Gold surge delivers US$2.7bn boost to top LatAm miners

Record gold prices spurred a surge in Q3 profits for Latin America’s top gold mining companies.

Free cash flows (or similar metrics) reported by seven leading LatAm producers soared by US$2.70bn to US$4.54bn, according to figures compiled by BNamericas – a 146% increase.

Gold passed the US$2,000/oz mark for the first time in August, averaging around US$1,900/oz in all three months of Q3, up from US$1,400-1,500/oz in the same period last year.

Prices have risen as governments around the world announced massive stimulus packages to prop up their ailing economies in the wake of the COVID-19 pandemic.

All seven of the companies – each of which produced at least 125,000oz gold from LatAm mines in the quarter – saw cash flows rise, with the increases ranging from 29-290%.

The rises came despite declines in production at six of the seven mines, with the falls partly due to COVID-19 protocols and restrictions, along with declining grades.

TOP CASH FLOWING GOLD MINERS

1. Barrick Gold - Q3 free cash flow: US$1.31bn

Barrick generated the highest free cash flow in the quarter, at US$1.31bn, up 161% from US$502mn in 3Q19.

In Latin America, Barrick has the Pueblo Viejo mine in the Dominican Republic, a 60:40 JV with Newmont, and Veladero in Argentina, a 50:50 JV with Shandong Gold.

2. Newmont – Q3 free cash flow: US$1.30bn

The region’s top gold producer came in a shade behind rival Barrick, with free cash flow of US$1.30bn, but the improvement over 3Q19 was far steeper, rising 256% from US$365mn.

Newmont’s LatAm assets are the Peñasquito mine in Mexico, Cerro Negro in Argentina, Merian in Suriname and Yanacocha in Peru, as well as a 40% stake in Pueblo Viejo.

3. Industrias Peñoles – Q3 net operating cash flows: US$733mn

Peñoles recorded net operating cash flow of US$733mn in the quarter, up from US$470mn, a 56% increase.

Peñoles, which controls precious metals subsidiary Fresnillo, is Mexico’s top gold producer, as well as a significant silver and industrial metals miner.

All its producing mines are located in Mexico.

4. Kinross Gold – Q3 operating cash flow: US$544mn

Kinross’s operating cash flow surged to US$544mn from US$232mn in 3Q19, a 134% rise.

In Latin America the company has the Paracatu gold mine in Brazil, which produced 131,000oz in the quarter.

5. AngloGold Ashanti - Q3 free cash flow: US$339mn

AngloGold saw the biggest percentage increase in free cash flow, up 290% to US$339mn from US$87mn.

The company is a top-five LatAm gold producer, with the Cerro Vanguardia mine in Argentina and two operations in Brazil.

6. Yamana Gold - Q3 net free cash flow: US$185mn

Yamana’s net free cash flow was up 107% from US$89.5mn in 3Q19.

The company’s mines are located in Brazil, Argentina, Chile and Canada.

7. Torex Gold – Q3 free cash flow: US$124mn

Free cash flow increased by 28.6% from US$96.4mn in 3Q19.

Torex’s El Limón-Guajes mine in Mexico is its sole producing asset, and one of the largest gold mines in Latin America.

OUTLOOK

Record gold prices swelled cash flows for the region’s top miners in Q3, and the outlook remains healthy.

Prices for the yellow metal have continued to trade around US$1,900/oz in Q4 and are expected to benefit from the delayed result of the US presidential elections - and a likely additional fiscal stimulus expected whoever emerges victorious.

While gold miners have not been immune to COVID-19 disruptions, the resulting declines in gold production have been marginal, and far outweighed by the benefits of higher prices.

Mining companies also appear to be maintaining discipline, with a focus on efficiency, paying down debt and delivering returns to shareholders through dividends rather than investing in new growth opportunities.