Investors have become cautious of miners’ escalating debt positions, the result of acquisitions at the peak of the cycle. Gold miners (GDX) (NUGT), including Barrick Gold (GOLD), Kinross Gold (KGC), and Newmont Mining (NEM) were impacted by peak cycle acquisitions and the resulting write downs.
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Stronger balance sheet
Barrick Gold has been focusing on reducing its debt and has paid down a large portion of it. In the first quarter, Barrick Gold had a comfortable liquidity position and a cash balance of ~$2.15 billion, and its net debt fell 12% sequentially to $3.65 billion. It had net debt of $12.9 billion at the beginning of 2015.
Financial leverage versus peers
During Barrick’s Q1 2019 earnings call, CEO Mark Bristow said, “we now can boast a strong balance sheet relative to the rest of our peer group.” Barrick has a debt-to-equity ratio of 37.2%, and its financial leverage has improved significantly since its merger with Randgold Resources. At the end of Q4 2018, its debt-to-equity ratio was 75.5%.
Prior to Q1, GOLD had one of the highest financial leverage ratios in the gold miner space (GDX). However, Newmont Mining (NEM), Kinross Gold (KGC), Yamana Gold (AUY), and Agnico Eagle Mines (AEM) now have debt-to-equity ratios of 41.6%, 41.9%, 49.4%, and 39.5%, respectively.