INVESTMENT THESIS
Barrick Gold Inc. (NYSE: GOLD) based on our expectations for sustained strong gold prices in the coming quarters. Our long-term rating also remains BUY.
RECENT DEVELOPMENTS
On November 5,Barrick reported 3Q adjusted net income of $726 million or $0.41 per share, up 78% sequentially and 173% year-over-year. Revenue rose 32% year-over-year to $3.54 billion.
Barrick reported solid 3Q results despite COVID-19 challenges. The company has made substantial financial donations to countries where its mines are located to help combat the pandemic.
From a technical standpoint, gold recently broke out of a three-year trading range into a bullish pattern of higher highs and higher lows, though it has since come down from its highs. As long as global economic uncertainty and virus fears are part of the market conversation, gold is likely to remain in demand.
EARNINGS & GROWTH ANALYSI
Barrick has gold and copper mining operations and projects in North and South America, Africa, Papua New Guinea, and Saudi Arabia.
The company generates revenue by mining and selling gold and copper. Gold production of 1.15 million ounces was up 1% sequentially in the third quarter, and overall nine-month production of 3.55 million ounces was on track to reach management’s full-year guidance of 4.6-5.0 million ounces. The average market price for gold in the third quarter was $1,926 per ounce. All-in sustaining costs were $966 per ounce.
Third-quarter copper production fell 14% sequentially and 8% year-over-year to 103 million pounds. The average market price for copper was $3.28 per pound. All-in sustaining costs were $2.31 per pound.
Management reaffirmed 2020 guidance. It projects 2020 gold production of 4.6-5.0 million ounces, and a cost of sales of $980-$1,030 per ounce, with an AISC of $920-$970 per ounce. It also expects production of 440-500 million pounds of copper, with an AISC of $2.20-$2.50 per pound.
FINANCIAL STRENGTH & DIVIDEND
The company has worked hard to pay down debt. The company has no significant maturities until 2033. Barrick pays a dividend.
MANAGEMENT & RISKS
Mark Bristow has been the CEO of Barrick since the company’s merger with Randgold on January 1, 2019. He was previously the CEO of Randgold. Graham Shuttleworth is the CFO; he had been CFO of Randgold since 2007.
Investors in GOLD shares face risks. The primary risk for investors is gold and copper price volatility.
COMPANY DESCRIPTION
Barrick Gold engages in the production and sale of gold, including exploration, development, mining and processing. Its operations are located in the United States, Canada, Australia, Peru, Chile, Argentina, Tanzania, and Zambia. Barrick was founded in 1983 and is based in Toronto.
VALUATION
On November 23, BUY-rated GOLD closed at $23.24, down $1.04.
Source: Argus
