Mineros’ gold bet raises cash and collateral risks
The strategy increases Mineros’ exposure to the metal beyond the gold it produces in Colombia and Nicaragua.
Mineros (TSX: MSA; US-OTC: MNSAF) increased its exposure to gold by purchasing $137.3 million worth of bullion in the third quarter and taking on additional borrowing against physical gold. Analysts warn that this treasury strategy is adding risk despite the company's strong mining profits. As of September, Mineros had $54 million in cash and $127.7 million in borrowings.
The company added gold-backed financing agreements that require additional cash collateral if prices fall. Red Cloud mining analyst Alina Islam noted that the treasury strategy now poses margin call exposure to the risks.
Mineros' strategy amplifies its exposure to gold beyond the gold it produces in Colombia and Nicaragua. Higher gold prices could benefit its holdings, but a decline could trigger cash calls at a time when weaker prices reduce mining revenue. The company defends the holdings as part of its capital-management policy, reflecting its belief that gold remains a long-term store of value in the current economic climate.
Mineros already held 15,601 oz. of gold in repurchase agreements at the end of September. Its Swiss subsidiary added 20,000 oz. of gold on October 16 for $73.2 million in net proceeds after depositing $8.7 million in cash collateral. Two more transactions followed on October 29 for an additional $32 million. Repurchase obligations are due in October and February 2027, respectively, and Mineros guarantees these obligations while retaining exposure to changes in gold prices.
About 88% of the company's physical gold is pledged under the agreements. This borrowing level is more than eight times its end-2025 figure. A forward contract to buy 18,650 oz. at $4,740 per oz. is included in the gold exposure, with a $10.5-million liability recorded and $12.5 million in cash margin posted as of September 30. A non-cash write-down of $11.9 million on allocated bullion is also recognized.
As shareholders prepare to vote on a special dividend of 20¢ per share, Mineros expects to fund it from cash on hand and operating cash flow. The company's strong quarterly earnings, index inclusion, share buybacks, and proposed dividend may support the stock in the near term. Mineros shares fell 3.4% to C$8.53 in Toronto on Friday, valuing the company at approximately C$2.5 billion.
Written by urgent.news from Mining.com's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.