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How Gold Miners Rank Based on Liquidity Profiles

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Liquidity positions

While financial leverage helps assess a company’s long-term solvency, analyzing their short-term liquidity profiles is also important.

Current ratio

One way to assess a company’s liquidity is to calculate its current ratio. The chart above shows the current ratios for five gold miners (RING)(GDX). This ratio shows these companies’ respective abilities to pay their short-term obligations using their short-term assets.

Company positions

A higher ratio means a company would be able to take better care of its short-term liabilities and vice versa. Newmont Mining (NEM) and Kinross Gold (KGC) are doing the best on this ratio among senior miner peers with ratios of 4.2x and 4.0x, respectively. Goldcorp (GG) and Yamana Gold (AUY), on the other hand, have the lowest current ratios of 1.0x each.

Even the companies with lower current ratios don’t seem to be in trouble as far as their liquidity profiles are concerned.

Only $66 million of Barrick Gold’s (ABX) debt is due before 2020. The majority of the debt is due for repayment after 2032. ABX had $2.0 billion in cash and an undrawn credit facility of $4.0 billion at the end of 3Q17.

Newmont’s total liquidity at the end of 3Q17 was $5.9 billion, including $3.0 billion in cash on hand.

Kinross Gold doesn’t have any debt maturity until 2021. Its liquidity position was also strong, with ~$2.5 billion in total liquidity at the end of 3Q17.

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