Goldcorp Inc. is spending $40 million this year to develop its recently acquired El Morro gold-and-copper project in Chile, despite a dispute over ownership of the project with the world's largest gold miner.
Goldcorp (TSX:G) chief operating officer Steve Reid said Friday the company has sent a team to the site to advance exploration and development and prepare it for production in 2015.
"It's expected to become one of our cornerstone assets and we'll further enhance and sustain our growth profile beyond 2015," he said on a conference call with investors to discuss the company's fourth quarter results and growth plans for 2010.
Barrick Gold Corp. (TSX:ABX) filed a lawsuit in January in an attempt to stop junior miner New Gold Inc. (TSX:NGD) from selling 70 per cent of the El Morro copper-gold project in Chile to Goldcorp.
Barrick announced in October that it had a deal to buy 70 per cent of El Morro from Anglo-Swiss mining giant Xstrata, but ran into a roadblock.
That's when Vancouver-based New Gold, which owns a 30 per cent stake in the project, exercised its right of first refusal to buy out Xstrata PLC's (LSE:XTA) stake with US$463 million supplied by Goldcorp. The junior miner then created a new El Morro subsidiary, that sold the 70 per cent stake to Goldcorp.
Barrick has asserted that New Gold broke Chile's laws by effectively shifting the right of first refusal to Goldcorp. At issue is a shareholders agreement created by the stakeholders at El Morro that Barrick has said "explicitly prohibits" transfer of the right of first refusal to a third party.
Goldcorp said it is "confident that it has acted lawfully and appropriately in all aspects of this transaction and intends to vigorously defend itself against the claim."
Meanwhile, the company revised its exploration guidance to $145 million from $130 million to pay for more exploration at El Morro and the recently acquired Camino Rojo project near its Penasquito mine.
Goldcorp plans to spend $1.5 billion to grow reserves in 2010 as part of an aggressive strategy toward a sharp increase in gold production by 2014.
Haytham Hodaly, an analyst at Salman Partners, said Goldcorp's decision to spend money on the project is a vote of confidence in their ability to win the suit.
Chuck Jeannes, president and chief executive of the Vancouver-based miner said he is excited about growth projects this year and the next five years of steady growth.
"This growth is readily achievable as it will be driven by just three mines that are already in production or well advanced in the construction process," said president and chief executive Chuck Jeannes.
Those mines include Penasquito in Mexico, Red Lake in Ontario and Pueblo Viejo in the Dominican Republic.
The company's Canadian projects, Red Lake, Porcupine, and Musselwhite, were its top producing mines in 2009. But, the miner says Penasquito will be the main driver of growth over the next five years.
"We're starting to turn our focus to our next generation of gold projects...strategic longer term development projects such as Eleonore and El Morro to ensure Goldcorp's success well into the future," Jeannes added.
Goldcorp announced it has completed a pre-feasbility study at its Eleonore project in Quebec, that confirmed it would be a low cost underground gold mine with at least a 16-year mine life. The company expects to begin production in 2015.
The Vancouver-based gold miner (TSX:G), which keeps its books in U.S. dollars, said Thursday it earned US$66.7 million or nine cents per share for the quarter ended Dec. 31 compared with a profit of $958.1 million or $1.31 per share a year ago.
The results for the latest quarter included a $128.9-million loss on foreign exchange, while the year-ago results included a $963-million gain on derivatives.
The company said it achieved record revenue during the quarter, with a total of $778.3 million, up from $609 million.
Shares in the company closed down two per cent or 78 cents at $40.09 Friday on the Toronto Stock Exchange.