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« Billionaire Stanley Drucknemiller Loads Up On Gold, Makes It His Largest Position For First Time Ever | Main | The Dollar Rally is the Key »

Barrick Gold debt on the brink of junk after downgrade

Debt agency Moody’s has downgraded its investment status to Baa3 – only one level above junk.

Lawrie Williams | 13 August 2015 11:16

LONDON – We have noted here before the debt level mire that most of the world’s major gold miners have found themselves in after years of chasing growth when the gold price was strong and moving upwards.

However since late 2012 the gold price has been declining, but the major debt commitments – mostly relating to significant new mining projects and expansions which came to a peak thereafter – somewhat typical of the cyclical nature of mining industry economics. But in the views of many, this has led to the companies being overstretched financially (albeit not beyond their powers to dig themselves out of the financial pit thus created). The major credit rating agencies have been treating them accordingly, based on their current debt positions. This makes the companies less attractive in the eyes of the institutions and hedge funds and can lead to a downrated entity – particularly if it falls to non-investment grade (junk) status, then likely having to pay higher interest rates in servicing its debt.

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