Friday, March 29, 2024
Homemetal commoditiesNew Year rally in gold miners conceals troubles that run deep

New Year rally in gold miners conceals troubles that run deep

The New Year's rally in gold stocks offers a respite for the beaten-down sector, but it masks deep-seated problems of bloated debt, weak growth prospects and overvalued assets that will emerge when miners post year-end results in coming weeks.

Market heavyweight Goldcorp's recent warning of a multibillion-dollar writedown and Yamana Gold's decision to issue stock to cut debt are signs that four years into a downturn, the gold-mining industry is still not out of the woods.

Miserly free cash generation since bullion peaked in 2011 has made it tough for miners to whittle down debt racked up in a decade-long acquisition and mine-building spree.

"Companies are operating with a very thin margin for error," said Deutsche Bank analyst Jorge Beristain.

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