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How Does Goldcorp’s Financial Leverage Look?

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Balance sheet remains strong

Goldcorp’s (GG) balance sheet remains strong compared to most of its close peers. At the end of Q2 2018, Goldcorp’s net debt and adjusted net debt totaled $2.4 billion and $2.3 billion, respectively. Thus, the net debt to EBITDA (earnings before interest, tax, depreciation, and amortization) for the company was closer to 1.7x during the second quarter. This ratio, however, is expected to fall below 1.0x by 2019. The company expects it to be at zero or close to it by 2021.

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Lower leverage outlook

The lower leverage outlook is mainly due to the fact that 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 the deleveraging and strengthening its balance sheet further to prepare the company for the next phase of the capital investment cycle, which is expected to start after 2020 with the buildup of the next generation of mines.

Liquidity

At the end of Q2 2018, Goldcorp had $3.0 billion in liquidity including $200.0 million in cash and cash equivalents and $2.8 billion available on its credit facility of $3.0 billion. Goldcorp’s next debt is 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.

Leverage outlook among peers

As the above graph shows, Goldcorp (GG) has the lowest financial leverage among senior gold miners (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 leverage than Goldcorp. Goldcorp’s leverage is expected to be lower than its peers.

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