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Which Gold Miners Are in Good Financial Health Post-2017?

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Strengthening balance sheets

As metals prices started weakening, investors shifted their focus from high-leverage miners (GDX) (GDXJ) to low-leverage miners with sound growth plans, leading miners to trim their balance sheets.

After reducing its debt by $1.3 billion in 2016, Newmont Mining (NEM) reduced its net debt by ~$1.0 billion in 2017. It ended 4Q17 with net debt of $0.8 billion. The company has reduced its net debt by over 83% since 2013.

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In 2017, Barrick Gold (ABX) reduced its total debt by $1.5 billion, or 19%, exceeding its targeted reduction of $1.45 billion. The company is now aiming to reduce its debt to $5 billion from its current level of $6.4 billion by the end of 2018. It plans to achieve this reduction through cash flow from operations and cash on hand—and also potentially through further portfolio optimization.

Strong financial position

Kinross Gold’s (KGC) management was quite upbeat about the company’s strong financial position. It stated that it has the financial strength and flexibility to invest in the future as it executes on five projects and advances three additional development opportunities. The strong cash flow generation from its business should also enable it to pursue these growth opportunities.

Goldcorp’s (GG) balance sheet also remains strong compared to those of its peers. At the end of 4Q17, its net debt and adjusted net debt were $2.2 billion and $2.1 billion, respectively, implying reductions of 3% and 5%, respectively, from its net debt and adjusted net debt at the end of 2016. The company exited its high capital phase in 2015 on the completion of its Cerro Negro and Eleonore mines. Now it’s focusing on deleveraging and strengthening its balance sheet further. This move should prepare it for the next phase of the capital investment cycle, which is expected to start beyond 2020.

In the next part of this series, we’ll look at gold miners’ liquidity profiles and see what we can learn from them.

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