LatAm gold miners' cash flows surge 150%

Higher gold prices handed leading miners in Latin America a huge cash windfall in 2020, despite COVID-19 operational disruptions.

Nine of the region’s top gold producers saw aggregate free cash flows (or similar metrics) surge by US$6.67bn or 151% to US$11.1bn, according to industry data compiled by BNamericas.

Following a shaky start to the year, gold prices surpassed US$2,000/oz for the first time in August.

Monthly averages were above US$1,800/oz for the whole of H2, compared to around US$1,500/oz in the same period 2019.

Gold was lifted by massive economic stimulus packages as governments globally looked to stabilize their economies in response to the pandemic.

The cash flow boom came despite major operational challenges during COVID-19, with Mexico, Peru and Ecuador among the Latin American countries in which the bulk of mines were temporarily suspended.

Mine-level outbreaks and strict new health protocols weighed on operations across the region.

Of the nine companies, only one – Equinox Gold – saw gold production rise last year, driven by its takeover of Leagold Mining last March.

TOP GOLD CASH FLOWS

1. Newmont: US$3.59bn

Latin America’s top gold producer saw free cash flow more than double from US$1.41bn in 2019.

The company has mines in Mexico, Peru, Argentina, Suriname and the Dominican Republic.

2. Barrick Gold: US$3.36bn

Newmont’s arch rival also saw free cash flow surge, from US$1.13bn in 2019, despite falling output.

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

3. Fresnillo: US$1.17bn

Mexican miner Fresnillo recorded US$1.17bn in cash generated from operations before changes in working capital (free cash flow data were not given in the company’s earnings release).

The figure was up from US$685mn in 2019.

4. Kinross Gold: US$1.01bn

Kinross saw one of the sharpest rises in free cash flow, which increased from US$165mn in 2019.

In Latin America, the company has the Paracatu mine in Brazil.

5. AngloGold Ashanti: US$743mn

AngloGold, whose assets include mines in Argentina and Brazil, saw free cash flow surge from US$127mn, despite lower gold production.

6. Yamana Gold: US$689mn

Yamana – which has mines in Brazil, Chile, Argentina and Canada – reported US$689mn in cash from operations before changes in working capital, up from US$590mn in 2019.

7. Equinox Gold: US$232mn

Operating cash flow before changes in working capital rose to US$232mn from US$76.1mn, reflecting higher prices and production, following the Leagold merger, which added Los Filos in Mexico and three Brazilian operations to its portfolio.

8. Torex Gold: US$168mn

Mexico-focused Torex was the only company to record a drop in free cash flow, down from US$181mn.

But the company – which has the El Limón-Guajes mine – paid down a significant chunk of debt, which declined to US$43.4mn at end-2020 from US$175mn a year earlier.

9. Buenaventura: US$123mn

Peruvian miner Buenaventura saw net cash and cash equivalents provided by operating activities rise from US$47.1mn in 2019.

OUTLOOK

Higher gold prices continued into 2021, with monthly averages of US$1,870/oz in January and US$1,814/oz in February.

Prices have moved into the US$1,700-1,800/oz range in March, but this remains a very profitable level for gold miners, many of which produce at all-in sustaining costs of US$1,000/oz or lower.

Many analysts expect gold prices to remain elevated for some time to come. BMO Capital Markets is forecasting prices of around US$1,900/oz in 2021 and US$1,875/oz next year, according to a February update.