After Record Losses During 2013, Gold Miners Are Set for a Comeback

Barrick Gold, Goldcorp, Newmont, and AngloGold reported crippling losses for fiscal 2013, but all is not as it seems.

Apr 30, 2014 at 10:57AM

During fiscal 2013, the world's four largest gold miners, Barrick Gold (NYSE:ABX), Goldcorp (NYSE:GG), Newmont (NYSE:NEM), and AngloGold (NYSE:AU), all reported seemingly catastrophic losses, which when combined totaled just under $18 billion.

However, despite these losses all four companies have continued to pay a dividend to investors, and year to date all four have seen their stock prices rise by as much as 30%. So what's going on?

Game-changing losses
Barrick, Goldcorp, Newmont, and AngloGold all started 2014 by reporting horrendous losses. For the most part, however, these losses were related to impairment charges and on an underlying basis, all four of the miners remained profitable.


FY Gross Profit


FY Loss After Impairments

Barrick Gold




Goldcorp (USA)




Newmont Mining Corp




AngloGold Ashanti Limited (ADR)




Figures in $US billions.

Indeed, most of these impairments relate to revaluations of gold reserves as the miners rebase the gold price levels at which these reserves have been calculated. These impairments also include operational restructuring costs, changes in forward mine plans and deferments in capital projects.

So, while on paper these losses appear to be irrecoverable, in practice the losses are just paper losses and are unlikely to reflect directly on to the business.

For example, if we take a look at the cash flow figures for the above companies the picture is completely different.


Cash Generated From Operations

Barrick Gold


Goldcorp (USA)


Newmont Mining Corp


AngloGold Ashanti Limited (ADR)


Figures in $US billions.

Using cash flows to analyze business performance is a much better way of assessing the health of the business over the traditional profit and loss account. Cash flows reflect the cash coming both in and out of the business, excluding non-cash impairments such as mine revaluations. Cash flows are essential to solvency -- if a business or person does not have enough cash to support its operations, it is said to be insolvent, and a likely candidate for bankruptcy should the insolvency continue.

The future looks bright
However, now these miners have taken such heavy losses that they have a margin of safety within which they can operate. In particular, as these impairments have already been taken, if the gold price falls further miners won't get caught out and have to take such hefty revaluation charges again.

The gold deposits are still there but are just a little less likely to be brought into future production plans without some very big gold price increases -- for the time being at least. This is an extremely cautious approach, exactly what's needed in the current environment of volatile gold prices.

Further, by deferring capital and exploration spending on these projects that have seen their values written down, in the short term miners should see their bottom lines improve. That being said, on a long-term basis it is likely that production could fall short of expectations as development projects remain idled, not producing enough gold to cover falling production from mature assets.

Overall then, in the short term, Barrick, Newmont, Anglo and Goldcorp could be in for a sustained period of earnings growth as they continue to cut costs and reconsider expensive projects while maintaining low-cost output.

Foolish summary
While the headline losses across the mining industry may have seemed frightening when they were announced at the end of 2013, the new cautious approach gold miners are taking is keeping financials in a healthier state than they have been for some time.

Take advantage of this little-known tax "loophole"
Recent tax increases have affected nearly every American taxpayer. But with the right planning, you can take steps to take control of your taxes and potentially even lower your tax bill. In our brand-new special report "The IRS Is Daring You to Make This Investment Now!," you'll learn about the simple strategy to take advantage of a little-known IRS rule. Don't miss out on advice that could help you cut taxes for decades to come. Click here to learn more.

Rupert Hargreaves has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information