Barrick Gold's (ABX) stock has taken a beating this year along with most gold and precious metals producers as uncertainty in the broader stock market spilled over mining equities.
2011 was a stellar year for Barrick as production totaled 7.7 million ounces of gold at net cash costs of $339 per ounce. Exploration programs were successful as well with gold reserves rising to 139.9 million ounces and 12.7 billion pounds of copper.
For 2012 gold production is estimated to come in between 7.3 and 7.8 million ounces at a net cash cost between $400-450 per ounce while 2012 copper output is floor hedged at $3.75 per pound.
First quarter gold production reached 1.88 million ounces with 117 million pounds of copper production. The net cash cost for gold totaled $432 per ounce broken down to a total cash cost of $545 per ounce for gold and $2.08 per pound of copper. The first quarter dividend was raised once again, this time to twenty cents per share giving the stock a yield of more than 2%..
The 2012 exploration budget is totaling between $450 and 490 million dollars with $65 million allocated to Goldrush in Nevada. Currently, there are 11 drill rigs operating at Goldrush and 14 drill rigs at Turquoise Ridge targeting resource upgrades and additions as both have significant upside potential.
In terms of the development pipeline, Pueblo Viejo is on track for production to begin in mid-2012 and Jabil Sayed will see a production start in the second half of 2012. Cost guidance at Pascua Lama will be under review during the second quarter of 2012.
Barrick recently tapped the debt market selling $1.25 billion of 10 year bonds at 3.85% and $750 million of 30 year bonds at 5.25% indicating strong credit demand for the industry's highest rated borrower. The proceeds were used to pay down revolvers in connection with the purchase of Equinox Minerals Limited.
It is unusual to find a large cap mining company with a significant growth profile but Barrick provides that to investors. In 2012 two major projects will be online providing significant cash flow to investors in coming years as production ramps up.
Despite being a large cap mining stock Barrick gets no respect from investors. Exploration programs are yielding significant discoveries easing the need to go outside the firm to add additional ounces. This is one reason the stock prices of juniors have collapsed in recent years.
A stock with a single digit PE ratio and 2+ percent dividend yield adding billions of cash flow in coming years as major projects come online should be a seen as a core holding for gold stock investors portfolios.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in ABX over the next 72 hours.
