Analysts’ estimates for FCF

Investors are typically interested in gold mining companies’ (GDX) (GDXJ) ability to generate FCF (free cash flow) because it helps said companies invest in future growth separately from their aim of returning cash to shareholders.

Assessing Gold Miners’ Free Cash Flows in 2018 and Beyond

Analysts expect Barrick Gold (GOLD) to generate significant FCF amounting to $519 million in 2018. This estimate is slightly lower than the $669 million in FCF the company generated in 2017. The anticipated fall is mostly the result of lower expected revenue driven by lower production.

Barrick Gold’s ability to generate positive FCF is higher than those of its peers, mostly due to its lower unit costs.

For Newmont Mining (NEM), analysts expect FCF similar to that of GOLD. The FCF estimate for NEM is $565 million for 2018, significantly lower than the $1.5 billion it generated in 2017. Lower production and higher costs have been the major drivers of this decline. Analysts expect the company’s FCF to increase significantly in 2019 and 2020 to 60% and 18%, respectively. Its lower costs, higher production, and lower capex are most likely driving these expectations.

Goldcorp and Kinross Gold

Goldcorp (GG) did not generate positive FCF in 2017 mostly due to a buildup of working capital. In 2018, analysts expect the company’s FCF to be -$265 million.

Like in 2017, analysts expect Kinross Gold (KGC) to achieve FCF of -$235.0 million in 2018. This lower FCF is most likely the result of the company’s capex spending on construction at its new projects.

Yamana Gold and Agnico Eagle Mines

While Yamana Gold (AUY) is expected to generate marginally positive FCF of $8.0 million in 2018, Agnico Eagle Mines (AEM) is expected to generate negative FCF of $450 million in the year, most likely due to its capex requirements for financing its growth projects.

In the next and final article, we’ll see what these gold miners’ relative valuations look like.

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