Gold Miners: Catalysts for Free Cash Flow Generation in 2018

Generating FCF (free cash flow) is important for gold mining companies (SGDM)(GDX). This excess cash helps miners optimize their financial leverage, invest in projects that can drive long-term value, and provide shareholder returns.

The third quarter of 2017 marked the tenth consecutive quarter of positive free cash flow for Barrick Gold (ABX). It generated FCF of $225 million, which was 67% lower year-over-year (or YoY). Lower operating cash flows, along with higher capital expenditure, led to this decline in FCF. Barrick’s FCF breakeven for 3Q17 was $1,037 per ounce. It’s targeting a breakeven FCF even as gold prices have reached $1,000 per ounce.

Newmont Mining (NEM) also achieved positive FCF to the tune of $494 million in 3Q17, which implies growth of 107% YoY. Year-to-date, it has generated FCF of $1,039 million—3.7% growth from the same period last year. 3Q17 was the sixth consecutive quarter of positive FCF for the company.

Kinross Gold (KGC) has also been generating growth in its operating cash flows. The company plans to use these funds along with the proceeds from a non-core assets sale and other sources to pursue development opportunities.

Goldcorp’s (GG) cash generation was also healthy during the third quarter. Its adjusted operating cash flow was $315 million in 3Q17, compared to $267 million in 3Q16.