessing opportunities to address water deficits as soon as possible.  We are optimistic that sufficient water will be secured to accommodate long-term throughput forecasts but until those sources are secured, we have reduced the forecasts for ongoing throughput and production. We remain encouraged that the ore body continues to meet expectations with respect to grade and recoveries.”

This recent news will not be looked upon favorably by several hedge funds, including Jeffrey Vinik’s Vinik Asset Management and Peter J. Eichler Jr.’s Aletheia Research and Management, both of which have stepped up their investments in Goldcorp during the first quarter of 2012. Vinik increased its sharehold by nearly 200 percent to a value of about $99 million, while Aletheia boosted its stake by more than 300 percent to more than $43 million.