Balance sheet remains strong
Goldcorp’s (GG) balance sheet remains strong compared to most of its close peers. At the end of 4Q17, its net debt and adjusted net debt was $2.2 billion and $2.1 billion, respectively, which implies a reduction of 3% and 5%, respectively, from its net and adjusted net debt at the end of 2016. In 2017, the company repaid $160 million in project finance facilities for Pueblo Viejo.
At the end of 2017, the company had a total of $3.2 billion in liquidity, including $234 million in cash and cash equivalents. Goldcorp has $500 million in debt due March 15, 2018, which it intends to repay through either cash from operations or drawing on its credit facility. The next debt comes due for repayment in 2021. It expects liquidity and free cash flow over the next five years to drive down its net debt to zero.
Deleveraging before next capital
Goldcorp’s net debt to EBITDA (earnings before interest, tax, depreciation, and amortization) is on a downward trend. Currently, the leverage ratio for the company is closer to 1.2x, which is expected to move down below $1.0x by 2019 and the company expects it to drive to zero or close to it by 2021.
The company has exited its high capital phase in 2015 with the completion of its Cerro Negro and Eleonore mines. Now it’s focusing on deleveraging and strengthening its balance sheet further, which should prepare the company for the next phase of the capital investment cycle, which is expected to start beyond 2020 with the building-up of the next generation of mines.
As the above graph shows, Goldcorp (GG) has the lowest financial leverage in the senior gold miners’ universe (GDX). Barrick Gold (ABX) and Newmont Mining (NEM) are at the higher end. These companies have significantly improved their financial leverages over the last few years. Yamana Gold (AUY) and Kinross Gold (KGC) have higher financial leverages than Goldcorp. Goldcorp’s leverage is expected to remain lower than its peers.