More Peñasquito problems for Goldcorp

Peñasquito mine in Mexico. Image: Goldcorp via Flickr.

Goldcorp (NYSE:GG TSX:G) shares got slammed on Wednesday after a drop in the gold price sparked a broad sell-off  in gold mining stocks and reports surfaced of possible environmental problems at its flagship Peñasquito mine in Mexico.

Shares were down 9.3% in New York by the end of trading with Goldcorp’s market worth falling to $13.5 billion, the lowest since April.

Reuters reports Mexican authorities have launched an investigation over whether the company broke any environmental regulators concerning contamination of groundwater at Peñasquito, the country’s largest gold mine:

“The Canadian company reported a rise in selenium levels in groundwater to the Mexican government in October 2014, after which the contamination near its mine waste facility intensified, according to internal company documents seen by Reuters, and interviews with government officials. Two weeks ago, the company told Mexican regulators that contaminated water had also been found in other areas of its property.

“There is no evidence that the leaks at the mine have endangered public health or caused environmental damage, Goldcorp and regulators say.

“Goldcorp said it has not informed villagers living near the mine because its tests showed the leak had not affected groundwater beyond its property line or contaminated the local drinking water.”

“This issue is one that we have taken seriously and we are taking the necessary measures to resolve,” Michael Harvey, the miner’s Latin America director for corporate affairs and security, told Reuters.

Vancouver-based Goldcorp posted a loss for its second quarter was blamed on a plunge in production of nearly a third to 613,400 ounces from 908,000 in the year-ago period. Lower output was mainly the result of a 10-day mill shut down at Peñasquito, located in the northern Zacatecas province. The company has approved a $420 million expansion at Peñasquito.

Lower ore grades and a corporate restructuring that included a workforce reduction also contributed to the slump the company said at the release of its financial results. The company, the world’s number four gold miner in terms of output, produced 1.4 million in the first half of 2016. The company maintained its 2016 guidance for gold production of between 2.8 and 3.1 million ounces, at an all in cost of between $850 and $925 per ounce.