As precious metal prices remain volatile, miners are aggressively pruning their balance sheets. Investors have become wary of companies with too much financial leverage.
Reducing financial leverage
Coeur Mining (CDE) ended 2016 with an outstanding debt of $210.9 million. That’s 57.0% lower than its debt at the end of 2015. Its net debt was $48.7 million at the end of 2016. The repayment of debt during the year also led to a $30.0 million annual fall in interest expenses. Coeur Mining’s net debt-to-EBITDA (earnings before interest, tax, depreciation, and amortization) ratio was 3.8x at the end of 4Q15. It fell to less than 1.0x at the end of 4Q16, a 74.0% improvement. Lower debt and improved EBITDA led to this massive fall.
Hecla Mining (HL) had a net debt of $314 million at the end of 4Q16, compared with $323 million at the end of 3Q16, and $365 million at the end of 4Q15. Most of its debt is long-dated, with notes coming due in 2021. Its liquidity was $300 million at the end of 4Q16. Fiscal 4Q16 was the fifth consecutive quarter of improving debt metrics for the company. Its net debt-to-EBITDA at the end of 4Q16 was 1.2x, compared with 3.1x at the end of 2015.
As of December 31, Tahoe Resources (TAHO) had cash and cash equivalents of $163.4 million and net cash of $113 million after debt and leases. It also has an undrawn line of credit of $150 million. Its balance sheet is strong, which should help fund its growth going forward.
First Majestic Silver (AG) ended 4Q16 with $129 million in cash and cash equivalents and $32 million in long-term debt. Along with cash generation, the company’s liquidity appears to be sufficient to fund internal growth projects as well as debt repayments.
Pan American Silver (PAAS) ended 4Q16 with $180.9 million in cash, which is an increase of $46.9 million from its standing on December 31, 2015. It also had an undrawn revolving credit facility of $263.8 million at the end of 2016. It had $43.3 million in debt at the end of 2016. Next, we’ll look at silver miners’ (SIL) liquidity profiles and see what we can learn from them.