Barrick Gold (ABX) seems intent on making interesting purchases all over the board. Most recently the company "signed a new software license agreement with ARANZ Geo for its Leapfrog Mining geological modeling and project evaluation software system". Barrick Gold has been using Leapfrog Mining technology for about seven years now and this new deal is a sign that the relationship will continue for many years to come. The system is beneficial to the mining company because it makes exploration activities substantially easier and more predictable to conduct. This may explain the company's slight edge over its competitors when it comes to staying ahead of the game and making new discoveries that benefit it substantially. Other mining companies could follow this lead and invest in similar technology to earn their own edge.
The company plans to purchase a gold mine in Nevada from Victoria Gold (VITFF) for $24 million. Barrick Gold is already the world's biggest mining company, and now it has increased its land in the vicinity of the highly successful Cortez mine even further. The exact size of the land the company acquired is 7000 acres.
I feel that this purchase reflects the current strategy of the company. Essentially, Barrick Gold is focused more on developing its own pipeline of projects at the expense of making huge acquisitions. At this point in time, with the substantially decreased prices of the commodity market in mind, I feel that this is a very sensible strategy for the mining company to follow. Furthermore, I believe that it is a strategy that will stand it in good light in the very near future. Barrick is able to keep its position as the largest mining company by avoiding unnecessary risks that new projects can often carry.
The Nevada purchase will increase the land that the company can devote to its Cortez operations. This too is very sensible as this is the largest mine the company owns. In addition, it is also a mine that functions at a very low cost as well as one that produces a large output. The company's latest and most significant finding also occurred in this area, namely the new site named "Goldrush" that the company expects will yield a minimum of seven million ounces. A focus on this mine will translate to success for the company very soon.
Victoria Gold elected to make the sale as it expects to use the proceeds to fund the development of its flagship Eagle gold project in Canada's Yukon Territory. We know that the land that Barrick has purchased will lead to a large output of gold. This makes me wonder whether the project that Victoria Gold hopes to fund in Yukon is not perhaps more valuable, if it was willing to sell its mine to Barrick on favor of funding another project.
Barrick Gold remains one of the strongest companies in this particular market and it is quite easy to see why. The company knows where to focus its attention in order to produce the greatest yields and this is what keeps it ahead of its main competitors.
Extremely low commodity prices and a long list of environmental stipulations may prevent BHP Billiton's (BHP) board from approving the expansion of its Olympic Dam copper and uranium mine project in South Australia. And, if the company does not provide evidence that construction has begun in the area by the end of the year, the approval granted by the Australian government to engage in that construction in the first place will be withdrawn and no extension will be granted. This could be a big blow for the productivity of the mine, and I feel that the company will not make the choice to move forward with the expansion project.
Barrick Gold, as well as other mining companies like Xstrata (XTA) and AngloGold Ashanti (AU), are among the companies that are being targeted by the Argentinean government. Basically, the government has decided that stronger import laws are required. This will affect the mining companies in that they will now have to get prior approval from the government before importing mining equipment and supplies. They may also be required to source such things locally rather than importing them in the very near future.
Another gold company that plays a role here is Goldcorp (GG). This company was recently reviewed by Fitch Ratings and the analysis reveals a number of very interesting things about the mining company. For example, this is one of the companies currently in a perfect position to benefit from the rising gold prices and will be expected to continue rising in the future. It also has numerous reserves with long mining lives ahead of them that are not located in geopolitically tense parts of the world and will therefore most likely continue producing at high levels for some time to come.
Competitor Freeport McMoRan (FCX) is experiencing some difficulties with locals at its Fungurume copper/cobalt mine, in the Democratic Republic of Congo. The locals are saying that the company has not provided them with enough in the way of compensation for the sacrifices they have had to make in order to accommodate the mine. In addition, they say that the mining company does not want to hire them. Whether or not these allegations are true, the bad press will no doubt have a negative effect on the stock and any violence that results from the situation could inhibit production.
Barrick Gold is keeping its head above the water and ahead of most its competitors too. Things are going smoothly and the company is wisely putting its profits to use in acquisitions and purchases. This should keep the company in good standing for the near future, even with reductions in prices. If this is your industry, Barrick Gold may be your best ticket.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
