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The stock market is currently valuing Barrick Gold Corp (NYSE:ABX) at $49 billion. This valuation represents a significant discount to ABX's true value based on its assets.

Estimated Reserves

Gold

  • 140 million ounces
  • $1750 per ounce
  • $245 billion

Silver

  • 1.07 billion ounces
  • $34 per ounce
  • $36 billion

Copper

  • 6.5 billion pounds
  • $3.85 per pound
  • $25 billion

Based on these numbers, ABX's reserves are valued at $306 billion. However, this is not the number that should be used to calculate what ABX is worth. Rather, we need to subtract the costs involved in mining the metals. The best way to account for ABX's expenses involved in mining is by looking at ABX's margins.

ABX's operating margins currently stand at 46.49%. By applying this number to the reserve ratio ($306 billion) we find that ABX's reserves are really worth about $142 billion after mining costs. However, this is still not the final value of ABX. We still need to account for expenses such as taxes and interest payments on debt. The net profit margin will accomplish this.

ABX's net profit margin currently stands at 31.05%. By applying this number to the reserve valuation ($306 billion) we find that ABX is worth a minimum of $94 billion based on asset valuation.

There are currently 1 billion shares outstanding for ABX. By dividing the $94 billion by 1 billion we find that the valuation for ABX should be about $94 per share.

Conclusion

ABX is undervalued based on the current valuation of its assets.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.