Goldcorp Earnings Call Nuggets: Reserve Calculations and Slimming Portfolios
Goldcorp, Inc. (NYSE:GG) recently reported its fourth quarter earnings and discussed the following topics in its earnings conference call.
John Bridges – JPMorgan: Well, congratulations on the results. It was quite difficult to find things to ask questions on last night. Everything looked nice. But one thing that was intriguing was, you used $1,350 gold price in your reserve calculation. I wonder if Charlie was holding something back there.
Charles A. Jeannes – President and CEO: Sorry, I didn’t understand, you’re asking it for holding…?
John Bridges – JPMorgan: The gold price that you used to calculate your reserves; $1,350, some of the other guys are using the maximum of $1,500.
Charles A. Jeannes – President and CEO: Well, this is consistent with the way we’re trying to run the business and being disciplined and not trying to maximize the last ounce we can, either in our reserve calculation or production, but to go after quality ounces. So, I don’t think it’s any different. If you look at the way we’ve compared in terms of our long-term price assumptions in the past and actual spot prices, we are right around the same range as we’ve been. So, for us, there hasn’t been any change there, John.
John Bridges – JPMorgan: Then following on from that and topical for today, there is (all a) bearish commentary around in the market; just wondered if you could talk about contingency plans if gold were to fall off sharply. I know you guys have an ongoing contingency plan in having low cost operations, but what should we expect from the industry if low prices continue?
Charles A. Jeannes – President and CEO: Well, I can only speak for us. I can certainly tell you that we sensitize everything we do looking at what would be the impact of lower sustained prices and I think that’s the key. I said earlier this year a couple of times that it wouldn’t surprise me to see some volatility in the gold price and to see some weakness in fact because I believe there is in some ways some artificial exuberance about international economic activity right now that is not likely to last throughout the course of the year. For example, we look at our reserves down to $1,200 and you’d see about a 6% decrease only in reserves at 1,000. They go down around 15%. So, certainly not something that’s significant. I think overall, as I said, I don’t expect this current weakness to continue. I am still very much a believer in the long-term trend in the gold price and it seems to me that all of the macroeconomic factors that have supported that continue very much in place if not even more so than they have been in the past in terms of the debt levels for countries around the world, the likelihood of inflation down the road or at a minimum, debasement of currency. So, yeah, I can’t say what other folks would do, but we’re very comfortable that the business will run quite well even at lower prices, although, we don’t expect them to be sustained.
Jorge Beristain – Deutsche Bank: I guess my question is for Chuck. We’ve seen some notable announcements in the gold space and mining space in general about the potential for slimming down of portfolios, and in that environment, would we be right to consider Goldcorp a potential buyer of assets if in fact there is more willing sellers out there?
Charles A. Jeannes – President and CEO: Well, we’re always on the lookout for opportunities, as you know Jorge. We have a pretty active corporate development department and I think we’ve made, as I said during my prepared remarks, some pretty solid acquisitions that are now in the process of adding real value to us in terms of Cerro Negro and Eleonore and Cochenour. And so, yeah, we’ll keep our eyes on things. I can say as a general matter, the things that others tend to want to dispose of would probably not be real high on our list of things that we would like to buy, but we’ll look at opportunities that are presented.
Jorge Beristain – Deutsche Bank: Just as a follow-up to that, could you talk a little bit about the quality if you have noted out from your development department of the bid-ask spread out there? It would seem that the market is not attributing a lot of value to companies that are now saying they might be selling assets, and I’m just trying to understand if you’re seeing a real widening of the bid-ask spread there or if the assets that you said maybe what’s being sold isn’t high enough quality to generate interest?
Charles A. Jeannes – President and CEO: Yeah, it’s hard for me to say because I don’t know what people are seeing in terms of the various bids for their assets. That’s the process that to the extent we’re involved which is very limited, we’re only seeing one side of that discussion, so you’d have to have the folks that are selling the assets.