While precious metal prices have remained buoyant since the start of the year, miners are leaving no stone unturned in their mission to prune their balance sheets wherever possible. Investors grew wary of companies with too much financial leverage.
Reducing financial leverage
Since 2Q16, Coeur Mining (CDE) has repaid $99 million on term loans and $4.4 million in prepayment premiums. These payments reduced the company’s interest expense by $9 million annually. They also amounted to a ~20% reduction in debt. After this repayment, the company said its debt to adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) stands at 2.5x compared to 5.9x a year ago. Coeur’s liquidity position remains comfortable with $258 million in cash at the end of 2Q16. The company expects its cash balance to decline in the first half of 2016, mainly due to ongoing operating initiatives as the company funds projects to reposition itself.
Hecla Mining (HL) had a net debt of $358 million at the end of 2Q16. Most of its debt is long-dated with notes coming due in 2021.
As at June 30, Tahoe Resources (TAHO) had cash and equivalents of $152 million, $35 million in debt, and access to an undrawn $150 million credit facility.
First Majestic Silver (AG) ended 2Q16 with $108 million in cash and $38 million in long-term debt. Along with cash generation, liquidity is quite sufficient to fund internal growth projects as well as debt repayments.
Pan American Silver (PAAS) ended 2Q16 with $204 million in cash and ~$60 million in debt, with the cash balance increasing $26.5 million sequentially.
Next, let’s look at silver miners’ (SIL) liquidity profiles and what we can learn from them.