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JPM: Barrick dilution mitigated by progress in cost cutting

  • J.P. Morgan reiterates its Neutral rating on Barrick Gold (ABX -5.7%) and lifts its target price to $19 from $18 after the miner's launch of a $3B public equity offering to pay down debt and get its capital structure under control.
  • The equity issue could be a demonstration of financial prudence or it could suggest weaker than expected 2014 operating results, JPM says.
  • News of the suspension of the Pascua-Lama project and continuing cost cuts should strengthen ABX's near-term cash flow, the firm adds.
  • The equity issuance creates ~16% dilution, but the firm says simultaneous progress with current costs and the promise of another $500M in savings seems to mitigate the impact of the higher share count, assuming the cost cuts are sustainable.
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