Barrick Gold: The Upside

After revising its gold forecasts lower, with average prices down from $935 per ounce to $850 in 2009, from $965 to $875 in 2010, and from $1000 to $900 for the long term, Barrick Gold Corp. (ABX) still got an upgrade from RBC Capital Markets. After all, based on a price target that was cut from $45 per share to $36, it is still expected return roughly 55%.

Analyst Stephen Walker moved his rating to “outperform” from “sector perform,” telling clients that Barrick is a low-risk investment that is in a good position to weather the credit crisis even if gold prices fall lower than his firm’s forecasts.

The share price is expected to be driven by the company’s 7.4 million ounces of production in 2009 and three new low-cost mines that should be completed in the next three years.

Barrick also boasts 125 million ounces of gold reserves in low-risk jurisdictions and 175 million in total, with the option to develop any or all of its four advance-stage feasibility projects.

At costs of $428 per ounce and gold at $850, Barrick would generated an estimated $900 million in free cash flow, after $1.5 billion in capital spending, according to RBC.

All dollars are US$ unless otherwise indicated.

Comments

[SW Richmond:]

If Barrick could get its hedge book straightened out it would be an OK company.

www.mineweb.com/minewe...

"Global hedging has fallen 10.3 Moz in the first nine months of 2008, but it is likely that full year dehedging will still be in our forecast range of 10-12 Moz as Q4 08 dehedging should slow sharply. In 2009 this slowdown will continue, as AngloGold Ashanti will have finished their dehedging programme, and together with Barrick they account for all but 4-5 Moz of global hedging. Nevertheless we expect further modest dehedging, with perhaps 1 Moz a quarter. However it is almost impossible to predict turning points, and the possibility of both much higher and much lower dehedging - or even an increase in hedging, cannot be discounted."

2008 Nov 07 02:01 PM

[BRAD IN ANA...:]

Physical gold silver and platinum is very diffiuclt to obtain and trading at huge premiums over spot. One ounce silver American Eagles are selling for $20 each or $360 for a roll of 20. Silver is under $10 an ounce on the exchange. Gold American Eagles are trading at over $900 and spot gold is under $750 and platinum 1 ounce anything is trading over $1200 with platinum under $850 an ounce on the commodities exchange. There is no change in sight. The physical product is trading at much higher prices and something has to happen. It is our prediction that the metals will rise to a price that will cause the supply to flow again. Silver over $20 Gold over $950 and Platinum over $1500 and rising. If you buy physical product your downside is very limited. Stay out of the futures as the Big boys will take you down. Bradley B Mugar anaheimjewelry.com
Bradley B. Mugar
Business Owner
Anaheim Jewelry & Coin

888-476-5397 (toll-free)
714-974-6362 (local)
714-345-8906 (mobile)
714-998-6067 (fax) anaheimjewelry.com

2008 Nov 08 07:37 PM