Barrick Gold (GOLD) is a Canadian mining company, and one of the world’s largest producers of gold.
The mining house also produces copper, which has added significant value to top-line growth in recent years.
I’m bullish on the stock. (See GOLD stock charts on TipRanks)
Performance, Valuation Metrics
Barrick Gold has surprisingly underperformed over the past year, with the stock trading down by more than 30%. Being positively correlated to gold prices, Barrick shot up abruptly alongside gold as the pandemic lockdowns started.
As Gold continued to oscillate between the $1,800 and $1,950 per ounce levels, Barrick stock surprisingly experienced a significant downturn. This presents an excellent dip-buying opportunity.
Gold has consolidated itself around the $1,800 mark, with Delta variant fears influencing prices. Copper prices have also consolidated above $4 per pound after an initial pullback with chip shortage fears.
Barrick Gold currently trades at a discount to its sector. Its P/E trades at a discount of 12.3%, and EV/EBITDA at a discount of 32%.
Randgold Merger, Nevada Gold Mines
Barrick Gold and Randgold merged in 2019 in a share-for-share deal. The results of the merger are tangible, as Barrick has managed to bolster its revenue by 34.2% and 29.6% respectively, over the past two full fiscal years.
Another significant change to Barrick’s structure is the establishment of Nevada Gold Mines. Newmont Mining (NEM) and Barrick Gold established Nevada Gold Mines in 2019, with Barrick Gold being the majority shareholder.
The entity operates various underground and open-pit mines, and Barrick continues to allocate a significant amount of its exploration budget to the entity.
NGM should contribute significantly to Barrick’s earnings in the future. Maintenance work took place at a variety of its mines and processing facilities during Q2, which increased the company’s expected cost of sales, subsequently diminishing earnings expectations (mining stocks and earnings expectations hold a close correlation).
Wall Street’s Take
Wall Street thinks Barrick Gold is a Strong Buy, with five unanimous Buy ratings. The average GOLD price target of $27.48 implies 34.8% upside potential.
Disclosure: At the time of publication, Steve Gray Booyens did not have a position in any of the securities mentioned in this article.
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