TORONTO (miningweekly.com) - In just a few weeks, Canada's second-biggest gold producer Goldcorp will reach commercial production at its new flagship mine in Mexico, Penasquito.

The big mine actually had its first gold pour in 2008, with the first zinc and lead concentrates produced about nine months ago, but Vancouver-based Goldcorp has waited until the second 50 000-t/d mill and flotation line is up and running to declare commercial production.

Mechanical completion will follow in the fourth quarter, after a high-pressure grinding roll is added, and the operation will then ramp up to its full 130 000 t/d capacity early in 2011.

The mine will be Mexico's biggest, seizing the crown from another Goldcorp operation, Los Filos, and is central to CEO Chuck Jeannes' plan to boost production by 50% from 2009, to 3,8-million ounces a year of gold by 2014.

The company has completed the big project within its own schedule set almost three years ago, and only just above budget, Jeannes said on Thursday.

The firm said in November 2007, that the mine would cost $1,5-billion, and the final figure is expected to be about 10% higher.

"I say it often, but the path toward commercial production has been extraordinarily smooth for a project of this magnitude," Jeannes said on a conference call.

Penasquito is expected to produce about 500 000 oz/y of gold, 28-million ounces a year of silver, 450-million pounds a year of zinc and 200-million pounds a year of lead, over a 22-year mine life.

However, the company also plans to develop a "satellite network" of smaller mines to feed into the larger operation, including  the Camino Rojo project that Goldcorp acquired earlier this year by taking over junior Canplats, as well as its own Noche Buena discovery.

The next big contributor to the group's production will be the start-up of Pueblo Viejo, in the Dominican Republic, in the fourth quarter of next year.

Goldcorp owns 40% of the mine, while Barrick Gold holds the other 60% and is the operator.

But Jeannes also noted that the 3,8-million by 2014 target does not include any output from the company's Eleanore project, in Canada, or from the El Morro operation, in Chile.

Both mines could start production in 2015, and Goldcorp plans to make a construction go-ahead decision on Eleanore by the end of 2010, COO Steve Reid confirmed.

The mine will likely cost some $800-million, he said.

Other projects include the Cochenour expansion at Goldcorp's Red Lake camp, where it is developing a five-kilometer high-speed haulage drift on the 5400 level that will connect the Cochenour shaft with Goldcorp's Red Lake mine.

Goldcorp is confident it can fund the development of existing mines and the construction of new mines, including Eleanore and El Morro, internally, CFO Lindsay Hall said.

DIVIDENDS

This week, the two biggest gold producers by output, Barrick Gold and Newmont Mining, announced increases in their dividend payments, as high gold prices boost margins and cash flow.

Jeannes repeated statements made earlier this year that the company may look at an increased dividend once it starts generating free cash, either later this year or early next year.

"We are looking at a situation now with Penasquito ramping up, we see ourselves entering into a time when we are generating free cash flow," he said.

"And that I think is when one would consider a change in the dividend policy. To us, it just doesn't make sense from a capital allocation standpoint to increase the dividend if one is not yet generating free cash.

"Effectively, you are just borrowing money to distribute it to shareholders."

Shares in Goldcorp, which has mines in Canada, Argentina, the US, Mexico, Honduras and Guatemala, slid 0,64%, to C$40,19 apiece by 16:10 in Toronto.