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Euphoria? What euphoria?

The soaring price of gold has failed to ignite expansion frenzy at Canada's largest gold miners. Instead, the latest round of earnings reports show an industry intent on reducing debt and rebuilding confidence.

Goldcorp Inc., which came up far short of analysts' expectations , told a conference call on Thursday that it was installing a rigorous new accounting system, cutting staff at head and regional offices by a third and selling mines as it seeks to reassure investors that it is on the right track.

Barrick Gold Corp. announced plans to sell its half stake in the Kalgoorlie mine in western Australia as it continues to make progress toward meeting its target of reducing debt by at least $2-billion (U.S.) this year.

Even the star of the quarter, Agnico Eagle Mines Ltd., is paying down debt, despite blowing past earnings forecasts and bumping up its dividend.

The new conservatism is good news for investors.

During the big run-up in gold prices from 2003 to 2011, most gold miners failed to generate lasting gains for shareholders. Many overspent on acquisitions and have suffered massive writedowns since the boom ended.

Now, as prices head upward again, the emphasis is on delivering returns rather than on expanding production.

On Thursday, Goldcorp said it would seek buyers for Los Filos in Mexico, Marlin in Guatemala and Alumbrera in Argentina as part of a strategy to focus on opportunities with greater potential.

"It takes as much management effort to manage a small mine as it does a big mine," Goldcorp chief executive officer David Garofalo said. "And none of those assets can really move the needle as being a significant component of our overall net asset value."

Mr. Garofalo, who took over the top job in February, has has replaced many senior managers and cut 130 jobs at corporate and regional offices.

Goldcorp's production fell by a third during the second quarter because of factors ranging from a maintenance shutdown at its Penasquito mine to lower ore grades at several locations. The company lost $78-million in the quarter, surprising analysts who had expected a profit.

The miner says it is still on track for full-year production of 2.8 million to 3.1 million ounces, but it is taking steps to improve its internal systems to avoid future shocks, including a zero-based budgeting system.

Like Goldcorp, Barrick has gone back to fundamentals. Over the past couple of years, it has sold several mines, slashed debt and reduced administrative overhead.

It is not letting up on its austerity drive. Among other things, it wants to boost free cash flow, continue to reduce debt and maintain a minimum 15-per-cent return on invested capital.

Barrick president Kelvin Dushnisky said the miner has no immediate plans to boost payouts to shareholders despite the large amounts of free cash flow it is generating. "We will return to being a robust dividend payer in due course, but our investors have been very supportive of the idea that we should continue driving down our debt."

Managing debt has been a priority at Agnico Eagle, which earned $19.1-million in the second quarter, nearly double analysts' expectations, and paid down $181-million in debt.

"We haven't been a victim of these massive writedowns over the past two to three years because our acquisition strategy has always been very measured," CEO Sean Boyd said. "It's about making small, incremental investments in early-stage opportunities."

In addition to a strong pipeline of projects, Agnico Eagle announced on Wednesday that it would boost its quarterly dividend to 10 cents a share from 8 cents previously.

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 18/03/24 2:44pm EDT.

SymbolName% changeLast
ABX-T
Barrick Gold Corp
-0.89%21.17
AEM-N
Agnico-Eagle Mines Ltd
-1.14%55.3
AEM-T
Agnico Eagle Mines Ltd
-1.24%74.84
G-N
Genpact Ltd
+0.42%33.26
G-T
Augusta Gold Corp
-1.12%0.88

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