Goldcorp Inc. (USA) (GG)

Q2 2013 Earnings Conference Call

July 25, 2013 1:00 pm ET

Executives

Charles A. Jeannes – President and Chief Executive Officer

George R. Burns – Executive Vice President and Chief Operating Officer

Lindsay Hall – Executive Vice President and Chief Financial Officer

Russell Ball and Executive Vice President, Capital Management

Analysts

Alec Kodatsky – CIBC World Markets

Stephen Walker – RBC Capital Markets

John Bridges – JPMorgan

Tony Lesiak – Macquarie

David Haughton – BMO Capital Markets

Greg Barnes – TD Newcrest Securities

Farooq Hamed – Barclays Capital Canada, Inc.

Patrick Chidley – HSBC Securities

Brian Yu – Citigroup

Anita Soni – Credit Suisse

Jorge Beristain – Deutsche Bank

Draft version. An edited version will be posted soon.

All participants please standby, your conference call is ready to begin. Good morning, ladies and gentlemen. Welcome to the Goldcorp Incorporated 2013 Second Quarter Conference Call for Thursday, July 25, 2013. Please be advised that this call is being recorded.

I would now like to turn the meeting over to Mr. Jeff Wilhoit, Vice President, Investor Relations of Goldcorp. Please go ahead, Mr. Wilhoit.

Jeff Wilhoit

Thank you, Dave, and welcome everyone to the Goldcorp second quarter conference call. Among the senior management in the room with me today are Chuck Jeannes, President and Chief Executive Officer; Lindsay Hall, Chief Financial Officer; and George Burns, Chief Operating Officer and Russell Ball , Executive Vice President, Capital Management

For those of you participating on the webcast, we’ve included a number of slides to support this afternoon’s discussion. These slides are available on our website at www.goldcorp.com. As a reminder, we will be discussing forward-looking information that involves unique risks concerning the business, operations, and financial performance and condition of Goldcorp. Forward-looking statements include, but are not limited to, statements with respect to future metal prices, the estimation of mineral reserves and resources, the timing and amount of estimated future production, cost of production, capital expenditures, and cost and timing of the development of new deposits. Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause the actual results to be materially different from those expressed or implied by such forward-looking statements. Accordingly, you should not place undue reliance on forward-looking statements.

With that, I will now turn the call over to Chuck Jeannes.

Charles A. Jeannes – President and Chief Executive Officer

Thanks, Jeff, and that’s everyone for joining us today. We are coming to you from Mexico City where we’ve just concluded our quarterly board meeting, we were also pleased to visit the key stakeholders and government representatives during our time here. In our experience, this week only reinforces what we’ve long believed that Mexico is one of the best mining jurisdictions in the world. We’re fortunate to have some of our most important operations here and we look forward to a continuation of these important relationships for many years to come, I am also pleased to introduce to you the newest member of our executive team and someone many of you know well from his time was a peer company, Russell Ball, our new Executive Vice President of Capital Management.

A big part of Goldcorp’s future is its growth projects and Russell’s primary focus is ensuring that these projects are not only delivered successfully, but also with an appropriate on financial discipline. With a forecast, $2.6 billion capital spend this year, Russell brings valuable skews and a lot of experience that have already begun to pay dividends.

In addition to our financial results, we’ll also review some of the capital spending and expense reduction that we’ve implemented in response to recent volatility in metals prices. It’s important to point out that our underlying business remains very strong. We’re taking these actions to safeguard our financial strength and to sustain our success in any conceivable market environment.

Our operations remained sound and our growth projects continue to progress. So the company remains well positioned for both short and long-term success, and this strong position has allowed us to maintain our dividend without change.

So moving on to the results, gold production increased in the second quarter inline with our expectations driven by the continued production ramp up at Peñasquito and [Alumbrera]. Unfortunately, our second quarter production was weighted towards the end of the quarter and nearly half of the sales came in the month of June, which was of course when we saw the large drop in medal prices. This resulted in our actual realized prices coming in well below the quarterly average for both gold and silver. And due to addition approximately 14,000 gold ounces poured at Red Lake remained in inventory at quarter end together these factors significantly impacted our revenue and lead to a lower than expected earnings result.

Greater-than-production at Peñasquito increased from the first quarter as planned. The cost were above expectations largely due to impacts of our annual labor settlement. We remain comfortable with our guidance at Peñasquito as we expect grades to continue to increase over the second half. We also announced important updates on the Peñasquito water studies, including the confirmation of the new water source that once constructed will remove the key obstacle to resuming the sulphide plant ramp up to design capacity. Detailed engineering surface access and permitting activities are underway towards the expected commencement of construction in the fourth quarter of this year.

In response to the recent decline in metal prices in the resulting valuation decrease for expiration assets, we’ve taken a non-cash charge of $1.96 billion after-tax. This impairment was mainly driven by a reduction in the market value of the expiration potential of Peñasquito.

Lindsay will provide further details on that Penasquito continues to be a world class assets that will be one of key drivers of cash flow for many years to come.

(inaudible) we announced in early May that an agreement in principle have been reached with the government of the Dominican Republic concerning amendments to the special lease agreements. And both sides continue to work their towards a definite agreement.

Our approach to managing the business in very difficult price environment remains consistent. We discussed with back in April actions that we would take in variously Gold price environment. Since that time we’ve seen a significant reduction in metals prices and we therefore implemented reductions in G&A, exploration and capital spending. We reduced our total 2013 capital expenditures by $200 million to $2.6 billion.

I’m pleased to be able to reaffirm our 2013 guidance, of between 2.55 and 2.8 million ounces of gold production with all in sustaining cash cost between the $1000 and $11,100 per ounce. And we were above this number in the second quarter which highlights an interesting point with respect to this new cost metrics. Namely that sustaining capital which is now included tends to be lumpy at the operations from quarter-to-quarter as mines may needed capital investments. With increased production and lower sustaining capital planned for the second half. We remain comfortable with our annual guidance for the all and sustaining cost.

We’ve also reduced our outlook for G&A and exploration spending for the year. The new G&A guidance is $164 million and exploration has been reduced to $200 million.

Looking further ahead, the key elements of our five production profile remain in place. We continue to advance three high-quality growth projects that are positioned to deliver strong returns for our shareholders in a wide range of potential metals price environments. So in summary, our projects continue on track. We had a solid quarter operationally and we expect a better second half.

So with that, I want to turn it right over to George for a review of operations.

George R. Burns – Executive Vice President and Chief Operating Officer

Thanks, Chuck. Gold production in the first quarter totaled 640,000 ounces with solid production across the mine portfolio that keeps us on track for 2013 guidance. Starting with Red Lake, production totaled 122,500 ounces at a total cash cost of $523 per ounce. Production decreased as expected compared to the first quarter as favorable mining sequence in the first quarter provided higher grades in tonnage in the High Grade Zone as compared to the second quarter.

High Grade Zone de-stressing in the 46-47 level is progressing as planned and mining in this areas is included in the mine plan for the fourth quarter with minimal ounces expected. Exploration drilling continued on the NXT zone and results today have been better than expected, zone remains open vertically into the west, and several growths are targeting this zone, both from the 4199 exploration drift and from existing infrastructure at higher levels in the mine. The key to mining successfully at Red Lake has always been maintaining flexibility and the NXT demonstrates good potential to enhance operational flexibility.

At Penasquito, the second quarter gold production totaled 88,100 ounces and by-product cash costs of $920 per ounce. As expected, production increased from the first quarter, as we began mining in a higher grade portion of the pit, which increased our average grade from 0.31 gram per tonne at 0.43 gram per tonne. We expect the grades to continue to increase throughout the year to approximately 0.06 gram per tonne in the fourth quarter. Mill throughput in the quarter averaged approximately 105,000 tonnes per day and due to peak water availability June averaged almost 120,000 tonnes per day. We continue to expect production of between 360,000 ounces to 400,000 ounces for the year.

We are aggressively targeting efficiency improvements and cost reductions at Peñasquito. On the mining side, we have made good progress in increasing efficiencies with respect to blasting, truckloading and (inaudible) productivity. We expect these and other improvements to yield significant reductions in our mining cost overtime. On the processing side, we are targeting further refinements to the primary crusher that are expected to resolve in greater productivity of the circuit. Overall, Peñasquito can operate much better and it will. Our operating for excellence initiatives are taking room and we look forward to seeing the benefits of these changes overtime.

Our exploration drilling on the (inaudible) and below the Peñasquito pits, continues to be positive. Fixed drills have nearly completed the plant wide space, testing stage of the deep copper (inaudible) deposits which remains open in all directions. We are pleased to announce identification of a new water source called the Northern Well Field that is expected to provide sufficient water to reach our permitted water capacity for Peñasquito. The Well Field is located at approximately 60 kilometers from the mine, within the basin of our approved water rights. We are currently engaged in permitting activities and evaluating route alternatives for the pipeline with an expected construction starting internationally the fourth quarter.

The capital cost is estimated to be approximately $150 million with completion expected late in 2014. We’ve also studied options to enhance tailings efficiency, Peñasquito with second tailings being a desired component of the options being evaluated. A follow-up study is now underway that will analyze the redesign of the current tailings facility to accommodate second tailings to reduce overall fresh water requirements of Peñasquito. The study is expected to be completed mid-2014.

Pueblo Viejo continues its ramp up to full capacity. Gold production totaled 81,000 ounces at (inaudible) cash cost of $507 per ounce. The increase in tonnes during the second resulted from the ramp up of the autoclave facility and progress and implementing modifications required to meet design capacity. The new 215 megawatt power is expected to be commissioned on schedule in the third quarter.

Now I’d like to turn the call over Russell Ball for a review of the projects.

Russell Ball

Thanks George, and good morning or good afternoon everyone. It’s really a pleasure and honor to be speaking with you today as part of the Goldcorp team. I look forward to help you deliver the significant growth profile that we ahead of us in which I believe to be the best in the gold business. It’s been a busy two months in my new role. I’ve been very impressed with the culture, the people and the level of energy and excitement within the company. I’m making it a priority to meet with as many of the project site and regional leaders as I can to get their perspectives on the challenges and opportunities we face in addition to visiting the operations and project to get a first hand understanding of the assets. I’m also spending time developing a framework to provide a more rigorous and disciplined capital allocation process whereby projects and mines will be required to compete for capital, not just across the internal portfolio of opportunities, but also against what is available to M&A.

As part of this effort, we are working on enhancing our stage gate process to enable a better understanding of risk adjusted returns, so we can allocate capital more effectively. Obviously, in light of the recent decline in the gold price and the inherent capital intensive nature of this business, the need for increased financial discipline is more important than ever.

Turning to slide 16, I have the pleasure of visiting Cerro Negro in Argentina last week, and I was impressed with the progress the team is making. On the ground, oil production from the Eureka mine commenced at the beginning of the quarter and initial ore development commenced at the Mariana Norte and Mariana Central mines in June.

Ore is being stockpiled on the surface while mine development continued to ramp access, vertical raises, and horizontal stope development. At the end of June, engineering was approximately 93% complete and the overall EPCM stope was 60.6% complete with a current forecast of first gold in December 2013.

As previously discussed, the delay in receiving the permit for the mine electrical transmission lines has the potential to delay commissioning and initial production into 2014. Consistent with our focus on reducing capital expenditures, we have deferred certain non-critical expenditures into 2014 with some spending potentially being deferred into 2015 as we evaluate the plant ramp up and performance in 2014. We’re going to make the light business decisions as we evaluate inherent (inaudible) between capital cost and schedule going forward.

Slide 17 shows a recent picture of the new building in light of the infrastructure. We will be getting a completed shortly and the building closed to the element, which should productivity rates. (inaudible).

Turning to ÉLÉONORE initial gold productions remains on track for last 2014. Although we are reassessing the schedule in light on the forest fires and strike. In this regard and I wanted to recognize the efforts of the team and that remained on side to coordinate the fire fighting efforts and thank the authorities for their assistance in this extinguishing the lots of fire in history.

At quarter end the exploration ramp progress beyond 3,350m. The production shaft reached a depth of 383m and in on track to reach 742m by year end. Exploration this quarter is going through the drilling the Upper mine area and exploration in the Lower mine area. A total of 23,528 meters of diamond drilling was completed from working platforms in the exploration ramp and at the 650m level. Currently, four diamond drills are conducting in-fill and exploration drilling.

Slide 19 includes the recent photos of the new building in light of the infrastructure. The team is building a world class in the new district, that I believe will be stern operation fir GoldCold for decades to come.

At Cochenour the Red Lake district, construction continues on schedule and on budget. At quarter the haulage drift was approximately 76%complete. And the shaft widening has progressed to depth of 716 meters. Two drills continue to drill from the haulage drift to test the potential of the underexplored area above and below the drift. Underground exploration diamond drilling of the Bruce Channel Deposit will commence once the haulage drift closed enough to drill from and drilling platforms are excavated.

In addition to progressing the Cochenour project, the team is working closely with existing Red Lake operations team to integrate Cochenour in to the larger Red Lake operations to ensure we maximize the valley from not only this asset for the existing facilities in the district.

And finally, Camino Rojo in Mexico, we continue to advance the project. Exploration activities focused on inflow drilling and are expecting more than 15 tonnes of core samples from metallurgical of the sulphide portions of the West Extension and Represa zones.

In addition, 20 tonnes of oxide and transitional core samples were extracted from the Represa zone for column and flotation testing. With that I’d like to turn over to Lindsay for his financial review.

Lindsay Hall – Executive Vice President and Chief Financial Officer

Thanks Russel. As you just heard from George and Russell production was up and significant progress was made out of projects this quarter. Before I get in to the plant in details from the balance sheet management perspective, we are tracking to our plants supply for the year as the loss revenue is due to piping this quarter as the last step by the delay and capital spending.

Right now we tend to be at the start of the year so financially we have weathered the decline in gold prices extremely well. As for the quarter, our ability to capture the higher gold and silver prices at the beginning of the quarter was a disappointment. For the quarter, almost half of our gold and silver were sold in June which coincided with the steep decline in prices and resulted in a significant difference between a realized prices and the average stock prices for the quarter.

We estimate revenues after sales in pricing amounted to approximately $0.06 per share. Also affecting our earnings with inventory on hand at Red Lake and PV at the end of the second quarter, which we estimate amounted to some $0.02 per share. Lastly, we had a negative provisional pricing adjustment in the amount $0.02 per share Pueblo Viejo and Alumbrera. So when you add up the average sales price realized, the inventory on hand and the negative.. Ten core drills operated for a total 34,533 metres drilled in 70 holes. Technical studies supporting the request for environmental permits for the exploration activities were submitted to the appropriate regulatory authorities. At June 30, 2013, total project expenditures were $51 million. Capitalized expenditures, excluding capitalized interest, during the inventory on hand and the negative provisional pricing impact that accounted for some $0.10 per share in earnings this quarter. The most significant non-cash item affecting our earnings with $1.96 billion or $2.41 per share, non-cash impairment expense are $1.83 billion related principally to the decline in the market value into (inaudible) exploration potential at the Peñasquito mine, and $131 million related to our investment at (inaudible). The combination of the decline in quantity prices and its impact on our share price relative to the book value were indicated of potential impairments under our accounting standards.

As required under those standards, the company must have (inaudible) impairment at all our mining properties or indicators (inaudible) and complete the assessment as of point in time. The Peñasquito basically half of financial statement carrying value was represented by the value of the mine and it’s associated reserves and resources plus did well. While the other half was in the value of an exploration potential, (inaudible) value.

For the value of the mine, we updated the short-term pricing assumption, the forecast and capital required to develop Northern Well Field and the proposed mix in mining duty. The other part of the test, was for the value of exploration potential using a market approach which examines markets comparable information and characteristic. Based on the assessment performed as of June, 30 2013 the company concluded that the market value for (inaudible) of exploration potential of Peñasquito, declined during the second quarter by approximately 25% to 35% resulting in a reduction in the value of that exploration potential and representing a significant portion of the Peñasquito impairment charge noted above.

IFRS impairment charges must first be allocated to any goodwill and then on a collateral basis to the regulative sharing amounts of the mining properties and exploration potentials. Based on these standards, the pretax charge was first applied against $283 million of goodwill then on a pro rata basis approximately $1.1 billion to the exploration potential, and approximately $1 billion to the mine.

The Peñasquito impairment charge also result in a reversal deferred tax (inaudible) of $600 million. Having dealt with the revenue shortfall and the impairment charges, which are the most significant items this quarter, I will just touch on a couple of other highlights. By-product cash prices were higher at 646 per ounces in Q3 2013 compared to 565 per ounce in the prior quarter, primarily due to lower by-product revenues, mainly resulting from lower level pricing.

On a coal product basis, cash costs were consistent, $713 per ounce in Q2 2013 compared to $710 in the prior quarter, as the impact of the higher product costs was offset by more ounces produced in the second quarter. Net loss for the second quarter amounted to $1.93 billion or $2.38 per share, compared to net earnings of $309 million or $0.38 a share in the prior quarter. Adjusted earnings for the quarter amounted to $117 million or $0.14 per share, compared to $253 million or $0.31 per share in the prior quarter.

To calculate adjusted earnings, we adjusted our reported net loss of $1.3 billion by adding back the impairment chargers of $1.96 billion net of tax and deducting the non-cash derivative gains of $16 million primarily associated with our convertible debt. We then removed the effect of the non-cash foreign exchange losses on the translation of deferred income tax asset and liabilities of $74 million from the book tax provision and foreign exchange losses on capital project of $22 million.

The detailed calculation of our adjusted net earnings disclosed on page 43 of our MD&A. Consists with the pervious quarters we did not make any adjustments for non–cash share compensation expense which amounted to $22 million or $0.03 per share.

The income tax provision included in our calculated adjusted earnings for the second quarter has an applied tax rate of 16%. To calculate the more meaning full effect of tax rate one needs to adjust the book tax recovery of $503 million over the following item. You have to add back the point exchange losses on the differed income tax assets liabilities of $74 million. The income tax expense related to (inaudible) of $15 million and benefit tax recovery of impairment charges of approximately $600 million.

From the loss before tax, we removed the impact of the impairment of charge of 2.6. $ 30 million of net mark–to–market gains from derivatives and $22 million of stock-based compensation for us to prevent different and these items will never be taxable. Resulting an effective tax rate of 29% for the quarter. This rate is comparable to our full year guidance which we continue to expect as our full effective tax rate.

For the third quarter, provisional pricing reflect 350,500 ounces of gold priced at $100,192 per ounce. 2.4 million ounces of sliver priced at 18.86 per ounce. 18.1 million pounds of gold priced at $0.93 per pound. And 31.8 million pounds gold priced at $0.83 per pound. While as Alumbrera will reflect 25.5 million pounds of copper priced at $3.06 per pound.

Although our statement of earnings reflects a loss for the quarter due to various impacts of mineral, lower metal pricers and the impairment charges. The company continues to generate strong cash flows from operations. Adjusted operating cash flows for the second quarter with $388 million were $0.48 per share. We invested $629 million at both our operating mines and projects and paid a $121 million in dividend this quarter. Strong cash flows and well managed capital investments are part of the Goldcorp’s established financial discipline. With over $3.4 billion of liquidity and strong credit ratings, we are very comfortable that we can fund our capital and continue to return capital to our shareholders.

With that I will turn it back to the operator for questions.

Question-and-Answer Session

Operator

Thank you, Mr. Hall. (Operator Instructions) Our first question is from Alec Kodatsky with CIBC. Your line is now open. Please go ahead.

Alec Kodatsky – CIBC World Markets

Great, thanks for taking the call. I just had a couple of questions on the operating side, first, with respect to Peñasquito highlighting that it operated above the 120,000 tonnes per day last month. Is that really a function of increased moving from what the availability or is there some connection to some of the water reductions efforts as well?

Unidentified Company Representative

Actually, a combination of the two as planned we implemented additional wells in our existing field and so there is an increase supply of water. Additionally, we are looking at conservation within the operation earnings slightly higher density in the floatation circuit and improve operating constrains out of the tailings pond themselves and ailing improved recoveries. So it’s a combination of those. The one thing I would highlight the higher water availability that we saw in June was a result of a number of wells coming on stream overall once and so our expectation will continue to see at k and flow rates out of each of the individual wells and we’re still comfortable with 105,000 ton a day expectation for the remainder of the year.

Alec Kodatsky – CIBC World Markets

Okay. And just wondering, maybe if you could get a bit of color around silver recoveries at PV and some of the stuffs being taken there?

Unidentified Company Representative

Sure, it probably (inaudible) silver recoveries are not at design at this point. The metallurgical design of that plan is to have silver recovery solutions at 90 degree C, and there are heat exchanges in the autoclave circuit than in (inaudible) heat transfer into those solutions. We’ve unable to retain those temperatures and we’re looking to a modification that will be implemented in the third quarter and the expectation is that we’ll resolve the temperature problem and get those silver recoveries of the design of 85%.

Alec Kodatsky – CIBC World Markets

Okay. So it’s an equipment shaft in, to view it’s still do the chemistry of the process is effective?

Unidentified Company Representative

Yeah. There’s three things in impacts silver recoveries, one is limestone additional or PH, two is the mineralogy of the silver in the third temperature and the temperatures are only issue and again, we’ve got a design retrofit that will be tested in the third quarter and optimistically we’re going to get it resolved.

Alec Kodatsky – CIBC World Markets

Okay. Thanks very much.

Operator

Thank you. The next question is from Stephen Walker with RBC Capital Markets. Please go ahead.

Stephen Walker – RBC Capital Markets

Thank very much, operator. First question is for Lindsay. Lindsay, I noticed that you’ve got again dividends from associates in the quarter from Alumbrera. What is your expectations or has there any indication on when you can expect dividends coming from Pueblo Viejo.

Unidentified Company Representative

No, we haven’t had a discussion with (inaudible) Pueblo Viejo, I think Steven, talked on behalf of (inaudible) we’ll get the MAU signed first and then we’ll decide what we’ll do with everything, you are about to talk about get more clarification on that.

Stephen Walker – RBC Capital Markets

Okay and just on the Alumbrera amount that are reported the, is that cash is actually repatriated back to head office or is that will that be the dividend that would be sitting in country Argentina.

Unidentified Company Representative

No I thought, for getting out of the country is if your question is given we’re actually flowing dividends out of the country from Alumbrera.

Unidentified Company Representative

Okay, sorry I just is there a reasonable exchange is that at the normal exchange rate that we would see posted I guess on the North American markets. That’s something to be checked I think that the official exchange rate Steven.

Stephen Walker – RBC Capital Markets

Okay great thank you. George maybe just a follow-up question on the NXT zone of Red Lake, when do you expect to be developing and or you’ve got the development in place to do the detailed drilling but can you give us a sense of when you could be developing and or and when do you could be reporting presumably reserves at some point.

George R. Burns – Executive Vice President and Chief Operating Officer

So we’ll be touching the next or body in the second half of this year and in terms of production expectations we expect to have some reserves at the end of the year and some production in our 2014 production plan.

Stephen Walker – RBC Capital Markets

Okay, thank for that much of that and just maybe a question for Russell, Russell in the prior conference call and Gary Goldberg made a comment that he thought for the 12% hurdle rate would be an appropriate level. I’m just curious what you think kind of appropriate hurdle we made for precious metals a gold mining company should be that given the jurisdiction in North America?

Russell Ball

That’s an interesting question. I think obviously, your point depends on the risking and the jurisdiction by jurisdiction. I would think that there are a number of factors whether it’s a single company versus a portfolio where you can diversify some of that risk. My personal belief is that 12 is a little high for gold business, but I’ll ask Lindsay to chip in, he is (inaudible) perspective he got the price trends.

Lindsay Hall – Executive Vice President and Chief Financial Officer

Usually, what we can see is when we start looking at assets competition for capitals usually is about a 15% unlevered in turn and then start looking at the risks around that 15%. But we start they deferred screening our opportunities to invest the capital.

Stephen Walker – RBC Capital Markets

Great. Thank you very much for that and congratulations on lending Russell.

Russell Ball

Thanks Dave, I appreciate it.

Operator

Thank you. The next question is from John Bridges with JP Morgan. Please go ahead.

John Bridges – JPMorgan

Good morning everybody.

Unidentified Company Representative

Hi John.

John Bridges – JPMorgan

My head is still spinning for your presentation, a lot of numbers there. I’m just thinking with respect IFRS is this a new age of upgrades and downgrades in the valuation of assets. Can we expect to see (inaudible) affecting a lot of other Canadian companies as we come through?

Lindsay Hall – Executive Vice President and Chief Financial Officer

Well, John, it’s Lindsay. That maybe neither followed you and me under IFRS that you can turn separate it down, but in the future for the fact that circumstances changing those indicators of testing and in fact the indicators staying the value of the asset goes up, you can actually read it out, which is kind of new under IFRS for us.

John Bridges – JPMorgan

Right, right. So that helps making you a little bit more amenable to tailoring the balance sheet to current valuation?

Unidentified Company Representative

I think so, John. Not it’s like more than, I don’t think so. That’s not the case at all, it’s just applying the standard, I guess what I’d say there hasn’t been a lot of companies asking that have actually written up assets, currently, but if in fact, you had sustained really quite high gold prices and you saw into the future, that would start getting companies under IFRS having to look at the value of our assets, they’ve been impaired before.

John Bridges – JPMorgan

Right, right, interesting. How you’re thinking about contingencies in this current environment with uncertain gold prices? You made some calc that would you go further as the gold prices back or do you think you’ve done enough?

Charles A. Jeannes – President and Chief Executive Officer

John, this is Chuck. If you think back to that slide, we put up this quarter and I put it up last quarter as well, I kind of talked about the range of options that we would look at various price scenarios and what we’ve announced today is simply that we follow that plan and because we’re down below $1,400 gold price environment we’ve looked at cuts of SG&A and exploration and some deferral of non-critical capital spending and I just want to highlight again, that doesn’t impact our near-term production. And so what we do in a lower price environment, as also indicated on that slide, we get down into the $1,200 and below price environment for a period. We have to start looking at whether some of the high cos operations should be sustained at the level as they said last quarter the high cost operations are well aware that guarantee you the day of working very hard to reinvent themselves so that they can look at different configurations and be free cash flow positive at $12,000. So that’s what we would do well would look at it but I would suspect at the same time that George and his team are going to be looking very hard if it have to make those sites profitable in the lower price environment.

John Bridges – JPMorgan

Okay.

Unidentified Company Representative

But the result has remade his spread might be some margin allowances that come out of the planned with a focus more on higher-quality ounces of those assets.

John Bridges – JPMorgan

Al right. I would like to kind of see his comment welcoming Russel and pleased to you find new best gold company.

Unidentified Company Representative

Thanks John. Appreciative.

John Bridges – JPMorgan

Bye.

Operator

Thank you. The next question is from Tony Lesiak with Macquarie. Please go ahead.

Tony Lesiak – Macquarie

Good morning everyone. Question on costs, looking at byproduct costs cash cost guidance for 2013 was unchanged and that’s despite that fact that you used some materially prices assumptions for let say over copper and if you look at the sensitivity table that you provided in the presentation and I mean you did think that your cost structure should up about a $80 a ounce. Where is the offset going to be coming from?

Unidentified Company Representative

(inaudible) Tony into say that you recall we did give you a range right? So we had some room within the range that we guided at the beginning of the year. And then secondly based on our current price environment. We’re comfortable that we’re going to meet that guidance that we provided that we provided certainly if we see a material move down in those by-product metal prices between now and the end of the year that could change things.

Unidentified Company Representative

I’d just add we’ve got a range in both our production and our cash costs and our production is coming in solid and we are feeling some pressure from those silver prices, but we’re still within the guidance.

Tony Lesiak – Macquarie

Okay. So there’s no specific asset or you might have some more flexibility to improve grades or lower costs in the near-term.

Unidentified Company Representative

Well, as planned, we’ve got higher grades at Peñasquito production increases and Peñasquito and Alumbrera, but those were as planned.

Tony Lesiak – Macquarie

And just to make clear, we’re not making any short-term changes to try to meet that numbers as the mine plants continue as said at the beginning of the year?

Unidentified Company Representative

Okay. And maybe, just on Peñasquito, can you talk to your comfort level of let’s say analysts utilizing long-term 130,000 tonne a day throughput rate, starting from 2015 on.

Unidentified Company Representative

Sure. The announcements of our water availability in our project, our confidence of having adequate water for 130,000 tonnes a day is very good and if you look at our announcement today, we did a 120,00 tonnes in June. So that I think we’re very confident that the ramp up is continuing and will continue. Now averaging to 130,000 tonnes a day consistently, we’ve got further pushing of the plants that needed to occur and until it happens, we can expect this further debottlenecking to occur, the only bottleneck we currently have for the production we’ve pushed thus far on the mine has been the primary pressure, and we’ve made some good progress in debottlenecking that, reducing time or the pressure is not fed, reducing the amount of plugging and bridging that happens within the pressure and that’s happened by improved blasting. So I’m comfortable we are going to achieve designed throughput at Peñasquito and the win will depend on getting the water available and pushing the circuit.

Tony Lesiak – Macquarie

Okay. Thanks Rich. And then finally, just on the timing of your results and met test from Camino?

Russell Ball

It’s Russ. Yeah, we are very early on the met per vendors out through the third quarter of next year, so I would (inaudible) toward the end of next year. We are busy recruiting for a study there I think it’s really drive Camino Rojo. We feel it’s a significant opportunity in a very perspective way. We are continuing to fund the project and we are partly optimistic that will be an ex-Goldcorp mine in Mexico, but it is very early to look for results and I’ll update towards the end of next year.

Tony Lesiak – Macquarie

Okay. But you won’t be giving us an update on drilling or expiration there.

Charles A. Jeannes – President and Chief Executive Officer

Tony, this is Chuck. We will give the normal update on drilling it year end and an updated resource for the project and that’s resource that we hand over them to the projects group and in combination with all the network and the other things that are going on we intend to start a feasibility study next year. And I’ll just say that we’re going on a lot of different funds here we are continuing to drill in full speed, doing the metallurgical testing and the percent when you are testing. We are working on lot of supplies which of course is a key issue in that part of Mexico. We are working on land acquisition in the Eagle agreements, so there is a lot of things happening. And this we are hopefully accommodate in the kick off of met studies sometime next year.

Tony Lesiak – Macquarie

Okay. Thanks so much.

Charles A. Jeannes – President and Chief Executive Officer

Thanks.

Operator

Thank you. The next question is from David Haughton with BMO. Please go ahead.

David Haughton – BMO Capital Markets

Yes, hi and thank you everybody for the update. Just following on from [Tony’s] question about the ramp up to 130,000 tons there. George, I heard what you were saying. Is that reasonable to expect that you could be at that point of run rate, maybe 2016 sort of time, if you do get the pipeline in, by middle of next year.

George R. Burns – Executive Vice President and Chief Operating Officer

That’s not an unreasonable expectation, I mean we are and as I said we hit the 120,000 tons in June. So my comfort level is improved relative to a quarter ago and we are focused on other things we can do with the primary crusher to be able to sustain the 130, so I would expect we can beat that thing but I just caution everybody that let us hit the water, let us continue to ramp up and I’m optimistic we’ll be there.

David Haughton – BMO Capital Markets

All right and with that in mind and I know that you are looking at the additional studies to see what you can do for potentially sickening or straw stacking portion of the (inaudible), is that just as a safety backup or do you see that is required for longer-term sustainability at that higher rate.

George R. Burns – Executive Vice President and Chief Operating Officer

So I mean we are only looking at (inaudible) now. We eliminated through test work, the idea of filter tailings. So we are focused entirely from a reduction of water consumption to the thickener option and really it fits in over, with an overall strategy, costs what’s our lowest cost option and then knowing that we’ve got the potential to increase our production logistic with Camino Rojo and water is going to be a key asset so any reduced water requirements of Peñasquito enables us to have additional water for the Camino Rojo project. So the second, it looks to make really good sense economically, it makes sense from protecting the water resource and our expansion plans in the district.

David Haughton – BMO Capital Markets

So is this Northern Well Field also or likely source for Camino?

Unidentified Company Representative

Well, we’re going 60 kilometers to the north to tie into this Northern Well Field. Camino Rojo is referred the same distance to the south.

David Haughton – BMO Capital Markets

Okay.

Unidentified Company Representative

So we can tie infrastructure and that’s what the feasibility study indicates it’s the best option, but obviously we’re looking for water closer to Camino Rojo, it’s the best option.

David Haughton – BMO Capital Markets

Just switching to another part of America, thinking about Cerro Negro, what you’re saying about a little bit explore on the connection with the power and possibly looking at a little bit of slippage on to deliver day maybe, what should we be thinking about for the capital spend remaining for this year and into next year, if we’re thinking about mining money around of it.

Unidentified Company Representative

Maybe, let me just say it first David, and I’ll pass it to Russell then. I guess I’d remind you that nothing is changed from the last quarter. We told you then that the late delivery of that pyramid was putting our first goal in late 2013 at risk, although that’s still what we’re shooting for, and then secondly to the extent that we do defer some capital from 2013 into 2014, which is what we announced today, obviously the amount to be spent in 2014 will go up from what we would have planned previously and maybe, Russell, turn it over to you for the details.

Russell Ball

Yeah, David. It’s for spend, we spent just on the $300 million for the first six months and we expecting putting about 750 for the year or so an additional 450 in the second half.

David Haughton – BMO Capital Markets

In next year what sort of number you look at there an 350, 400 on a number?

Unidentified Company Representative

Let me get back to David. We’re actually going through an evaluation as (inaudible) mentioned on differing non–critical and we’re looking at putting some of the fine grinding capital potential into 15, so we’re going through the analysis right now. we’ll be able to give at least a better indication on the third quarter call and then once finalize the budget in early December.

David Haughton – BMO Capital Markets

Al right. Question now to ÉLÉONORE I guess on a similar time here. You’ve got development of the Upper mine underway and that’s going to get 3.5 tones a day ultimately doubling with Lower mine. 2017 is your kind of time. With the conservation of capital and sliding through time, can you see a scenario where that Lower mine could be pushed out in time if needed?

Unidentified Company Representative

Well just to be clear that is not the scenario of today. All we’ve done right now is push some noncritical path surface infrastructure into 2015 given that we’re in a low revenue environment and this conserving capital we’ve not done anything to impact the long–term the plan and frankly we don’t intend to in this environment we’re quiet comfortable with our liquidity and with the plan at ÉLÉONORE. Again if things change, if the gold price dropped and stayed and there for a while those would be the kinds of things you would have to things about deferring those development as a lower mine would be one of things are on the list.

Unidentified Company Representative

And David to give you an indication of capital, we’re about $284 million for the first six months and we expect to be around 650 for the full year.

David Haughton – BMO Capital Markets

Okay. Got you. All right, thank you very much for that.

Unidentified Company Representative

Thanks David.

Operator

Thank you. The next question is from Greg Barnes with TD Securities. Your line is now open. Please go ahead.

Greg Barnes – TD Newcrest Securities

Thank you, operator. Question back to Peñasquito. In the financial one of the financial statements you talked about the one of impairment test on the assets of various cost return and you used a 50 per ton of gold mine. It seemed relatively high versus the current run rate and I would expect that to come down if you are increasing the throughput to 130,000 tonnes. Is the 850,000 just a conservative number is that your expectation going forward?

George R. Burns – Executive Vice President and Chief Operating Officer

Yes, George. That is a conservative number our current costs are better than that and our expectation continues to improvement processes is to get better.

Greg Barnes – TD Newcrest Securities

Okay so more like 750 would be an appropriate number or 700 tonne?

George R. Burns – Executive Vice President and Chief Operating Officer

Yeah, Greg also and again this is George, for the impairment testing that the 750 up give or take we added some – we believe downline that in fact will be adding some (inaudible) cost for in order to get deeper in the ore body perhaps some copper. So that is the cost and because remember when we look at impairment test we are looking at the whole weight of the mine and when we put in the average cost and say those are the parameters we use for valuing the net present value of the mine line and we are looking over a long period of time for the impairment test so it might start out it will start out of the much lower rate in 853 and then build up as we start to know some of those additional impact. Copper is the bottom around the ore body, okay, that we use for impairment analysis. But it’s certainly much higher than current run rate we anticipate for the next period of time.

Unidentified Company Representative

Our current cost are in that 725, 775 per tonne range, and again, we’re looking at opportunities to bring that number down.

Greg Barnes – TD Newcrest Securities

Right, okay, good. Secondly, on PV, I’m just wondering on the status of the autoclave, I believe one of them was going to come up in the second half of 2013, I’m just wondering where we are in the run rates on each of the autoclaves at this point?

George R. Burns – Executive Vice President and Chief Operating Officer

So yeah, we’ve got three or the four autoclave retrofits completed before nearly complete, and all those retrofit designs are operating as planned. We have had issues with delivery of the modified (inaudible) in the autoclave circuit and that’s caused some issues on the ramp up in the second quarter. But essentially, we’re on track with the retrofits and again, comfortable with the guidance we’ve put out for (inaudible) and expecting to get the full production in the second half for design.

Greg Barnes – TD Newcrest Securities

Okay, good. Thanks, George.

Operator

Thank you. The next question is from Farooq Hamed with Barclays. Please go ahead.

Farooq Hamed – Barclays Capital Canada, Inc.

Thanks for taking my question. My question is related to Peñasquito. So in your MD&A, when you talked about the impairment charge you took, you say that is the result of the institute exploration ounces, but you also mentioned that’s in combination with changes of the life of mine plant. So can you give us some details on what you meant there by changes to the life of mine plant?

Unidentified Company Representative

Yeah, all we did Farooq, it’s clumsy, all we did for changes of the life of mien plant is that as we announced, we’ve put in the northern (inaudible) capital George talked about, but attaching that, and there is a proposed mining tax in Mexico that we took a position on that and took that into the life of mine plant, although those are the two primary changes to what I call the operating mine.

Farooq Hamed – Barclays Capital Canada, Inc.

Okay so there wasn’t any let’s call them uneconomic ounces that were removed from the current mine plant.

Unidentified Company Representative

None of that, so we also did use a short-term lower short-term price stack on that Life of Mine plan.

Farooq Hamed – Barclays Capital Canada, Inc.

Okay and then maybe just switching gears a little bit, talking about the [thickener] solution there, so that’s expected to be the study for the [thickener] solutions expected to be done by mid-2014, given that if it’s viable it can reduce your water requirements by nearly 40% power potentially up to 40%, if it’s viable how quickly could you implement that solution after the study is done.

Unidentified Company Representative

So the current tailings down that we’re depositing in, that was part of the initial construction. It’s got 4.5 years of life left and then employees they use of cyclones for separating sands and finds, and I think they won’t work in that configuration, so the studies are to look at a [thickener] in the new tailings down that would be implemented in four to five years. And again we are confident, we know that the cost of the [thickener] we’re confident about the water that will save and confident that it’s going to be an important part of the next phase of the tailings designed at Peñasquito but it’s implementation is four, five years out.

Farooq Hamed – Barclays Capital Canada, Inc.

Okay that’s helpful thank you. And then maybe one last question, just about related to the slide on managing volatile gold prices, so you know you have a point there that the gold prices (inaudible) you would look at reconfiguring and shutting down the higher cost mines, one question there would be how long would the gold price have to be sustained under that level before you started making those decisions.

Unidentified Company Representative

Yeah there is no defined timeframe it really depends on a wide variety of factors that we would take into consideration to give us the best estimate of the future price rate. It’s not just how long it stayed there what the macroeconomic environment is in the world that gives us our best ability to ultimate future might. So I can’t say that it’s a quarter or two quarters. And it also depends largely on the mines themselves. If they’re able to make adjustments so that they are not bleeding free cash and we certainly have more time to be able to work through the process.

Unidentified Company Representative

I might just add, from particularly opened pits and lower metal prices we run pit designs at that lower metal price and come up with the modified ultimate pit and modified mine sequence and so at any one of the operations if we’re pressured on the lower metal price we’re looking at our opportunities to optimize mine plans and that will improve cash flow so those are levers we would fall. The underground’s are similar that you were lower great stokes that requires development and when you look at only cost of mining nuances some of them will drop off at lower prices and obviously because they are lower grade they’re going to have small impact on our production profile but will help in operation the more cash flow positive and lower metal price. So there is number of levers that we can pull in again our teams are focused on looking at those alternatives as we speak.

Farooq Hamed – Barclays Capital Canada, Inc.

Okay, great thank you.

Operator

Thank you. The next question is from Patrick Chidley with HSBC. Your line now open sir please go ahead.

Patrick Chidley – HSBC Securities

Thanks. Hi, everybody

Unidentified Company Representative

Hi.

Patrick Chidley – HSBC Securities

Just a couple of new legal questions to maybe Chuck (inaudible). First, down in Santa Cruz, maybe you can just [brush up] a bit more detail about this proposed or actually now and acted 1% tax and whether or not you feel this is possibility being grandfather on the previous system or if everybody has to pay this and if not what are the ways in which you think you can find this?

Unidentified Company Representative

Patrick, I certainly, we believe and I think I can fairly speak for the other operators and the developers and in Santa Cruz that this is not a fact that’s supportable under the law of Argentina and still we will be approaching or considering our options in terms of a legal challenge to that tax. Now it has been acted but in a very broad base firm and there is a lot of work that needs to be done to actually implement it and during now and then this one will be considering those legal options.

Patrick Chidley – HSBC Securities

Okay.

Unidentified Company Representative

I should say that there is a connection between the fact of we’ve shutdown expiration at (inaudible) I mean, there is several factors involved and certainly we are looking to defer in our necessary spending throughout the organization and we have many, many years that 9 years of solid reserve life already laid down in front of us (inaudible). But we are going to be taxed on the value of our reserves it doesn’t really make a lot of sense to add years to that reserve profile going forward.

Patrick Chidley – HSBC Securities

Right, right. And as I understand, they’re proposing to charge 1% of the revenue potential, institute value of your reserves each year. is that right?

Unidentified Company Representative

That’s the reported system, yes.

Patrick Chidley – HSBC Securities

Okay. And then just a small one here, that wasn’t a legal challenge or an issue at one of the (inaudible) at Peñasquito, I think the last quarter, I just wanted to know more than outcome of that was reduced come to an agreement and solved the problem or if it’s still an issue?

Unidentified Company Representative

It’s still outstanding, I can say that we’ve got a lot of folks working on it from a lot of different directions and I feel confident that we’ll get to a situation where we can negotiate a fair settlement with the Ejido and that’s what we’re working towards, but there is legal matters pending and a lot of work going on, on that right now.

Patrick Chidley – HSBC Securities

Okay. Thanks, Chuck.

Operator

Thank you. The next question is from Brian Yu with Citigroup. Please go ahead.

Brian Yu – Citigroup

Hi, thanks, good morning. My first question is on Peñasquito, I’m not sure if you got the shared what the July mill head grade is looking like and then also with the expected decay and (inaudible) if you guys had an expectation what that’s going to look like and when it will stabilize?

Unidentified Company Representative

I can just give you a broad description and we’ve got additional wells planned, and our expectation for the second half is to have adequate water to average of 105,000 tonnes a day, so there is going to be a movement from month-to-month depending on when wells come on stream and that decreased in water coming out of existing well field and in terms of trying to predict month-by-month for that, I’m not going to do that, I’ll just tell you where I’m confident we are going to average around 105,000 tonnes a day in the second half and expect it will be a bit lumpy month-to-month and its all about the water that’s available and growth to come on stream in this decay inflow rates.

Unidentified Company Representative

And just to clarify Brian that is very well within in our guidance for gold production that we’ve given you for the year. So we are comfortable in reaffirming that guidance.

Brian Yu – Citigroup

Okay. And how is July [working]?

Unidentified Company Representative

July. July is on track with that.

Brian Yu – Citigroup

Okay. And then there is small question to what’s that the 20% write down in the Peñasquito carry by you should (inaudible) a proportionate drop in the DD&A going forward?

Unidentified Company Representative

There will be a drop in the DD&A going forward, but not 20% drop. I am actually I have to get back to you Brian but as you know most of the impairment went against expiration potential this doesn’t affect appreciation on an allocation basically we have to allocate some to the plans. But they don’t have immediate in fact this year, but in the future it might it will.

Brian Yu – Citigroup

Okay. Guys, and just switching gears a little bit on Cerro Negro I thought I heard Russell that you sent for all this for some grinding. Could you elaborate on other piece of it that are being deferred and if that has any impact on looks like ramp the production or cost?

Unidentified Company Representative

Yeah Brian, just to look at it, it was the (inaudible) is we know areas 200. We have the equipment, but we are looking at running without that there just to see the ramp up and consuming some capital and then we’ll install it if and when we needed. As far as the other reductions, things like admin, warehouse, a maintenance shop somewhere in order to study the $50 million we are still working through that analysis with the team, but it’s what I consider non-discretionary and converting initial construction facilities into more permanent facilities and saving capital that way too.

Brian Yu – Citigroup

Got it, lastly I got is with the sales and how we are halfway, nearly halfway in the month of June, is that normal or is there something else that occurred in the quarter.

Unidentified Company Representative

That’s actually pretty normal as you might expect, we kind of clean-up the circuits beyond each quarter and then get a slow start to the year and as the growth company and with our production growing through the year and it also grows the quarter, so that tends to put most of the production later in the quarter and just to anticipate a question, we do not do any kind of speculating or holding back or into the quarter hedging or anything like that, we sell the gold as it comes out.

Brian Yu – Citigroup

Okay thank you.

Operator

Thank you. The next question comes from Anita Soni with Credit Suisse Please go ahead.

Anita Soni – Credit Suisse

Hi Good morning guys. My question is just in regards to the NPI that’s being implemented at PD, how do you anticipate treating that with a conventional platform, will it commence (inaudible).

Unidentified Company Representative

You were very hard to hear Anita.

Anita Soni – Credit Suisse

I’m sorry about that. So on the PD NPI once that comes in affect, when you finalize that, will that be – how do you intend on treating that, would that come into (inaudible) cost or included from that.

Unidentified Company Representative

I think I won’t – I will say my opinion that my good friend of mine, will actually determine that – I don’t think it will be an (inaudible) sustaining cost. The net profits, interest taxes kind of a form of royalty to me but you get a average.

Anita Soni – Credit Suisse

It’s quite helpful for today, right I was just curious.

Unidentified Company Representative

That’s all right, I can debate with them more.

Anita Soni – Credit Suisse

Okay, guys you could follow-on and then just in terms of Cerro Negro, would it be safe to assume that you might be more inclined to take write-down if you have been required to, given the new taxation resume is Santa Cruz?

Unidentified Company Representative

We’ll actually need it when we, as you know we got to look at all our properties and we actually even though obviously as you’ve heard from Chuck, we were disputing that lead for account through that tax in, and even then we had lost the head room at Cerro Negro. The Cerro Negro impairment really revolves around our assumption that there will be a devaluation in the pit, but that ore body is so large and high grade even when we threw the tax in for modelling assumption and it was just from modelling assumptions, still I’ve had a lot to have them.

Anita Soni – Credit Suisse

And two last questions, the first question was with regard to those production costs and the leverage that you provide, production costs are essentially just the operating cost right before these sustaining costs in your, so when you say something has to increase by 66%, we’re talking about the operating costs having to increase by 56%?

Unidentified Company Representative

Maybe, I’m confused, I mean just to say your question a bit. I mean (inaudible) impairment or just the actual offer to costs.

Anita Soni – Credit Suisse

The impairments so the disclosure that it providers, I think it’s on page five of the MD&A.

Unidentified Company Representative

Yeah.

Anita Soni – Credit Suisse

And like as an example, Red Lake staying 52% increase.

Unidentified Company Representative

Yes, yeah. Sorry I’ll shut up for a second, I’ll let you ask your question.

Anita Soni – Credit Suisse

Sorry, and so then when you’re saying the production costs, you’re talking about the production costs there is not all sustaining costs?

Unidentified Company Representative

Absolutely, correct you, it’s just a plant to give you a hand on margin.

Anita Soni – Credit Suisse

Yeah. And the last question, because Tony, I’m sorry, said that something about the guidance now, sort of reflecting higher cost assumptions, I guess with my understanding these are two separate issues that’s impairment charged up necessarily mean that you are using a lower gold price assumption for your byproduct credit guidance for this year. Is that the case or?

Unidentified Company Representative

We’re tell you that we believe our byproduct cost and our all end sustaining cost will meet the guidance that provided you at the beginning of the year. And obviously there is risk in that if the byproduct metal prices go down very far. But where we are today we’re still comfortable with that guidance. If the byproduct prices dropped meaningfully below were we are today that would be a risk.

Anita Soni – Credit Suisse

Al right, thank you very much.

(Inaudible)

Operator

Thank you. The next question is from Jorge Beristain withDeutsche Ban. Please go ahead.

Jorge Beristain – Deutsche Bank

Good morning guys. I guess my question is maybe for Lindsay, could you specifically tell us what is the assumed Mexican resource tax that you’ve baked in?

Unidentified Company Representative

Just a 5% tax on EBITDA , I’m sorry.

Jorge Beristain – Deutsche Bank

5% EBITDA tax?

Unidentified Company Representative

Yeah.

Jorge Beristain – Deutsche Bank

Got it and.

Unidentified Company Representative

Sorry I just want to interrupt. That hasn’t been determined for impairment testing this is number that was included in a law that was passed in one hose of the Congress whether that exactly is what gets passed or when it gets passed we don’t know but for impairment testing being conservative that’s what they put in. They wouldn’t want to assume from that. We believe that 5% EBITDA is necessarily eminent/

Jorge Beristain – Deutsche Bank

Got it. And Lindsay, maybe I could just prove a little more deeply on this writedown can you just clarify, what was specifically the catalyst event? I know you that talk about lower commodity prices, that was playing in simply that, because typically these write-downs have been handled at the fourth quarter under IFRS as we’ve seen. So just wanted to understand if there was anything more to it, if there was really the combination of the tax issue in Mexico and some other things. And then secondly, would there be anything that could lead to potential write-downs like these other mines based on the stress dosing that you’ve already done or we’ve done with these kind of write-downs?

Unidentified Company Representative

Well, first question is that we had the indicators we saw in the quarter was the commodity price decline, plus we saw that the market cap of the company had drooped a little bit our book value, so that gave us positive to as the indicators that we had the test for impairments. So those are primarily two things, if I drove to something that would add color to that, certainly what happened to June 30 is the price of the institute value of exploration properties, certainly we’re much far below 25% to 35% below what we had this exploration potential on the balance sheet, so actually that’s why we’ve stepped in indicators of the impairment, took the impairment test, ran it and took the charge under IFRS, there’s nothing in the rooms or as we go forward, we wait to the fourth quarter to take charges as when you have indicators of impairment and they have to test. Then your second question, we’ve tested all our assets and we’ve given lots of disclosures the headroom’s of the other operations that we’ve tested for impairments, so it’s in the MD&A, both as a (inaudible) just the previous question, we gave you some ideas on the cost structure of the various entities, that to really favor to the market where our headroom is with our other properties and capital projects.

Jorge Beristain – Deutsche Bank

Got it, thanks very much.

Operator

Thank you. There are no further questions registered at this time. Mr. Jeannes, you may proceed sir.

Charles A. Jeannes – President and Chief Executive Officer

Okay, thank you very much, and thanks everyone for joining us today. I got to say I’ve been quite gratified by the support and confidence of many of our shareholders during what’s been a pretty tough period in the gold market given this price volatility. And I think we continue to believe in our consistent long-term strategy. We have seen a partial rebound in the price of gold and other metals here recently and I believe that the factors that are supported gold strong performance over the last decade will continue to feel a healthy market for our product. I think, I said this last quarter but I want to say it again, it has been said that you should never let a serious crisis go to waste and I think this is important because, while this downturn has been painful, the changes that we are making in response to that I think we’ll resolve in Goldcorp being an even stronger company going forward that is very well positioned for long-term success. So we look forward to taking on these challenges that we face and turn them in to opportunities and certainly look forward to updating all of you in the third quarter on our progress. Thanks very much.

Operator

Thank you. The conference call has now ended. Please disconnect your lines at this time. Thank you for your participation.