Worst than Pascua Lama : ABX & Equinox Minerals deal
The debt pile
Gold miners, who had amassed enormous amounts of debt, are now cutting down their costs and selling assets to improve their cash position in order to avoid any possible downgrade to their credit rating. According to BMO Capital Markets, in the last decade, the net debt of 55 precious metal firms has increased more than ten folds from less than $2 billion to $21 billion.
Barrick Gold is at the top of this list. The company’s debt has ballooned from $6.6 billion at the end 2010 to $14 billion in December 2012. During this period, its debt-to-equity ratio, a primary solvency ratio which measures debt as a percentage of shareholders' equity, deteriorated significantly from 34% in 2010 to 64% in 2012. Some of this rise can be attributed to the poorly timed debt-financed purchase of the copper miner Equinox Minerals for $7.65 billion, which was followed by a fall in copper prices.