Goldcorp swimming in it.

• Author: Ross, Ian
• Position: NEWS

Goldcorp Inc. billing itself as the world's only gold producer to strategically withhold production on the belief that the price of gold is going higher over the next six years.

The company withheld 31 per cent of gold production during its third quarter--27,132 ounces--and plans to do the same for the next fiscal period. They believe prices will continue to rise and generate higher earnings than if all the gold had been sold when produced.

Things are going so well for the Toronto-based miner, its outgoing president says the company is so awash in cash it could stop production for the short term and still thrive.

"With our cash reserves, we could stop selling gold and run more than two years, covering all our operating expenses and capital expenditures and all our dividends," says Rob McEwen, who admitted he has broached the idea with the company's board of directors.

"I definitely like the idea."

The company has no debt, a $420-million treasury and pays a dividend 12 times a year.

Goldcorp Inc. grew dramatically in the 1990s after discovering new deposits at its Red Lake mine in northwestern Ontario. Its high-grade deposits have made Red Lake one of the hottest exploration areas in the world. The company is sinking a new Red Lake shaft, which had reached a depth of 1,900 feet by mid-October 2004.

McEwen, who announced his resignation as CEO in September 2004, after 18 years as Goldcorp's head, remains bullish on gold for the long term.

"I think we're in the middle of a long-term economic cycle that in the last 108 years has delivered two periods where gold produced superior returns and we've entered the third period in the summer of 1999 with another six years to go."

He believes gold will eventually test US$850 per ounce by the time the current cycle is over.

With the U.S. economy awash in debt...