VANCOUVER, British Columbia--(BUSINESS WIRE)--Nov. 8, 2005--(All figures are in US dollars unless stated otherwise)
Goldcorp Inc. (TSX:G - News; NYSE:GG - News) is pleased to announce its third
quarter results, highlights of which are:
- Net earnings of $57 million ($0.17 per share), compared to $10
million ($0.05 per share) in 2004;
- Operating cash flows of $85 million ($0.25 per share), compared
to $22 million ($0.12 per share) in 2004;
- Gold production of 283,700 ounces (2004 - 163,800 ounces);
- Gold sales more than doubled to 276,700 ounces (2004 - 112,800
ounces);
- Total cash costs of $9 per ounce, compared to $121 per ounce in
2004;
- First gold pour at the Amapari project, with commercial
production expected during the fourth quarter.
For the nine months to September 30, 2005, net earnings increased
to $184 million ($0.60 per share) compared with $36 million ($0.19
per share) in 2004, and operating cash flows increased to $329
million ($1.08 per share), compared with $31 million ($0.16 per
share) in 2004. Gold production totalled 840,000 ounces for the nine
months to September 30, 2005 compared with 462,000 ounces in 2004,
while gold sales increased to 1,037,000 ounces at a total cash cost
of $49 per ounce, compared with 314,000 ounces at a total cash cost
of $112 per ounce in 2004.
President and CEO Ian Telfer said, "The superb quarterly results
are indicative of the Company's ability to deliver on its strategy of
providing shareholders with superior returns through increasing gold
production, strong earnings and cash flows, and the lowest cash costs
in the industry."
Goldcorp is the world's lowest-cost million ounce gold producer
with safe, profitable, and sustainable mining operations throughout
the Americas and in Australia. The Company has no debt or hedging.
Production in 2005 is expected to exceed 1.1 million ounces at a cash
cost of less than $60 per ounce. If the proposed transaction with
Barrick is finalized, Goldcorp's 2007 gold production is expected to
more than double from current levels to 2.4 million ounces while
maintaining Goldcorp's status as the lowest cost million ounce gold
producer.
Third Quarter Earnings Conference Call:
A conference call will be held Wednesday, November 9th at 11:00
a.m. (ET) to discuss these results. You may join the call by dialing
toll free 1-877-888-3855 or (416) 695-6622 for calls from outside
Canada and the US. The conference call will be recorded and you can
listen to a playback of the call after the event by dialing
1-888-509-0081 or (416) 695-5275. A live and archived audio webcast
will be available on the website at www.goldcorp.com.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This press release contains "forward-looking statements", within
the meaning of the United States Private Securities Litigation Reform
Act of 1995 and similar Canadian legislation. Forward-looking
statements include, but are not limited to, statements with respect
to the future price of gold, silver and copper, the estimation of
mineral reserves and resources, the realization of mineral reserve
estimates, the timing and amount of estimated future production,
costs of production, capital expenditures, costs and timing of the
development of new deposits, success of exploration activities,
permitting time lines, currency exchange rate fluctuations,
requirements for additional capital, government regulation of mining
operations, environmental risks, unanticipated reclamation expenses,
title disputes or claims and limitations on insurance coverage.
Generally, these forward-looking statements can be identified by the
use of forward-looking terminology such as "plans", "expects" or
"does not expect", "is expected", "budget", "scheduled", "estimates",
"forecasts", "intends", "anticipates" or "does not anticipate", or
"believes", or variations of such words and phrases or state that
certain actions, events or results "may", "could", "would", "might"
or "will be taken", "occur" or "be achieved".
Forward-looking statements are subject to known and unknown
risks, uncertainties and other factors that may cause the actual
results, level of activity, performance or achievements of Goldcorp
to be materially different from those expressed or implied by such
forward-looking statements, including but not limited to: risks
related to the integration of acquisitions; risks related to
international operations; risks related to joint venture operations;
actual results of current exploration activities; actual results of
current reclamation activities; conclusions of economic evaluations;
changes in project parameters as plans continue to be refined; future
prices of gold, silver and copper; possible variations in ore
reserves, grade or recovery rates; failure of plant, equipment or
processes to operate as anticipated; accidents, labour disputes and
other risks of the mining industry; delays in obtaining governmental
approvals or financing or in the completion of development or
construction activities, as well as those factors discussed in (a)
the section entitled "Description of the Business - Risk Factors" in
Goldcorp's annual information form for the year ended December 31,
2004, and (b) the section entitled "Description of the Business -
Risk Factors" in Wheaton River Minerals Ltd.'s annual information
form for the year ended December 31, 2004. Although Goldcorp has
attempted to identify important factors that could cause actual
results to differ materially from those contained in forward-looking
statements, there may be other factors that cause results not to be
as anticipated, estimated or intended. There can be no assurance that
such statements will prove to be accurate, as actual results and
future events could differ materially from those anticipated in such
statements. Accordingly, readers should not place undue reliance on
forward-looking statements. Goldcorp does not undertake to update any
forward-looking statements that are incorporated by reference herein,
except in accordance with applicable securities laws.
Readers are advised that National Instrument 43-101 of the
Canadian Securities Administrators requires that each category of
mineral reserves and mineral resources be reported separately.
Readers should refer to the respective annual information forms of
Goldcorp and Wheaton River Minerals Ltd., each for the year ended
December 31, 2004, and other continuous disclosure documents filed by
Goldcorp since January 1, 2005 available at www.sedar.com, for this
detailed information, which is subject to the qualifications and
notes set forth therein.
Cautionary Note to United States Investors Concerning Estimates
of Measured, Indicated and Inferred Resources: This press release
uses the terms "Measured", "Indicated" and "Inferred" Resources.
United States investors are advised that while such terms are
recognized and required by Canadian regulations, the United States
Securities and Exchange Commission does not recognize them. "Inferred
Mineral Resources" have a great amount of uncertainty as to their
existence, and as to their economic and legal feasibility. It cannot
be assumed that all or any part of an Inferred Mineral Resource will
ever be upgraded to a higher category. Under Canadian rules,
estimates of Inferred Mineral Resources may not form the basis of
feasibility or other economic studies. United States investors are
cautioned not to assume that all or any part of Measured or Indicated
Mineral Resources will ever be converted into Mineral Reserves.
United States investors are also cautioned not to assume that all or
any part of an Inferred Mineral Resource exists, or is economically
or legally mineable.
Management's Discussion and Analysis
of Financial Condition and Results of Operations
For the Nine Months Ended September 30, 2005
This Management's Discussion and Analysis should be read in
conjunction with Goldcorp's unaudited consolidated financial
statements for the nine months ended September 30, 2005 and related
notes thereto which have been prepared in accordance with Canadian
generally accepted accounting principles. In addition, the following
should be read in conjunction with the 2004 audited consolidated
financial statements, the related annual Management's Discussion and
Analysis, and the Annual Information Form/40-F on file with the
Canadian provincial securities regulatory authorities and the US
Securities and Exchange Commission. This Management's Discussion and
Analysis contains "forward-looking statements" that are subject to
risk factors set out in a cautionary note contained herein. All
figures are in United States dollars unless otherwise noted. This
Management's Discussion and Analysis has been prepared as of November
7, 2005.
THIRD QUARTER HIGHLIGHTS
- Net earnings of $56.5 million ($0.17 per share), compared to
$9.9 million ($0.05 per share) in 2004.
- Operating cash flows of $84.8 million (2004 - $22.3 million).
- Gold production of 283,700 ounces (2004 - 163,800 ounces).
- Gold sales more than doubled to 276,700 ounces (2004 - 112,800
ounces).
- Total cash costs of $9 per ounce, compared to $121 per ounce in
2004.
- Dividends paid of $15.2 million.
- Cash and cash equivalents at September 30, 2005 totalled $421
million.
- First gold pour at the Amapari project, with commercial
production expected during the fourth quarter.
- On October 30, 2005, Goldcorp entered into an agreement with
Barrick such that, following Barrick's successful acquisition of
Placer Dome, Goldcorp will acquire from Barrick certain of Placer
Dome's Canadian operations and other assets for cash of approximately
$1.35 billion.
OVERVIEW
Goldcorp is a leading intermediate gold producer engaged in gold
mining and related activities including exploration, extraction,
processing and reclamation. As a result of the successful acquisition
of Wheaton River Minerals Ltd ("Wheaton") on February 14, 2005, the
Company's assets are comprised of the Red Lake gold mine in Canada, a
37.5% interest in the Alumbrera gold/copper mine in Argentina, the
Luismin gold/silver mines in Mexico, the Peak gold mine in Australia,
and the Wharf gold mine in the United States. Significant development
projects include the expansion of the existing Red Lake mine, the Los
Filos/Bermejal gold project in Mexico and the Amapari gold project in
northern Brazil. Goldcorp also owns a 65% interest in Silver Wheaton
Corp ("Silver Wheaton"), a publicly traded silver mining company.
Goldcorp is listed on the New York Stock Exchange (symbol:GG) and
the Toronto Stock Exchange (symbol:G). In addition, the Company has
five series of share purchase warrants which trade on the Toronto
Stock Exchange; two of which also trade on the New York Stock
Exchange. The Series A, B and C share purchase warrants replaced the
former Wheaton share purchase warrants as of April 15, 2005, adding
to the two previously existing series of Goldcorp share purchase
warrants.
Goldcorp's strategy is to provide its shareholders with superior
returns from high quality assets. The Company has a strong and liquid
balance sheet, no debt outstanding and has not hedged or sold forward
any of its future gold production.
Goldcorp is presently the world's lowest cost million ounce gold
producer. As a result of the proposed transaction with Barrick Gold
Corporation ("Barrick"), 2007 gold production is expected to double
from current levels to 2.4 million ounces.
ACQUISITION OF WHEATON RIVER MINERALS LTD.
On December 6, 2004, Goldcorp and Wheaton announced a proposed
transaction which provided for Goldcorp to make a take-over bid for
Wheaton on the basis of one Goldcorp share for every four Wheaton
shares. On December 29, 2004, Goldcorp mailed the Goldcorp Take-over
Bid Circular to the Wheaton shareholders.
On February 8, 2005, Goldcorp announced a special $0.50 per share
cash dividend would be payable to existing Goldcorp shareholders
should shareholders approve by majority Goldcorp's take-over bid for
Wheaton and Wheaton shareholders tender the minimum two-thirds bid
requirement. The payment of the special dividend also resulted in an
adjustment to the exchange ratio of Goldcorp's outstanding warrants -
an increase in entitlement from 2.0 to 2.08 Goldcorp shares per
warrant.
On February 10, 2005, at a special meeting, Goldcorp shareholders
approved the issuance of additional Goldcorp common shares to effect
the acquisition of Wheaton. As of February 14, 2005, the effective
date of the acquisition, approximately 70% of the outstanding Wheaton
common shares were tendered to Goldcorp's offer, satisfying the
minimum two-thirds bid requirement under the terms of the Goldcorp
offer. With conditions met, the special $0.50 per share cash
dividend, totalling approximately $95 million, was paid on February
28, 2005.
As of March 31, 2005, Goldcorp held approximately 82% of the
outstanding Wheaton common shares and by April 15, 2005, 100% had
been acquired. Consideration amounted to $1,887 million satisfied by
the issue of 143.8 million Goldcorp shares at a price of $13.13 per
share. In addition, each Wheaton warrant or stock option, which gave
the holder the right to acquire common shares of Wheaton, was
exchanged for a warrant or stock option of Goldcorp, giving the
holder the right to acquire common shares of Goldcorp on the same
basis as the exchange of Wheaton common shares for Goldcorp common
shares.
This business combination has been accounted for as a purchase
transaction, with Goldcorp being identified as the acquirer and
Wheaton as the acquiree in accordance with CICA 1581 "Business
Combinations". These consolidated financial statements include 82% of
Wheaton's operating results for the period February 15, 2005 to April
15, 2005, and 100% of the results thereafter.
For the purposes of these consolidated financial statements, the
purchase consideration has been allocated on a preliminary basis to
the fair value of assets acquired and liabilities assumed, with
goodwill assigned to specific reporting units, based on management's
best estimates and taking into account all available information at
the time these consolidated financial statements were prepared.
Goldcorp will continue to review information and perform further
analysis with respect to each of the Wheaton assets, including an
independent valuation, prior to finalizing the allocation of the
purchase price. This process will be performed in accordance with the
recent accounting pronouncement relating to "Mining Assets -
Impairment and Business Combination" (Emerging Issue Committee
Abstract 152). Although the results of this review are presently
unknown, it is anticipated that it may result in a change to the
amount assigned to goodwill and a change to the value attributable to
tangible assets.
SUMMARIZED FINANCIAL RESULTS
--------------------------------------------------------------------
September 30 June 30
2005 2004 2005 2004
--------------------------------------------------------------------
(note 1)
Revenues ($000's) $ 203,669 $ 50,369 $ 301,605 $ 40,461
Gold produced
(ounces) 283,700 163,800 281,000 138,600
Gold sold (ounces) 276,700 112,800 543,100 93,600
Average realized
gold price (per
ounce) $ 444 $ 399 $ 432 $ 393
Average London
spot gold price
(per ounce) $ 440 $ 401 $ 427 $ 393
Earnings from
operations
($000's) $ 86,977 $ 22,839 $ 162,410 $ 16,363
Net earnings
($000's) $ 56,521 $ 9,854 $ 98,030 $ 9,198
Earnings per share
Basic $ 0.17 $ 0.05 $ 0.30 $ 0.05
Diluted $ 0.15 $ 0.05 $ 0.28 $ 0.05
Cash flow from
operating
activities
($000's) $ 84,816 $ 22,306 $ 163,870 $ 11,947
Total cash costs
(per gold ounce)
(note 2) $ 9 $ 121 $ 52 $ 116
Dividends paid
($000's) $ 15,231 $ 8,537 $ 15,213 $ 8,532
Cash and cash
equivalents
($000's) $ 420,901 $ 315,642 $ 420,843 $ 302,850
Total assets
($000's) $ 3,839,225 $ 648,914 $ 3,755,982 $ 608,541
--------------------------------------------------------------------
March 31 December 31
2005 2004 2004 2003
--------------------------------------------------------------------
(note 1)
Revenues ($000's) $ 122,849 $ 48,314 $ 51,872 $ 110,625
Gold produced
(ounces) 275,400 159,300 166,300 158,300
Gold sold (ounces) 217,500 107,400 113,800 280,400
Average realized
gold price (per
ounce) $ 430 $ 411 $ 432 $ 388
Average London
spot gold price
(per ounce) $ 427 $ 408 $ 434 $ 391
Earnings from
operations
($000's) $ 53,694 $ 26,703 $ 19,347 $ 63,267
Net earnings
($000's) $ 29,489 $ 17,328 $ 14,967 $ 43,330
Earnings per share
Basic $ 0.12 $ 0.09 $ 0.08 $ 0.23
Diluted $ 0.11 $ 0.09 $ 0.08 $ 0.22
Cash flow from
operating
activities
($000's) $ 80,244 $ (3,538) $ 22,388 $ 69,849
Total cash costs
(per gold ounce)
(note 2) $ 94 $ 100 $ 127 $ 95
Dividends paid
($000's) $ 105,305 $ 27,454 $ 8,548 $ 10,091
Cash and cash
equivalents
($000's) $ 338,966 $ 328,701 $ 333,375 $ 378,954
Total assets
($000's) $ 3,309,220 $ 607,488 $ 701,518 $ 638,523
(1) Includes, with the exception of net earnings, 100% of Wheaton's
operating results for the period subsequent to February 14, 2005,
the date of acquisition. Net earnings include 82% of Wheaton's
operating results from February 15, 2005 to April 15, 2005 and
100% from April 16, 2005 onwards.
(2) The calculation of total cash costs per ounce of gold for Peak
and Alumbrera is net of by-product copper sales revenue and for
Luismin is net of by-product silver sales revenue of $3.90 per
silver ounce sold to Silver Wheaton.
RESULTS OF OPERATIONS
--------------------------------------------------------------------
Three Months Ended September 30, 2005
Red Lake Alumbrera Luismin Amapari Peak
--------------------------------------------------------------------
(note 1) (note 2) (note 3)
Revenues
($000's) $ 65,448 $ 81,479 $ 24,300 $ - $ 11,536
Gold produced
(ounces) 153,700 48,100 41,000 - 29,700
Gold sold
(ounces) 147,900 48,200 39,100 - 26,200
Average
realized gold
price (per
ounce) $ 440 $ 452 $ 440 $ - $ 449
Earnings from
operations
($000's) $ 36,935 $ 36,002 $ 3,503 $ - $ 1,927
Total cash
costs (per
gold ounce) $ 110 $ (594) $ 118 $ - $ 241
Silver
Wharf Wheaton Corporate Total
--------------------------------------------------------------------
Revenues ($000's) $ 7,002 $ 18,107 $ (4,203) $ 203,669
Gold produced (ounces) 11,200 - - 283,700
Gold sold (ounces) 15,300 - - 276,700
Average realized gold
price (per ounce) $ 444 $ - $ - $ 444
Earnings from operations
($000's) $ 537 $ 6,088 $ 1,985 $ 86,977
Total cash costs
(per gold ounce) $ 307 $ - $ - $ 9
Three Months Ended September 30, 2004
Red Lake Wharf Corporate Total
--------------------------------------------------------------------
Revenues ($000's) $ 41,372 $ 5,763 $ 3,234 $ 50,369
Gold produced (ounces) 143,800 20,000 - 163,800
Gold sold (ounces) 99,000 13,800 - 112,800
Average realized gold
price (per ounce) $ 398 $ 405 $ - $ 399
Earnings (loss) from
operations ($000's) $ 26,542 $ 1,545 $ (5,248) $ 22,839
Total cash costs
(per gold ounce) $ 100 $ 271 $ - $ 121
(1) Includes Goldcorp's 37.5% share of the results of Alumbrera. The
calculation of total cash costs per ounce of gold for Alumbrera
is net of by-product copper sales revenue.
(2) All Luismin silver is sold to Silver Wheaton at a price of $3.90
per ounce. The calculation of total cash costs per ounce of gold
is net of by-product silver sales revenue.
(3) The calculation of total cash costs per ounce of gold at Peak is
net of by-product copper sales revenue.
Nine Months Ended September 30, 2005
Red Lake Alumbrera Luismin Amapari Peak
--------------------------------------------------------------------
(notes 1,2)(notes 1,3) (note 1)(notes 1,4)
Revenues
($000's) $ 298,374 $ 168,275 $ 63,687 $ - $ 31,890
Gold produced
(ounces) 495,000 120,700 103,200 - 75,900
Gold sold
(ounces) 683,800 111,100 106,400 - 70,700
Average
realized gold
price (per
ounce) $ 434 $ 439 $ 432 $ - $ 440
Earnings
(loss) from
operations
($000's) $ 205,255 $ 71,339 $ 10,231 $ - $ 5,773
Total cash
costs (per
gold ounce) $ 87 $ (502) $ 109 $ - $ 251
Silver
Wharf Wheaton Corporate Total
--------------------------------------------------------------------
(note 1) (note 1)
Revenues ($000's) $ 28,954 $ 48,227 $ (11,283) $ 628,124
Gold produced (ounces) 45,300 - - 840,100
Gold sold (ounces) 65,300 - - 1,037,300
Average realized gold
price (per ounce) $ 434 $ - $ - $ 435
Earnings (loss) from
operations ($000's) $ 3,190 $ 16,542 $ (9,247) $ 303,083
Total cash costs
(per gold ounce) $ 289 $ - $ - $ 49
Nine Months Ended September 30, 2004
Red Lake Wharf Corporate Total
--------------------------------------------------------------------
Revenues ($000's) $ 110,325 $ 19,294 $ 9,525 $ 139,144
Gold produced (ounces) 400,800 60,900 - 461,700
Gold sold (ounces) 267,000 46,800 - 313,800
Average realized gold
price (per ounce) $ 402 $ 401 $ - $ 402
Earnings (loss) from
operations ($000's) $ 74,951 $ 3,092 $ (12,440) $ 65,603
Total cash costs
(per gold ounce) $ 87 $ 250 $ - $ 112
(1) Includes 100% of Wheaton's operating results for the period
subsequent to February 14, 2005, the date of acquisition.
(2) Includes Goldcorp's 37.5% share of the results of Alumbrera. The
calculation of total cash costs per ounce of gold for Alumbrera
is net of by-product copper sales revenue.
(3) All Luismin silver is sold to Silver Wheaton at a price of $3.90
per ounce. The calculation of total cash costs per ounce of gold
is net of by-product silver sales revenue.
(4) The calculation of total cash costs per ounce of gold at Peak is
net of by-product copper sales revenue.
OPERATIONAL REVIEW
Red Lake Mine
Three Months Ended
Sep 30 Jun 30 Mar 31 Dec 31 Sep 30
Operating Data 2005 2005 2005 2004 2004
--------------------------------------------------------------------
Tonnes of ore milled 58,500 60,600 59,400 56,500 58,500
Average mill head
grade (grams/tonne) 74 79 104 86 68
Average recovery rate 97% 97% 97% 97% 97%
Gold produced (ounces) 153,700 142,800 198,500 151,100 143,800
Gold sold (ounces) 147,900 408,500 127,400 98,300 99,000
Average realized
gold price (per ounce) $ 440 $ 433 $ 429 $ 427 $ 398
Total cash costs
(per ounce) $ 110 $ 81 $ 81 $ 105 $ 100
Financial Data
--------------------------------------------------------------------
(in thousands)
Revenues $65,448 $176,939 $55,987 $41,883 $41,372
Earnings from operations $36,935 $129,144 $39,176 $27,317 $26,542
The Red Lake mine had a strong third quarter, producing 153,700
ounces of gold at a total cash cost of $110 per ounce sold, compared
with 143,800 ounces at a total cash cost of $100 per ounce for the
corresponding period last year. The Canadian dollar was approximately
9% stronger relative to the United States dollar, compared to the
third quarter of 2004, which negatively impacted the total cash costs
per ounce. The average mill feed grade was 74 g/t and recoveries were
maintained at 97%.
This quarter represented the first quarter in which the gold sold
approximated the amount of gold produced. Previously, the Company had
adopted a policy of holding back from sale approximately one-third of
mine production. This practice was discontinued effective April 1,
2005 and the gold bullion on hand at that date was sold during the
second quarter.
During the quarter, the new shaft was advanced by 153 metres,
bringing the depth to 1,257 metres as at September 30, 2005. Progress
was slowed by poor ground conditions for much of the quarter, but
conditions are now improving and increased productivity is expected
going forward. On surface, the new ore loading facility and conveyor
have now been erected. Shaft completion is anticipated in late 2007
with the expanded mill to be ready for operation prior to that.
A comprehensive strategic review of the mine plan is well
underway, in order to maximize the benefits of the new shaft. It is
anticipated that the review will be completed by year end.
Alumbrera Mine (Goldcorp interest - 37.5%)
Three Months Ended
Operating Sep 30 June 30 Mar 31 Mar 31 Dec 31 Sep 30
Data 2005 2005 2005 2005 2004 2004
--------------------------------------------------------------------
(six
weeks)
(note 1)
Tonnes
of ore
mined 2,527,400 3,442,900 1,725,600 3,235,300 3,182,800 2,935,000
Tonnes
of waste
removed 8,188,600 7,535,900 3,540,800 7,190,200 7,174,200 7,303,000
Ratio of
waste
to ore 3.2 2.2 2.1 2.2 2.3 2.5
Tonnes
of ore
milled 3,255,900 3,450,000 1,735,761 3,430,200 3,463,400 3,400,600
Average
mill head
grade
- Gold
(grams/
tonne) 0.60 0.58 0.55 0.56 0.79 0.65
- Copper
(%) 0.57% 0.56% 0.46% 0.49% 0.62% 0.54%
Average
recovery
rate
- Gold (%) 77% 77% 78% 77% 80% 77%
- Copper
(%) 89% 91% 89% 90% 91% 89%
Gold
produced
(ounces) 48,100 48,900 23,700 47,600 70,500 55,200
Copper
produced
(thousands
of pounds) 36,270 38,994 17,162 32,781 43,007 36,151
Gold sold
(ounces) 48,200 47,700 15,200 50,200 51,900 54,200
Copper sold
(thousands
of pounds) 38,568 33,937 9,998 30,000 32,909 34,914
Average
realized
price
- Gold
(per
ounce) $ 452 $ 422 $ 452 $ 417 $ 451 $ 405
- Copper
(per
pound) $ 1.85 $ 1.59 $ 1.62 $ 1.62 $ 1.51 $ 1.38
Total cash
costs
(per gold
ounce)
(note
2) ($ 594) $ (442) $ (397) $ (389) $ (457) $ (374)
Financial
data
--------------------------------------------------------------------
(in thousands) (note 1)
Revenues $ 81,479 $ 65,612 $ 21,184 $ 61,231 $ 68,540 $ 65,049
Earnings
from
opera-
tions $ 36,002 $ 26,323 $ 9,014 $ 32,586 $ 40,168 $ 33,753
(1) Alumbrera's operations are included in Goldcorp's operating
results for the period subsequent to February 14, 2005, the date
of acquisition of Wheaton.
(2) The calculation of total cash costs per ounce of gold for
Alumbrera is net of by-product copper sales revenue. If copper
production were treated as a co-product, average total cash costs
at Alumbrera for the three months ended September 30, 2005 would
be $185 per ounce of gold and $0.88 per pound of copper
(September 30, 2004 - $150 per ounce of gold and $0.57 per pound
of copper).
During the third quarter, the stripping ratio increased from an
average of 2.2 to 3.2, in line with plan, as a result of the mining
sequence. This is expected to reduce to 2.6 in the fourth quarter and
an average of 2.9 in 2006. Mill throughput for the quarter, which
included approximately 700,000 tonnes of stockpiled ore, was
approximately 6% below expectations as a result of power outages
caused by storms.
Total cash costs decreased in the third quarter to minus $594 per
ounce of gold, net of by-product copper credits, compared to minus
$374 per ounce during the same period last year. This decrease in
total cash costs resulted primarily from a 34% improvement in the
copper price to an average of $1.85 per pound, offset by a doubling
of copper concentrate treatment and refining charges and a 36%
increase in ocean freight costs. Also, operating costs have been
adversely affected by inflationary pressures, primarily a 60%
increase in fuel costs and a 20% increase in the price of
electricity, compared with 2004, increasing total costs per tonne of
ore milled by approximately 20% overall.
Product shipments late in the third quarter (Goldcorp's share -
11,200 ounces of gold and 9,060,000 pounds of copper) will not be
recognized as sales until the fourth quarter due to the shipping
schedules which delayed the transfer of title. These shipments would
have increased Goldcorp's revenue by $17.2 million and net earnings
by $7.1 million in the third quarter, the impact of which has been
offset by late shipments in the second quarter, which were not
recognized as sales until the third quarter.
Design work is well underway on the 8% expansion of the
concentrator to a 40 million tonne per annum milling capacity
(Goldcorp's share - 15 million tonnes) through the installation of an
additional 6.7 MW ball mill and ancillary equipment. As previously
reported, orders for major long lead time equipment have already been
placed. The capital cost of the concentrator expansion is estimated
at $16 million (Goldcorp's share - $6 million) with commissioning
expected by the end of 2006.
The open pit trial of multiple benching and pre-splitting
continues to produce excellent results in the upper levels of the
mine, further reinforcing the possible opportunities to optimize the
pit ore and waste volumes.
Meanwhile, further delineation diamond drilling continued in the
pit area during the quarter with 14 of the planned 20 holes
completed. The drilling program is on schedule for completion by the
fourth quarter of 2005. The ongoing geotechnical optimization and
delineation drilling program may lead to a further increase in
reserves and resources.
Luismin Mines
Three Months Ended
Operating Sep 30 Jun 30 Mar 31 Mar 31 Dec 31 Sep 30
Data 2005 2005 2005 2005 2004 2004
--------------------------------------------------------------------
(six
weeks)
(note 1)
Tonnes
of ore
milled 244,100 218,700 100,800 199,000 199,900 187,800
Average
mill head
grade
- Gold
(grams/
tonne) 5.55 6.23 6.58 6.59 5.35 5.95
- Silver
(grams/
tonne) 332 310 328 335 280 326
Average
recovery
rate
- Gold (%) 94% 95% 96% 95% 94% 95%
- Silver
(%) 88% 91% 90% 88% 88% 91%
Gold
produced
(ounces) 41,000 41,800 20,400 40,000 32,300 34,200
Silver
produced
(oun-
ces) 2,005,700 1,974,400 961,500 1,894,000 1,586,900 1,798,700
Gold sold
(ounces) 39,100 44,000 23,300 38,300 32,800 33,400
Silver
sold
(oun-
ces) 2,003,800 1,976,400 1,314,800 1,974,000 1,615,100 1,792,000
Average
realized
price
- Gold
(per
ounce) $ 440 $ 427 $ 430 $ 428 $ 436 $ 402
- Silver
(per
ounce)
(note
2) $ 3.90 $ 3.90 $ 3.90 $ 3.90 $ 4.33 $ 6.47
Total cash
costs
per gold
ounce
(note 2) $ 118 $ 115 $ 80 $ 86 $ 115 $ 71
Financial
data
--------------------------------------------------------------------
(in thousands) (note 1)
Revenues $ 24,300 $ 25,559 $ 13,828 $ 22,942 $ 20,676 $ 24,406
Earnings
from
opera-
tions $ 3,503 $ 3,328 $ 3,400 $ 5,529 $ 6,238 $ 10,811
(1) Luismin's results are included in Goldcorp's operating results
for the period subsequent to February 14, 2005, the date of
acquisition of Wheaton.
(2) Subsequent to October 15, 2004, all Luismin silver is sold to
Silver Wheaton at a price of $3.90 per ounce. The calculation of
total cash costs per ounce of gold is net of by-product silver
sales revenue of $3.90 per silver ounce (pro forma basis prior to
October 15, 2004).
Gold production for the three months ended September 30, 2005 was
41,000 ounces, a 20% increase compared to the same period in 2004, as
a result of a 30% increase in tonnes milled, offset by slightly lower
gold grades and recoveries. The installation of two additional
treatment tanks at San Dimas mine has increased the mill capacity by
25%, compared with 2004. Cash costs were higher during the quarter as
compared to 2004 due primarily to lower gold grades, fuel and labour
cost pressures, as well as under-utilization of mill capacity.
Modifications will be completed by year end, which will allow
increased mill throughput without a reduction in recoveries.
During the quarter, intensive exploration and development
activities continued throughout each of the Luismin operations, with
exploration meters drilled increasing by 11% compared to the third
quarter of 2004.
Peak Mine
Three Months Ended
Operating Sep 30 Jun 30 Mar 31 Mar 31 Dec 31 Sep 30
Data 2005 2005 2005 2005 2004 2004
--------------------------------------------------------------------
(six
weeks)
(note 1)
Tonnes
of ore
milled 148,700 165,200 82,600 167,300 165,800 162,200
Average
mill head
grade
- Gold
(grams/
tonne) 6.94 6.67 6.22 5.95 8.23 7.94
- Copper
(%) 0.46% 0.28% 0.58% 0.61% 0.39% 0.55%
Average
recovery
rate
- Gold (%) 89% 88% 91% 90% 92% 89%
- Copper
(%) 71% 60% 82% 80% 84% 81%
Gold
produced
(ounces) 29,700 31,100 15,100 29,000 40,600 37,100
Copper
produced
(thousands
of pounds) 1,065 579 864 1,819 1,195 1,590
Gold sold
(ounces) 26,200 27,200 17,300 27,800 40,200 33,100
Copper sold
(thousands
of pounds) 734 505 1,612 1,612 892 1,492
Average
realized
price
- Gold
(per
ounce) $ 449 $ 442 $ 423 $ 422 $ 460 $ 400
- Copper
(per
pound) $ 1.71 $ 1.53 $ 1.36 $ 1.36 $ 1.54 $ 1.29
Total cash
costs
per gold
ounce
(note 2) $ 241 $ 246 $ 272 $ 278 $ 197 $ 161
Financial
data
--------------------------------------------------------------------
(in thousands) (note 1)
Revenues $ 11,536 $ 12,326 $ 8,028 $ 12,091 $ 18,969 $ 14,610
Earnings
from
opera-
tions $ 1,927 $ 2,138 $ 1,708 $ 1,741 $ 7,786 $ 5,230
(1) Peak's operations are included in Goldcorp's operating results
for the period subsequent to February 14, 2005, the date of
acquisition of Wheaton.
(2) The calculation of total cash costs per ounce of gold is net of
by-product copper sales revenue.
Peak sold 26,200 ounces of gold and 0.7 million pounds of copper
during the quarter. There remains approximately 10,000 ounces of gold
in stockpiled concentrate to be sold by the end of the year. Ore
milled was in line with plan, however, 15,000 tonnes of ore was toll
treated for a third party during the quarter. Production of 29,700
ounces was below expectations, due primarily to a five day shutdown
to work on the mill upgrade project, which is expected to increase
capacity to 750,000 tonnes per annum once completed in 2006. The
scheduled high grade production from the Perseverance ore body was
brought on line with good results towards the end of the quarter.
Higher grades are scheduled for the fourth quarter, which is
anticipated to result in increased gold production.
Total cash costs for the quarter were $241 per ounce of gold.
These costs are higher than the same quarter in 2004, as a result of
a 7% stronger Australian dollar relative to the United States dollar,
lower average mill head grades processed (particularly by-product
copper), and increased concentrate treatment and refining charges
resulting from market constraints on smelter capacity.
The New Cobar underground project was completed at the end of
September with the project being delivered well under budget and on
time. The total cost of the project was$6.1 million compared to a
budget of $8.1 million. Development ore has been treated with
excellent metallurgical results to date. New Cobar produced 3,200
ounces during the quarter which were sold and credited against the
project costs since the project had not yet achieved sufficient
production rates to be deemed to be in commercial production. Access
to this ore body will provide Peak with far more operational
flexibility by providing another ore source to assist ore scheduling
to the mill.
Exploration work and delineation drilling continued to focus on
New Cobar, Upper Peak and Perseverance Zone D.
Wharf Mine
Three Months Ended
Operating Data Sep 30 Jun 30 Mar 31 Dec 31 Sep 30
2005 2005 2005 2004 2004
--------------------------------------------------------------------
Tonnes of ore
mined 755,500 584,300 646,000 735,000 722,000
Tonnes of ore
processed 733,900 561,100 656,000 670,000 760,000
Average grade of
gold processed
(grams/ tonne) 1.04 0.99 1.10 0.93 1.06
Average recovery
rate (%) 75% 75% 75% 75% 75%
Gold produced
(ounces) 11,200 16,400 17,700 15,200 20,000
Gold sold (ounces) 15,300 15,700 34,300 15,500 13,800
Average realized
gold price
(per ounce) $ 444 $ 429 $ 431 $ 432 $ 405
Total cash costs
(per ounce) $ 307 $ 291 $ 282 $ 268 $ 271
Financial Data
--------------------------------------------------------------------
(in thousands)
Revenues $ 7,002 $ 7,014 $ 14,938 $ 6,826 $ 5,763
Earnings from
operations $ 537 $ 627 $ 2,026 $ 1,270 $ 1,545
The Wharf Mine produced 11,200 ounces of gold in the quarter;
ounces sold were 15,300 compared to 13,800 ounces in 2004. Total cash
costs for the quarter were $307 per ounce, compared to $271 per ounce
during the third quarter of 2004, a 13% increase primarily as a
result of the lower ounces produced. Tonnes of ore processed each
quarter do not necessarily correlate to ounces produced during the
quarter as there is a time delay between placing tonnes on the leach
pad and pouring ounces of gold. The lower gold ounces produced for
the quarter was due to the higher than expected silver content in the
processed ore. This silver content displaces gold in the recovery
plant, keeping the gold in the circuit longer due to the physical
limitation of the recovery plant.
Silver Wheaton Corp. (Goldcorp interest - 65%)
(100% figures shown) Three Months Ended
Operating Sep 30 Jun 30 Mar 31 Mar 31 Dec 31 Sep 30
Data 2005 2005 2005 2005 2004 2004
--------------------------------------------------------------------
(six
weeks)
(note 1)
Ounces of
silver
purchased
- Luis-
min 2,003,800 2,088,000 1,314,800 1,974,000 1,387,300 -
- Zink-
gruvan 531,000 476,200 223,300 330,800 240,500 -
- Tot-
al 2,534,800 2,564,200 1,538,100 2,304,800 1,627,800 -
Ounces of
silver
sold
- Luis-
min 2,003,800 2,088,000 1,314,800 1,974,000 1,387,300 -
- Zink-
gruvan 531,000 580,400 226,400 349,000 117,800 -
- Tot-
al 2,534,800 2,668,400 1,541,200 2,323,000 1,505,100 -
Average
realized
silver
price
(per
ounce) $ 7.13 $ 7.22 $ 7.04 $ 6.92 $ 7.30 $ -
Total cash
costs
(per
silver
ounce) $ 3.90 $ 3.90 $ 3.90 $ 3.90 $ 3.90 $ -
Financial
Data
--------------------------------------------------------------------
(in thousands) (note 1)
Revenues $ 18,107 $ 19,263 $ 10,857 $ 16,077 $ 10,986 $ -
Earnings
from
opera-
tions $ 6,088 $ 6,560 $ 3,894 $ 5,257 $ 3,938 $ -
(1) Silver Wheaton's operations are included in Goldcorp's operating
results for the period subsequent to February 14, 2005, the date
of acquisition of Wheaton.
Silver Wheaton, a publicly traded company, is owned 65% by
Goldcorp as a result of the acquisition of Wheaton. Silver Wheaton
has agreements to purchase all of the silver produced by Goldcorp's
Luismin mines in Mexico and Lundin Mining Corporation's Zinkgruvan
mine in Sweden for a per ounce cash payment of the lesser of $3.90
and the prevailing market price, subject to adjustment.
PROJECT DEVELOPMENT REVIEW
Amapari Project
Project commissioning continued through the quarter focussing on
the crushing, agglomeration and stacking system. Commissioning was
also commenced during the quarter on the leaching system and
hydrometallurgical plant, with the first gold bar weighing 330 ounces
successfully poured on September 23, 2005. Construction of a number
of key infrastructure areas was completed in the third quarter,
including the leach solution pipework, water supply and main offices.
Construction continues on the main workshop. Final completion of the
reclaimer and conveyor system continues, which is not yet required
for production.
Pit pre-stripping continued from the five pits now opened up for
maximum ore mining flexibility. Waste dump civil construction was
also commenced. More than 3.4 million tonnes of waste have now been
pre-stripped allowing the stockpiling and leach stacking of more than
395,000 tonnes of ore with an average grade of 2.04 g/t of gold. The
larger waste stripping excavator and first of the larger haul trucks
were also commissioned.
At September 30, 2005, direct construction costs for the project
totalled $76 million. These costs continued to be negatively impacted
by the strong Brazilian currency, which appreciated against the
United States dollar by a further 6% during the quarter (total of 30%
since construction commenced). This currency appreciation, together
with oil and steel price increases, has increased these costs by a
total of approximately $15 million.
Also, additional expenditures of $15 million have been incurred,
which were originally anticipated in 2006 and future years, in order
to increase mining flexibility. These expenditures primarily relate
to additional mining fleet and pre-stripping costs. Pre-operating
costs continue to be capitalized as the project has not yet achieved
commercial production, which is expected by year end.
Infill drilling in the main pit continues to assist long term
mine planning. Exploration activities have continued at Urucum East
where drilling is to commence in the fourth quarter. Following
further surface mapping and sampling at Timbo an encouraging 3km
trend of rock types has been outlined including 1km that has provided
elevated gold grade chip samples. Once access tracks are fully
permitted, drilling will commence. Three other areas of strong
exploration interest have also been generated from data compilation
within the 120km long tenement package.
Los Filos/Bermejal Project
On March 31, 2005, Goldcorp completed the acquisition of the 2.4
million ounce Bermejal gold deposit in Mexico for cash consideration
of $70 million, from a joint venture of Industrias Penoles S.A. de
C.V. and Newmont Mining Corporation. The Bermejal gold deposit is
located just two kilometres south of Goldcorp's Los Filos gold
deposit.
The Company plans to develop the two deposits as a single
operation with two open pits and one single heap leach pad facility.
The feasibility study of a standalone Los Filos project is complete;
however, in order to maximize the synergies with Bermejal, a detailed
engineering study for the combined project is being completed.
Exploration continues in the area; 40,000 metres have been
drilled to date with positive results. The Los Filos ore deposit
block model is already completed and mine design is well advanced as
a part of the new combined feasibility study. Step out drilling in
the Bermejal pit has been completed and the block model work is in
progress.
Advances in infrastructure included the completion of the first 9
km sector of the main access road and the remaining 13 km sector is
expected to be completed by the end of this year. The 115 KV power
transmission line and feeder are fully commissioned and approved by
the Federal Council of Electricity. The electrical distribution
system, water supply system and pumping stations are all in progress.
The heap leach pad facilities are presently being excavated and
sub drainage work has started, with geotextile membrane and piping
installation. Detailed engineering and procurement services were
contracted for the hydrometallurgical plant.
The Los Filos stand alone environmental impact assessment (EIA),
which includes the new pad area, has been approved by the Mexican
Government Agency. The Bermejal EIA as well as the land use change
technical study and the environmental risk analysis, have been
submitted for approval.
EXPENSES
--------------------------------------------------------------------
Three Months Ended Nine Months Ended
September 30 September 30
(in thousands) 2005 2004 2005 2004
--------------------------------------------------------------------
Depreciation and depletion $ 29,457 $ 4,976 $ 87,349 $ 13,795
Corporate administration 7,442 2,107 18,234 6,514
Exploration 2,255 1,474 6,265 4,042
Depreciation and depletion, which relates to mining activities,
increased to $29.5 million for the quarter, compared to $5 million in
2004, primarily as a result of the acquisition of Wheaton mining
assets effective February 15, 2005.
Corporate administration costs increased during the third quarter
of 2005, compared to the same period in 2004, due primarily to
increased corporate activity relating to the Wheaton acquisition and
the consolidation of Wheaton's operating results in 2005.
OTHER INCOME (EXPENSE)
--------------------------------------------------------------------
Three Months Ended Nine Months Ended
September 30 September 30
(in thousands) 2005 2004 2005 2004
--------------------------------------------------------------------
Interest and other income $ 4,321 $ 1,728 $ 9,678 $ 7,379
Stock option expense (3,096) (1,087) (10,572) (3,298)
Gain (loss) on foreign
Currency 4,741 (259) 1,388 243
Gain (loss) on marketable
securities, net 774 (5,620) 2,218 (7,163)
Corporate transaction costs (153) - (3,592) -
--------------------------------------------------------------------
$ 6,587 $ (5,238) $ (880) $(2,839)
--------------------------------------------------------------------
--------------------------------------------------------------------
As a result of the acquisition of Wheaton, Goldcorp stock options
which existed at December 31, 2004 became fully vested during the
first quarter of 2005 and were expensed in the amount of $5.3
million. During the second quarter, the Company granted 5,000,000
stock options vesting over a period of three years, with a fair value
of $19.9 million. Of this, stock option expense of $2.9 million has
been recognized in the third quarter, $2.9 million will be recognized
in the fourth quarter, $8.1 million in 2006, $3.1 million in 2007 and
$0.7 million in 2008.
During the third quarter, the Company earned a foreign currency
gain of $4.7 million (nine months to September 30, 2005 - $1.4
million) as a result of holding a portion of its cash balances in
Canadian dollars during a period of a weakening US dollar. In
addition, the Company earned interest income of $4.3 million (nine
months to September 30, 2005 - $9.7 million) as a result of the
increase in cash and cash equivalents near the end of the second
quarter, upon the sale of the withheld gold bullion.
Corporate transaction costs pertaining to the acquisition of
Wheaton in the amount of $0.2 million for the three months ended
September 30, 2005 and $3.6 million for the nine months ended
September 30, 2005 relate to severance and restructuring of insurance
policies, which may not be capitalized as acquisition costs under
current accounting standards and thus have been expensed.
INCOME AND MINING TAXES
Income and mining taxes for the three months ended September 30,
2005 totalled $34.8 million, approximately 37% of earnings before
taxes. In 2004, income and mining taxes were $7.7 million, or 44% of
earnings before taxes. Income and mining taxes for the nine months
ended September 30, 2005 totalled $108.5 million (approximately 36%
of earnings before taxes) compared with $26.4 million (42% of
earnings before taxes) in the prior year.
The lower effective tax rate during 2005 is due to the lower
statutory tax rates applicable to the Wheaton operations. The
statutory tax rate at Goldcorp's Canadian operations is approximately
40% while the combined statutory tax rate at the Wheaton operations
is approximately 30%.
NON-CONTROLLING INTERESTS
During the quarter ended March 31, 2005, Goldcorp acquired an 82%
interest in Wheaton, which resulted in an 18% non-controlling
interest in the amount of $141.9 million. During the period February
15 to April 15, 2005, the non-controlling interest's share of
Wheaton's net earnings was $3.5 million. Goldcorp acquired the 18%
non-controlling interest's share of Wheaton on April 15, 2005.
A further non-controlling interest arose as a result of the
Wheaton acquisition with respect to Wheaton's 65% ownership of its
subsidiary, Silver Wheaton. The share of earnings of the 35%
non-controlling interest for the three months to September 30, 2005
amounted to $2.3 million.
NON-GAAP MEASURES - PRO FORMA ADJUSTED NET EARNINGS
"Pro Forma Adjusted Net Earnings" when used with respect to
Goldcorp net earnings for the three and nine months ended September
30, 2005, refers to net earnings that include 100% of the earnings of
Goldcorp and Wheaton for the full three and nine month period,
adjusted for certain items that management of Goldcorp believes
facilitates the evaluation of future operations. Pro Forma Adjusted
Net Earnings excludes non-recurring stock option expenses and
corporate transaction costs (including investment banking, legal, and
other fees relating to the acquisition of Wheaton) and includes
adjustments for gold bullion withheld or sold, during the period and
estimated additional depreciation and depletion. Management believes
that such adjustments are appropriate. Pro Forma Adjusted Net
Earnings should not be construed as an alternative to net earnings
determined in accordance with Canadian generally accepted accounting
principles ("GAAP"). For a reconciliation of Pro Forma Adjusted Net
Earnings to net earnings, based on the financial statements prepared
in accordance with GAAP, see "Reconciliation of Pro Forma Adjusted
Net Earnings to Net Earnings". Pro Forma Adjusted Net Earnings is not
a recognized measure under GAAP and does not have a standardized
meaning prescribed by GAAP, and may differ from methods by which
other companies calculate such measures and, accordingly, such
measures as used herein may not be comparable to similarly titled
measures used by other companies. Further, the pro forma financial
information is not necessarily indicative of the results of
operations that may be obtained in the future.
Reconciliation of Pro Forma Adjusted Net Earnings to Net Earnings
(for the three and nine months ended September 30, 2005):
Three Months Nine Months
Ended Ended
(in thousands) Sep 30 Sep 30
Net earnings $ 56,521 $ 184,040
Non-controlling interest
in Wheaton (note 1) - 3,548
Wheaton:
Results for January 1 -
February 14, 2005 (note 2) - 17,145
Estimated additional depreciation
and depletion (note 3) - (4,383)
--------------------------------------------------------------------
56,521 200,350
Corporate transaction costs (note 4) 153 6,099
Bullion adjustments (note 5) - (39,392)
--------------------------------------------------------------------
Pro forma adjusted net earnings $ 56,674 $ 167,057
--------------------------------------------------------------------
--------------------------------------------------------------------
(1) Add back non-controlling interest arising from Goldcorp only
owning 82% of Wheaton between February 15 and April 15, 2005.
(2) Includes 100% of Wheaton earnings from January 1 to February 14,
2005, adjusted for the non-recurring corporate transaction costs
incurred by Wheaton to effect the merger.
(3) Represents estimated additional depreciation and depletion if
Wheaton had been acquired on January 1, 2005.
(4) Represents adjustment for the non-recurring corporate transaction
costs incurred by Goldcorp to effect the merger. This includes
stock option expenses incurred from the immediate vesting of all
unvested options as a result of the transaction.
(5) Represents adjustment to recognize earnings on all gold bullion
withheld from sale, or sold, during the period.
Revenue from gold bullion production is recognized in the
consolidated financial statements when title passes to the purchaser
and, as a result, revenue is recorded when the gold is sold, not when
it is produced. During the second quarter the Company decided to
abandon its previous policy to withhold gold bullion production and
sold its bullion inventory, therefore there is no bullion adjustment
in the third quarter.
Reconciliation of Pro Forma Adjusted Basic Earnings per Share
The number of shares used in the computation of pro forma adjusted
basic earnings per share is as follows:
Three Months Nine Months
Ended Ended
(in thousands) September 30 September 30
--------------------------------------------------------------------
Weighted-average number of Goldcorp
shares outstanding for the period 336,651 305,944
Adjustment to reflect acquisition of 100%
of Wheaton, effective January 1, 2005 - 28,923
--------------------------------------------------------------------
Pro forma weighted average number of
shares outstanding for period 336,651 334,867
--------------------------------------------------------------------
--------------------------------------------------------------------
Pro Forma Adjusted Net Earnings $ 56,674 $ 167,057
--------------------------------------------------------------------
--------------------------------------------------------------------
Pro forma adjusted basic earnings
per share $ 0.17 $ 0.50
--------------------------------------------------------------------
--------------------------------------------------------------------
NON-GAAP MEASURE - TOTAL CASH COST PER GOLD OUNCE CALCULATION
The Company reports total cash costs on a sales basis. In the
gold mining industry, this is a common performance measure but does
not have any standardized meaning, and is a non-GAAP measure. The
Company follows the recommendations of the Gold Institute standard.
The Company believes that, in addition to conventional measures,
prepared in accordance with GAAP, certain investors use this
information to evaluate the Company's performance and ability to
generate cash flow. Accordingly, it is not intended to provide
additional information and should not be considered in isolation or
as a substitute for measures of performance prepared in accordance
with GAAP. The following table provides a reconciliation of total
cash costs per ounce to the financial statements:
(in thousands, except Three Months Ended Nine Months Ended
gold ounces sold and September 30 September 30
per ounce amounts) 2005 2004 2005 2004
--------------------------------------------------------------------
Operating expenses per
financial statements $ 77,538 $ 18,973 $ 213,193 $49,190
Industrial minerals
operating expense (2,889) (2,991) (8,691) (8,702)
Treatment and refining
charges on concentrate sales 13,586 - 28,655 -
By-product silver and copper
sales, and other (84,387) (316) (176,940) (854)
Non-cash adjustments (1,310) (1,960) (5,037) (4,434)
--------------------------------------------------------------------
$ 2,538 $ 13,706 $ 51,180 $35,200
--------------------------------------------------------------------
Divided by gold ounces sold 276,700 112,800 1,037,300 313,800
--------------------------------------------------------------------
Total cash costs per ounce $ 9 $ 121 $ 49 $ 112
--------------------------------------------------------------------
--------------------------------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2005 the Company held cash and cash equivalents
of $421 million (December 31, 2004 - $333 million) and working
capital of $431 million (December 31, 2004 - $400 million).
In the opinion of management, the working capital at September
30, 2005, together with cash flows from operations, are sufficient to
support the Company's normal operating requirements on an ongoing
basis.
Total assets increased to $3,839 million at September 30, 2005
from $702 million at December 31, 2004, primarily as a result of the
acquisition of Wheaton. The Wheaton acquisition, financed by the
issuance of Goldcorp common shares, resulted in an increase in total
assets of $2,955 million, an increase in total liabilities of $720
million, and an increase in shareholders' equity of $2,235 million.
Mining interests increased by $2,397 million, representing the fair
value of Wheaton's mining properties acquired, and goodwill increased
by $249 million. Future income tax liabilities of $541 million and
deferred employee profit sharing liabilities of $86 million were
accrued on the acquisition and will be amortized to income as the
related mining interests are depreciated. Accounting for income taxes
uses the liability method which takes into consideration the
differences between accounting and tax values of all assets and
liabilities. In particular, on business acquisitions, the Company
grosses up the value of mining interests acquired to reflect the
recognition of future income tax liabilities for the tax effect of
such differences.
During the quarter, the Company generated operating cash flows of
$85 million (nine months ended September 30, 2005 - $329 million),
compared with $22 million (nine months ended September 30, 2004 - $31
million) during the same period of 2004. The favourable non-cash
operating working capital movement during the nine months ended
September 30, 2005 primarily resulted from the second quarter sale of
the gold bullion inventory, offset by cash tax payments at Alumbrera
of $69 million. Conversely, a negative non-cash operating working
capital movement of $44 million during the nine months to September
30, 2004 was largely due to cash tax payments.
The acquisition of Wheaton during 2005 resulted in net cash
acquired of $132 million after cash payments of acquisition costs. In
January 2005, the Company invested cash of $70 million to acquire the
Bermejal property in Mexico. During the nine months ended September
30, 2005, the Company invested a total of $195 million in mining
interests, including $43 million at Red Lake, $72 million at the
Luismin operations, $57 million at Amapari and $15 million at Peak.
Cash dividend payments for the nine months totalled $136 million,
primarily due to the payment of a special $0.50 per share cash
dividend, totalling approximately $95 million, during the first
quarter. The Company paid a monthly dividend of $0.015 per share,
resulting in cash dividend payments for the third quarter of $15.2
million.
As of November 7, 2005, there were 339 million common shares of
the Company issued and outstanding and 13.8 million stock options
outstanding under its share option plan. In addition, the Company had
7 million share purchase warrants outstanding (exchangeable for 14.5
million common shares) and 158.1 million Series A, B and C share
purchase warrants outstanding (exchangeable for 39.5 million common
shares), issued in exchange for existing Wheaton share purchase
warrants.
Derivative instruments
The Company employs, from time to time, interest rate and
Canadian dollar forward and option contracts to manage exposure to
fluctuations in metal prices and foreign currency exchange rates.
Commitments
Commitments exist for expenditures for mining interests of
approximately $101 million, primarily relating to the Red Lake
expansion, completion of construction of Amapari and commencement of
construction at Los Filos/Bermejal.
Related party transactions
During the nine months ended September 30, 2005, Goldcorp sold
its holdings in three marketable securities to a company owned by
Robert R. McEwen, the former Chairman and CEO of Goldcorp. These were
non-brokered transactions which were executed at market value based
on the average of the TSX closing price for the ten trading days
prior to the sale agreements, resulting in gains totalling
approximately $4 million. During the third quarter, the Company sold
its share ownership of Lexam Explorations Inc. to a company owned by
Mr. McEwen for proceeds of $0.3 million.
CRITICAL ACCOUNTING POLICIES
Acquisition accounting
For the purposes of these consolidated financial statements, the
purchase consideration has been allocated on a preliminary basis to
the fair value of assets acquired and liabilities assumed based on
management's best estimates and taking into account all available
information at the time these consolidated financial statements were
prepared. Goldcorp will continue to review information and perform
further analysis with respect to these assets, including an
independent valuation, prior to finalizing the allocation of the
purchase price. This process will be performed in accordance with the
recent accounting pronouncement relating to "Mining Assets -
Impairment and Business Combination" (Emerging Issue Committee
Abstract 152). Although the results of this review are presently
unknown, it is anticipated that it may result in a change to the
amount assigned to goodwill and a change to the value attributable to
tangible assets.
Goodwill and impairment testing
The acquisition of Wheaton was accounted for using the purchase
method whereby assets acquired and liabilities assumed were recorded
at their fair market values as of the date of acquisition and any
excess of the purchase price over such fair value was recorded as
goodwill. Goodwill was identified and allocated to reporting units by
preparing estimates of the fair value of each reporting unit and
comparing this amount to the fair value of assets and liabilities in
the reporting unit.
The Company evaluates, on at least an annual basis, the carrying
amount of goodwill to determine whether current events and
circumstances indicate that a reporting unit's carrying amount is
greater than its fair value. This impairment assessment involves
estimating the fair value of each reporting unit that includes
goodwill. We compare this fair value to the total carrying amount of
the reporting unit (including goodwill). If the fair value exceeds
this carrying amount, we consider that the goodwill is not impaired.
If the fair value is less than this carrying amount, then we estimate
the fair values of all identifiable assets and liabilities in the
reporting unit, and compare this net fair value of assets less
liabilities to the estimated fair value of the entire reporting unit.
The difference represents the fair value of goodwill, and if
necessary, we reduce the carrying amount of goodwill to this fair
value with a charge to operations. Assumptions underlying fair value
estimates are subject to significant risks and uncertainties.
Investment in Alumbrera
The Company has joint control over Alumbrera through certain
matters requiring unanimous consent in the shareholders' agreement
and, therefore, has proportionately consolidated its 37.5% share of
the financial statements of Alumbrera from February 15, 2005. On this
basis, the Company records its 37.5% share of the assets,
liabilities, revenues and expenses of Alumbrera in these consolidated
financial statements.
Non-controlling interest
Non-controlling interest exists on less than wholly-owned
subsidiaries of the Company and represents the outside interest's
share of the carrying value of the subsidiaries. As at September 30,
2005, non-controlling interests had a 35% interest in Silver Wheaton.
OUTLOOK
Goldcorp anticipates continued strong operating results for the
fourth quarter of 2005, with total gold production for the year
forecast to exceed 1.1 million ounces at a total cash cost of less
than $60 per ounce (net of by-product sales revenue).
Expenditures for mining interests for the remainder of the year
are forecast to approximate $69 million, which primarily relate to
the Red Lake expansion and construction of the Los Filos/Bermejal
project.
SUBSEQUENT EVENT
On October 30, 2005, Goldcorp entered into an agreement with
Barrick Gold Corporation ("Barrick") to acquire certain mining assets
and interests. Barrick has offered to acquire all the outstanding
shares of Placer Dome Inc. ("Placer Dome") for approximately $9.2
billion in shares and cash and in a separate agreement, upon closing
of Barrick's transaction with Placer Dome, Goldcorp has agreed to
purchase from Barrick certain of Placer Dome's Canadian and other
assets for cash of approximately $1.35 billion. Subject to any
required consents and government approvals, Goldcorp will acquire
Placer Dome's interests in the Campbell, Porcupine and Musselwhite
gold mines in Ontario, and the La Coipa gold/silver mine in Chile.
Goldcorp will also acquire a 40% interest in the Pueblo Viejo
development project in the Dominican Republic, together with Placer
Dome's interest in its Canadian exploration properties, including the
Mount Milligan copper/gold deposit in British Columbia.
In order to fund this proposed transaction, Goldcorp intends to
use a portion of its current cash balances of over $400 million, $500
million from its existing revolving credit facilities, and new
committed credit facilities of $700 million. The new $700 million
credit facilities will be unsecured, and amounts drawn down will
incur interest at LIBOR plus 0.625% to 1.125% per annum dependent
upon the Company's leverage ratio, increasing by an additional 0.125%
per annum if the total amount drawn under this facility exceeds $350
million. Undrawn amounts will be subject to a 0.15% to 0.25% per
annum commitment fee dependent on the Company's leverage ratio. All
amounts drawn will be required to be refinanced or repaid within two
years of the closing date.
On completion of this transaction, Goldcorp's annualized 2006
gold production will increase by approximately 50% to over 2 million
ounces at a total cash cost of less than US$150/oz. Proven and
probable reserves will increase by 83% to approximately 23 million
ounces, measured and indicated gold resources by 195% to 16 million
ounces, and inferred gold resources by 86% to 11 million ounces. The
transaction provides geographical synergies, participation in a
large-scale, long-life development asset as well as strong
exploration potential in Canada, which should significantly enhance
Goldcorp's growth profile while maintaining its status as the lowest
cost million ounce gold producer.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Management's Discussion and Analysis release contains
"forward-looking statements", within the meaning of the United States
Private Securities Litigation Reform Act of 1995 and similar Canadian
legislation. Forward-looking statements include, but are not limited
to, statements with respect to the future price of gold, silver and
copper, the estimation of mineral reserves and resources, the
realization of mineral reserve estimates, the timing and amount of
estimated future production, costs of production, capital
expenditures, costs and timing of the development of new deposits,
success of exploration activities, permitting time lines, currency
exchange rate fluctuations, requirements for additional capital,
government regulation of mining operations, environmental risks,
unanticipated reclamation expenses, title disputes or claims and
limitations on insurance coverage. Generally, these forward-looking
statements can be identified by the use of forward-looking
terminology such as "plans", "expects" or "does not expect", "is
expected", "budget", "scheduled", "estimates", "forecasts",
"intends", "anticipates" or "does not anticipate", or "believes", or
variations of such words and phrases or state that certain actions,
events or results "may", "could", "would", "might" or "will be
taken", "occur" or "be achieved".
Forward-looking statements are subject to known and unknown
risks, uncertainties and other factors that may cause the actual
results, level of activity, performance or achievements of Goldcorp
to be materially different from those expressed or implied by such
forward-looking statements, including but not limited to: risks
related to the integration of acquisitions; risks related to
international operations; risks related to joint venture operations;
actual results of current exploration activities; actual results of
current reclamation activities; conclusions of economic evaluations;
changes in project parameters as plans continue to be refined; future
prices of gold, silver and copper; possible variations in ore
reserves, grade or recovery rates; failure of plant, equipment or
processes to operate as anticipated; accidents, labour disputes and
other risks of the mining industry; delays in obtaining governmental
approvals or financing or in the completion of development or
construction activities, as well as those factors discussed in (a)
the section entitled "Description of the Business - Risk Factors" in
Goldcorp's annual information form for the year ended December 31,
2004, and (b) the section entitled "Description of the Business -
Risk Factors" in Wheaton River Minerals Ltd.'s annual information
form for the year ended December 31, 2004. Although Goldcorp has
attempted to identify important factors that could cause actual
results to differ materially from those contained in forward-looking
statements, there may be other factors that cause results not to be
as anticipated, estimated or intended. There can be no assurance that
such statements will prove to be accurate, as actual results and
future events could differ materially from those anticipated in such
statements. Accordingly, readers should not place undue reliance on
forward-looking statements. Goldcorp does not undertake to update any
forward-looking statements that are incorporated by reference herein,
except in accordance with applicable securities laws.
Readers are advised that National Instrument 43-101 of the
Canadian Securities Administrators requires that each category of
mineral reserves and mineral resources be reported separately.
Readers should refer to the respective annual information forms of
Goldcorp and Wheaton River Minerals Ltd., each for the year ended
December 31, 2004, and other continuous disclosure documents filed by
Goldcorp since January 1, 2005 available at www.sedar.com, for this
detailed information, which is subject to the qualifications and
notes set forth therein.
Cautionary Note to United States Investors Concerning Estimates
of Measured, Indicated and Inferred Resources: This Management's
Discussion and Analysis uses the terms "Measured", "Indicated" and
"Inferred" Resources. United States investors are advised that while
such terms are recognized and required by Canadian regulations, the
United States Securities and Exchange Commission does not recognize
them. "Inferred Mineral Resources" have a great amount of uncertainty
as to their existence, and as to their economic and legal
feasibility. It cannot be assumed that all or any part of an Inferred
Mineral Resource will ever be upgraded to a higher category. Under
Canadian rules, estimates of Inferred Mineral Resources may not form
the basis of feasibility or other economic studies. United States
investors are cautioned not to assume that all or any part of
Measured or Indicated Mineral Resources will ever be converted into
Mineral Reserves. United States investors are also cautioned not to
assume that all or any part of an Inferred Mineral Resource exists,
or is economically or legally mineable.
Consolidated Statements of Earnings
(in thousands of United States dollars and shares,
except per share amounts - Unaudited)
Three Months Ended Nine Months Ended
September 30 September 30
Note 2005 2004 2005 2004
--------------------------------------------------------------------
Revenues $ 203,669 $ 50,369 $ 628,124 $ 139,144
Operating expenses 77,538 18,973 213,193 49,190
Depreciation and
depletion 29,457 4,976 87,349 13,795
--------------------------------------------------------------------
Earnings from mine
operations 96,674 26,420 327,582 76,159
Corporate administration 7,442 2,107 18,234 6,514
Exploration 2,255 1,474 6,265 4,042
--------------------------------------------------------------------
Earnings from operations 86,977 22,839 303,083 65,603
--------------------------------------------------------------------
Other income (expense)
Interest and other income 4,321 1,728 9,678 7,379
Stock option expense 12 (3,096) (1,087) (10,572) (3,298)
Gain (loss) on foreign
currency 4,741 (259) 1,388 243
Gain (loss) on marketable
securities, net 774 (5,620) 2,218 (7,163)
Corporate transaction
costs 6 (153) - (3,592) -
--------------------------------------------------------------------
6,587 (5,238) (880) (2,839)
--------------------------------------------------------------------
Earnings before taxes and
non-controlling interests 93,564 17,601 302,203 62,764
Income and mining taxes (34,774) (7,747) (108,488) (26,384)
Non-controlling interests (2,269) - (9,675) -
--------------------------------------------------------------------
Net earnings $ 56,521 $ 9,854 $ 184,040 $ 36,380
--------------------------------------------------------------------
--------------------------------------------------------------------
Earnings per share 12
Basic $ 0.17 $ 0.05 $ 0.60 $ 0.19
Diluted 0.15 0.05 0.54 0.19
Weighted average number
of shares outstanding
Basic 336,651 189,799 305,944 189,640
Diluted 374,841 193,068 339,044 193,323
The accompanying notes form an integral part of these consolidated
financial statements
Consolidated Balance Sheets
(in thousands of
United States dollars - Unaudited)
September 30 December 31
Note 2005 2004
--------------------------------------------------------------------
Assets
Current
Cash and cash equivalents $ 420,901 $ 333,375
Gold bullion (market value:
$nil; 2004 - $96,363) - 33,895
Marketable securities (market
value: $33,195; 2004 - $31,006) 20,552 22,873
Accounts receivable 58,724 7,197
Income and mining taxes
receivable 2,774 12,269
Inventories and stockpiled ore 7 70,692 15,329
Other 9,252 1,735
--------------------------------------------------------------------
582,895 426,673
Mining interests 3,8 2,845,964 264,949
Goodwill 3 249,315 -
Silver contract 5 75,241 -
Stockpiled ore 7 50,961 -
Future income and mining taxes 3,455 -
Long-term investments (market
value: $15,110 ; 2004 - $nil) 15,069 -
Other 16,325 9,896
--------------------------------------------------------------------
$ 3,839,225 $ 701,518
--------------------------------------------------------------------
--------------------------------------------------------------------
Liabilities
Current
Accounts payable and accrued
liabilities $ 78,262 $ 25,507
Income and mining taxes payable 73,953 -
Future income and mining taxes - 1,149
--------------------------------------------------------------------
152,215 26,656
Future income and mining taxes 617,316 70,610
Reclamation and closure cost
obligations 50,225 26,403
Future employee benefits and other 10 90,268 -
--------------------------------------------------------------------
910,024 123,669
--------------------------------------------------------------------
Non-controlling interests 11 61,729 -
--------------------------------------------------------------------
Shareholders' equity
Capital stock 12 2,633,846 386,703
Cumulative translation adjustment 101,930 107,741
Retained earnings 131,696 83,405
--------------------------------------------------------------------
2,867,472 577,849
--------------------------------------------------------------------
$ 3,839,225 $ 701,518
--------------------------------------------------------------------
--------------------------------------------------------------------
Commitments and contingencies (note 15)
Subsequent events (notes 17)
The accompanying notes form an integral part of these consolidated
financial statements
Consolidated Statements of Cash Flows
(in thousands of United
States dollars - Unaudited)
Three Months Ended Nine Months Ended
September 30 September 30
Note 2005 2004 2005 2004
--------------------------------------------------------------------
Operating activities
Net earnings $ 56,521 $ 9,854 $ 184,040 $ 36,380
Reclamation expenditures (1,009) (135) (2,535) (712)
Items not affecting cash
Depreciation and depletion 29,457 4,976 87,349 13,795
(Gain) loss on marketable
securities, net (774) 5,620 (2,218) 7,163
Stock option expense 3,096 1,087 10,572 3,298
Future income and
mining taxes 3,651 2,131 1,532 14,414
Non-controlling interests 2,269 - 9,675 -
Other (6,878) - (1,501) -
Change in non-cash
operating working
capital 13 (1,517) (1,227) 42,016 (43,623)
--------------------------------------------------------------------
Net cash provided by
operating activities 84,816 22,306 328,930 30,715
--------------------------------------------------------------------
Investing activities
Mining interests (77,885) (14,082) (194,506) (43,506)
Acquisition of Wheaton
River Minerals Ltd, net
of cash acquired 3 - - 132,446 -
Acquisition of Bermejal
property 4 - - (70,010) -
Purchase of marketable
securities - (4,988) (8,205) (21,611)
Proceeds from sale of
marketable securities 3,303 30 18,782 3,827
Long-term investments (15,069) - (15,069) -
Other (1,462) 210 (1,649) 955
--------------------------------------------------------------------
Net cash used in investing
activities (91,113) (18,830) (138,211) (60,335)
--------------------------------------------------------------------
Financing activities
Common shares issued 14,237 831 27,577 3,346
Dividends paid to common
shareholders (15,231) (8,537) (135,749) (44,523)
Other (409) - 2,903 -
--------------------------------------------------------------------
Net cash used in financing
activities (1,403) (7,706) (105,269) (41,177)
--------------------------------------------------------------------
Effect of exchange rate
changes on cash 7,758 17,022 2,076 7,485
--------------------------------------------------------------------
Increase (decrease) in cash
and cash equivalents 58 12,792 87,526 (63,312)
Cash and cash equivalents,
beginning of period 420,843 302,850 333,375 378,954
--------------------------------------------------------------------
Cash and cash equivalents,
end of period $ 420,901 $ 315,642 $ 420,901 $ 315,642
--------------------------------------------------------------------
--------------------------------------------------------------------
Supplemental cash flow information (note 13)
The accompanying notes form an integral part of these consolidated
financial statements
Consolidated Statements to Shareholders' Equity
(In thousands - Unaudited)
Common Shares Share
Purchase Stock
Shares Amount Warrants Options
--------------------------------------------------------------------
At January 1, 2004 189,274 $ 359,717 $ 16,110 $ 2,275
Stock options exercised 706 3,529 - (9)
Fair value of stock
options issued - - - 5,081
Dividends declared - - - -
Unrealized gain on
translation of non-US
dollar denominated
accounts - - - -
Net earnings - - - -
--------------------------------------------------------------------
At December 31, 2004 189,980 363,246 16,110 7,347
Issued pursuant to
Wheaton acquisition
(note 3) 143,771 1,887,421 290,839 30,794
Stock options exercised 2,178 24,031 - (6,765)
Share purchase
warrants exercised 1,958 22,358 (11,861) -
Fair value of stock
options issued - - - 10,522
Share issue costs - (196) - -
Dividends declared - - - -
Unrealized loss on
translation of non-US
dollar denominated
accounts - - - -
Net earnings - - - -
--------------------------------------------------------------------
At September 30, 2005 337,887 $2,296,860 $ 295,088 $ 41,898
--------------------------------------------------------------------
--------------------------------------------------------------------
Cumulative
Translation Retained
Adjustment Earnings Total
--------------------------------------------------------------------
At January 1, 2004 $66,282 $63,358 $507,742
Stock options exercised - - 3,520
Fair value of stock
options issued - - 5,081
Dividends declared - (31,300) (31,300)
Unrealized gain on translation
of non-US dollar denominated
accounts 41,459 - 41,459
Net earnings - - 51,347
--------------------------------------------------------------------
Net earnings - - -
At December 31, 2004 107,741 83,405 577,849
Issued pursuant to Wheaton
acquisition (note 3) - - 2,209,054
Stock options exercised - - 17,266
Share purchase warrants
exercised - - 10,497
Fair value of stock options
issued - - 10,522
Share issue costs - - (196)
Dividends declared - (135,749) (135,749)
Unrealized loss on translation
of non-US dollar denominated
accounts (5,811) - (5,811)
Net earnings - 184,040 184,040
--------------------------------------------------------------------
At September 30, 2005 $ 101,930 $ 131,696 $2,867,472
--------------------------------------------------------------------
--------------------------------------------------------------------
The accompanying notes form an integral part of these consolidated
financial statements
Notes to the Consolidated Financial Statements
Nine Months Ended September 30, 2005
(in United States dollars, tabular amounts in thousands - Unaudited)
1. DESCRIPTION OF BUSINESS AND NATURE OF OPERATIONS
Goldcorp Inc ("Goldcorp" or "the Company") is a leading
intermediate gold producer engaged in gold mining and related
activities including exploration, extraction, processing and
reclamation. As a result of the successful acquisition of Wheaton
River Minerals Ltd ("Wheaton") during the year (note 3), the
Company's assets are comprised of the Red Lake gold mine in Canada, a
37.5% interest in the Alumbrera gold/copper mine in Argentina, the
Luismin gold/silver mines in Mexico, the Peak gold mine in Australia,
and the Wharf gold mine in the United States. Significant development
projects include the expansion of the existing Red Lake mine, the Los
Filos/Bermejal gold project in Mexico and the Amapari gold project in
northern Brazil. Goldcorp also owns a 65% interest in Silver Wheaton
Corp ("Silver Wheaton"), a publicly traded silver mining company.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These unaudited interim consolidated financial statements have
been prepared by the Company in accordance with Canadian generally
accepted accounting principles ("Canadian GAAP"). The preparation of
financial data is based on accounting policies and practices
consistent with those used in the preparation of the audited annual
consolidated financial statements, other than as set out below. The
accompanying unaudited consolidated financial statements should be
read in conjunction with the notes to the Company's audited
consolidated financial statements for the year ended December 31,
2004, since they do not contain all disclosures required by Canadian
GAAP for annual financial statements.
(a) Basis of presentation
These consolidated financial statements reflect the results of
Goldcorp's Red Lake and Wharf mines, together with an 82% interest in
those of Wheaton from February 15 to April 15, 2005 and 100%
thereafter (note 3).
The principal mining assets of Wheaton are listed below:
Operations and
Ownership Development
Mining Asset Location Interest Status Projects Owned
--------------------------------------------------------------------
Minera Alumbrera
Ltd. ("Alumbrera") Argentina 37.5% Proportion-
ately
consolidated Alumbrera mine
Luismin SA de CV
("Luismin") Mexico 100% Consolidated San Dimas,
San Martin and
Nukay mines and
Los Filos/
Bermejal
development
project
Mineracao Pedra
Branco do Amapari
Ltda ("Amapari") Brazil 100% Consolidated Amapari
development
project
Peak Gold Mines
Pty Ltd ("Peak") Australia 100% Consolidated Peak mine
Silver Wheaton Corp
("Silver Wheaton") Canada 65% Consolidated Silver
contracts in
Mexico and
Sweden
(b) Revenue recognition
Revenue from the sale of metals is recognized in the accounts
when title and risk passes to the buyer, collection is reasonably
assured and the price is reasonably determinable. Revenue from the
sale of metals in concentrate may be subject to adjustment upon final
settlement of estimated metal prices, weights and assays. Adjustments
to revenue for metal prices are recorded monthly and other
adjustments are recorded on final settlement. Refining and treatment
charges are netted against revenue for sales of metal concentrate.
(c) Investment in Alumbrera
The Company has joint control over Alumbrera through certain
matters requiring unanimous consent in the shareholders' agreement
and, therefore, has proportionately consolidated its 37.5% share of
the financial statements of Alumbrera from February 15, 2005. On this
basis, the Company records its 37.5% share of the assets,
liabilities, revenues and expenses of Alumbrera in these consolidated
financial statements.
(d) Goodwill
The acquisition of Wheaton was accounted for using the purchase
method whereby assets acquired and liabilities assumed were recorded
at their fair market values as of the date of acquisition and any
excess of the purchase price over such fair value was recorded as
goodwill. Goodwill was identified and allocated to reporting units by
preparing estimates of the fair value of each reporting unit and
comparing this amount to the fair value of assets and liabilities in
the reporting unit.
The Company evaluates, on at least an annual basis, the carrying
amount of goodwill to determine whether current events and
circumstances indicate that a reporting unit's carrying amount is
greater than its fair value. This impairment assessment involves
estimating the fair value of each reporting unit that includes
goodwill. We compare this fair value to the total carrying amount of
the reporting unit (including goodwill). If the fair value exceeds
this carrying amount, we consider that the goodwill is not impaired.
If the fair value is less than this carrying amount, then we estimate
the fair values of all identifiable assets and liabilities in the
reporting unit, and compare this net fair value of assets less
liabilities to the estimated fair value of the entire reporting unit.
The difference represents the fair value of goodwill, and if
necessary, we reduce the carrying amount of goodwill to this fair
value with a charge to operations. Assumptions underlying fair value
estimates are subject to significant risks and uncertainties.
(e) Silver contract
Contracts for which settlement is called for in silver are
recorded at cost. These assets are depreciated on a unit-of-sale
basis over the estimated recoverable reserves and resources at the
mine corresponding to the specific contract.
Evaluations of the carrying values of each contract are
undertaken at least annually to determine if estimated undiscounted
future net cash flows are less than the carrying value. Estimated
undiscounted future net cash flows are calculated using estimated
production, sales prices and purchase costs. If it is determined that
the undiscounted future net cash flows from an operation are less
than the carrying value then a write-down is recorded with a charge
to operations.
(f) Long-term investments
Long-term investments are carried at cost. When a decline in
market value that is other than temporary has occurred, these
investments are written down to provide for the loss.
(g) Foreign currency translation
Prior to April 1, 2005, the Canadian dollar was determined to be
the measurement currency of the Company's Canadian operations and
these operations have been translated into United States dollars up
until this date using the current rate method as follows: all assets
and liabilities are translated into United States dollars at the
exchange rate prevailing at the balance sheet date; all revenue and
expense items are translated at the average rate of exchange for the
period; and the resulting translation adjustment is recorded as a
separate component of shareholders' equity. In addition, unrealized
gains and losses due to movements in exchange rates on cash balances
held in foreign currencies are shown separately on the Consolidated
Statements of Cash Flows.
Due to the Wheaton acquisition and related changes, including
holding a greater proportion of the Company's cash in United States
dollars, it has been determined that as of April 1, 2005, the United
States dollar is the reporting and measurement currency of the
Company's Canadian operations and therefore these operations have
been translated using the temporal method from that date onward. All
operations outside of Canada, including those of Wheaton, previously
applied the United States dollar as their reporting and measurement
currency and therefore translated their operating results using the
temporal method. Under this method, foreign currency monetary assets
and liabilities are translated into United States dollars at the
exchange rates prevailing at the balance sheet date; non-monetary
assets denominated in foreign currencies are translated using the
rate of exchange at the transaction date; foreign currency
transactions are translated at the United States dollar rate
prevailing on the transaction dates; and foreign exchange gains and
losses are included in the determination of earnings.
(h) Non-controlling interest
Non-controlling interest exists on less than wholly-owned
subsidiaries of the Company and represents the outside interest's
share of the carrying values of the subsidiaries. When the subsidiary
company issues its own shares to outside interests, a dilution gain
or loss arises as a result of the difference between the Company's
share of the proceeds and the underlying equity of the shares
involved. Dilution gains that do not represent the culmination of
earnings are deferred and recognized as revenue on a systematic basis.
(i) Financial instruments
The Company employs, from time to time, interest rate and
Canadian dollar forward and option contracts to manage exposure to
fluctuations in interest rates and foreign currency exchange rates.
(j) Income and mining taxes
The Company uses the liability method of accounting for income
taxes. Under the liability method, future tax assets and liabilities
are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Upon
business acquisitions, the liability method results in a gross up of
mining interests to reflect the recognition of the future tax
liabilities for the tax effect of such differences.
Future tax assets and liabilities are measured using enacted or
substantively enacted tax rates expected to apply when the asset is
realized or the liability settled. A reduction in respect of the
benefit of a future tax asset (a valuation allowance) is recorded
against any future tax asset if it is not likely to be realized. The
effect on future tax assets and liabilities of a change in tax rates
is recognized in income in the period in which the tax rate changes.
(k) Comparative amounts
Certain comparative information has been reclassified to conform
to the current period's presentation.
3. BUSINESS COMBINATION
On December 6, 2004, Goldcorp and Wheaton announced a proposed
transaction which provided for Goldcorp to make a take-over bid for
Wheaton on the basis of one Goldcorp share for every four Wheaton
shares. On December 29, 2004, Goldcorp mailed the Goldcorp Take-over
Bid Circular to the Wheaton shareholders.
On February 8, 2005, Goldcorp announced a special $0.50 per share
cash dividend would be payable to existing Goldcorp shareholders
should shareholders approve by majority Goldcorp's take-over bid for
Wheaton and Wheaton shareholders tender the minimum two-thirds bid
requirement. The payment of the special dividend also resulted in an
adjustment to the exchange ratio of Goldcorp's outstanding warrants -
an increase in entitlement from 2.0 to 2.08 Goldcorp shares per
warrant.
On February 10, 2005, at a special meeting, Goldcorp shareholders
approved the issuance of additional Goldcorp common shares to effect
the acquisition of Wheaton. As of February 14, 2005, the effective
date of acquisition, approximately 70% of the outstanding Wheaton
common shares were tendered to Goldcorp's offer, satisfying the
minimum two-thirds bid requirement under the terms of the Goldcorp
offer. With conditions met, the special $0.50 per share cash
dividend, totalling approximately $95 million, was paid on February
28, 2005.
As of March 31, 2005, Goldcorp held approximately 82% of the
outstanding Wheaton common shares and by April 15, 2005, 100% had
been acquired. In addition, each Wheaton warrant or stock option,
which gave the holder the right to acquire common shares of Wheaton,
was exchanged for a warrant or stock option of Goldcorp, giving the
holder the right to acquire common shares of Goldcorp on the same
basis as the exchange of Wheaton common shares for Goldcorp common
shares.
This business combination has been accounted for as a purchase
transaction, with Goldcorp being identified as the acquirer and
Wheaton as the acquiree in accordance with CICA Handbook Section 1581
"Business Combinations". These consolidated financial statements
include 82% of Wheaton's operating results for the period February 15
to April 15, 2005, and 100% of the results thereafter.
The preliminary allocation of the purchase price of the shares of
Wheaton is summarized in the following table and is subject to
adjustment:
Purchase price
Common shares of Goldcorp issued to acquire 100%
of Wheaton (143.8 million shares) $ 1,887,421
Share purchase warrants of Goldcorp in exchange
for those of Wheaton (174.8 million warrants) 290,839
Stock options of Goldcorp in exchange for those
of Wheaton (4.9 million options) 30,794
Acquisition costs 25,969
--------------------------------------------------------------------
$ 2,235,023
--------------------------------------------------------------------
--------------------------------------------------------------------
Net assets acquired:
Cash and cash equivalents $ 168,663
Marketable securities 4,348
Other non-cash operating working capital (7,753)
Mining interests 2,396,671
Silver contract 77,489
Stockpiled ore, non-current 55,286
Other long-term assets 3,767
Other liabilities (10,248)
Future income taxes, net (540,570)
Reclamation and closure costs obligations (20,613)
Future employee benefits and other (86,424)
Non-controlling interest in Silver
Wheaton (35%) (note 11) (54,908)
--------------------------------------------------------------------
Net identifiable assets 1,985,708
Residual purchase price allocated to goodwill 249,315
--------------------------------------------------------------------
$ 2,235,023
--------------------------------------------------------------------
--------------------------------------------------------------------
A total of 143.8 million Goldcorp shares were issued to acquire a
100% interest in the shares of Wheaton at a price of $13.13 per
share. This issue price is the five-day average share price of
Goldcorp common shares at February 8, 2005, reduced by the amount of
the special dividend.
For the purposes of these consolidated financial statements, the
purchase consideration has been allocated on a preliminary basis to
the fair value of assets acquired and liabilities assumed, with
goodwill assigned to specific reporting units, based on management's
best estimates and taking into account all available information at
the time of acquisition as well as applicable information at the time
these consolidated financial statements were prepared. Goldcorp will
continue to review information and perform further analysis with
respect to these assets, including an independent valuation, prior to
finalizing the allocation of the purchase price. This process will be
performed in accordance with the recent accounting pronouncement
relating to "Mining Assets - Impairment and Business Combination"
(Emerging Issue Committee Abstract 152). Although the results of this
review are presently unknown, it is anticipated that it may result in
a change to the amount assigned to goodwill and a change to the value
attributable to tangible assets.
4. ACQUISITION
On March 31, 2005, Goldcorp completed the acquisition of the
Bermejal gold deposit in Mexico for cash consideration of US$70
million from a joint venture of Industrias Penoles SA de CV and
Newmont Mining Corporation. The Bermejal gold deposit is located two
kilometres south of Goldcorp's Los Filos gold deposit, where a
feasibility study has recently been completed. The Company plans to
develop the two deposits as a single project, the Los Filos/Bermejal
project, and a detailed engineering study of the combined project is
being completed.
5. SILVER CONTRACT
Silver Wheaton has an agreement to purchase all of the silver
produced by Lundin Mining Corporation's Zinkgruvan mine in Sweden for
a per ounce cash payment of the lesser of $3.90 and the prevailing
market price, subject to adjustment. The carrying value of the silver
contract at September 30, 2005 is $75,241,000 which is being
amortized on a unit-of-sale basis.
6. CORPORATE TRANSACTION COSTS
Certain costs associated with the restructuring of Goldcorp's
Toronto office, following the acquisition of Wheaton, including
severance and restructuring of insurance policies, may not be
capitalized as acquisition costs under current accounting standards.
These costs have been expensed in the amount of $153,000 for the
three months ended September 30, 2005 (nine months ended September
30, 2005 - $3,592,000).
7. INVENTORIES AND STOCKPILED ORE
September 30 December 31
2005 2004
--------------------------------------------------------------------
Supplies $ 20,405 $ 4,146
Finished goods 19,314 644
Work in process 25,560 10,539
Stockpiled ore 56,374 -
--------------------------------------------------------------------
121,653 15,329
--------------------------------------------------------------------
Less: non-current stockpiled ore 50,961 -
--------------------------------------------------------------------
$ 70,692 $ 15,329
--------------------------------------------------------------------
--------------------------------------------------------------------
Non-current stockpiled ore is comprised of lower grade ore at
Alumbrera, which will be processed later in the mine life.
8. MINING INTERESTS
September 30, 2005
--------------------------------------------------------------------
Accumulated
Depreciation
Cost and Depletion Net
--------------------------------------------------------------------
Mineral properties
Red Lake mine, Canada $ 271,582 $ (100,796) $ 170,786
Alumbrera mine, Argentina 399,257 (22,570) 376,687
Luismin mines, Mexico 577,410 (10,359) 567,051
Peak mine, Australia 165,443 (3,713) 161,730
Wharf mine, United States 52,183 (44,101) 8,082
--------------------------------------------------------------------
1,465,875 (181,539) 1,284,336
--------------------------------------------------------------------
Plant and equipment
Red Lake mine, Canada 165,461 (58,020) 107,441
Alumbrera mine, Argentina 208,853 (10,510) 198,343
Luismin mines, Mexico 55,148 (2,075) 53,073
Peak mine, Australia 23,063 (1,928) 21,135
Wharf mine, United States 50,964 (50,655) 309
Corporate and other, Canada 16,670 (12,725) 3,945
--------------------------------------------------------------------
520,159 (135,913) 384,246
--------------------------------------------------------------------
Properties under development
Los Filos/Bermejal project,
Mexico 292,572 - 292,572
Amapari project, Brazil 718,637 - 718,637
--------------------------------------------------------------------
1,011,209 - 1,011,209
--------------------------------------------------------------------
Exploration projects
El Limon and other
projects, Mexico 166,173 - 166,173
--------------------------------------------------------------------
$ 3,163,416 $ (317,452) $2,845,964
--------------------------------------------------------------------
--------------------------------------------------------------------
December 31, 2004
--------------------------------------------------------------------
Accumulated
Depreciation
Cost and Depletion Net
--------------------------------------------------------------------
Mineral properties
Red Lake mine, Canada $ 234,565 $ (90,080) $ 144,485
Alumbrera mine, Argentina - - -
Luismin mines, Mexico - - -
Peak mine, Australia - - -
Wharf mine, United States 48,985 (40,764) 8,221
--------------------------------------------------------------------
283,550 (130,844) 152,706
--------------------------------------------------------------------
Plant and equipment
Red Lake mine, Canada 160,567 (52,339) 108,228
Alumbrera mine, Argentina - - -
Luismin mines, Mexico - - -
Peak mine, Australia - - -
Wharf mine, United States 50,915 (50,280) 635
Corporate and other, Canada 16,345 (12,965) 3,380
--------------------------------------------------------------------
227,827 (115,584) 112,243
--------------------------------------------------------------------
Properties under development
Los Filos/Bermejal project,
Mexico - - -
Amapari project, Brazil - - -
--------------------------------------------------------------------
--------------------------------------------------------------------
Exploration projects
El Limon and other projects,
Mexico
--------------------------------------------------------------------
$ 511,377 $ (246,428) $ 264,949
--------------------------------------------------------------------
--------------------------------------------------------------------
9. BANK CREDIT FACILITIES
(a) The Company has an Aus$5,000,000 ($3,821,000), unsecured,
revolving working capital facility for its Peak mine operations of
which $nil was drawn down at September 30, 2005. The loan bears
interest related to the Australian Treasury Bill rate plus 1.5% per
annum.
(b) During 2005, the Company cancelled a $300 million acquisition
facility and a $75 million revolving working capital facility, both
of which were undrawn.
(c) On July 29, 2005, Goldcorp entered into a $500 million
revolving credit facility with a syndicate of five lenders. The
facility is unsecured and available to finance acquisitions and for
general corporate purposes. Amounts drawn incur interest at LIBOR
plus 0.625% to 1.125% per annum dependent upon the Company's leverage
ratio, increasing by an additional 0.125% per annum if the total
amount drawn under this facility exceeds $250 million. Undrawn
amounts are subject to a 0.15% to 0.25% per annum commitment fee
dependent on the Company's leverage ratio. All amounts drawn are
required to be refinanced or repaid by July 29, 2010. The facility is
currently undrawn.
10. FUTURE EMPLOYEE BENEFITS AND OTHER
September 30 December 31
2005 2004
--------------------------------------------------------------------
Deferred employee profit sharing $ 85,248 $ -
Other 5,020 -
--------------------------------------------------------------------
$ 90,268 $ -
--------------------------------------------------------------------
--------------------------------------------------------------------
Deferred employee profit sharing
Under Mexican tax laws, the Company is required to remit 10% of
taxable income to employees as statutory profit sharing. The
provision for deferred profit sharing is based on the liability
method. Deferred profit sharing liabilities arise from the
recognition of the differences between the financial statement
carrying amounts and the tax bases of certain assets and liabilities.
11. NON-CONTROLLING INTERESTS
During the quarter ended March 31, 2005, Goldcorp acquired an 82%
interest in Wheaton (note 3) which resulted in an 18% non-controlling
interest of $141,850,000. During the period February 15 to April 15,
2005, the non-controlling interest's share of Wheaton's net earnings
was $3,548,000. Goldcorp acquired the 18% non-controlling interest's
share of Wheaton on April 15, 2005.
A further non-controlling interest arose as a result of the
Wheaton acquisition with respect to Wheaton's 65% ownership of its
subsidiary, Silver Wheaton. The details of this non-controlling
interest are as follows:
At January 1, 2005 $ -
Arising upon acquisition of Wheaton 54,908
Issuance of shares of Silver Wheaton to
non-controlling interests 694
Share of net earnings of Silver Wheaton 6,127
----------------------------------------------------------
At September 30, 2005 $ 61,729
----------------------------------------------------------
----------------------------------------------------------
12. SHAREHOLDERS' EQUITY
September 30 December 31
2005 2004
--------------------------------------------------------------------
Common shares $ 2,296,860 $ 363,246
Share purchase warrants (a) 295,088 16,110
Stock options (b) 41,898 7,347
--------------------------------------------------------------------
$ 2,633,846 $ 386,703
--------------------------------------------------------------------
--------------------------------------------------------------------
At September 30, 2005, the Company had 337,887,000 common shares
outstanding (December 31, 2004 - 189,980,000). Refer to the
Consolidated Statements of Shareholders' Equity for movement in
capital stock.
(a) Share Purchase Warrants
The payment of a special dividend (note 3) during February 2005
resulted in an adjustment to the exchange ratio of Goldcorp's
warrants outstanding prior to the acquisition of Wheaton - an
increase in entitlement from 2.0 to 2.08 Goldcorp shares per warrant.
Upon completion of the Wheaton transaction on April 15, 2005,
Goldcorp issued 174.8 million Series A, B and C share purchase
warrants to the former Wheaton share purchase warrant holders. Each
share purchase warrant is exercisable for 0.25 Goldcorp common shares
at prices ranging from C$1.65 to C$3.10 (or C$6.60 to C$12.40 for
four share purchase warrants which are exchangeable for one Goldcorp
common share), with expiry dates ranging from 2007 to 2008.
The following table summarizes information about the share purchase
warrants outstanding at September 30, 2005:
Common
Shares
to be Effec-
Received tive
(in thousands upon Price
of warrants Warrants Exercise Exchange Exercise Per Expiry
and shares) Outstanding Price Ratio of Warrants Share Date
--------------------------------------------------------------------
US dollar
Warrants 3,991 $25.00 2.08 8,302 $12.02 April
30,
2007
--------------------------------------------------------------------
--------------------------------------------------------------------
Canadian dollar
Warrants
Series A and C 102,825 C$1.65 0.25 25,706 C$6.60 May 30,
2007
Series B 64,133 3.10 0.25 16,033 12.40 August
25,
2008
Share purchase
warrants 3,000 20.00 2.08 6,240 9.62 May 13,
2009
--------------------------------------------------------------------
47,979 C$8.93
--------------------------------------------------------------------
--------------------------------------------------------------------
(b) Stock Options
On May 15, 2005, shareholders approved the Company's 2005 Stock
Option Plan which allows for up to 12.5 million stock options, with a
maximum exercise period of ten years, to be granted to employees,
officers and consultants.
The Company recognizes a compensation expense for all stock
options awarded since January 1, 2003, based on the fair value of the
options on the date of grant which is determined by using an option
pricing model with the following assumptions: risk-free interest rate
of 3% (2004 - 4%); dividend yield of 1% (2004 - 1%); volatility
factor of the expected market price of the Company's common stock of
30% (2004 - 42%); and a weighted average expected life of the options
of fours years (2004 - five years). The fair value of the options is
expensed over the vesting period of the options. No compensation
expense had been recorded for stock options issued before January 1,
2003. As a result of the acquisition of Wheaton, all Goldcorp stock
options which existed at December 31, 2004 became fully vested during
the first quarter of 2005 and were expensed in the amount of
$5,320,000. On April 15, 2005, as a result of the Wheaton
acquisition, Wheaton stock options with a fair value of $30,794,000
were converted to 4.9 million Goldcorp stock options, all of which
are fully vested and are exercisable at prices ranging from C$2.28 to
C$15.68, with expiry dates ranging from 2006 to 2010.
In addition, on June 29, 2005, the Company granted 5,000,000
stock options which vest over a period of three years, are
exercisable at C$19.23 per option and have a total fair value of
$19,855,000. Compensation expense of $2,856,000 has been recognized
in the third quarter and the remainder will be recognized as the
stock options vest.
Weighted
Average
(in thousands, except per option amounts) Outstanding Exercise Price
--------------------------------------------------------------------
At January 1, 2004 6,012 C$12.68
Granted 1,335 16.89
Exercised (706) (6.64)
Cancelled (497) (16.47)
--------------------------------------------------------------------
At December 31, 2004 6,144 13.98
Issued in connection with acquisition
of Wheaton 4,917 9.52
Granted 5,000 19.23
Exercised (2,153) (9.83)
Cancelled (24) (17.01)
--------------------------------------------------------------------
At September 30, 2005 13,884 C$14.93
--------------------------------------------------------------------
--------------------------------------------------------------------
The following table summarizes information about the options
outstanding at September 30, 2005:
Options Outstanding
-------------------------------------------
Weighted
Average
Options Weighted Remaining
Outstanding Average Contractual
Exercise Prices (C$) (000's) Exercise Price Life (years)
--------------------------------------------------------------------
$2.05 - $3.90 475 C$3.01 2.9
$4.40 - $8.48 1,516 6.10 2.4
$11.40 - $13.30 3,861 12.56 4.9
$14.80 - $16.87 1,354 16.53 8.0
$17.15 - $19.46 6,665 18.83 9.3
$23.80 13 23.80 8.2
--------------------------------------------------------------------
13,884 C$14.93 7.8
--------------------------------------------------------------------
--------------------------------------------------------------------
Options Exercisable
-------------------------------------------
Options Weighted
Outstanding Average
and Weighted Remaining
Exercisable Average Contractual
Exercise Prices (C$) (000's) Exercise Price Life (years)
--------------------------------------------------------------------
$2.05 - $3.90 475 C$3.01 2.9
$4.40 - $8.48 1,516 6.10 2.4
$11.40 - $13.30 3,861 12.56 4.9
$14.80 - $16.87 1,354 16.53 8.0
$17.15 - $19.46 2,198 18.01 8.4
$23.80 13 23.80 8.2
--------------------------------------------------------------------
9,417 C$12.90 6.8
--------------------------------------------------------------------
--------------------------------------------------------------------
(c) Restricted Share Units
On May 15, 2005, shareholders approved the Company's Restricted
Share Unit Plan which allows for up to 500,000 restricted share units
to be granted to employees, directors and consultants.
On June 29, 2005, the Company issued 31,500 restricted share
units to the non-executive Directors of the Company, which vest over
a period of two years from the grant date. The Company will record
compensation expense totalling $495,000 over the two year vesting
period. Compensation expense of $227,000 has been recognized in the
third quarter and the remainder will be recognized as the restricted
share units vest.
(d) Diluted Earnings per Share
The following table sets forth the computation of diluted earnings
per share:
Three Months Ended Nine Months Ended
September 30 September 30
2005 2004 2005 2004
--------------------------------------------------------------------
Earnings available to common
shareholders $ 56,521 $ 9,854 $ 184,040 $ 36,380
--------------------------------------------------------------------
--------------------------------------------------------------------
Weighted average shares
outstanding 336,651 189,799 305,944 189,640
Effect of dilutive securities:
Stock options 4,048 1,033 2,897 1,139
Warrants 34,121 2,236 30,182 2,544
Restricted share units 21 - 21 -
--------------------------------------------------------------------
Adjusted weighted average
shares and assumed
conversions 374,841 193,068 339,044 193,323
--------------------------------------------------------------------
--------------------------------------------------------------------
Earnings per share
Basic $ 0.17 $ 0.05 $ 0.60 $ 0.19
Diluted $ 0.15 $ 0.05 $ 0.54 $ 0.19
The following lists the stock options and warrants excluded from the
computation of diluted earnings per share because the exercise prices
exceeded the average fair market value of the common shares for the
period:
Three Months Ended Nine Months Ended
September 30 September 30
2005 2004 2005 2004
--------------------------------------------------------------------
Stock options 13 1,832 5,118 1,843
Warrants - 8,000 - -
(e) Pro forma Earnings
The following is the Company's pro forma earnings with the fair value
method applied to all options issued since January 1, 2002 (the
Black-Scholes option pricing model assumptions used are consistent
with those described in Note 8 (d) to the 2004 audited consolidated
financial statements):
Three Months Ended Nine Months Ended
September 30 September 30
2005 2004 2005 2004
--------------------------------------------------------------------
Net earnings $ 56,521 $ 9,854 $ 184,040 $ 36,380
Net additional compensation
expense related to fair
value of stock options - (336) (320) (1,120)
--------------------------------------------------------------------
Pro forma earnings $ 56,521 $ 9,518 $ 183,720 $ 35,260
--------------------------------------------------------------------
--------------------------------------------------------------------
Pro forma earnings
per share
Basic $ 0.17 $ 0.05 $ 0.60 $ 0.19
Diluted $ 0.15 $ 0.05 $ 0.54 $ 0.18
13. SUPPLEMENTAL CASH FLOW INFORMATION
Three Months Ended Nine Months Ended
September 30 September 30
2005 2004 2005 2004
--------------------------------------------------------------------
Change in non-cash
operating working
capital
Gold bullion $ - $ (7,901) $ 33,895 $ (21,331)
Accounts receivable (10,512) (5,366) (7,959) (140)
Income and mining
taxes receivable - - 12,269 -
Inventories and
stockpiled ore (6,943) 4,320 (12,511) 7,041
Accounts payable
and accrued
liabilities 919 2,502 (7,485) (4,049)
Income and mining
taxes payable 14,793 4,726 21,294 (25,557)
Other 226 492 2,513 413
--------------------------------------------------------------------
$ (1,517) $ (1,227) $ 42,016 $ (43,623)
--------------------------------------------------------------------
--------------------------------------------------------------------
Non-cash financing
and investing
activities
Shares issued on
acquisition of
Wheaton $ - $ - $ 1,887,421 $ -
Warrants issued in
exchange for those
of Wheaton - - 290,839 -
Options issued in
exchange for those
of Wheaton - - 30,794 -
Operating activities
included the
following cash
payments
Interest paid $ - $ - $ - $ -
Income taxes paid 15,529 2,666 73,934 39,493
14. SEGMENTED INFORMATION
The Company's reportable operating segments are summarized in the
table below.
Three Months Ended September 30, 2005
Red Lake Alumbrera Luismin Amapari Peak
--------------------------------------------------------------------
Revenues $ 65,448 $ 81,479 $ 24,300 $ - $ 11,536
Depreciation
and depletion 7,252 14,225 4,968 - 2,486
Earnings from
operations 36,935 36,002 3,503 - 1,927
Expenditures
for mining
interests 14,271 1,053 35,775 17,948 7,556
Silver
Wharf Wheaton Corporate Total
--------------------------------------------------------------------
Revenues $ 7,002 $ 18,107 $ (4,203) $ 203,669
Depreciation and
depletion 1,496 1,641 (2,611) 29,457
Earnings from
operations 537 6,088 1,985 86,977
Expenditures for
mining interests 1,247 - 35 77,885
Nine Months Ended September 30, 2005
Red Lake Alumbrera Luismin Amapari Peak
--------------------------------------------------------------------
(note 1) (note 1) (note 1) (note 1)
Revenues $ 298,374 $ 168,275 $ 63,687 $ - $ 31,890
Depreciation
and depletion 26,993 33,080 12,581 - 5,823
Earnings
(loss) from
operations 205,255 71,339 10,231 - 5,773
Expenditures
for mining
interests 43,455 3,118 72,228 56,878 15,450
Total assets 284,902 710,691 1,187,138 731,921 202,879
Silver
Wharf Wheaton Corporate Total
--------------------------------------------------------------------
(note 1) (note 1)
Revenues $ 28,954 $ 48,227 $ (11,283) $ 628,124
Depreciation and
depletion 6,167 4,276 (1,571) 87,349
Earnings (loss) from
operations 3,190 16,542 (9,247) 303,083
Expenditures for
mining 3,248 - 129 194,506
Total assets 47,130 296,895 377,669 3,839,225
(1) Includes results for the period subsequent to February 14, 2005,
the date of acquisition of Wheaton.
Three Months Ended September 30, 2004
Red Lake Wharf Corporate Total
--------------------------------------------------------------------
Revenues $ 41,372 $ 5,763 $ 3,234 $ 50,369
Depreciation and depletion 3,365 1,370 241 4,976
Earnings (loss) from
operations 26,542 1,545 (5,248) 22,839
Expenditures for mining
interests 12,528 1,426 128 14,082
Nine Months Ended September 30, 2004
Red Lake Wharf Corporate Total
--------------------------------------------------------------------
Revenues $ 110,325 $ 19,294 $ 9,525 $ 139,144
Depreciation and depletion 8,759 4,528 508 13,795
Earnings (loss) from
operations 74,951 3,092 (12,440) 65,603
Expenditures for mining
interests 38,382 4,921 203 43,506
Total assets
(December 31, 2004) 280,289 32,037 389,192 701,518
The geographical distribution of the above segments is as follows:
- Canada - Red Lake and Corporate
- Argentina - Alumbrera
- Mexico - Luismin (includes Luismin mines, Los Filos/Bermejal
project, El Limon and other projects)
- Australia - Peak
- United States - Wharf
- Cayman Islands - Silver Wheaton
15. COMMITMENTS AND CONTINGENCIES
(a) Commitments exist for capital expenditures of approximately
$101 million.
(b) In early May 2005, the Corporation was served with Statements
of Claim with respect to a class action against, among others, the
Corporation and certain of its directors. The plaintiffs are seeking
an unspecified amount of damages as a result of stock options granted
in September 2004. The claims allege that the defendants acted on
material non-public information at the time of the option grants. The
Corporation believes that the allegations are unfounded and intends
to vigorously defend these claims.
16. RELATED PARTY TRANSACTION
During the nine months ended September 30, 2005, Goldcorp sold
its holdings in three marketable securities to a company owned by
Robert McEwen, the former Chairman and CEO of Goldcorp. These were
non-brokered transactions which were executed at market value based
on the average of the TSX closing price for the ten trading days
prior to the sale agreements, resulting in gains totalling
approximately $4 million. During the third quarter, the Company sold
its share ownership of Lexam Explorations Inc. to a company owned by
Mr. McEwen for proceeds of $0.3 million.
17. SUBSEQUENT EVENT
On October 30, 2005, Goldcorp entered into an agreement with
Barrick Gold Corporation ("Barrick") to acquire certain mining assets
and interests. Barrick has offered to acquire all the outstanding
shares of Placer Dome Inc. ("Placer Dome") for approximately $9.2
billion in shares and cash and in a separate agreement, upon closing
of Barrick's transaction with Placer Dome, Goldcorp has agreed to
purchase from Barrick certain of Placer Dome's Canadian and other
assets for cash of approximately $1.35 billion. Subject to any
required consents and government approvals, Goldcorp will acquire
Placer Dome's interests in the Campbell, Porcupine and Musselwhite
gold mines in Ontario, and the La Coipa gold/silver mine in Chile.
Goldcorp will also acquire a 40% interest in the Pueblo Viejo
development project in the Dominican Republic, together with Placer
Dome's interest in its Canadian exploration properties, including the
Mount Milligan copper/gold deposit in British Columbia.
In order to fund this proposed transaction, Goldcorp intends to
use a portion of its current cash balances of over $400 million, $500
million from its existing revolving credit facilities, and new
committed credit facilities of $700 million. The new $700 million
credit facilities will be unsecured, and amounts drawn down will
incur interest at LIBOR plus 0.625% to 1.125% per annum dependent
upon the Company's leverage ratio, increasing by an additional 0.125%
per annum if the total amount drawn under this facility exceeds $350
million. Undrawn amounts will be subject to a 0.15% to 0.25% per
annum commitment fee dependent on the Company's leverage ratio. All
amounts drawn will be required to be refinanced or repaid within two
years of the closing date.
