Top priorities for Goldcorp's new CEO

Goldcorp's new CEO David Garofalo will take the reins of a company in robust form, with record production generating positive free cash flow.

Garofalo, who resigned as CEO of HudBay Minerals, will replace Chuck Jeannes to head Latin America's biggest gold producer when the latter retires in April after eight years at the helm. During his five year tenure, Garofalo built Hudbay into a mid-tier copper-zinc producer with the addition of the US$1.7bn Constancia mine in Peru and the Reed and Lalor mines in Canada.

While investors will be looking for a safe pair of hands, a key priority will be delivering a new phase of low-cost growth.

STRONG POSITION

Goldcorp reported significant improvements in Q3, with operations generating positive free cash flow before dividends of US$243mn, compared to negative US$355mn in the prior-year period.

Gold production rose 42% to a record 922,200oz, with all-in sustaining costs dropping to US$848/oz from US$1,066/oz.

Keeping a lid on costs will be among the key priorities for Garofalo.

The Canadian company reported US$3.3bn of liquidity at the end of the quarter, giving flexibility to adapt to lower gold prices or expand production.

MINES

Goldcorp's Latin American mines accounted for 62% of gold output in Q3.

Priorities for the new CEO include delivering steady, low-cost production at Cerro Negro in Argentina, and avoiding any repeat of a four-day stoppage by striking workers, which began on September 30. The mine started commercial operations last year.

Maintaining strong production and low costs at Peñasquito in Mexico will be another challenge, drawing a line under water issues that previously impacted performance.

Tackling security concerns and lowering costs at Los Filos in Mexico are other priorities, with AISCs more than doubling to US$1,275/oz in Q3.

PROJECTS

Following construction of the Cerro Negro and Éléonore mines, 2016 is expected to be a year of low capital spending, but the CEO will oversee progress at a number of promising Latin American projects.

These include Camino Rojo in Mexico, where a prefeasibility study is due next year, and the Corridor project in Chile, which combines Goldcorp's El Morro and Teck Resources' Relincho assets.

Prefeasibility and community studies are expected to begin in 2016.

M&A

Goldcorp's growth to become one of the world's top gold producers has partly stemmed from acquisitions.

A challenge for the new CEO will be to take advantage of low valuations to snap up further mines or projects and ensure they deliver profits, even at weak gold prices.

Before his previous position at HudBay, Garofalo worked at Agnico Eagle and Inmet Mining, former owner of the Cobre Panamá project. Goldcorp also has mines in Guatemala, the Dominican Republic and Canada.

Pictured: Cerro Negro mine.