uploads///Leverage

Goldcorp’s Balance Sheet Is in Deleveraging Mode

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May. 8 2018, Updated 7:32 a.m. ET

Balance sheet remains strong

Goldcorp’s (GG) balance sheet remains strong compared to most of its close peers. At the end of 1Q18, Goldcorp’s net debt and adjusted net debt totaled $2.3 billion and $2.1 billion, which is almost the same as at the end of 2017.

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Liquidity

At the end of 1Q18, Goldcorp had $3.1 billion in liquidity, excluding $186.0 million in cash and cash equivalents held at its associates. Its liquidity includes $200.0 million in cash and cash equivalents and short-term investments and $2.95 billion out of its $3.0 billion credit facility. 

Goldcorp had $500.0 million in debt due on March 15, for which it entered into three one-year non-revolving term loan agreements totaling $400.0 million. 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.

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Deleveraging before next capital

Goldcorp’s net debt to EBITDA[1. 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 fall below 1.0x by 2019. 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. This is expected to prepare the company for the next phase of the capital investment cycle, which is expected to start beyond 2020 with the buildup of the next generation of mines.

Leverage outlook

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 leverage metrics 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.

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