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Can Miners Increase Free Cash Flow Generation in 3Q16 and Beyond?

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Free cash flow

Investors usually look at mining companies’ abilities to generate FCF (free cash flow) in a volatile metal price environment. In this part of our series, we’ll see what analysts are projecting in terms of FCF for senior gold miners (GDX).

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Analysts’ estimates for FCF generation

Analysts estimate that Barrick Gold (ABX) will have FCF of $306 million in 3Q16 and ~$1.2 billion in 2016. Barrick generated $471 million in FCF in 2015. Higher gold prices and Barrick’s focus on reducing its unit costs should help it to achieve significant positive FCF.

Newmont Mining (NEM) generated FCF of $756 million in 2015, more than double that of 2014. Most of this rise was due to cost and productivity improvements. Analysts are projecting FCFs of $1.2 billion and $1.6 billion for NEM in 2016 and 2017, respectively.

Goldcorp and Kinross

After generating negative FCF In 1Q16, Goldcorp (GG) delivered positive FCF in 2Q16. As its revenue rises and its costs fall, the company should generate positive FCF in 2H16. Analysts are projecting FCFs of $419 million and $644 million for the company in 2016 and 2017, respectively.

Kinross Gold (KGC) generated FCF of $222 million in 2015. Its management has guided a 20% fall in overhead costs YoY to $165 million in 2016. Along with lower costs and higher gold prices, lower overhead costs should help KGC to achieve significant FCF going forward. Analysts are projecting FCFs of $85 million for the company in 3Q16 and $232 million in 2016.

Yamana and Agnico Eagle

Yamana Gold (AUY) generated FCF of $80 million in 2Q16. The company has taken several initiatives, including streaming transactions and forming strategic partnerships, to improve its ability to generate FCF.

AUY’s cash flow generation is expected to accelerate going forward as production starts in high-grade areas and costs see support from currency tailwinds. Analysts are projecting FCFs of $196 million for the company in 2016 and $256 million in 2017.

Agnico Eagle Mines (AEM) generated FCF of $166 million in 2015. For 2016, analysts are projecting FCF of $294 million for the company.

In the next article, we’ll explore some key expectations for Newmont Mining in 3Q16.

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