Liquidity positions

In addition to financial leverage, which helps assess a company’s long-term solvency, it is important for investors to look at a company’s short-term liquidity profile.

Which Gold Miners Have the Best Liquidity Profile?

Current ratio

One way to assess a company’s liquidity is the current ratio. The above chart shows the current ratios of these gold miners. 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 3.02x, Kinross Gold (KGC) is doing the best on this ratio. Newmont Goldcorp (NEM) and Agnico Eagle Mines (AEM) follow with ratios of 2.97x and 2.96x, respectively. Barrick Gold (GOLD) also has a comfortable liquidity position given its current ratio of 2.46x.

Maturity profiles

At the end of the first quarter of 2019, Barrick Gold had a comfortable liquidity position and a cash balance of ~$2.15 billion. Newmont Goldcorp’s (NEM) liquidity profile is also attractive. The company had total liquidity of $6.47 billion at the end of the fourth quarter. Newmont Mining’s liquidity includes ~$3.5 billion in cash and cash equivalents. The company intends to use ~$1.7 billion out of its cash and cash equivalents in connection with the Newmont Goldcorp transaction and the payment of a one-time special dividend. The company also has one of the best credit ratings in the mining sector.

Kinross Gold’s total liquidity at the end of the first quarter was $1.8 billion with $406.9 million in cash and cash equivalents. As compared to this, its cash was $349 million at the end of the fourth quarter. KGC’s debt maturity also remains comfortable as 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 first quarter, Agnico Eagle Mines had $196.5 million in cash and cash equivalents and $1.2 billion in undrawn credit lines available.

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