Free cash flow
Investors usually look at a miner’s ability to generate FCF (free cash flow) in a volatile metal price environment. In this part of our series, we’ll see how Kinross Gold (KGC) is progressing in this metric.
Kinross Gold generated $320.0 million in operating cash flow in 3Q16, which is a rise of more than 50.0% YoY (year-over-year). After capital expenditure, FCF for the quarter was $112.0 million. With this, the company has generated $390.0 million in FCF year-to-date.
Along with its available liquidity, this FCF should be enough to fund the company’s operations, near-term capital expenditure, and exploration activities.
The main drivers for Kinross Gold’s increasingly positive FCF in 3Q16 were as follows:
- higher gold prices
- lower capital expenditure due to the suspension of Tasiast in 2Q16 and 3Q16
- strong performance from its US, Russian (RSX), and Brazilian operations
- low oil prices and favorable exchange rates
- continued discipline in capital and operating expenditure
Other gold miners, including Eldorado Gold (EGO), AngloGold Ashanti (AU), Goldcorp (GG), Yamana Gold (AUY), and Newmont Mining (NEM), are also taking steps to increase their FCFs to weather this volatile gold price environment.
Remember, you can gain exposure to the gold sector by investing in ETFs such as the VanEck Vectors Gold Miners ETF (GDX), which invests in intermediate and senior gold producers. Goldcorp makes up 7.6% of GDX’s holdings. The SPDR Gold Shares (GLD) tracks spot gold prices.