In addition to financial leverage, which helps assess a company’s long-term solvency, it is important to look at its short-term liquidity profile.
A company’s current ratio is one way to assess a company’s liquidity. The above chart shows the current ratios of these gold miners (GDX) (RING). A higher ratio means a company should be better able to take care of its short-term liabilities, and vice versa.
With the highest current ratio of 2.95x, Newmont Mining (NEM) is doing the best on this ratio. Kinross Gold (KGC) follows with a ratio of 2.6x. Barrick Gold (GOLD) also has a comfortable liquidity position given its current ratio of 2.4x. Goldcorp (GG), on the other hand, has the lowest current ratio of 0.87x.
At the end of the fourth quarter of 2018, Barrick Gold had a cash balance of ~$1.6 billion and a $3 billion undrawn credit facility. Randgold had $0.7 billion in cash at the end of 2018. The company’s consolidated cash position would be $2.3 billion. Barrick Gold’s liquidity position also remains comfortable. The company has $150.0 million in debt due before 2020. Among Barrick Gold’s total debt outstanding, ~87.0% doesn’t mature until after 2032.
Newmont Mining’s liquidity profile is also attractive. The company had total liquidity of $6.3 billion at the end of the fourth quarter. Newmont Mining’s liquidity includes ~$3.4 billion in cash and cash equivalents. The company also has one of the best credit ratings in the mining sector.
Kinross Gold’s total liquidity at the end of the fourth quarter was $1.9 billion with $349 million in cash and cash equivalents. As compared to this, its cash was $500 million at the end of the third quarter. KGC’s liquidity position is also significant given that it doesn’t have any debt maturity until 2021. Its financial position should help it fund its future development opportunities.
At the end of the fourth quarter, Goldcorp had $134 million in cash and cash equivalents and $38 million in short-term investments. It also had $2.65 billion available on its credit facility of $3.0 billion.