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Chart in Focus: The Improving Financial Health of Senior Gold Miners

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Strengthening balance sheets

As investors started punishing gold miners (GDX) (GDXJ) for their high financial leverages in the weak precious metal price environment, miners started to trim their balance sheets.

After reducing its debt by $1.3 billion in 2016, Newmont Mining (NEM) repaid ~$400 million in 1H17 to bring its net debt to $1.5 billion at the end of June 2017. Not only has its debt level come down, but its maturity profile has also become much more manageable. It does not have any debt due until 2019. 

NEM’s financial metrics have also improved significantly. Its net debt-to-adjusted EBITDA[1. earnings before interest, tax, depreciation, and amortization] improved to 0.6x in 2Q17 from 0.7x at the end of 1Q17 and 1.3x at the end of 2015.

Barrick Gold (ABX) has also maintained the pace of its debt reduction program. After paying off $2.0 billion in 2016, it is aiming to reduce its debt to $5 billion by 2018 from $7.9 billion at the start of 2017. 

ABX is targeting at least half of this reduction in 2017. In 1H17, Barrick Gold reduced its debt by $487 million. Its maturity profile is also comfortable, with only $200 million of debt due before 2020.

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Strong financial position

Kinross Gold’s (KGC) financial position remains strong with $1.1 billion in cash and cash equivalents at the end of 2Q17. In July 2017, the company closed the debt offering of $500 million notes due in 2027, which it used to repay its August 2020 term loan. This pushed KGC’s maturities by a year, and it now has no debt maturities until 2021. 

Kinross Gold’s management sounded upbeat during its 2Q17 earnings call, as the company is pursuing future development opportunities due to the strength of its balance sheet.

Goldcorp’s (GG) balance sheet also remains strong compared to its peers.

Next, we’ll look at gold miners’ liquidity profiles and see what we can learn from them.

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