Falling gold prices over the past four years has made mining the precious metal unprofitable for many small companies. In addition to this, resource producers levy great leverage, as equipment, land and production activities require an abundance of capital. The interest coverage ratio, as determined by taking a business’ operating income and dividing it by the interest expense, analyzes a company’s ability to meet its interest payments. A ratio below 1.5 indicates poor short-term liquidity. Keep this in mind when looking at the following gold producers currently experiencing a negative interest coverage ratio.
B2Gold Corp. (TSX: BTO) – $1.93
B2Gold Corp. is a Canada-based gold producer with three operating mines, including two in Nicaragua and one in the Philippines, and a portfolio of development and exploration assets in Namibia, Nicaragua, Mali, Burkina Faso and Colombia. Its mines include Masbate Gold Mine – Philippines, La Libertad Gold Mine – Nicaragua and El Limon Gold Mine – Nicaragua. Its development projects include Otjikoto Development Project, Namibia; Fekola Development Project – Mali.
- Total Revenue (LTM): $541,719,295
- Operating Income (LTM): -$858,597,285
- Debt (current level): $440,656,798
- Interest Coverage Ratio: -151.0
Golden Star Resources Ltd. (TSX: GSC) – $0.25
Golden Star Resources Ltd. (Golden Star) is a gold mining company with producing assets and development projects in Ghana since 1999. The Company also has exploration properties in other parts of West Africa and Brazil. Golden Star holds a 90% equity interest in Golden Star (Wassa) Limited (Wassa) and Golden Star (Bogoso/Prestea) Limited (Bogoso) which, respectively, own the Wassa and the Bogoso open-pit gold mines and processing plants in Ghana. The Company’s operations produced and sold 330,806 ounces of gold in 2013, and expect to produce and sell approximately 295,000 to 320,000 ounces of gold in 2014.
- Total Revenue (LTM): $366,440,010
- Operating Income (LTM): -$95,261,220
- Debt (current level): $119,641,002
- Interest Coverage Ratio: -11.4
Orvana Minerals Corp. (TSX: ORV) – $0.35
Orvana Minerals Corp. is a Canada-based multi-mine gold-copper producer. The Company operations consist of the El Valle-Boinas/Carles gold-copper mines and the copper-gold-silver Don Mario Mine. El Valle-Boinas Mine and Carles Mine are two underground gold-copper-silver mines located in the northern part of Spain and Upper Mineralized Zone at the Don Mario Mine is an open-pit gold-copper-silver mine located in the south-eastern part of Bolivia.
- Total Revenue (LTM): $162,816,516
- Operating Income (LTM): -$46,383,661
- Debt (current level): $4,008,210
- Interest Coverage Ratio: -10.3
Majestic Gold Corp. (TSXV: MJS) – $0.04
Majestic Gold Corp. (Majestic) is a Canada-based gold producer with mining operations in China. The Company’s main business involves the acquisition, exploration and development of mineral properties. The Company’s Songjiagou Gold Mine is located in Muping County on the Jiaodong Peninsula, Shandong Province. Majestic holds its interest in Muping through its 94% owned subsidiary Majestic Yantai Gold Ltd., The Company is currently focused on reviewing operations at the Songjiagou Mine. Annual gold production from the Songjiagou Gold Mine is approximately 19,611 ounces.
- Total Revenue (LTM): $29,617,943
- Operating Income (LTM): -$5,248,467
- Debt (current level): $22,353,264
- Interest Coverage Ratio: -3.8
Barkerville Gold Mines Ltd. (TSXV: BGM) – $0.26
Barkerville Gold Mines Ltd. is a Canada based company engaged in the exploration and development of gold properties. The Company continues production with ore from its Bonanza Ledge Mine trucked to the QR Mill facility. In conjunction with gold production, a number of drill programs have taken place on the Company’s Cariboo Gold property. The Company has developed an additional resource estimate at the neighboring Cow Mountain at its Cariboo Gold Project in central British Columbia. Barkerville’s Bonanza Ledge Mine is located on the southwest flank of Barkerville Mountain.
- Total Revenue (LTM): $20,842,360
- Operating Income (LTM): -$7,766,270
- Debt (current level): $16,110,070
- Interest Coverage Ratio: -1.4
