Goldcorp Inc. (USA) (GG), Teck Resources Ltd (USA) (TCK), Cliffs Natural Resources Inc (CLF): Plunging Gold Prices Brought on These Spending Cuts

Cost cutting really has been the theme for miners this earnings season. It was the highlight in Cliffs Natural Resources Inc (NYSE:CLF)‘ latest release, in which the company noted that its selling, general, and administrative expenses (SG&A) were cut by 44% year over year. This enhanced Cliffs Natural Resources Inc (NYSE:CLF)’ profitability and enabled the company to produce $414 million in cash from operations during this past quarter. It’s not done cutting costs just yet — the company is looking to take another $25 million off the top. To get there, it’s shaving its exploration budget by $10 million, while cutting another $15 million of its SG&A. Taken together, that’s $25 million cut from the planned $315 million budget.

The company has been using the money it’s saving to pay down its debt; last quarter, Cliffs Natural Resources Inc (NYSE:CLF) was able to slash $110 million off its debt levels. It was its hefty debt levels that caused the company to undercut its historical dividend and raise equity earlier this year. However, its now using this increased balance sheet flexibility to boost its planned capex budget this year. This new plan has the company adding about $200 million to bring its capex to a billion dollars this year for two projects at its Bloom Lake Mine.

Mining companies really need to react quickly to changing commodity prices. This past quarter both coal and gold plunged 23%, which has necessitated these belt-tightening moves. Companies that don’t react quickly enough to these changes could end up racking up piles of debt, which makes for some really tough cuts later on, as Cliffs Natural Resources Inc (NYSE:CLF) investors saw this past year when the company slashed its dividend. That’s why it’s important to see how quickly a company like Goldcorp Inc. (USA) (NYSE:GG) is reacting to the changing gold market.

The article Plunging Gold Prices Brought on These Spending Cuts originally appeared on Fool.com and is written by Matt DiLallo.

Fool contributor Matt DiLallo has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

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