Barrick Gold (ABX) has been down lately. It's on the lower end of its 52-week range and down nearly 20% from where it began 2012. For that reason, it's good news that the company has named a new CFO, who also happens to be an old employee from the company.
Recently Barrick Gold announced that Ammar Al-Joundi, current senior vice president for finance and chief financial officer at Agnico-Eagle Mines (AEM), will return to work at Barrick Gold after a brief absence in the capacity of senior vice president and chief financial officer. Before working for Agnico-Eagle Mines, Al-Joundi worked for Barrick Gold for 11 years in a variety of different positions. He has a great deal of experience in the business and will no doubt serve as an excellent asset for the company now that he is back on its staff. This change is the second one that seems to be aimed at improving the company's share prices. Recently, Barrick Gold also ousted its CEO citing that he was responsible for the drop in share prices it was experiencing at that time. The reshuffling that occurred as a result opened up the CFO position for Al-Joundi.
A change in management is often a refreshing one for many companies, so it will be interesting to monitor the situation and see where Barrick Gold goes now that it has made the afore mentioned changes to its company and leadership structures. It cannot be denied that the company has indeed experienced less than ideal share prices of late. An overhaul of the management structure may be the way to address this. Or it may not. It really depends on the skills and methods of the leaders chosen. Al-Joundi is an experienced veteran in the field, so overall I feel that this will be a positive move for the mining company.
Following this news, Barrick Gold shares dropped very slightly, but it is not clear at this point whether or not this is in fact due to the news of the new CFO or if it is merely a coincidence that the two events happened to coincide. What we can say for sure is that Barrick Gold has not been performing at its best in recent weeks and months and that the company needs to do something in order to change this situation. Target prices for Barrick Gold have gotten as high as $78, which seems outlandish, but even the median target price sits around $58, which seems less and less likely for the year.
Whether or not the management change is the best method for dealing with the situation is something that has yet to be determined, but at least the company is taking action and responsibility for the change that so desperately needs to take place.
Al-Joundi, needless to say, comes at a tumultuous time in the company's history. On one hand, Barrick Gold recently lost a court case to Goldcorp (GG) regarding the ownership of a big El Morro gold-copper project in Chile. As Goldcorp is a far smaller company than Barrick Gold this really is a significant win for that mining stock. Essentially the court ruled that Barrick had no case in its endeavors to sue Goldcorp for blocking its rights to buy a stake in the extremely lucrative and much sought after gold and copper project.
As one analyst points out, Barrick's numbers are very similar to Goldcorp's at this point. I don't think either stock at this point is a good buy, though one could make the case for them being cheap and undervalued. Barrick has performed better over the last 5 years, though both companies are struggling in 2012 and neither seems remotely likely to reach the upper-$50 price target attributed to each.
At this point, competitor Vale (VALE) may be the best buy, if only because the company was able to increase its cash and cash equivalents by 8% up to $4.9 billion. The whole industry has been struggling since the last quarter of 2011, none more so than Cliff's Natural Resources (CLF) which is now trading under $50 after having hit $100 last July. It started the year above $75.
Vale may be the best of the worst right now. Certainly, with all the cash on hand, it presents the company with more options than both Barrick Gold or Goldcorp.
For me, Barrick is not worth considering right now. It may be undervalued, but it's in a mess of a state right now with nothing truly promising on the horizon. The hope is that Al-Joundi can come in and straighten things out to the point they were when he left the company years ago. But even then, Barrick will have done nothing to combat the weakening global economy and toughening conditions for mining stocks. Its dividend yield is 2.20% and there's really nothing else to give a glimmer of hope. The company is down more than 10% since the beginning of June, and July looks to be a month without much excitement. I suggest staying away from Barrick right now, and looking toward Vale if you're interested in staying in the industry.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.