Marginal decline in net debt
Goldcorp (GG) reduced its gross debt by $845 million to $2.7 billion in 3Q15 from $3.5 billion in 2Q15. However, cash and cash equivalents fell from $940 million in 2Q15 to $257 million in 3Q15. With lower cash, net debt decreased only by $162 million to $2.4 billion from $2.6 billion in 2Q15.
Goldcorp’s DE (debt-to-equity ratio) decreased QoQ (quarter-over-quarter) from 0.20x in 2Q15 to 0.16x in 3Q15, but almost remained flat YoY (year-over-year) at 0.16x in 3Q15. Its debt-to-assets ratio showed a similar trend in the same period.
Goldcorp’s debt ratios are lower than Barrick Gold Corporation’s, Newmont Mining Corporation’s, and Agnico Eagle Mines’ (AEM). Barrick has a high DE ratio of 1.0x and a debt-to-assets ratio of 0.38x, while Newmont’s and Agnico’s DE ratios are 0.44x and 0.29x, respectively. Goldcorp is leveraged lower than Barrick, Newmont and Agnico Eagle.
Goldcorp’s leverage is expected to remain at a lower level than that of its peers. Capex has come down from $2.2 billion in 2014 to the expected $1.3 billion midpoint in 2015. Going forward, the capital expenditure is not expected to increase majorly, due to the completion of expansion at its major mines Cerro Negro and Éléonore. With lower capex, Goldcorp’s free cash flow has also increased in 3Q15. The company is expected to maintain its leverage in 2016.
Its peer Barrick has planned to reduce debt by $3 billion to around $10 billion by this year’s end. Despite massive debt reduction, Barrick will be leveraged higher than Goldcorp.
The iShares Gold Trust ETF (IAU) and the SPDR Gold Trust ETF (GLD) are two major gold ETFs. They track the performance of gold prices. Randgold Resources (GOLD) and Kinross Gold Corporation (KGC) form 5% and 4%, respectively, of the Sprott Gold Miners ETF (SGDM). In the next part, we’ll discuss Goldcorp’s liquidity profile.