Special Situations for SMART INVESTORS
GOLDCORP INC. NEW (TORONTO:G): FOLLOW-UP NO 2
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RED LAKE - A WORLD CLASS GOLD MINE
Business Summary
At the beginning of the 21st Century, Goldcorp is well positioned to profit, prosper and increase share-owner wealth in both low and high gold-price environments.
Its Red Lake Mine is truly "world class" and provides an extremely strong platform from which the company can grow.
Goldcorp is financially strong. It has no debt, a rapidly growing treasury and no financing requirements. Innovation, creativity, and a challenge to conventional thinking have been key ingredients in the company's success. These characteristics will continue to be a very important part of Goldcorp's future.
An example of Goldcorp's innovative thinking is in its use of the Internet. "The Goldcorp Challenge", and the recently launched "Global Search Challenge", are two exploration contests accessible via the Internet. They are examples of how Goldcorp is using the Internet to access the intellectual expertise of the world's exploration and mining communities.
Already the results of the first challenge have had a positive impact on the company's exploration effort at the Red Lake Mine.
Goldcorp is confident that such initiatives will help increase its odds of exploration success and shorten the required time frames.
Recent News: ENCOURAGING RESULTS IN FAR EAST
Goldcorp continues to experience exploration success at its Red Lake mine. The highlights of the most recent exploration results are summarized below.
The high-grade zone appears to be widening at depth. The deepest and richest intersection encountered was 10.80 ounces of gold per ton (opt) (370.3 grams per ton (g/t)) over 70 feet (21.34 metres (m)) at a vertical depth of 6,850 feet (2,088 m). It was within a 338-foot (103-m) interval containing 10 zones of gold mineralization.
Drilling (delineation and definition) within and immediately around the high-grade zone, which was carried out to upgrade resources to reserves and increase total resources, has produced good results. There were 51 intersections of high-grade gold with an average grade of 8.34 ounces per ton (286 g/t) over an average thickness of 6.1 feet (1.86 m).
The most significant new intersection from the Far East zone was 1.84 ounces per ton (63.0 g/t), over 26 feet (7.92 m) at a vertical depth of 5,950 feet (1,814 m).
The continuity of the sulphide mineralization continues to be confirmed. Drilling below the limits of previous mining encountered generally lower-grade intersections over widths up to 21 feet. However, the highlight was an intersection of 1.98 ounces per ton (67.9 g/t) over 7.0 feet (2.13 m) that appears to align with the company's Western Complex structural model.
Four target areas
Goldcorp is currently conducting its largest exploration program ever at the Red Lake mine. The goal of this work is to substantially expand reserves and resources to a level sufficient to increase mine life and expand gold production. The exploration program is focused on four areas, which are: 1) depth extensions of the high-grade zone from which all current production takes place; 2) depth extensions of the sulphide mineralization, which was the source of all production from 1948 to 1996; 3) a potential repeat sequence of Red Lake mine style mineralization to the east in the Far East zone; and 4) potential high-grade mineralization west of the high-grade zone in what is called the Western Complex area.
Confirmation of exploration model
The results obtained during 2002 continue to confirm the validity of the company's exploration model, which is based on observations that the high-grade mineralization at both the Red Lake mine itself and the adjacent Campbell mine is controlled by distinct linear structures. More than 75 per cent of all the gold discovered at the Red Lake mine occurs along, or adjacent to, such a structure. The company believes more gold will be discovered along extensions of this known structure and along additional parallel linear structure in the Far East zone and Western Complex area.
Depth extensions of high-grade zone
Hole 37L032AW intersected 10 zones of gold mineralization within a 338-foot (103-m) interval. Among these, three were particularly noteworthy including 10.80 ounces per ton (370.3 g/t) over 70 feet (21.34 m), 1.85 ounces per ton (63.4 g/t) over four feet (1.22 m), and 0.89 ounce per ton (30.5 g/t) over 12.0 feet (3.66 m). This is the highest grade, deepest intersection obtained, to date, at a vertical depth of 6,850 feet (2,088 m). This hole was completed as a wedge (or second intersection) off hole 37L032. It was the first hole where multiple zones of mineralization had been reported below the current limit of resources (May 29, 2002).
While the intersections in the most recent hole (37L032AW) are only a short distance (10 feet or 3.05 m) from this first hole, these results are significant for two principal reasons. First, they confirm the results from hole 37L032 and therefore the occurrence of potentially continuous multiple zones of high-grade mineralization at depth. In addition, they demonstrate that the extremely high-grade nature of this zone is continuous at depth.
A further particularly encouraging development is that depth extensions of other zones of mineralization within the high-grade zone have also been identified 1,500 feet (457 m) further to the east of the Hanging Wall 5 zone, with results including 0.76 ounce per ton (26.1 g/t) over 3.3 feet (1.01 m), and 0.62 ounce per ton (21.3 g/t) over 3.0 feet (0.91 m) both in hole 34L1054, together with 0.62 ounce per ton (21.3 g/t) over 5.0 feet (1.52 m) in hole 34L1053. These intersections are extensions of what are called the Footwall (FW) zones within the high-grade zone and their style and grade are representative of these zones elsewhere in the mine. This mineralization was intersected down to a vertical depth of 6,500 feet (1,981 m), approximately 1,000 feet (305 m) vertically below the current limit of reserves in these zones.
Delineation drilling confirms continuity of high-grade zone at depth
Drilling below the 37 level (5,550 feet or 1,692 m below surface) has obtained 51 intersections of high-grade mineralization with an average grade of 8.34 ounces per ton (286 g/t) over an average of 6.1 feet (1.86 m). Some of the more significant intersections include 57.83 ounces per ton (1,982.7 g/t) over 5.7 feet (1.74 m) in hole 37L307, 50.29 ounces per ton (1,724.2 g/t) over 4.5 feet (1.37 m) in hole 37L232, and 36.69 ounces per ton (1,257.9 g/t) over 8.0 feet (2.44 m) in hole 37L247.
Far East zone
Intersections up to 1.84 ounces per ton (63.0 g/t) over 26 feet (7.92 m).
The Far East zone has the potential to host another Red Lake mine. The exploration model suggests that gold mineralization in this area could be controlled by two (or more) parallel linear structures. The first is the upward projection of the structure hosting the high-grade zone, and the second is interpreted to be to the east and parallel to this first structure. Since the last exploration update this zone has been drilled both from underground locations, 16 level (2,400 feet or 732 m below surface) and the 34 level (5,000 feet or 1,525 m below surface) and from surface.
Underground drilling -- results are encouraging
Drilling from level 16 targeted the upward projection of the structure hosting the high-grade zone. The most impressive intersections were 0.34 ounce per ton (11.7 g/t) over 37.5 feet (11.43 m), including 1.06 ounces per ton (36.3 g/t) over 2.5 feet (0.76 m) in hole 16L1188, in addition to 0.41 ounce per ton (14.1 g/t) over 15.0 feet (4.57 m) in hole 16L1175. The fact that gold mineralization was encountered over substantial widths and that some holes encountered multiple zones of mineralization is particularly encouraging.
Drilling from level 34 targeted the projection at depth of the second structural trend, which is interpreted to occur in the Far East zone. The latest results provided increased confidence in that interpretation and in the continuity of mineralization in that area. Some of the more significant intersections included 1.84 ounces per ton (63.0 g/t) over 26 feet (7.92 m) in hole 34L1086, together with 0.69 ounce per ton (23.7 g/t) over 5.0 feet (1.52 m), and 0.43 ounce per ton (14.7 g/t) over 4.9 feet (1.49 m) both in hole 34L1085. This work was able to test the Far East zone over a vertical distance of 1,200 feet (366 m) and a lateral distance of 400 feet (122 m). Again the occurrence of multiple intersections in one hole is a good sign.
Depth extensions of sulphide mineralization
The latest exploration results continue to confirm the continuity of this mineralization to depth. The grade of intersections varied from 0.10 ounce per ton (3.4 g/t) to 1.98 ounces per ton (67.9 g/t) over widths from 1.5 feet (0.46 m) to 21 feet (6.4 m). The highlight was 1.98 ounces per ton (67.9 g/t) over 7.0 feet (2.13 m) in hole 34L1018, which appears to align with our Western Complex structural model. This mineralization has previously been encountered in isolated drill holes to a vertical depth of 7,200 feet (2,195 m) suggesting the possibility that it is indeed continuous to greater depths. The current exploration program has focused on establishing continuity of the sulphide below previously mined areas.
Sulphide mineralization was the sole source of production at the Red Lake mine from 1948 to 1996 contributing 3.2 million ounces of gold to a vertical depth of 4,400 feet (1,341 m). This mineralization is typically lower grade than the high-grade zone. However, should this mineralization be continuous to the same depths as the high-grade zone (at least 6,850 feet or 2,088 m), it would provide a substantial increase in reserves and a valuable source of additional production.
Fundamental Considerations: The goals - measurable, specific, ambitious
Short-term goals (1-3 years)
Red Lake
- Grow reserves by 50% in 3 years
- Expand annual production by 35% in 2 years
- Lower production cost to $70/oz of gold.
Corporate
- Reach annual production level of 1,000,000 ounces of gold at $100/oz
- Remain unhedged and debt free
- Increase dividend payout
- 50% of trading volume on NYSE
Long-term goals (5 years)
- Share price of US$25 (minimum)
- High dividend payout
- Double Red Lake reserves
- Conservative financials
Technical Considerations
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