I am bullish on Barrick Gold (GOLD) because its share price appears to be quite cheap at the moment, even as operations and the balance sheet are stronger than ever.
Barrick Gold Corporation is a mining, heavy equipment, and engineering corporation that produces gold and copper from 16 reserves. It also engages in mine exploration and development in 13 countries across the world. The company has over 20,000 employees and was the largest gold mining company in the world, until Newmont Corporation’s acquisition of Goldcorp in 2019.
Strengths
Barrick Gold operates mines and exploration projects, using best-in-class technology, on five continents. The company has probable gold mineral reserves that stand at 130 million ounces and has a reported environmental-related spending of $90 million.
The company has the distinction of having installed the world’s highest situated wind turbine at the Veladero mine in Argentina. It is known for its operational excellence, which has consistently led the organization to meet its gold production goals.
Recent Results
Barrick Gold Corporation announced net earnings of $411 million or 23 cents per share in Q2 2021, showing a year-over-year increase from $357 million. Adjusted earnings per share were $0.29 excluding one-time items, beating consensus estimates of $0.26 by 11.54%. The company recorded total sales of $2.893 billion, which shows a decrease of 5% year-over-year and missed consensus estimates by 2%.
Over the last four quarters, Barrick Gold has surpassed analysts’ expectations four times.
The company also reported a total gold production of around 1.04 million ounces, a decrease of 9% from 1.15 million ounces. The average realized price of gold was $1,820 per ounce in Q2 2021, showing an increase of 6% year-over-year. Copper production also declined to 96 million pounds year-over-year, and its average realized price was listed as $4.57 per pound year-over-year, showing a 64% increase.
At the end of the quarter, the company showed cash and cash equivalents of $5.138 billion with a total debt of $5.152 billion. This showed an increase of 37% and a decrease of 0.3% year-over-year, respectively.
For 2021, the company expects attributable gold production of 4.4 to 4.7 million ounces at an AISC of $970-$1,020 per ounce and copper production of 410 to 460 million pounds with an AISC of $2.00 to $2.20 pounds.
The company’s capital expenditures are expected to be in the range of $1.8 billion and $2.1 billion.
Valuation Metrics
Barrick Gold’s stock looks attractively valued right now, as its EV/EBITDA ratio and Price to Normalized Earnings ratio both indicate the stock is trading below its historical average. The EV/EBITDA ratio is currently 5.26x, compared to its 5-year average of 6.22x. The Price to Normalized Earnings ratio is currently 14.59x, compared to its 5-year average of 16.92x. (See GOLD stock charts on TipRanks)
Wall Street’s Take
From Wall Street analysts, Barrick Gold earns a Strong Buy analyst consensus, based on 5 Buy ratings, 1 Hold rating, and 0 Sell ratings in the past 3 months. Additionally, the average Barrick Gold price target of $27.30 puts the upside potential at 47.97%.
Summary and Conclusions
Barrick Gold is a leading global precious metals and copper miner with strong leverage to the price of gold. Furthermore, it enjoys a stellar balance sheet and efficient operations that should insulate it well from down cycles in the gold price. Best of all, it appears to be trading at a discount, and Wall Street overwhelmingly appears to agree. As a result, it might be a good time for investors to buy shares.
Disclosure: At the time of publication, Samuel Smith had a long position in GOLD.
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