Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Micro Strategy Bubble Mania - 10th May 24
Biden's Bureau of Labor Statistics is Cooking Jobs Reports - 10th May 24
Bitcoin Price Swings Analysis - 9th May 24
Could Chinese Gold Be the Straw That Breaks the Dollar's Back? - 9th May 24
The Federal Reserve Is Broke! - 9th May 24
The Elliott Wave Crash Course - 9th May 24
Psychologically Prepared for Bitcoin Bull Market Bubble MANIA Rug Pull Corrections 2024 - 8th May 24
Why You Should Pay Attention to This Time-Tested Stock Market Indicator Now - 8th May 24
Copper: The India Factor - 8th May 24
Gold 2008 and 2022 All Over Again? Stocks, USDX - 8th May 24
Holocaust Survivor States Israel is Like Nazi Germany, The Fourth Reich - 8th May 24
Fourth Reich Invades Rafah Concentration Camp To Kill Palestinian Children - 8th May 24
THE GLOBAL WARMING CLIMATE CHANGE MEGA-TREND IS THE INFLATION MEGA-TREND! - 3rd May 24
Banxe Reviews: Revolutionising Financial Transactions with Innovative Solutions - 3rd May 24
MRNA - The beginning of the end of cancer? - 3rd May 24
The Future of Gaming: What's Coming Next? - 3rd May 24
What is A Split Capital Investment Trust? - 3rd May 24
AI Tech Stocks Earnings Season Stock Market Correction Opportunities - 29th Apr 24
The Federal Reserve's $34.5 Trillion Problem - 29th Apr 24
Inflation Still Runs Hot, Gold and Silver Prices Stabilize - 29th Apr 24
GOLD, OIL and WHEAT STOCKS - 29th Apr 24
Is Bitcoin Still an Asymmetric Opportunity? - 29th Apr 24
AI Tech Stocks Earnings Season Opportunities - 28th Apr 24
S&P Stock Market Detailed Trend Forecast Into End 2024 - 25th Apr 24
US Presidential Election Year Equity Performance in the Presence of an Inverted Yield Curve- 25th Apr 24
Stock Market "Bullish Buzz" Reaches Highest Level in 53 Years - 25th Apr 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Barrick Gold Corporation: Buy, Sell or Hold?

Commodities / Gold & Silver Stocks Oct 17, 2011 - 03:20 AM GMT

By: Bob_Kirtley

Commodities

Best Financial Markets Analysis ArticleBarrick Gold Corporation (ABX) has a market capitalization of $48.21bln and is the largest gold mining company in the world. There are 999 million shares in circulation, 72% of the companies stock is held by the Institutions and it is reasonably liquid in that its average volume of shares traded is between 4 and 8 million per day, however, it can spike to 100 million shares on a very busy day.


Its sheer magnitude makes Barrick an attractive vehicle for the larger funds and investors to access and exit the gold market with ease. Smaller gold producers do not offer this facility as to move large amounts of funds into and out of them could possibly effect the stock price at an inopportune time.

Background:

Barrick is the gold industry leader, with a portfolio of 26 operating mines and advanced exploration and development projects located across five continents, and large land positions on some of the world’s most prolific and prospective mineral trends. The Company also has the largest reserves in the gold industry, with about 140 million ounces of proven and probable gold reserves. In addition, Barrick has 6.5 billion pounds of copper reserves and 1.07 billion ounces of silver contained within gold reserves as of December 31, 2010. In July, 2011, Barrick acquired Equinox Minerals which adds a further 4.5 billion pounds of copper reserves from the Lumwana mine and 1.2 billion pounds of copper reserves from the Jabal Sayid project.

For 2011, Barrick expects gold production of 7.6-8.0 million ounces at total cash costs and net cash costs of $450-$480 per ounce or $290-$320 per ounce, respectively. The Company also expects 2011 copper production of 455-475 million pounds at total cash costs of $1.55-$1.70 per pound.

The Company is targeting growth in annual gold production to 9.0 million ounces within five years, which includes production from the newly expanded Cortez mine, two advanced development projects, the Pueblo Viejo and Pascua-Lama projects, as well as additional opportunities around existing operations. 

Going forward you might want to note that the Third Quarter Results will be released on October 27th, before the markets open.

The management team consists of high profile board members such Peter Munk, who is the Founder and Chairman of the Board of Barrick Gold Corporation and Aaron Regent who was appointed President and Chief Executive Officer of Barrick Gold Corporation since 16thJanuary 2009.

We will now take a look quick at how they have been performing over the last decade or so when compared to gold itself.

The chart above says it all, in our humble opinion and its not too good for Barrick.

It would have been more profitable to have owned gold than this stock.

This chart compares Barrick Gold Corporation and the price of Gold over the last 11 years or so. As we can see gold has outperformed the giant gold producer by a considerable margin.

It should also be noted that Barracks stock price traded at around $53.00 in early 2008 and today it can be purchased for $48.24. The companies recovery since the late 2008 sell off has been slow and doesn't reflect the progress made by the underlying asset, gold. 

Barrick does however pay a dividend, but, at $.0.12 per quarter for the previous four quarters, which gives us a return of $0.48 for the year or approximately 1% of the stock price, it doesn't make up for the stocks poor performance.

So whats the problem? Well it appears to us to be too big to perform.

Once a mine enters the production phase it is only a matter of time before it is exhausted and the production slows to a point where it becomes uneconomical to continue. In Barrick's case this means that they have to replace their massive reserves through either organic growth and via new acquisitions, at some canter, just to stay were they are. This stock is a lumbering giant that does not have the ability to keep up with gold prices and therefore any leverage to gold is non-existent. Without a leveraged return there is no point in investing a gold producer as it brings with it a myriad of risks that you can avoid by owing gold itself.

On the positive side Barrick's P/E ratio is down to 12.58 which is a tad better than many of its competitors. Also, having such huge reserves should bode well for the company should gold prices rocket, as many expect them to do over the coming months and years. However, performance is all about comparison and there other vehicles which have outperformed Barrick so far and they could well do so in the future.

Conclusion:

In conclusion we do not own this stock, nor do we intend to acquire it in the future. If we did own it we would be looking to unload it during the next rally.

To stay updated on our market commentary, which gold stocks we are buying and why, please subscribe to The Gold Prices Newsletter, completely FREE of charge. Simply click here and enter your email address. (Winners of the GoldDrivers Stock Picking Competition 2007)

For those readers who are also interested in the silver bull market that is currently unfolding, you may want to subscribe to our Free Silver Prices Newsletter.

DISCLAIMER : Gold Prices makes no guarantee or warranty on the accuracy or completeness of the data provided on this site. Nothing contained herein is intended or shall be deemed to be investment advice, implied or otherwise. This website represents our views and nothing more than that. Always consult your registered advisor to assist you with your investments. We accept no liability for any loss arising from the use of the data contained on this website. We may or may not hold a position in these securities at any given time and reserve the right to buy and sell as we think fit.
Bob Kirtley Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in