Barrick Gold – Not a steady bet

Barrick Gold is a leading gold mining company in the world. The company engages primarily in gold and copper operations as well as exploration and mine development. Barrick Gold’s merger with Randgold Resources has created a sector-leading gold mining company. 

Barrick Gold sells its products in the world market through different distribution channels like the gold spot market and independent smelting companies. The company has a diversified portfolio spanning across the world’s prolific gold districts. Barrick has gold and copper mining operations and projects in 13 countries in North and South America, Africa, Papua New Guinea, and Saudi Arabia.

More than 40% of its revenue is derived from the U.S. The company focuses on high-margin, long-life assets and operates six Tier-1 gold mines. Its reportable segments are Carlin (18% of 2019 revenues), Cortez (~13%), and Turquoise Ridge in Nevada, and Loulo-Gounkoto (~10%), Pueblo Viejo (~14%), Kibali (~45%).

Barrick Gold has over 61% ownership rights on Nevada Gold, which is the single largest gold-producing complex in the world. Its mining operation comprises 8 mines with advanced infrastructure and processing facilities.

ABX is also available as a dual listed stock trading under GOLD on the NYSE. It’s a good way to keep the dividend in USD.

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Key Investment Data

 


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Revenue Growth & Market Exposure

Barrick’s gold business is supported by its robust copper business. The company derives ~95% of its revenues from gold sales and the balance of 5% from copper. It is the owner of a diversified asset portfolio located in many of the world’s richest gold areas. Barrick Gold is in a good position to realize the full potential of Nevada mines through synergies and best-in-class operational improvements. It is also favorably placed for new discoveries and organic growth from its existing asset base. The company also has a presence in the under-explored and emerging frontiers. 

Barrick Gold continues to expand its global exploration portfolio with new projects and targets. The company met its 2020 production targets amidst the COVID-19 pandemic and delivered consistent operating performance across all quarters. It should benefit from commencement of work at the Pueblo Viejo plant, on-track ramp-up of Bulyanhulu and ongoing improvement at Turquoise Ridge. An uninterrupted supply chain and engagements with key suppliers helped in mitigating volatility and uncertainty. 

Dividends

Barrick Gold sports a dividend yield of 1.6% and has a low dividend payout ratio of 27%. The company last raised its dividend by 12.5% and achieved a dividend growth rate of more than 35% CAGR in the last three years. The quarterly dividend of 9 cents per share increased threefold since the Randgold merger announcement. Barrick proposed to return $750 million of capital to shareholders in 2021.

Though the demand for physical gold slid due to the pandemic, it continued to be a preferred choice of investment in the investment community. The average price of gold in 2020 was $1,770/oz, a 27% increase over the $1,393/oz average in 2019, representing the fifth straight year of annual average price increases.

Copper is a valuable industrial metal and was a meaningful contributor to Barrick’s bottom line in 2020. Favorable fundamentals for electric vehicles act as a tailwind for copper demand in the long run. Barrick has the lowest cash cost amongst its peers and has at least ten years of productive life remaining.

Barrick Gold’s share prices have significantly gained after the merger with Randgold Resources. The company has also reduced its debt load from near $13 billion at the end of 2014. It has no significant debt maturities until the next ten years. Barrick delivered a strong free cash flow of $3.4 billion in the last year which has increased more than ninefold since the merger was completed two years ago. The company’s net operating cash flow also increased by 91% YoY.

Barrick Gold (ABX) historical yield
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Competition

Barrick Gold competes with the likes of Goldcorp and Agnico Eagle. Goldcorp is a global gold producer with a portfolio of long-life, high-quality assets throughout the Americas. Agnico Eagle is a leading gold miner having mines in Canada, Finland, and Mexico with extensive experience of more than 60 years.

An integrated supply chain stretching over multiple continents, operating presence in prolific gold districts, dedicated international partnerships, and industry-leading logistical arrangements are Barrick Gold’s key strengths.

TickerKeyTickerCompanySectorIndustryScoreQuoteMarket CapP/EFPEEPSYield RawYieldPayoutRatioPaymentsDividendChowderGrowthRatingIncomeRatingTollboothAmbassadorAchieverAristocratKingCountryGraph
TSE:NGTNGTNewmontBasic MaterialsGold0.3078.2162.600.000.004.450.03513.511.000042.200.035123IntermediateNONONONOCanada1
TSE:ABXABXBarrick GoldBasic MaterialsGold0.4527.1648.3015.7315.731.640.01651.650.237040.360.016525IntermediateNONONONOCanada1
TSE:FNVFNVFranco-Nevada CorpBasic MaterialsGold0.45199.5538.1251.3051.303.790.00750.750.335041.200.049764IntermediateYESYESYESNOCanada1
TSE:WPMWPMWheaton Precious Metals CorpBasic MaterialsGold0.4757.6325.9436.2436.241.590.01211.210.352040.560.095853IntermediateNONOYESNOCanada1
TSE:AEMAEMAgnico Eagle MinesBasic MaterialsGold0.6380.7119.6720.9820.983.580.02162.160.402041.400.202675IntermediateNONOYESNOCanada1
TSE:FMFMFirst Quantum Minerals Ltd.Basic MaterialsCopper0.3426.7218.4546.3146.310.810.00040.040.016020.010.000423IntermediateNONONONOCanada1
TSE:TECK.BTECK.BTeck ResourcesBasic MaterialsOther Industrial Metals & Mining0.1528.4815.2298.6398.631.940.00700.700.000040.200.007001IntermediateNONONONOCanada1
TSE:PAASPAASPan American Silver CorpBasic MaterialsSilver0.4335.037.3723.9423.941.760.01001.000.204040.280.010033IntermediateNONONONOCanada1
TSE:BTOBTOB2GoldBasic MaterialsGold0.505.235.506.836.830.630.03823.820.229040.160.038245IntermediateNONONONOCanada1
TSE:YRIYRIYamana GoldBasic MaterialsGold0.385.595.4025.3025.300.450.02352.350.550040.110.035314IntermediateNONONONOCanada1
TSE:AGIAGIAlamos GoldBasic MaterialsGold0.2810.143.98143.65143.650.670.01231.230.247040.100.025731IntermediateNONONONOCanada1
TSE:OROROsisko Gold RoyaltiesBasic MaterialsGold0.3517.012.8569.0169.010.320.01181.180.818040.200.047542IntermediateNONONONOCanada1
TSE:SVMSVMSilvercorp MetalsBasic MaterialsSilver0.316.201.0918.9818.980.320.00500.500.835020.030.005012IntermediateNONONONOCanada1

Bottom Line

Barrick has continued to reduce its debt, grow cash from operations, and maintain its dividend. As one of the largest gold miners in the world, Barrick Gold should gain from the rising gold prices. It continues to make significant progress since the transformational merger with Randgold towards becoming the world’s most valued gold company.

Barrick Gold’s focus on Tier-1 mines should also support its steady and low-cost production in the future. It is an industry leader in technological innovation and is well-positioned to adapt to changing values and expectations.

If you aren’t comfortable holding the stock, check out the Canadian Gold ETFs. The company is also a dual listed stock and can be found on the NYSE.

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Barrick Gold (ABX) historical PE
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