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Gold Miners and Free Cash Flow Upside Estimates for 2017

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Oct. 23 2017, Updated 7:40 a.m. ET

Analysts’ estimates for FCF generation

Gold mining companies’ (GDX) (GDXJ) ability to generate FCF (free cash flow) in a volatile metal price environment becomes especially important to investors.

Analysts are forecasting free cash flow of ~$1.1 billion in 2017 for Barrick Gold (ABX). The company generated FCF of $1.5 billion in 2016. The lower estimated FCF is mostly due to lower forecast revenues, driven by lower production.

Barrick Gold’s ability to generate positive FCF is higher compared to its peers, mostly due to lower unit costs. Barrick Gold is targeting a break-even FCF despite gold price’s level of $1,000 per ounce.

However, Newmont Mining’s (NEM) forecast FCF for 2017 is higher at ~$1.1 billion. The company generated FCF of $784.0 million in 2016. Most of the expected increase in FCF is attributable to higher revenues backed by higher production.

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Goldcorp and Kinross Gold

Goldcorp (GG) could not generate positive FCF in 2016, mostly due to a buildup of working capital. For 2017, analysts are forecasting FCF of $14.0 million for the company, which is expected to grow to $400.0 million in 2018.

Kinross Gold (KGC) generated FCF of $465.0 million in 2016. The estimates for its FCF going forward are lower at $83.0 million for 2016, $55.0 million for 2018, and $14.0 million for 2019. This is mostly because the company is expected to spend on the construction of its new projects, especially Tasiast Expansion and Round Mountain Phase W.

Yamana Gold and Agnico Eagle Mines

Yamana Gold (AUY) also generated positive FCF in 2016. The analysts, however, are expecting negative FCF of 137 million for the company in 2017. Its capital expenditure could increase its cash flow in 2017, which could be the reason analysts are projecting negative FCF. The FCF is expected to start gaining momentum after that, coming in at $211.4 million and $383.7 million for 2018 and 2019, respectively.

For Agnico Eagle Mines (AEM), analysts expect FCF of -$44.2 million for 2017 and -$148.2 million for 2018.

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