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查看配图View of Mineros' Nechi Alluvial operation in Colombia. Credit: Mineros.
Mineros (TSX: MSA; US-OTC: MNSAF) bought $137.3 million (C$195.7 million) of bullion in the third quarter and expanded its borrowing against physical gold, drawing an analyst warning that its treasury strategy is adding risk despite strong mining profits.
The purchases pushed reported quarterly operating cash flow below zero, Mineros said Wednesday. Mineros ended September with $54 million in cash and $127.7 million in borrowings, then added gold-backed financing agreements that require additional cash collateral if prices fall, according to its quarterly filings.
“We continue to view the treasury strategy negatively and now add margin call exposure to the risks,” Red Cloud mining analyst Alina Islam said Friday in a note. Mineros’ treasury strategy “is taking up a growing share of the balance sheet and adding leverage.”
Increased exposure
The strategy increases Mineros’ exposure to the metal beyond the gold it produces in Colombia and Nicaragua. Higher bullion prices could benefit its holdings, but a decline could create calls for cash at the same time weaker prices reduce mining revenue.
The company’s explanation is that retaining exposure to gold aligns its treasury with investors who buy the shares for exposure to the sector. Management considers the holdings part of its capital-management policy, CEO Daniel Henao said.
“This position reflects our view that gold remains an effective long-term store of value in the current macroeconomic environment,” Henao said in the results release.
Borrowing against bullion
Mineros already had 15,601 oz. of gold tied to repurchase agreements at Sept. 30. Its Swiss subsidiary posted 20,000 oz. of gold on Oct. 16 for net proceeds of $73.2 million after an $8.7-million cash collateral deposit, followed by 8,981 oz. on Oct. 29 for $32 million.
Repurchase obligations fall due in October 2027 and February 2027, respectively. Mineros guarantees the obligations and retains the exposure to changes in gold prices.
Islam calculated that about 88% of the company’s physical gold was pledged under the agreements. That estimate combines September’s pledged gold with the October transactions and assumes no intervening changes in holdings or earlier agreements.
Borrowings at the September quarter-end were more than eight times their level at the end of 2025, before the October transactions.
Forward contract
The gold exposure also included a forward contract to buy 18,650 oz. at $4,740 per oz. As of Sept. 30, Mineros recorded a $10.5-million liability on that contract and had posted $12.5 million in cash margin. It also recognized an $11.9-million non-cash write-down on allocated bullion.
The financing comes as shareholders prepare to vote on a special dividend of 20¢ a share, totalling about $58 million, at a Nov. 24 meeting. The proposal was announced Oct. 23, between the two gold-backed financing transactions.
If approved, the payment would be made Dec. 4 to shareholders of record Dec. 1, in addition to the ordinary dividend. Mineros expects to fund it from cash on hand and operating cash flow.
As of Sept. 30, the company also reported $145.4 million of unpledged precious metals in its net cash calculation, which put net cash at $71.7 million after borrowings. That company-defined measure treats available precious metals as cash equivalents for this calculation.
Strong quarter
The mining business delivered quarterly adjusted earnings before interest, taxes, depreciation and amortization of $140 million, 55% more than a year earlier, the company reported. Net income was $89.5 million, or 30¢ a share, compared with 18¢ a year earlier. The realized gold price averaged $4,301 per ounce.
Reported operating cash flow was negative $21.6 million after bullion purchases. Before those purchases, the company’s operating cash flow before strategic gold purchases was positive $115.7 million.
Quarterly gold production rose 13% to 62,253 ounces. Mineros’ full-year forecast stands at 235,000 to 245,000 oz., following an increase announced in October. Its Hemco plant expansion in Nicaragua is due for completion by year-end.
The stronger earnings, index inclusion, share buybacks and proposed dividend could all support the stock in the near term, Islam said.
Mineros shares dropped 3.4% to C$8.53 in Toronto Friday afternoon, valuing the company at about C$2.5 billion. That cut their gain since the start of the year to about 56%.
“Gold that cannot be sold or repledged, and that may require margin calls in a falling market, is better viewed as collateral, not liquidity,” Islam said.