Vancouver-based Goldcorp (TSX: G, NYSE: GG) has decided to defer spending at its Cerro Negro project in Argentina's Santa Cruz province, CEO Chuck Jeannes said in a webcast to discuss Q3 financial results.
Exploration for the rest of 2013 remains suspended, and development of the Mariana Norte vein has been pushed forward until late 2014, according to the CEO.
Construction continued to advance in Q3 in key areas of the project including plant construction, infrastructure, and mine development.
The decision was based on a series of challenges the company has been facing in the country.
These include a six-month delay to the start of construction of the main power line due to permit delays, "significant" inflation of approximately 25-30% in Argentina, labor and contractor productivity issues and uncertainty surrounding a recent resource tax in Santa Cruz.
REVISED CAPEX, SCHEDULE
The company has also revised up capex for the project from US$1.35bn to US$1.6-US$1.8bn. First gold production is now expected in mid-2014 instead of last 2013, with commercial production set for 4Q14.
Estimated gold output in 2014 is 130,000-180,000oz.
Despite the approval of its environmental impact study by Chilean authorities on October 23, and the "hard work for a lot of people on our team down in Chile," Goldcorp is going back to the drawing board with its El Morro gold-copper project in northern region III.
"We now find ourselves with a feasibility study that is quite stale in terms of capital and cost estimates," Jeannes said. "We need to get back to the drawing board and update that feasibility study."
The initial capex estimate for El Morro, a 70:30 JV with compatriot New Gold (TSX, Amex: NGD), was US$3.9bn.
The other problem with project development is power supply, which was originally to have been supplied by Brazilian company MPX's US$4.5bn Castilla coal-fired plant project. Chile's supreme court ordered a new EIS for that project last year and the future is unclear.
"The problem that we have in respect to a lack of a power line solution still remains and so, we'll be working on that, and as we learn more and have a better sense of things going forward at El Morro," Jeannes said.
El Morro has proven and probable reserves in the order of 8.17Moz gold y 6.12Blb copper.
Goldcorp's net earnings in Q3 decreased to US$5mn due to lower revenues mainly resulting from lower gold and silver realized prices and lower sales volumes, and the tax impact of the renegotiated agreement with the government of the Dominican Republic for the Pueblo Viejo gold mine, a 40:60 JV with compatriot Barrick Gold (NYSE, TSX: ABX).