Goldcorp, the world's biggest gold miner by market value, said it had increased its capital cost estimate on Cerro Negro to between $1.6 billion and $1.8 billion from $1.35 billion before. In 2011, Goldcorp estimated the cost at $749 million.

Cerro Negro has faced several challenges, including a permitting delay that held up construction of a key power line, rapid inflation in Argentina, the country's high taxes, and some productivity problems.

Goldcorp also said it has suspended further exploration at Cerro Negro, and has deferred some development there. First production will be delayed by at least three months, to midyear 2014.

Even so Goldcorp's stock was up 4.7 percent on the Toronto Stock Exchange at C$27.80 after the gold miner reported better-than-expected third quarter earnings. Other gold mining stocks were also firmer, boosted by a stronger gold price.

"We continue to believe that despite the challenges being faced in Argentina, Goldcorp remains the best senior gold producer, in terms of quality of asset base, production growth, and a solid balance sheet," Scotia Capital Tanya Jakusconek said in a note to clients.

Goldcorp now expects to produce between 130,000 ounces and 180,000 ounces of gold from Cerro Negro in 2014, down from a previous forecast of about 400,000 ounces.

Soaring costs and a steep drop in the price of gold have prompted miners of the metal to slow down or cancel new projects around the world.

Along with the Cochenour project in Ontario and Eleonore in Quebec, Cerro Negro is one of Goldcorp's most important new developments for boosting gold output over the next five years.

Goldcorp will "continue to engage at the provincial and federal levels in Argentina to see constructive solutions to the challenges before us at Cerro Negro", Chuck Jeannes, Goldcorp's chief executive said on a conference call.

MEXICAN TAX

A proposed 7.5 percent royalty on mining companies' pre-tax earnings in Mexico will likely drive Goldcorp's investments elsewhere if the company cannot get the returns it wants, Jeannes said.

The royalty proposal is part of President Enrique Pena Nieto's plan to bolster Mexico's feeble tax haul, a reform which focuses on reaping more income tax from higher earners, closing corporate loopholes and widening the tax base.

Jeannes said the royalty would take Mexico "from being one of our more competitive jurisdictions from a tax standpoint to being one of our highest tax jurisdictions." He said Goldcorp was in talks with government officials on the proposal.

NUMBERS

Earlier, Goldcorp said its net earnings for the third quarter fell to $5 million, or 1 cent a share, from $498 million, or 61 cents a share, a year earlier on the back of weaker gold prices.

Excluding some one-off and unusual items, profit declined to $190 million, or 23 cents a share, from $441 million, or 54 cents a share, in the year-before quarter. Revenue fell to $929 million from $1.28 billion.

Analysts, on average, had expected earnings of 20 cents a share on revenue of $1.11 billion, according to Thomson Reuters I/B/E/S.

Gold prices have fallen sharply since the beginning of the year, nearing a three-year low at about $1,180 an ounce in late June. Gold was at about $1,347 on Thursday, down 20 percent this year.

Goldcorp's average realized gold price for the quarter was $1,339 per ounce, down from $1,685 an ounce a year earlier.

All-in sustaining costs rose to $992 per ounce from $801 an ounce. Gold sales rose 5.5 percent to 652,100 ounces.

For 2013, Goldcorp narrowed its gold production output forecast to between 2.6 million and 2.7 million ounces at an all-in sustaining cost of between $1,050 and $1,100 per ounce. Last quarter it said it expected to produce 2.55 million to 2.8 million gold ounces in 2013, at all-in sustaining costs of $1,000 to $1,100 an ounce.

Capital spending remains on track at $2.6 billion.

($1=$1.04 Canadian)

(Editing by Gerald E. McCormick, Lisa Von Ahn, Peter Galloway and Marguerita Choy)

By Nicole Mordant and Allison Martell