(Updates with closing share price in fifth paragraph.)
Oct. 24 (Bloomberg) -- Goldcorp Inc., the world’s largest gold miner by market value, deferred work at its Cerro Negro project in Argentina after the estimated construction cost jumped on permitting delays and higher labor expenses.
Cerro Negro will cost $1.6 billion to $1.8 billion, Goldcorp said in its third-quarter earnings statement today. That compares with a January estimate of $1.35 billion. The Vancouver-based company said it’s suspending exploration and development of the Mariana Norte vein at the site. Gold production is now expected to start in mid-2014.
“While we anticipated a slow ramp-up/delay at Cerro Negro, the deferral of Mariana Norte combined with the six-month delay is worse than we expected,” Greg Barnes, a Toronto-based analyst at TD Securities Inc., said in a note. Initial output was previously expected in the first quarter of next year, he said.
Gold producers are trying to cut spending and curb rising mining costs after the metal slipped into a bear market in April. Cerro Negro has been affected by inflation in Argentina at an annualized rate of about 25 percent to 30 percent and no corresponding drop in the peso exchange rate, Goldcorp said.
Goldcorp rose 4.5 percent to C$27.76 at the close in Toronto after the gold price climbed as much as 1.4 percent in New York and the company reported better-than-expected earnings.
Third-quarter profit excluding one-time items was 23 cents a share, exceeding the 20-cent average of 19 analysts’ estimates compiled by Bloomberg.
Net income fell to $5 million, or break even per share, from $498 million, or 61 cents, a year earlier. Sales declined to $929 million from $1.28 billion, missing the $1.07 billion average estimate.
The company’s average cost to produce and sell gold, after profiting from sales of silver and other metals, was $551 an ounce, compared with $220 an ounce in the third quarter of 2012 and the $554 average of seven estimates compiled by Bloomberg.
All-in sustaining costs, a more comprehensive metric adopted this year by most producers, rose to $992 an ounce from $801.
Gold production rose to 637,100 ounces from 592,500 ounces a year earlier. The average of eight estimates was for 683,100 ounces.
Goldcorp expects 2013 output will be 2.6 million to 2.7 million ounces, at all-in sustaining costs of $1,050 to $1,100 per ounce. Its previous forecasts were for 2.55 million to 2.8 million ounces and costs of $1,000 to $1,100 per ounce.
Gold averaged $1,328 on the Comex in New York in the third quarter, 20 percent less than a year earlier and 6.3 percent lower than the second quarter.
Toronto-based Barrick Gold Corp. is the world’s biggest gold producer by sales.
--Editors: Simon Casey, Steven Frank