This gold company beat analysts’ EPS estimates by $0.04 last quarter and raised its quarterly dividend by 25%, to $0.05 per share.
Barrick Gold Corporation (ABX.TO)
From Power Gold Investor
Right now, top gold stocks like Barrick Gold Corporation (ABX.TO, (TSINetwork Rating: Average) offer you a classic heads-you-win-tails-you-break-even kind of opportunity. Under the heads scenario, you should make an attractive return over the next five or 10 years; under the tails scenario, you should make an even more attractive return.
Barrick and other top gold-mining companies look better now than at any other time in the past several years: For one, they’ve taken steps to cut their mining costs and expand their gold output; two, their shares have been poor performers since around 1990, while the rest of the market shot up. This makes them cheap despite their recent surge. Since May, gold has jumped to six-year highs. Barrick stock has climbed 53% over that time. We’re confident it has much more growth to offer investors. Why?
If inflation rises these next few years (a clear possibility), gold stocks will attract new interest to keep pushing up prices. If gold-loving markets in Asia and other emerging markets continue to expand, consumer gold purchases will rise as well. That will take Barrick even higher. Still, if the global economy continues to sputter, the stock should hold onto its gains and its appeal as a “safe harbor” for investors.
Barrick is the second-largest gold mining company in the world after Newmont Goldcorp (NEM). Barrick has its headquarters in Toronto, Canada and has mining operations and projects in 15 countries, including Argentina, Australia, Canada, Chile, Côte d’Ivoire, Democratic Republic of Congo, Dominican Republic, Mali, Papua New Guinea, Peru, Saudi Arabia, Senegal, the U.S. and Zambia.
In January 2019, in a deal valued at $6.5 billion, Barrick merged with Randgold Resources, a gold-mining company focused on Africa. Barrick now owns five of the industry’s “Top 10 Tier One” gold assets. A Tier One gold asset is a mine that will produce at least 500,000 ounces of gold for at least 10 more years with a total cash cost within the bottom half of the industry’s cash cost-curve. With the deal, Barrick now has 78 million ounces in gold reserves.
In July 2019, Nevada Gold Mines, a joint venture with Newmont Goldcorp, began its operations. Barrick owns 61.5% and is the operator. Newmont holds the remaining 38.5%. The new firm combines their assets in Nevada to create the world’s single-largest gold-producing complex. Three of these mines are already Tier One gold mines and the Goldrush-Fourmile project has the potential to become the fourth. By eliminating duplicate processing and other operations, the partners expect to cut an average of $500 million annually from their costs within five years.
Barrick produced 1.35 million ounces of gold in the quarter ended June 30, 2019. That’s up 26.2% from 1.07 million ounces a year earlier. Revenue grew 20.5%, to $2.06 billion from $1.71 billion. Earnings reached $154 million, or $0.09, in the latest quarter. That’s up 90.1% from $81 million, or $0.07. The company expects to produce up to 5.6 million ounces of gold for all of 2019, an increase of 24.4% over 2018’s output of 4.5 million ounces.
Although some of Barrick’s assets are in less stable jurisdictions and come with a higher risk of disruption, the company has a large and diversified portfolio. That cuts some of its risk as does its big presence in mining-friendly Nevada. In fact, the company has some of the industry’s lowest production costs, and recent mergers will further cut them. Barrick’s efficiency gains—along with rising output and gold prices—give it strong appeal.
Barrick Gold is a Power Buy.
Patrick McKeough, Power Gold Investor, www.tsinetwork.ca, 888-292-0296, November 2019