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16.05.2005 08:01:00
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Goldcorp Earnings Increase 70% with Production up 73%
News Editors
VANCOUVER, British Columbia--(BUSINESS WIRE)--May 16, 2005--Goldcorp Inc. (TSX:G)(NYSE:GG) is pleased to announce its first quarter results, highlights of which are:
- Successful acquisition of Wheaton, creating the world's lowest cost million ounce Gold producer.
- Net earnings increased 70% to $29.5 million ($0.12 per share), compared with $17.3 million ($0.09 per share) in 2004;
- Operating cash flows grew to $80.2 million ($0.32 per share), compared with a cash outflow of $3.5 million in 2004;
- Gold production increased by 73% to 275,400 ounces for the quarter;
- Total cash costs declined to $94 per ounce compared to $100 in 2004.
These results reflect only an 82% ownership of Wheaton for the six weeks from February 15 to March 31, 2005.
- Had Goldcorp owned the Wheaton operations for the full three months, and had all gold withheld from sale during the quarter been sold, net earnings for the quarter would have been $62.9 million, or $0.19 per share, and total cash costs would have been $38 per ounce.
- Red Lake and Luismin mines achieve record gold production for the quarter.
- Liquid assets at March 31, 2005 totalled $480 million.
"We are thrilled with the financial and operating results for the quarter, which include Wheaton's operations for only six weeks. Production and earnings are up and cash costs are down. This is a great start to the year for both management and shareholders of the new expanded Goldcorp," stated Ian Telfer, President and CEO.
First Quarter Earnings Conference Call:
A conference call will be held today, Monday, May 16th, at 11:00 a.m. (ET) to discuss these results. You may join the call by dialing toll free 1-877-667-7774 or (416) 695-9753 for calls from outside of 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.
Goldcorp is the world's lowest cost million ounce gold producer, with 2005 gold production expected to exceed 1.1 million ounces of gold at a cash cost of less than US$60 per ounce. By 2007, gold production is expected to grow to over 1.6 million ounces. Goldcorp has a strong balance sheet with approximately US$450 million in cash and equivalents, and no debt.
Management's Discussion and Analysis of Financial Condition and Results of Operations Three Months Ended March 31, 2005
This Management's Discussion and Analysis should be read in conjunction with Goldcorp's unaudited consolidated financial statements for the three months ended March 31, 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 US Securities and Exchange Commission and Canadian provincial securities regulatory authorities. All figures are in United States dollars unless otherwise noted. This Management's Discussion and Analysis has been prepared as of May 13, 2005.
FIRST QUARTER HIGHLIGHTS
- Successful acquisition of Wheaton, creating the world's lowest-cost million ounce gold producer.
- First quarter results reflect only an 82% ownership of Wheaton for the six weeks from February 15 to March 31, 2005:
- Net earnings increased 70% to $29.5 million ($0.12 per share), compared with $17.3 million ($0.09 per share) in 2004.
- Operating cash flows grew to $80.2 million (2004 - outflow of $3.5 million).
- Gold production increased by 73% to 275,400 ounces, compared with 159,300 ounces in 2004.
- Gold sales more than doubled to 217,500 ounces, compared with 107,400 ounces in 2004.
- Total cash costs declined to $94 per ounce (2004; $100).
- Had Goldcorp owned the Wheaton operations for the full three months, and had all gold withheld from sale during the quarter been sold, net earnings for the quarter would have been $62.9 million ($0.19 per share), and total cash costs would have been $38 per ounce (note 1).
- Red Lake and Luismin mines achieve record gold production for quarter.
- Dividends paid during the quarter of $105.3 million.
- Liquid assets at March 31, 2005 totalled $480 million (note 2).
(1) See "Non-GAAP Measures - Pro Forma Adjusted Net Earnings". (2) Liquid assets are comprised of cash and short-term investments, gold bullion and marketable securities, at market value.
OVERVIEW
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") on February 14, 2005, the Company's assets are comprised of the Red Lake Mine, a 37.5% interest in the world-class 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 and Bermejal gold projects 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 has a strong and liquid balance sheet, no debt and has not hedged or sold forward any of its future gold production.
Goldcorp's strategy is to provide its shareholders with superior returns from high quality assets. At March 31, 2005, Goldcorp had liquid assets with a market value of $480 million, comprised of cash and short-term investments of $339 million, gold bullion of $118 million and marketable securities of $23 million. The Company also has debt facilities available of $75 million which may be used for future acquisitions.
Goldcorp is listed on the New York Stock Exchange (symbol:GG) and the Toronto Stock Exchange (symbol:G) and its options trade on the American Stock Exchange, the Chicago Board of Options Exchange and the Pacific Stock Exchange in the United States and on the Montreal Exchange in Canada. 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.
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, 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, totaling approximately $95 million, was paid on February 28, 2005.
As of March 31, 2005, Goldcorp held approximately 82% of the outstanding Wheaton common shares. Consideration amounted to $1,544 million satisfied by the issue of 117.6 million Goldcorp shares 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. A non-controlling interest has been assigned to the 18% interest in Wheaton that Goldcorp did not own as of March 31, 2005. This non-controlling interest was subsequently eliminated on April 15, 2005 when Goldcorp acquired the remaining outstanding common shares of Wheaton for further common share consideration of $336 million.
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 relating to each of the Wheaton assets and intends to 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.
Subsequent to March 31, 2005, Goldcorp and a subsidiary entered into a series of transactions with Wheaton that resulted in Goldcorp owning 100% of Wheaton common shares. Further, the series of transactions resulted in each Wheaton warrant or stock option, which gave the holder the right to acquire common shares of Wheaton, being exchanged for a warrant or stock option of Goldcorp which gives 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".
SUMMARIZED FINANCIAL RESULTS -------------------------------------------------------------------- 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
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 short-term investments ($000's) $ 338,966 $ 328,701 $ 333,375 $ 378,954
Total assets ($000's) $3,309,220 $ 607,488 $ 701,518 $ 638,523
-------------------------------------------------------------------- September 30 June 30 2004 2003 2004 2003 --------------------------------------------------------------------
Revenues ($000's) $ 50,369 $ 55,792 $ 40,461 $ 48,750
Gold produced (ounces) 163,800 161,500 138,600 149,400
Gold sold (ounces) 112,800 140,000 93,600 127,700
Average realized gold price (per ounce) $ 399 $ 364 $ 393 $ 352
Earnings from operations ($000's) $ 23,246 $ 26,534 $ 16,664 $ 24,101
Net earnings ($000's) $ 9,854 $ 23,671 $ 9,198 $ 17,595
Earnings per share Basic $ 0.05 $ 0.13 $ 0.05 $ 0.10 Diluted $ 0.05 $ 0.12 $ 0.05 $ 0.09
Cash flow from operating activities ($000's) $ 22,306 $ 23,025 $ 11,947 $ 16,595
Total cash costs (per gold ounce) (note 2) $ 121 $ 116 $ 116 $ 100
Dividends paid ($000's) $ 8,537 $ 4,579 $ 8,532 $ 9,145
Cash and short-term investments ($000's) $ 315,642 $ 260,731 $ 302,850 $ 200,020
Total assets ($000's) $ 648,914 $ 544,943 $ 608,541 $ 512,212
(1) Includes, with the exception of net earnings, 100% of Wheaton's operating results from February 15, 2005, the date of acquisition, to March 31, 2005. Net earnings include 82% of Wheaton's operating results for the six week period. (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 March 31, 2005 Red Lake Alumbrera Luismin Amapari Peak -------------------------------------------------------------------- (notes 1,2)(notes 1,3) (note 1) (notes 1,4)
Revenues ($000's) $ 55,987 $ 21,184 $ 13,828 $ - $ 8,028
Ounces of gold produced 198,500 23,700 20,400 - 15,100
Ounces of gold sold 127,400 15,200 23,300 - 17,300
Average realized gold price (per ounce) $ 429 $ 452 $ 430 $ - $ 423
Earnings (loss) from operations ($000's) $ 39,176 $ 9,014 $ 3,400 $ - $ 1,708
Total cash costs (per ounce) $ 81 $ (397) $ 80 $ - $ 272
-------------------------------------------------------------------- Three Months Ended March 31, 2005 Silver Wharf Wheaton Corporate Total -------------------------------------------------------------------- (note 1) (note 1)
Revenues ($000's) $ 14,938 $ 10,857 $ (1,973) $122,849
Ounces of gold produced 17,700 - - 275,400
Ounces of gold sold 34,300 - - 217,500
Average realized gold price (per ounce) $ 431 $ - $ - $ 430
Earnings (loss) from operations ($000's) $ 2,026 $ 3,894 $ (5,524) $ 53,694
Total cash costs (per ounce) $ 282 $ - $ - $ 94
Three Months Ended March 31, 2004 Red Lake Wharf Corporate Total -------------------------------------------------------------------- Revenues ($000's) $ 38,907 $ 6,282 $ 3,125 $ 48,314 Ounces of gold produced 140,200 19,100 - 159,300 Ounces of gold sold 92,300 15,100 - 107,400 Average realized gold price (per ounce) $ 412 $ 407 $ - $ 411 Earnings (loss) from operations ($000's) $ 27,975 $ 1,094 $(2,366) $ 26,703 Total cash costs (per ounce) $ 77 $ 238 $ - $ 100
(1) Includes 100% of Wheaton's operating results for the six weeks from February 15, 2005, the date of acquisition, to March 31, 2005. (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 Mar 31 Dec 31 Sep 30 June 30 Mar 31 Operating Data 2005 2004 2004 2004 2004 -------------------------------------------------------------------- Tonnes of ore milled 59,400 56,500 58,500 54,500 54,500 Average mill head grade (grams/tonne) 104 86 68 68 86 Average recovery rate 97% 97% 97% 98% 97% Ounces of gold produced 198,500 151,100 143,800 116,800 140,200 Ounces of gold sold 127,400 98,300 99,100 75,600 92,300 Average realized gold price (per ounce) $ 429 $ 427 $ 398 $ 393 $ 412 Total cash costs (per ounce) $ 81 $ 105 $ 100 $ 85 $ 77
Financial Data -------------------------------------------------------------------- (in thousands) Revenues $ 55,987 $ 41,883 $ 41,369 $ 30,039 $ 38,907 Earnings from operations $ 39,176 $ 27,317 $ 26,598 $ 20,655 $ 28,104
During the quarter, the Red Lake mine produced 198,500 ounces of gold at a total cash cost of $81 per ounce, compared with 140,200 ounces at a total cash cost of $77 per ounce for the corresponding period last year. Overall, this was the Red Lake mine's strongest quarter of operating results in history, as records were set for the most ounces produced in a quarter, highest quarterly tonnage milled and highest quarterly mill head grade.
The Canadian Dollar was approximately 8% stronger relative to the United States dollar, compared to the first quarter of 2004. This negative impact on total cash costs per ounce was offset by a 21% increase in average grades mined.
During the quarter, Red Lake sold 127,400 ounces of gold (2004 - 92,300 ounces), being approximately 64% of production (2004 - 66%). This resulted from the Company's previous policy of holding back from sale approximately one-third of mine production. During the quarter, Goldcorp announced that this policy would be discontinued effective April, 2005, and the gold inventory on hand at March 31, 2005 will be sold during the second quarter.
The shaft expansion project at Red Lake is progressing well. During the quarter the shaft depth advanced 246 metres, bringing the depth to 944 metres at March 31, 2005.
Alumbrera Mine (Goldcorp interest - 37.5%)
(Goldcorp's share only) Three Months Ended
Mar 31 Mar 31 Dec 31 Operating Data 2005 2005 2004 -------------------------------------------------------------------- (six weeks) (note 1)
Tonnes of ore mined 1,725,600 3,235,300 3,182,800
Tonnes of waste removed 3,540,800 7,190,200 7,303,000
Ratio of waste to ore 2.1 2.2 2.3
Tonnes of ore milled 1,735,761 3,430,200 3,463,400
Average mill head grade - Gold (grams/tonne) 0.55 0.56 0.79 - Copper (%) 0.46% 0.49% 0.62%
Average recovery rate - Gold (%) 78% 77% 80% - Copper (%) 89% 90% 91%
Ounces of gold produced 23,700 47,600 70,500
Pounds of copper produced (thousands) 17,162 32,781 43,007
Ounces of gold sold 15,200 50,200 51,900
Pounds of copper sold (thousands) 9,998 30,000 32,909
Average realized price - Gold (per ounce) $ 452 $ 417 $ 451 - Copper (per pound) $ 1.62 $ 1.62 $ 1.51
Total cash costs (per ounce) (note 2) $ (397) $ (389) $ (457)
Financial Data -------------------------------------------------------------------- (in thousands) (note 1)
Revenues $ 21,184 $ 61,231 $ 68,540
Earnings from operations $ 9,014 $ 32,586 $ 40,168
(Goldcorp's share only) Three Months Ended
Sep 30 June 30 Mar 31 Operating Data 2004 2004 2004 --------------------------------------------------------------------
Tonnes of ore mined 2,935,000 3,113,700 2,836,900
Tonnes of waste removed 7,303,000 7,803,000 7,516,900
Ratio of waste to ore 2.5 2.51 2.7
Tonnes of ore milled 3,400,600 3,222,200 3,171,400
Average mill head grade - Gold (grams/tonne) 0.65 0.64 0.80 - Copper (%) 0.54% 0.49% 0.58%
Average recovery rate - Gold (%) 77% 74% 77% - Copper (%) 89% 88% 91%
Ounces of gold produced 55,200 49,200 62,800
Pounds of copper produced (thousands) 36,151 30,194 36,513
Ounces of gold sold 54,200 56,500 63,900
Pounds of copper sold (thousands) 34,914 31,114 40,287
Average realized price - Gold (per ounce) $ 405 $ 388 $ 417 - Copper (per pound) $ 1.38 $ 1.21 $ 1.33
Total cash costs (per ounce) (note 2) $ (374) $ (218) $ (435)
Financial Data -------------------------------------------------------------------- (in thousands)
Revenues $ 65,049 $ 53,353 $ 75,112
Earnings from operations $ 33,753 $ 26,392 $ 44,253
(1) Alumbrera's operations are included in Goldcorp's operating results for the six weeks from February 15, 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 March 31, 2005 would be $172 per ounce of gold and $0.68 per pound of copper (March 31, 2004 - $138 per ounce of gold and $0.44 per pound of copper).
Gold production during the quarter ended March 31, 2005 was above budget due primarily to mine schedule improvements, which will result in a slightly smoother grade profile for 2005. Gold grades are expected to increase during the remainder of the year, in line with budget. Ongoing productivity improvements in the mill continued, with the throughput rate for March breaking a monthly record.
Sales of gold and copper, particularly during the last six weeks of the quarter, were below expectations. This resulted primarily from a continued tightening of the concentrate market, with many smelters taking "holidays" for shutdowns as allowed under the frame contracts. Sales are expected to exceed production in the second quarter of 2005 with a normalization of sales during the second half of the year as market constraints are resolved.
Further work was carried out in the open pit to test the use of multiple benching and pre-splitting to further optimize the ultimate pit slopes, thereby increasing recovered ore and reducing waste volumes and operating costs. Results to date are promising.
Luismin Mines
Three Months Ended
Mar 31 Mar 31 Dec 31 Operating Data 2005 2005 2004 -------------------------------------------------------------------- (six weeks) (notes 1 & 2) (note 2) (note 2)
Tonnes of ore milled 100,800 199,000 199,900
Average mill head grade - Gold (grams/tonne) 6.58 6.59 5.35 - Silver (grams/tonne) 328 335 280
Average recovery rate - Gold (%) 96% 95% 94% - Silver (%) 90% 88% 88%
Ounces of gold produced 20,400 40,000 32,300
Ounces of silver produced 961,500 1,894,000 1,586,900
Ounces of gold sold 23,300 38,300 32,800
Ounces of silver sold 1,314,800 1,974,000 1,615,100
Average realized price - Gold (per ounce) $ 430 $ 428 $ 436 - Silver (per ounce) (note 2) $ 3.90 $ 3.90 $ 4.33
Total cash costs per ounce $ 80 $ 86 $ 115
Financial Data -------------------------------------------------------------------- (in thousands) (note 1)
Revenues $ 13,828 $ 22,942 $ 20,676
Earnings from operations $ 3,400 $ 5,529 $ 6,238
Three Months Ended Sep 30 June 30 Mar 31 Operating Data 2004 2004 2004 --------------------------------------------------------------------
Tonnes of ore milled 187,800 192,600 209,800
Average mill head grade - Gold (grams/tonne) 5.95 5.61 5.19 - Silver (grams/tonne) 326 302 266
Average recovery rate - Gold (%) 95% 95% 94% - Silver (%) 91% 89% 90%
Ounces of gold produced 34,200 33,300 32,700
Ounces of silver produced 1,798,700 1,664,400 1,615,500
Ounces of gold sold 33,400 33,500 32,400
Ounces of silver sold 1,792,000 1,654,500 1,612,900
Average realized price - Gold (per ounce) $ 402 $ 392 $ 410 - Silver (per ounce) (note 2) $ 6.47 $ 6.09 $ 6.78
Total cash costs per ounce (note 2) $ 71 $ 88 $ 116
Financial Data -------------------------------------------------------------------- (in thousands)
Revenues $ 24,406 $ 22,709 $ 23,715
Earnings from operations $ 10,811 $ 9,789 $ 8,942
(1) Luismin's results are included in Goldcorp's operating results for the six weeks from February 15, 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 March 31, 2005 was 40,000 ounces, a 22% increase compared to the same period in 2004, as a result of a 26% increase in the average mill head grade. This represents the highest quarterly production on record. Ore milled decreased approximately 5% compared with 2004, in order to maintain high recoveries.
During the quarter intensive exploration and development activities continued throughout the Luismin operations, with overall underground development increasing by 21% compared to the first quarter of 2004.
At the San Dimas Mine, exploration by drilling and drifting has confirmed the extension of the high grade mineralization in several veins along the high grade trend in the Central Block. At the deepest levels, exploration indicates wider thickness and continued high grades. Three tunnels to provide infrastructure for drilling and drifting, are advancing according to plan.
At the San Martin Mine, exploration drilling in the eastern portion of the mine has detected several veins with good mineralization. Exploration drilling is continuing to confirm the extent of the vein system.
At the Nukay mine, exploration drilling continues with preliminary drill results confirming that the current ore bodies have lateral and depth extensions. Some drill holes have assayed more than 10 g/t of gold in a structure more than 4.0 m wide.
Peak Mine Three Months Ended
Mar 31 Mar 31 Dec 31 Operating Data 2005 2005 2004 -------------------------------------------------------------------- (six weeks) (note 1)
Tonnes of ore milled 82,600 167,300 165,800
Average mill head grade - Gold (grams/tonne) 6.22 5.95 8.23 - Copper (%) 0.58% 0.61% 0.39%
Average recovery rate - Gold (%) 91% 90% 92% - Copper (%) 82% 80% 84%
Ounces of gold produced 15,100 29,000 40,600
Pounds of copper produced (thousands) 864 1,819 1,195
Ounces of gold sold 17,300 27,800 40,200
Pounds of copper sold (thousands) 1,612 1,612 892
Average realized price - Gold (per ounce) $ 423 $ 422 $ 460 - Copper (per pound) $ 1.36 $ 1.36 $ 1.54
Total cash costs per ounce (note 2) $ 272 $ 278 $ 197
Financial Data -------------------------------------------------------------------- (in thousands) (note 1)
Revenues $ 8,028 $ 12,091 $ 18,969
Earnings from operations $ 1,708 $ 1,741 $ 7,786
Three Months Ended Sep 30 June 30 Mar 31 Operating Data 2004 2004 2004 --------------------------------------------------------------------
Tonnes of ore milled 162,200 164,600 170,800
Average mill head grade - Gold (grams/tonne) 7.94 7.04 6.44 - Copper (%) 0.55% 0.55% 0.83%
Average recovery rate - Gold (%) 89% 89% 91% - Copper (%) 81% 68% 82%
Ounces of gold produced 37,100 32,900 32,100
Pounds of copper produced (thousands) 1,590 1,331 2,579
Ounces of gold sold 33,100 33,000 33,400
Pounds of copper sold (thousands) 1,492 1,385 2,592
Average realized price - Gold (per ounce) $ 400 $ 379 $ 405 - Copper (per pound) $ 1.29 $ 1.28 $ 1.29
Total cash costs per ounce (note 2) $ 161 $ 172 $ 217
Financial Data -------------------------------------------------------------------- (in thousands)
Revenues $ 14,610 $ 14,137 $ 15,307
Earnings from operations $ 5,230 $ 4,551 $ 4,273
(1) Peak's operations are included in Goldcorp's operating results for the six weeks from February 15, 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 27,800 ounces of gold and 1.6 million pounds of copper during the quarter. Ore milled was in line with plan, however, production of 29,000 ounces was below expectations due to rescheduling lower grade ore that would have been lost had the original production plan been followed, as well as excessive dilution in the New Occidental ore body due to changes in mine sequencing. Treatment and refining charges relating to gold/copper concentrate, which accounted for approximately 28% of total gold production for the quarter, increased substantially due to market constraints on smelter capacity.
Total cash costs for the quarter were $278 per ounce and $272 per ounce for the six weeks from February 15, 2005, the date of acquisition. These costs are significantly higher than prior quarters, as a result of the lower average mill head grades processed and the increased treatment and refining charges.
Exploration work and delineation drilling continued to focus on New Cobar and Perseverence Zone D where additional reserves and resources are expected to be added in 2005, with drilling on several new prospects scheduled for the remainder of the year.
Wharf Mine Three Months Ended Mar 31 Dec 31 Sep 30 June 30 Mar 31 Operating Data 2005 2004 2004 2004 2004 --------------------------------------------------------------------
Tonnes of ore mined 646,000 735,000 722,000 505,000 804,000
Tonnes of waste removed 2,413,000 2,236,000 1,938,000 1,459,000 2,746,000
Ratio of waste to ore 3.7 3.0 2.7 2.9 3.4
Tonnes of ore processed 656,000 670,000 760,000 584,000 741,000
Average grade of gold processed (grams/tonne) 1.10 0.93 1.06 0.79 1.06
Average recovery rate (%) 75% 75% 75% 75% 75%
Ounces of gold produced 17,700 15,200 20,000 21,800 19,100
Ounces of gold sold 34,300 15,500 13,800 18,000 15,100
Average realized gold price (per ounce) $ 431 $ 432 $ 405 $ 395 $ 407
Total cash costs (per ounce) $ 282 $ 268 $ 271 $ 245 $ 238
Financial Data -------------------------------------------------------------------- (in thousands)
Revenues $ 14,938 $ 6,826 $ 5,763 $ 7,250 $ 6,281
Earnings from operations $ 2,026 $ 1,270 $ 452 $ 1,014 $ 1,710
The Wharf Mine produced 17,700 ounces of gold in the first quarter of 2005, in line with budget. Total cash costs for the quarter were $282 per ounce, compared to $238 per ounce during the first quarter of 2004, primarily as a result of an increased ratio of waste to ore tonnes mined and increased crusher costs.
Wharf sold 34,300 ounces of gold during the quarter, approximately twice the level of previous quarters. This was a result of discontinuing the previous policy of holding back from sale a portion of the production and selling the gold bullion inventory on hand.
The life of mine reclamation program continues to be carried out with excellent results as evidenced by the continued presence of native wildlife.
Silver Wheaton Corp. (Goldcorp interest - 65%)
(100% figures shown) Three Months Ended Mar 31 Mar 31 Dec 31 Sep 30 June 30 Mar 31 Operating Data 2005 2005 2004 2004 2004 2004 --------------------------------------------------------------------- (six weeks) (note 1) Ounces of silver purchased - Luismin 1,314,800 1,974,000 1,387,300 - - - - Zinkgruvan 223,300 330,800 240,500 - - - - Total 1,538,100 2,304,800 1,627,800 - - - Ounces of silver sold - Luismin 1,314,800 1,974,000 1,387,300 - - - - Zinkgruvan 226,400 349,000 117,800 - - - - Total 1,541,200 2,323,000 1,505,100 - - - Average realized silver price (per ounce) $ 7.04 $ 6.92 $ 7.30 $ - $ - $ - Total cash costs (per silver ounce) $ 3.90 $ 3.90 $ 3.90 $ - $ - $ -
Financial Data --------------------------------------------------------------------- (in thousands) (note 1) Revenues $ 10,857 $ 16,077 $ 10,986 $ - $ - $ - Earnings from operations $ 3,894 $ 5,257 $ 3,938 $ - $ - $ -
(1) Silver Wheaton's operations are included in Goldcorp's operating results for the six weeks from February 15, 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
Progress on the construction of the Amapari project continues to exceed expectations, with the project ahead of schedule. Project construction manning numbers have now started to reduce with 1,200 personnel at quarter end, as construction activities wind down. Project commissioning is targeted for the third quarter of 2005, several months earlier than originally planned.
Erection has been completed of the three crushers, conveyors, agglomeration plant, lime and cement feed systems and leach pad boom stacker. In addition, the raw water supply dam has been completed and is fully charged. The leach pad reclaimer and process plant construction continues including process buildings, tankage, refinery and reagent storage facilities.
The 69 kV power connection from the regional grid and State-owned 75MW hydro power station will be energized by the end of May. The main access road is now complete.
Pit pre-stripping continues with about 60,000 tonnes of ore presently stockpiled. Haul road construction is well underway.
Capital expenditures have been impacted by a 14% appreciation of the Brazilian real, but the Company still expects to finalize construction within approximately a 10% budget overrun ($6 million).
Los Filos and Bermejal Projects
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 kilometers south of Goldcorp's Los Filos gold deposit.
With the acquisition of the Bermejal deposit, the Los Filos Project is now envisioned as a unified 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, adjustments to the original construction scope of the Los Filos project will now be required. Some permits will also require modification. A revised (combined) feasibility study is anticipated by the end of 2005.
Design work has already commenced with the geotechnical works on the new pad.
Infrastructure items, such as power, water supply systems and an access road, have been modified to fit the increase in mining and processing volumes. Land tenure has already been arranged for the new pit, waste dumps and pad areas and further exploration work on the Bermejal ore body has commenced along with the requisite environmental activities.
The Los Filos Environmental Impact Assessment (EIA) study was submitted to the Mexican Government Agency, in February. Additionally, a new EIA study for the Bermejal pit and waste dumps is underway along with a sustainable development program for the Bermejal area.
During the first quarter, 48 diamond drill holes were drilled in the northeast section of the Los Filos and Aquita pit area in order to continue exploration, as well as to define additional resources.
EXPENSES -------------------------------------------------------------------- Three Months Ended March 31 March 31 (in thousands) 2005 2004 --------------------------------------------------------------------
Depreciation and depletion $ 17,579 $ 4,546 Corporate administration 4,009 2,049 Exploration 1,517 108
Depreciation and depletion, which relates to mining activities, increased to $17.6 million for the quarter, compared to $4.5 million in 2004. Of this increase, $11.1 million relates to the Wheaton mining assets acquired effective February 15, 2005.
Corporate administration increased during the first 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 from February 15, 2005 onwards.
A total of $1.5 million (2004 - $0.1 million) was invested in exploration during the quarter.
OTHER INCOME (EXPENSE) -------------------------------------------------------------------- Three Months Ended March 31 March 31 (in thousands) 2005 2004 -------------------------------------------------------------------- Interest and other income $ 2,868 $ 2,657 Stock option expense (5,320) (1,577) (Loss) gain on foreign currency (1,203) 137 Gain on marketable securities, net 2,591 722 Corporate transaction costs (2,898) - --------------------------------------------------------------------
$ (3,962) $ 1,939 -------------------------------------------------------------------- --------------------------------------------------------------------
As a result of the acquisition of Wheaton, Goldcorp stock options which existed at December 31, 2004 became fully vested during the quarter and $5.3 million was expensed. Corporate transaction costs pertaining to the acquisition of Wheaton in the amount of $2.9 million, including severance and restructuring of insurance policies, may not be capitalized as acquisition costs under current accounting standards and have been expensed during the quarter.
INCOME AND MINING TAXES
Income and mining taxes for the three months ended March 31, 2005 totalled $16.0 million, approximately 32% of earnings before taxes. In 2004, income and mining taxes were $11.3 million, or 40% of earnings before taxes.
The effective tax rate at Goldcorp's Canadian operations is approximately 39% while the combined effective tax rate at the Wheaton operations acquired on February 15, 2005, is approximately 28%.
NON-GAAP MEASURES - PRO FORMA ADJUSTED NET EARNINGS
"Pro Forma Adjusted Net Earnings" when used with respect to Goldcorp net earnings for the three months ended March 31, 2005, refers to net earnings that include 100% of the earnings of Goldcorp and Wheaton for the full three 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 withheld from sale during the quarter 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 months ended March 31, 2005):
(in thousands)
Net earnings $ 29,489 Non-controlling interest in Wheaton (note 1) 2,716 Wheaton: Results for January 1 - February 14, 2005 (note 2) 17,145 Estimated additional depreciation and depletion (note 3) (4,383) -------------------------------------------------------------------- 44,967
Corporate transaction costs (note 4) 5,622 Bullion adjustments (note 5) 12,278 --------------------------------------------------------------------
Pro forma adjusted net earnings $ 62,867 -------------------------------------------------------------------- --------------------------------------------------------------------
(1) Add back non-controlling interest arising from Goldcorp only owning 82% of Wheaton between February 15 and March 31. (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 withheld from sale during the quarter, as if it had been sold.
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 first quarter of 2005, the Red Lake mine withheld from sale 71,100 ounces of gold bullion while the Wharf mine sold an additional 16,600 ounces of gold, held back from prior year production. Had those mines sold the gold produced during the quarter, the net result would have been 54,500 additional ounces sold resulting in a $12.3 million increase in net earnings and a $14.5 million increase in cash flow from operations for the quarter. Similarly in the first quarter of 2004, the Red Lake and Wharf mines held back from sale 51,900 ounces of production which would have increased net earnings by $8.6 million and cash flow from operations by $16.1 million had those ounces been sold.
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:
(in thousands)
Weighted-average number of Goldcorp shares outstanding for the quarter 248,829 Adjustment to reflect acquisition of 100% of Wheaton, effective January 1, 2005 83,965 -------------------------------------------------------------------- Pro forma weighted average number of shares outstanding for quarter 332,785 -------------------------------------------------------------------- --------------------------------------------------------------------
Pro Forma Adjusted Net Earnings $ 62,867 -------------------------------------------------------------------- --------------------------------------------------------------------
Pro forma adjusted basic earnings per share $ 0.19 -------------------------------------------------------------------- --------------------------------------------------------------------
NON-GAAP MEASURES - 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. The Company follows the recommendations of the Gold Institute standard. The following table provides a reconciliation of total cash costs per ounce to the financial statements:
Three Months Ended -------------------------------------------------------------------- March 31 March 31 (in thousands) 2005 2004 --------------------------------------------------------------------
Operating expenses per financial statements $46,050 $ 14,908 Industrial minerals operating expense (3,158) (2,825) Treatment and refining charges 4,699 - By-product silver and copper sales and other (25,879) (666) Non-cash adjustments (1,187) (651) --------------------------------------------------------------------
$ 20,525 $ 10,766 --------------------------------------------------------------------
Divided by gold ounces sold 217,500 107,400 -------------------------------------------------------------------- Total cash costs per ounce $ 94 $ 100 -------------------------------------------------------------------- --------------------------------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2005 the Company held cash and short-term investments of $339.0 million (December 31, 2004 - $333.4 million) and working capital of $379.6 million (December 31, 2004 - $400.0 million).
In the opinion of management, the working capital at March 31, 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 $3,309.2 million at March 31, 2005 from $701.5 million at December 31, 2004, primarily as a result of the acquisition of 82% of the shares of Wheaton, effective February 15, 2005. The Wheaton acquisition, financed by the issuance of Goldcorp common shares, resulted in an increase in total assets of $2,679.4 million, an increase in total liabilities of $877.4 million, and an increase in shareholders' equity of $1,802.0 million.
Mining interests increased 2,099.9 million, representing the fair value of Goldcorp's 82% interest in Wheaton's mining properties acquired. Future income tax liabilities of $463.1 million and deferred employee profit sharing liabilities of $70.7 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.
During the quarter, the Company generated operating cash flows of $80.2 million, compared with cash used in operating activities of $3.5 million during the same period of 2004. Favourable non-cash operating working capital movements during the quarter of $21.5 million resulted primarily from the timing of income and mining taxes payable. Conversely, the negative non-cash operating working capital movement of $29.1 million during the first quarter of 2004 was largely due to cash tax payments.
During the three months ended March 31, 2005, the Company disposed of marketable securities for a net gain of $2.6 million and invested a total of $48.3 million in mining interests, including $21.0 at Red Lake, $11.1 million at the Luismin operations and $10.2 million at Amapari.
The acquisition of Wheaton resulted in net cash acquired of $140.6 million after cash payments of acquisition costs. The Company invested $70.0 million in cash to acquire the Bermejal property in Mexico.
During the first quarter of 2005, the Company declared and paid a special $0.50 per share cash dividend, totalling approximately $95.0 million. In addition, the Company paid a monthly dividend of $0.015 per share, resulting in total cash dividend payments for the quarter of $105.3 million.
As of May 13, 2005, there were 333.9 million common shares of the Company issued and outstanding, an increase of 26.2 million common shares since March 31, 2005, as a result of the Company acquiring the remaining common shares of Wheaton on April 15, 2005. The Company had 11.0 million stock options outstanding under its share option plan as a result of exchanging Wheaton stock options for those of Goldcorp on a 4 to 1 basis. In addition, the Company had 7.0 million share purchase warrants outstanding (exchangeable for 14.6 million common shares) and 174.8 million Series A, B and C share purchase warrants outstanding (exchangeable for 43.7 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 $100 million, primarily relating to the Red Lake expansion, completion of construction of Amapari and commencement of construction at Los Filos.
Related party transactions
During the first quarter of 2005, Goldcorp sold its holdings in two marketable securities to a company owned by Robert R. McEwen, the non-Executive Chairman and former CEO of Goldcorp. This was a non-brokered transaction which was executed at market value based on the average of the TSX closing price for the ten trading days prior to the sale agreement, resulting in a gain of $3,990,000.
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 relating to each of the Wheaton assets and intends to 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 March 31, 2005, non-controlling interests had a 35% interest in Silver Wheaton and an 18% interest in Wheaton. The non-controlling interest in Wheaton was subsequently eliminated on April 15, 2005 when the Company acquired the remaining outstanding common shares of Wheaton.
OUTLOOK
Expenditures for mining interests for the remainder of the year are forecast to approximate $150 million, which primarily relate to the Red Lake expansion, completion of the construction of Amapari and commencement of construction at Los Filos.
Goldcorp has announced that it will discontinue its previous policy of holding back from sale a portion of the Red Lake production and will, effective April 2005, sell gold as it is produced. As a result, during the second quarter, Goldcorp expects to sell its gold bullion inventory on hand at March 31, 2005 of 276,000 ounces, in addition to its mine production. The Company has not hedged or sold forward any of its future gold production.
Goldcorp anticipates continued strong operating results for the balance 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).
Additional information relating to the Company, including its Annual Information Form, is available on SEDAR at www.sedar.com.
This Management's Discussion & Analysis contains certain forward-looking statements. All statements, other than statements of historical fact, included herein, including without limitation, statements regarding future plans and objectives of the Company are forward-looking statements that involve various risks and uncertainties. There can be no assurance that such statements will prove accurate, and actual results and future events could differ materially from those anticipated in such statements. Important factors that could cause actual results to differ materially from the Company's expectations are disclosed in Company documents filed from time to time with the Toronto Stock Exchange and other regulatory authorities.
Consolidated Statements of Earnings (in thousands of United States dollars and shares, except per share amounts - Unaudited) Three Months Ended -------------------------------------------------------------------- March 31 March 31 Note 2005 2004 --------------------------------------------------------------------
Revenues $ 122,849 $ 48,314
Operating expenses 46,050 14,908 Depreciation and depletion 17,579 4,546 --------------------------------------------------------------------
Earnings from mine operations 59,220 28,860
Corporate administration 4,009 2,049 Exploration 1,517 108 --------------------------------------------------------------------
Earnings from operations 53,694 26,703 --------------------------------------------------------------------
Other income (expense) Interest and other income 2,868 2,657 Stock option expense 12 (5,320) (1,577) (Loss) gain on foreign currency (1,203) 137 Gain on marketable securities, net 2,591 722 Corporate transaction costs 6 (2,898) - -------------------------------------------------------------------- (3,962) 1,939 -------------------------------------------------------------------- Earnings before taxes and non-controlling interests 49,732 28,642
Income and mining taxes 16,038 11,314 Non-controlling interests 4,205 - --------------------------------------------------------------------
Net earnings $ 29,489 $ 17,328
Retained earnings, beginning of period 83,405 63,358 Dividends paid to common shareholders (105,305) (8,526) --------------------------------------------------------------------
Retained earnings, end of period $ 7,589 $ 72,160 -------------------------------------------------------------------- --------------------------------------------------------------------
Earnings per share 12 Basic $ 0.12 $ 0.09 Diluted $ 0.11 $ 0.09
Weighted average number of common shares outstanding Basic 248,829 189,465 Diluted 263,249 194,675
The accompanying notes form an integral part of these consolidated financial statements.
Consolidated Balance Sheets (in thousands of United States dollars - Unaudited)
March 31 March 31 Note 2005 2004 -------------------------------------------------------------------- Assets Current Cash and short-term investments $ 338,966 $ 333,375 Gold bullion (market value: $117,852; 2004 - $96,363) 7 33,559 33,895 Marketable securities (market value: $23,798; 2004 - $31,006) 21,870 22,873 Accounts receivable 53,674 7,197 Income and mining taxes receivable 4,601 12,269 Inventories and stockpiled ore 8 51,449 15,329 Other 12,543 1,735 -------------------------------------------------------------------- 516,662 426,673
Mining interests 3,9 2,460,467 264,949 Goodwill 3 183,661 - Silver contract 5 77,078 - Stockpiled ore 8 57,500 - Deposits for reclamation costs 5,114 4,924 Future income and mining taxes 2,357 - Other 6,381 4,972 -------------------------------------------------------------------- $ 3,309,220 $ 701,518 -------------------------------------------------------------------- --------------------------------------------------------------------
Liabilities Current Accounts payable and accrued liabilities $ 79,476 $ 25,507 Income and mining taxes payable 54,439 - Future income and mining taxes 3,135 1,149 -------------------------------------------------------------------- 137,050 26,656
Future income and mining taxes 537,748 70,610 Reclamation and closure cost obligations 49,251 26,403 Future employee benefits and other 11 76,364 - --------------------------------------------------------------------
800,413 123,669 --------------------------------------------------------------------
Non-controlling interests 3 204,156 - --------------------------------------------------------------------
Shareholders' equity Capital stock 12 2,195,132 386,703 Cumulative translation adjustment 101,930 107,741 Retained earnings 7,589 83,405 --------------------------------------------------------------------
2,304,651 577,849 --------------------------------------------------------------------
$ 3,309,220 $ 701,518 -------------------------------------------------------------------- --------------------------------------------------------------------
Commitments and contingencies (note 15) Subsequent event (note 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 -------------------------------------------------------------------- March 31 March 31 Note 2005 2004 --------------------------------------------------------------------
Operating activities Net earnings $ 29,489 $ 17,328 Reclamation expenditures (111) (119) Items not affecting cash Depreciation and depletion 17,579 4,546 Gain on marketable securities, net (2,591) (722) Stock option expense 5,320 1,577 Future income and mining taxes 4,106 3,587 Future employee benefits 1,031 - Non-controlling interests 4,205 - Other (282) (591) Change in non-cash operating working capital 13 21,498 (29,144) --------------------------------------------------------------------
Net cash provided by (used in) operating activities 80,244 (3,538) --------------------------------------------------------------------
Investing activities Mining interests (48,269) (15,628) Acquisition of Wheaton River Minerals Ltd., net of cash acquired 3 140,618 - Acquisition of Bermejal property 4 (70,010) - Purchase of marketable securities (2,937) (3,698) Proceeds from sale of marketable securities 10,678 2,462 Other (11) 81 --------------------------------------------------------------------
Net cash provided by (used in) investing activities 30,069 (16,783) --------------------------------------------------------------------
Financing activities Common shares issued 1,109 1,154 Shares issued by subsidiary to non-controlling interest 3,192 - Dividends paid to common shareholders (105,305) (27,454) --------------------------------------------------------------------
Net cash used in financing activities (101,004) (26,300) --------------------------------------------------------------------
Effect of exchange rate changes on cash (3,718) (3,632) --------------------------------------------------------------------
Increase (decrease) in cash and short-term investments 5,591 (50,253)
Cash and short-term investments, beginning of period 333,375 378,954 --------------------------------------------------------------------
Cash and short-term investments, end of period $ 338,966 $ 328,701 -------------------------------------------------------------------- -------------------------------------------------------------------- Supplemental cash flow information (note 13)
The accompanying notes form an integral part of these consolidated financial statements.
Notes to the Consolidated Financial Statements Three Months Ended March 31, 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") on February 14, 2005 (Note 3), the Company's assets are comprised of the Red Lake Mine, a 37.5% interest in the world-class 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 and Bermejal gold projects 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. 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, 2005 (note 3).
Principal mining assets of Wheaton at March 31, 2005 are listed below:
Owner- Operations and ship Development Mining Asset Location Interest Status Projects Owned -------------------------------------------------------------------- Minera Alumbrera Ltd. ("Alumbrera") Argentina 37.5% Proportionately Alumbrera consolidated mine Luismin SA de CV ("Luismin") Mexico 100% Consolidated San Dimas, San Martin and Nukay mines and Los Filos and Bermejal development projects 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) 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.
(c) 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.
(d) 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 future net cash flows from an operation are less than the carrying value then a write-down is recorded with a charge to operations.
(e) Foreign currency translation
The United States dollar is the Company's reporting currency as well as the measurement currency of the Company's operations in the United States, Mexico, Brazil, Argentina and Australia. These operations have been translated into United States dollars using the temporal method as follows: 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.
Until March 31, 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 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 Statement of Cash Flows. Due to circumstances arising from the Wheaton acquisition and subsequent events, it has been determined that as of April 1, 2005, the United States dollar is the measurement currency of the Company's Canadian operations and therefore these will be translated using the temporal method on a prospective basis.
(f) 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.
(g) 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.
(h) 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, 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, totaling approximately $95 million, was paid on February 28, 2005.
As of March 31, 2005, Goldcorp held approximately 82% of the outstanding Wheaton common shares. Subsequent to March 31, 2005, Goldcorp and a subsidiary entered into a series of transactions with Wheaton that resulted in Goldcorp owning 100% of Wheaton common shares. Further, the series of transactions resulted in each Wheaton warrant or stock option, which gave the holder the right to acquire common shares of Wheaton, being exchanged for a warrant or stock option of Goldcorp which gives 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. The Wheaton options and warrants have been included as part of the purchase price consideration.
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".
The preliminary allocation of the purchase price of 82% of the shares of Wheaton is summarized in the following table and is subject to refinement:
Purchase price
Common shares of Goldcorp issued to acquire 82% of Wheaton $ 1,544,000 Share purchase warrants of Wheaton to be exchanged for those of Goldcorp 240,000 Stock options of Wheaton to be exchanged for those of Goldcorp 18,000 Acquisition costs 22,000 ----------------------------------------------------------------
$ 1,824,000 ---------------------------------------------------------------- ----------------------------------------------------------------
Net assets acquired: Cash and short-term investments $ 168,663 Marketable securities 4,348 Other non-cash working capital (16,808) Mining interests 2,099,911 Silver contract 77,489 Stockpiled ore, non-current 58,586 Other long-term assets 3,767 Future income taxes, net (463,077) Reclamation and closure costs obligations (20,613) Future employee benefits and other (75,169) Non-controlling interest in Wheaton (18%) (141,850) Non-controlling interest in Silver Wheaton (35%) (54,908) ----------------------------------------------------------------
Net identifiable assets 1,640,339 Residual purchase price allocated to goodwill (82% interest) 183,661 ----------------------------------------------------------------
$ 1,824,000 ---------------------------------------------------------------- ----------------------------------------------------------------
A total of 117.6 million Goldcorp shares were issued to acquire the 82% 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. A non-controlling interest has been assigned to the 18% interest in Wheaton that Goldcorp did not own as of March 31, 2005. This non-controlling interest was subsequently eliminated on April 15, 2005 when Goldcorp acquired the remaining outstanding common shares of Wheaton for further common share consideration of $336 million.
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 relating to each of the Wheaton assets and intends to 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. ACQUISITIONS
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.
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 value of the silver contract at March 31, 2005 is $77,078,000 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 during the quarter in the amount of $2,898,000.
7. GOLD BULLION
Market Unrealized Ounces Total Cost Value Gain -------------------------------------------------------------------- Unsold production at: March 31, 2005 275,678 $ 33,559 $ 117,852 $ 84,293 December 31, 2004 221,220 33,895 96,363 62,468
8. INVENTORIES AND STOCKPILED ORE
March 31 December 31 2005 2004 ------------------------------------------------------------------
Supplies $ 16,075 $ 4,146 Finished goods 18,870 644 Work in process 9,552 10,539 Stockpiled ore 64,452 - ------------------------------------------------------------------
108,949 15,329 Less: non-current stockpiled ore 57,500 - ------------------------------------------------------------------
$ 51,449 $ 15,329 ------------------------------------------------------------------ ------------------------------------------------------------------
Non-current stockpiled ore is primarily comprised of lower grade ore at Alumbrera, which will be processed later in the mine life.
9. MINING INTERESTS
March 31, 2005 -------------------------------------------------------------------- Accumulated Depreciation Cost and Depletion Net --------------------------------------------------------------------
Mineral properties Red Lake mine, Canada $ 245,067 $ (94,292) $ 150,775 Alumbrera mine, Argentina 330,928 (2,622) 328,306 Luismin mines, Mexico 486,799 (1,870) 484,929 Peak mine, Australia 136,433 (701) 135,732 Wharf mine, United States 50,743 (41,928) 8,815 --------------------------------------------------------------------
1,249,970 (141,413) 1,108,557 --------------------------------------------------------------------
Plant and equipment Red Lake mine, Canada 162,537 (53,948) 108,589 Alumbrera mine, Argentina 206,248 (1,312) 204,936 Luismin mines, Mexico 47,075 (406) 46,669 Peak mine, Australia 16,552 (116) 16,436 Wharf mine, United States 50,915 (50,479) 436 Corporate and other, Canada 16,751 (13,000) 3,751 --------------------------------------------------------------------
500,078 (119,261) 380,817 --------------------------------------------------------------------
Properties under development Los Filos project, Mexico 169,049 - 169,049 Bermejal project, Mexico 70,010 - 70,010 Amapari project, Brazil 587,163 - 587,163 --------------------------------------------------------------------
826,222 826,222 --------------------------------------------------------------------
Exploration projects El Limon and other projects, Mexico 144,871 - 144,871 --------------------------------------------------------------------
$ 2,721,141 $ (260,674) $ 2,460,467 -------------------------------------------------------------------- --------------------------------------------------------------------
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 project, Mexico - - - Bermejal project, Mexico - - - Amapari project, Brazil - - - --------------------------------------------------------------------
- - - --------------------------------------------------------------------
Exploration projects El Limon and other projects, Mexico - - - --------------------------------------------------------------------
$ 511,377 $ (246,428) $ 264,949 -------------------------------------------------------------------- --------------------------------------------------------------------
10. BANK CREDIT FACILITIES
(a) The Company has a $75,000,000 revolving working capital facility bearing interest at LIBOR plus 1.625% to 2.25%, depending on covenant ratios, of which $nil was drawn down at March 31, 2005. There are no net repayment terms, and the facility matures in June 2007. Undrawn amounts are subject to a 0.65% per annum commitment fee.
(b) The Company has an Aus$5,000,000 ($3,860,000), unsecured, revolving working capital facility for its Peak mine operations of which $nil was drawn down at March 31, 2005. The loan bears interest related to the Australian Treasury Bill rate plus 1.5% per annum.
(c) During the quarter, the Company cancelled a $300 million acquisition facility, which was undrawn.
11. FUTURE EMPLOYEE BENEFITS AND OTHER
March 31 2005 --------------------------------------------------
Deferred employee profit sharing $ 71,667 Other 4,697 --------------------------------------------------
$ 76,364 -------------------------------------------------- --------------------------------------------------
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.
12. SHAREHOLDERS' EQUITY
March 31 December 31 2005 2004 ------------------------------------------------------------------
Capital stock Common shares $ 1,908,448 $ 363,246 Share purchase warrants 16,110 16,110 Share purchase warrants to be issued 240,000 - Stock options 12,574 7,347 Stock options to be issued 18,000 - ------------------------------------------------------------------
$ 2,195,132 $ 386,703 ------------------------------------------------------------------ ------------------------------------------------------------------
At March 31, 2005, the Company had 307,677,000 common shares outstanding (December 31, 2004 - 189,980,000). The payment of a special dividend referred to in note 2 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. Movements in the Company's capital stock during the quarter are as follows:
Shares Amount ------------------------------------------------------------------ Common shares
Outstanding at January 1, 2005 189,980 $ 363,246 Issued pursuant to Wheaton acquisition 117,603 1,544,000 Exercise of stock options 94 1,202 ------------------------------------------------------------------
Outstanding at March 31, 2005 307,677 $ 1,908,448 ------------------------------------------------------------------ ------------------------------------------------------------------
Share purchase warrants
Outstanding at January 1 and March 31, 2005 7,000 $ 16,110 ------------------------------------------------------------------ ------------------------------------------------------------------
Share purchase warrants to be issued
Series A, B and C share purchase warrants to be issued, pursuant to Wheaton acquisition, at March 31, 2005 (note 1) $ 240,000 ------------------------------------------------------------------ ------------------------------------------------------------------
Stock options
Outstanding at January 1, 2005 6,144 7,347 Stock option expense - 5,320 Exercised/cancelled (94) (93) ------------------------------------------------------------------
Outstanding at March 31, 2005 6,050 12,574 ------------------------------------------------------------------ ------------------------------------------------------------------
Stock options to be issued
Stock options to be issued, pursuant to Wheaton acquisition, at March 31, 2005 (note 1) $ 18,000 ------------------------------------------------------------------ ------------------------------------------------------------------
(1) Upon completion of the Wheaton transaction on April 15, 2005, Goldcorp will issue 174.8 million Series A, B and C share purchase warrants to the former Wheaton share purchase warrant holders. Each share purchase warrant will be exercisable for 0.25 Goldcorp common shares at prices ranging from Cdn$1.65 to Cdn$3.10 (or Cdn$6.60 to Cdn$12.40 for four share purchase warrants which are exchangeable for one Goldcorp common share), with expiry dates ranging from 2007 to 2008. In addition the Company will issue 4.9 million Goldcorp stock options to former Wheaton stock option holders in exchange for 19.6 million former Wheaton stock options. The stock options are exercisable at prices ranging from Cdn$2.28 to Cdn$15.68 with expiry dates ranging from 2006 to 2010.
The following table sets forth the computation of diluted earnings per share: Three Months Ended March 31 March 31 2005 2004 ------------------------------------------------------------------
Earnings available to common shareholders $ 29,489 $ 17,328 ------------------------------------------------------------------ ------------------------------------------------------------------
Weighted average shares outstanding 248,829 189,465
Effect of dilutive securities: Stock options 2,102 1,667 Warrants 12,318 3,543 ------------------------------------------------------------------ Adjusted weighted average shares and assumed conversions 263,249 194,675 ------------------------------------------------------------------ ------------------------------------------------------------------
Earnings per share Basic $ 0.12 $ 0.09 Diluted $ 0.11 $ 0.09
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 March 31 March 31 2005 2004 ------------------------------------------------------------------
Stock options 1,797 118 Warrants - - ------------------------------------------------------------------
1,797 118 ------------------------------------------------------------------ ------------------------------------------------------------------
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. The fair value of the options is expensed over the vesting period of the options. No compensation expense has 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 quarter and were expensed in the amount of $5,320,000.
At March 31, 2005, Wheaton stock options with a fair value of $18,000,000 (representing Goldcorp's 82% interest) were to be converted to Goldcorp stock options effective April 15, 2005 as a result of the Wheaton acquisition. All Wheaton stock options outstanding are fully vested.
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 March 31 March 31 2005 2004 ------------------------------------------------------------------
Net earnings $ 29,489 $ 17,328 Net additional compensation expense related to fair value of stock options (320) (620) ------------------------------------------------------------------ Pro forma earnings $ 29,169 $ 16,708 ------------------------------------------------------------------ ------------------------------------------------------------------
Pro forma earnings per share Basic $ 0.12 $ 0.09 Diluted $ 0.11 $ 0.09
13. SUPPLEMENTAL CASH FLOW INFORMATION
Three Months Ended March 31 March 31 2005 2004 ------------------------------------------------------------------
Change in non-cash operating working capital
Gold bullion $ 250 $ (6,172) Accounts receivable (2,540) (610) Income and mining taxes receivable 10,256 - Inventories and stockpiled ore 3,816 1,055 Accounts payable and accrued liabilities 7,306 (4,900) Income and mining taxes payable 2,646 (18,687) Other (236) 170 ------------------------------------------------------------------
$ 21,498 $ (29,144) ------------------------------------------------------------------ ------------------------------------------------------------------
Non-cash financing and investing activities Shares issued on acquisition of Wheaton $ 1,544,000 $ -
Operating activities included the following cash payments Interest paid $ 31 $ - Income taxes paid 89 26,304
14. SEGMENTED INFORMATION
The Company's reportable operating segments are summarized in the table below.
Three Months Ended March 31, 2005 -------------------------------------------------------------------- Red Lake Alumbrera Luismin Amapari Peak (note 1) (note 1) (note 1) (note 1) Revenues $ 55,987 $ 21,184 $ 13,828 $ - $ 8,028 Depreciation and depletion 4,818 3,934 2,306 - 855 Earnings (loss) from operations 39,176 9,014 3,400 - 1,708 Expenditures for mining interests 21,002 336 11,134 10,247 3,723 Total assets 286,263 696,771 1,009,363 592,664 174,865
Silver Wharf Wheaton Corporate Total -------------------------------------------------------------------- (note 1) (note 1) Revenues $ 14,938 $ 10,857 $ (1,973) $ 122,849 Depreciation and depletion 3,076 899 1,691 17,579 Earnings (loss) from operations 2,026 3,894 (5,524) 53,694 Expenditures for mining interests 1,759 - 68 48,269 Total assets 42,709 228,227 278,358 3,309,220
(1) Includes results from February 15, 2005, the date of acquisition of Wheaton.
Three Months Ended March 31, 2004 -------------------------------------------------------------------- Red Lake Wharf Corporate Total -------------------------------------------------------------------- Revenues $ 38,907 $ 6,282 $ 3,125 $ 48,314 Depreciation and depletion 2,990 1,450 106 4,546 Earnings (loss) from operations 27,975 1,094 (2,366) 26,703 Expenditures for mining interests 13,535 2,054 39 15,628 Total assets (December 31, 2004) 280,289 32,037 389,192 701,518
The geographical distribution of the above segments is as follows:
- Red Lake and Corporate - Canada - Alumbrera - Argentina - Luismin - Mexico, Cayman Islands - Amapari - Brazil - Peak - Australia - Wharf - United States - Silver Wheaton - Canada, Cayman Islands
15. COMMITMENTS AND CONTINGENCIES
(a) Commitments exist for capital expenditures of approximately $100 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 first quarter of 2005, Goldcorp sold its holdings in two marketable securities to a company owned by Robert R. McEwen, the non-Executive Chairman and former CEO of Goldcorp. This was a non-brokered transaction which was executed at market value based on the average of the TSX closing price for the ten trading days prior to the sale agreement, resulting in a gain of $3,990,000.
17. SUBSEQUENT EVENT
On April 15, 2005, Goldcorp completed its acquisition of Wheaton as described in Note 3 with Wheaton's shares and warrants subsequently de-listed from the TSX and AMEX. Goldcorp shares were issued under the plan of arrangement and replaced outstanding Wheaton shares on the basis of 0.25 of a Goldcorp share for each Wheaton share.
Under the plan of arrangement, Wheaton Series A, B and Common Share Purchase warrants become Goldcorp Series A, B and C warrants, respectively, representing Goldcorp warrants to purchase 0.25 of a Goldcorp share.
Cautionary Note Regarding Forward Looking Statements
Safe Harbor Statement under the United States Private Securities Litigation Reform Act of 1995: Except for the statements of historical fact contained herein, the information presented constitutes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements, including but not limited to those with respect to the price of gold, silver and copper, the timing and amount of estimated future production, costs of production, reserve determination and reserve conversion rates involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievement of Goldcorp to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, risks related to the integration of acquisitions, risks related to international operations, risks related to joint venture operations, the 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, as well as those factors discussed in the section entitled "General Development of the Business - Risks of the Business" in Goldcorp's Form 40-F on file with the Securities and Exchange Commission in Washington, D.C. and Goldcorp's Annual Information Form on file with the securities regulatory authorities in Canada. Although Goldcorp has attempted to identify important factors that could cause actual results to differ materially, 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 Inc. (TSX:G) (NYSE:GG)
--30--CCN/na*
CONTACT: Goldcorp Inc. Julia Hasiwar Director, Investor Relations (604) 696-3011 Fax: (604) 696-3001 info@goldcorp.com www.goldcorp.com
KEYWORD: NEW YORK INTERNATIONAL CANADA INDUSTRY KEYWORD: MINING/METALS SOURCE: Goldcorp Inc.
Copyright Business Wire 2005
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