Which Gold Miners Could Show Free Cash Flow Upside in 2019?


Mar. 14 2019, Published 1:59 p.m. ET

Free cash flow

FCF (free cash flow) generation is quite important for gold mining companies (SGDM) (GDX), as this excess cash helps them invest in projects, optimize their financial leverage, and drive long-term value.

Barrick Gold (GOLD) generated FCF of $37 million in the fourth quarter compared to -$319 million in the third quarter. Its Q4 2018 FCF implied a decline of 85% YoY. The company had generated positive FCF for 12 consecutive quarters prior to the second quarter. In 2019, Barrick plans to focus on improving productivity, driving down operating costs, and reducing working capital. As a result, the company’s FCF should improve going forward.

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Consistently delivering FCF

Newmont Mining (NEM) generated $473.0 million in FCF (free cash flow) in the fourth quarter, an increase of 8% year-over-year. The increase is due to the completion of underground development projects in North America and Africa. For fiscal 2018, the company generated $805 million in FCF, a decline of 37%. The decline followed unfavorable working capital changes and higher capital expenditures.

FCF generation

In the fourth quarter, Kinross Gold (KGC) generated $183.5 million in adjusted operating cash flow. Its FCF for the last few quarters has been negative, mainly due to its higher capex. However, as most of the major capex is now done, especially on Tasiast, the company should see accelerated FCF from 2019 onward.

Goldcorp’s (GG) FCF generation is currently negative. Going forward, after its merger with Newmont Mining, the combined company should generate significant FCF based on an increase in production and cost synergies.


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