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Update: Barrick Gold To Suspend Copper Mine
- Barrick Gold has announced it will suspend operations at its Lumwana copper mine in Zambia as the country hiked royalty rates to 20%.
- Barrick also plans to report an impairment charge related to Lumwana in the fourth quarter.
- This news may appear negative, but Lumwana was a higher-cost operation that wasn't very profitable to begin with. It was also mentioned in the company's Q3 report.
Insiders Are Buying Shares Of Barrick Gold - Should You?
- Barrick Gold insiders are buying shares hand over fist as the stock price is at its lowest point in two decades.
- The stock is being weighed down by the company's high debt load and a lower gold price.
- However, Barrick owns several outstanding gold assets such as the Goldstrike, Cortez, and Pueblo Viejo mines; I also like several of the company's development assets.
- I think shares of Barrick provide investors with an excellent long-term buying opportunity as a result.
Update: Barrick Gold Completes Its JV Deal With Ma'aden For Its Saudi Arabian Jabal Sayid Copper Project
- Barrick Gold just finalized its JV with Ma'aden for its Jabil Sayid Project.
- I had anticipated this and lauded the consequent de-risking of this deal in a recent article.
- Barrick is not the best gold play out there by a long shot, but it may have reached a level where it offers compelling value.
- The Pascua Lama project is an endless money pit.
- With a Q3 debt/equity ratio of 1.83 and $12.9 billion in outstanding debt, Barrick is overleveraged.
- Gold prices will continue to depreciate this quarter.
- High management turnover indicates continued business turmoil.
- Barrick Gold just announced that Shaun Usmar will take over as CFO starting February 18th.
- I had not anticipated this.
- Barrick has been shaking up management for years now, with improvements coming inconsistently, and I remain skeptical that this is a viable investment.
- Barrick Gold is set for an enormous stock jump IF the Pascua Lama project flourishes.
- Barrick dropped $12 billion cash on Equinox and Pascua Lama, and while there is really nothing to show so far, the potential gains are staggering.
- The Equinox purchase was and always will be a bust, but there is a bright future for the Pascua Lama mine.
What It Really Costs To Mine Gold: The Barrick Gold Third Quarter Edition
- Barrick’s gold-equivalent production costs on both a core and a core non-tax basis fell noticeably in the third quarter.
- Third quarter cost decreases were due to a combination of increased production and lower nominal costs.
- Though the company had a very good quarter, investors should still be careful as it will be important to see the company maintain its cost structure moving forward.
- Barrick Gold states that it hopes to proceed with the giant project.
- The company estimates that the development of the project will cost additional $4 billion.
- Deteriorating gold prices pressure Pascua-Lama's economics.
Gold Market Dynamics And Problems In Zambia Make Barrick Gold A Risky Investment
- Barrick Gold is taking a number of steps to increase production and lower costs, but weak gold pricing and demand make a turnaround difficult.
- Barrick is facing political issues in Zambia, and might be forced to exit the country after investing heavily.
- Barrick has huge debt.
- Barrick Gold has recently reported a progress in costs.
- The company stated that it wanted net debt of $7 billion.
- Yet, nothing meaningful was said on the development of Pascua-Lama.
- I expected that Barrick Gold will move faster towards Pascua-Lama solution, and now I'm less optimistic on the company's prospects.
- Barrick Gold spent $12 billion in cash on Equinox and Pascua-Lama and has nothing to show for it except for a bloated balance sheet.
- Barrick isn't going bankrupt, and even if gold declines to $950 it will survive.
- The company has $13.1 billion in debt, but the majority of that debt doesn't come due for many years, and Barrick is paying a low interest rate on the debt.
- Barrick is a low cost gold producer, and it owns some of the best gold assets in the world. The cash flow from these assets will reduce the debt load.
- Barrick would be one of the first gold companies I would buy if I were betting on a rebound in gold.
- Barrick Gold’s revenue for the third quarter rose by 7% sequentially. The adjusted EPS reached $0.19 per share – higher than expected.
- The company’s revised its outlook for gold and copper production.
- The current weakness in the gold market has crowded out the impact of the earnings report.
Fed-Stravaganza Clouds Barrick Gold's Earnings Beat; Debt Overhang Is Still Worrisome
- Barrick Gold has managed to lower costs significantly, besting senior gold peers.
- The company beat earnings estimates, topping Wall St. expectations by $0.01 per share.
- Barrick's high debt burden is overwhelming to investors and could prompt them to look for a lower risk gold play.
- Barrick Gold earned $125 million in the third quarter reflecting continued cost reduction and no major writedowns.
- I had anticipated that the company can earn a slight profit with gold prices where they are.
- Shares made a new multi-decade low on the day on weakness in the gold market; the selling is nearing an end.
- Barrick Gold produces more than I expected at a lower cost and is able to narrow down its production and cost guidance.
- The free cash flow of roughly $200M for the quarter was a positive surprise and will help to lower the company’s net debt position.
- The investment thesis doesn’t change; 2014 was better than 2013, but I’ll be looking for confirmation in 2015 and a lower net debt before investing.
- Barrick shares are trading at 15 year lows in spite of the fact that the gold price has risen more than 4X in value.
- While there are reasons to believe that there is an opportunity in light of this there continue to be risks.
- Even if you decide Barrick is a good bet there are simply too many other good ones in the gold mining space without the aforementioned risks. .
- Thus I continue to avoid the stock even at the current valuation.
- Barrick's share price would be much higher had it not been for Equinox and Pascua-Lama.
- Barrick spent $12 billion in cash on these, and doesn't have much to show for it.
- The Equinox acquisition is a bust, but Pascua-Lama can still be salvaged.
- Pascua-Lama will more than likely be a producing asset for Barrick, but it will take much higher gold prices for Barrick to make its money back.
- Barrick is still paying for these blunders, and it will take many more years before it is forgiven for these.
- Barrick Gold’s revenue for the third quarter is expected to fall by 13%, year over year.
- The current low gold prices are likely to drive down its profit margins.
- If Barrick Gold doesn’t meet its production goals and maintain its production costs low, this could adversely impact its stock.
How Will The Delay In Pascua Lama Project Affect Barrick Gold's Share Rating?
- The Pascua Lama Project was initiated by Barrick Gold’s, and is one of the world’s largest resources for gold and silver.
- The project ran into some legal difficulties and was suspended in the fourth quarter of 2013.
- The project would yield up to 800,000 to 850,000 ounces of gold and 35 million ounces of silver during the first five years, a minimum cost of $50-200 per ounce.
- Delays in construction have significantly pushed up costs over the past few years.
- The company could face some cash outflows if construction does not resume soon and operations do not start in the near future.
Yesterday, 9:07 AM
- Barrick Gold (NYSE:ABX) confirms it is suspending operations at the Lumwana copper mine in Zambia after the country passed legislation to more than triple the royalty rate on open-pit mining operations.
- "Despite the progress we have made to reduce costs and improve efficiency at the mine, the economics of an operation such as Lumwana cannot support a 20% gross royalty, particularly in the current copper price environment,” ABX says.
- ABX says it will record an unspecified impairment charge related to Lumwana in Q4; it says the operation’s current net carrying value is ~$1B.
- Earlier: Barrick Gold likely to suspend Zambian mine
Wed, Dec. 17, 6:50 PM
- Barrick Gold (NYSE:ABX) probably will take steps - perhaps as soon as tomorrow - to stop production at its Zambian operation after the country increased mining royalties, Bloomberg reports.
- Zambia's parliament approved the government's 2015 budget proposals, which will replace corporate income tax on mines with increased royalties and increase the rates on open-pit mines such as ABX’s Lumwana to 20% from 6%.
Wed, Dec. 3, 9:11 AM
- Barrick Gold (NYSE:ABX) says it has completed a 50-50 joint venture with Saudi Arabia's Ma'aden to run its Jabal Sayid copper asset in the kingdom, and the mine is now expected to begin shipping low-cost concentrate in early 2016.
- When fully operational, the mine is expected to produce 100M lbs./year of copper in concentrate in its first full five years, with the potential to increase to 130M lbs./year.
Mon, Dec. 1, 4:45 PM
- Gold futures surged 3.6% to reclaim the $1,200 level for the first time since late October, sparked in part by the downgrade of Japan’s sovereign debt rating and a retreat in the dollar, as well as India easing its import restrictions and some short covering.
- Gold had sold off initially amid news that Swiss voters rejected a referendum to force the Swiss National Bank to hold 20% of its reserves in gold, slumping to overnight lows near $1,140/oz. before rallying to settle at $1,218.
- As a result, gold miners were among the strongest sectors, with the Market Vectors Gold Miners ETF (NYSEARCA:GDX) finishing 7.7% higher; investors also may have reacted to takeover speculation, as weekend reports said Paramount Gold (NYSEMKT:PZG) was is in talks to be acquired by Coeur Mining (NYSE:CDE).
- Among the top precious metals miners: ABX +4.3%, AEM +6.9%, AU +9.1%, GG +8.2%, GFI +9.2%, SLW +7.2%, NEM +6.8%, AGI +7.7%, IAG +11.3%, AUY +7.4%, KGC +8.5%, NGD +13.7%, GOLD +6.4%, RGLD +7%.
- Other ETFs: NUGT, DUST, SIL, GLDX, SLVP, RING, SGDM, PSAU
Fri, Nov. 28, 1:21 PM
- Already hit hard over the last two years by declining prices, gold and silver miners saw more pain today as commodity stocks in general got hammered thanks to OPEC's decision not to slash crude production.
- Decliners: ABX -8%. GG -6.1%. AUY -9.8%. KGC -8.2%. GFI -9.9%. SLW -7%. NEM -5.8%. AGI -6.9%. PAAS -9%. AG -15.4%. SSRI -11.6%. CDE -11.4%. HL -8.8%. TAHO -7.8%.
- Previous: Precious metals slide alongside oil; Swiss vote ahead
Thu, Nov. 20, 3:13 PM
- Given the uncertain and volatile outlook for the dollar and thus gold prices, J.P. Morgan's commodities team suggests three "conservative" pair trades it expects to be profitable in a neutral or weaker metal price environment.
- The firm recommends buying Newmont Mining (NYSE:NEM) and selling Barrick Gold (NYSE:ABX), “driven by the idea that the deal where Barrick buys Newmont could be back."
- Buy Agnico Eagle Mines (NYSE:AEM) and sell New Gold (NYSEMKT:NGD), as JPM sees underground mines as more resilient than open pits, and AEM has fallen more sharply than deserved.
- Also, JPM likes buying Silver Wheaton (NYSE:SLW) and selling Coeur Mining (NYSE:CDE), as it believes royalty/streaming companies will be more robust in times of weak metals prices than pure-play miners.
Tue, Nov. 18, 5:37 PM
- Barrick Gold (NYSE:ABX) names Shaun Usmar as its new CFO, effective Feb. 18, following the departure of Ammar Al-Joundi, who will leave ABX after the release of its year-end results.
- Usmar joined Xstrata in 2002 as a founding member of the leadership team that grew the company into one of the world's largest diversified miners at the time of its acquisition by Glencore in 2013.
Tue, Nov. 18, 3:59 PM
- Gold prices jumped 1.2% to settle just shy of $1,200/oz. as the dollar eased against major currencies amid tensions in eastern Europe and the Middle East, and some observers are starting to ask if gold mining and production stocks (GDX +4.8%) have finally found a bottom.
- 24/7's Chris Lange thinks gold giants may have hit their lows on Nov. 5, followed by an impressive recovery since that date with gold fundamentals apparently not changing drastically.
- Major precious metals miners are strong across the board: ABX +6.5%, AEM +4.4%, AU +6.2%, GG +3.7%, GFI +7.6%, SLW +3.6%, NEM +3.4%, AGI +4.9%, IAG +6.6%, AUY +6.8%, KGC +9.2%, NGD +2.8%, GOLD +1.9%, RGLD +3.7%.
- Other ETFs: GDXJ, NUGT, DUST, SIL, JNUG, GLDX, JDST, SLVP, SILJ, RING, SGDM, PSAU
Fri, Nov. 14, 11:40 AM
- Barrick Gold (ABX +2.8%) has hired a heavy hitter in the Chilean mining scene to oversee the potential development of its stalled Pascua Lama mining project, but Citi analyst Brian Yu does not believe a re-start is imminent.
- “The project remains on care and maintenance, likely requires additional engineering optimization to make sure they can get it right on the second go-around, and economics remain questionable in the current gold and silver price environment,” Yu writes.
Fri, Nov. 14, 10:58 AM
- The gold market will enter deficit by 2016 as producers cut capex, resulting in reduced supply in the medium- to long-term, Credit Suisse analyst Anita Soni writes, seeing 2014 as a likely plateau for supply (Briefing.com).
- Agnico Eagle Mines (AEM +2.6%) and Eldorado Gold (EGO +4.5%) are the firm's top picks among gold miners under coverage.
- Other Outperform rated gold companies are GG, KGC, AUY, AUQ, FNV, GSS and IAG; rated Neutral are ABX, NEM, NGD and AGI.
Thu, Nov. 13, 9:09 AM
- Barrick Gold (NYSE:ABX) names former Codelco exec Sergio Fuentes as project director for its suspended Pascua-Lama gold and copper development in South America.
- Fuentes will focus on optimizing detailed engineering, improving the project's economics and developing an execution plan for remaining construction activities at Pascua-Lama; in the short term, he will lead the completion of final engineering for the water management system and attempt to reduce ongoing care and maintenance expenditures at the project.
- ABX says a decision to restart the project would depend on the resolution of permitting and legal matters in Chile and improved project economics.
Wed, Nov. 12, 9:58 AM
- Barrick Gold (ABX +1.2%) is looking for ways to move forward with its stalled Pascua Lama gold mine, which would likely cost another ~$4B to complete, according to the senior VP for the project.
- Although construction of the project on the Chile-Argentina border has been halted after investing ~$5B, ABX says it is committed to completing the building of a water management system and is talking with the local communities who have opposed the project to try to work out an agreement.
- "The company has made significant changes... Definitely there is an opportunity - it's small, but it exists," the exec says.
Mon, Nov. 10, 6:46 PM
- With gold trading down as low as $1,131/oz., precious metals miners were hit hard again today, with the Market Vectors Gold Miners ETF (NYSEARCA:GDX) tumbling 6.3% and now 17% lower YTD.
- Barrick Gold (NYSE:ABX), which fell 6.7% today, was the subject of negative comments from Deutsche Bank, which said, “Management’s target net debt of $7B, conveyed on its 3Q14 earnings conference call, is a tall order without a combination of a higher gold price and asset sales.”
- Mining companies at least can look forward to the modest consolation prize of weaker local currencies and falling oil prices that will help trim their costs; for example, Agnico Eagle Mines (NYSE:AEM) estimates local currency declines could reduce its U.S. dollar-denominated cash production costs by 5%-6%.
- Also today: AU -9.8%, GG -4.8%, GFI -4.6%, SLW -4.7%, NEM -5.9%, AGI -6.8%, IAG -6.1%, AUY -6.6%, KGC -6.4%, NGD -7.2%, GOLD -5.1%, RGLD -5.3%.
- Other ETFs: GDXJ, NUGT, DUST, SIL, JNUG, GLDX, JDST, SLVP, SILJ, RING, SGDM, PSAU
Tue, Nov. 4, 12:34 PM
- Barrick Gold (ABX -2.9%) is in talks with Chinese miner Zijin Mining (OTCPK:ZIJMF) to explore the formation of a partnership on the Pascua-Lama project, according to the mining minister of Argentina’s San Juan province.
- Such a partnership would not be a major surprise, as ABX is known to want a partner to share the financial burden of the project, and Zijin has been named as a potential buyer of other ABX mines in media reports; also, CEO John Thornton has deep links to Asia and has talked about forming partnerships with Chinese mining companies.
Mon, Nov. 3, 11:27 AM
- There's more than just falling gold prices behind Deutsche Bank's downgrade of Barrick Gold (ABX -1.5%) to Hold from Buy with a target price cut to $16 from $22, which also cites dimming prospects for ABX's copper business and lack of strategic action on partnerships despite an operationally solid Q3 results.
- DB says it is removing contributions for Pascua-Lama, a key gold growth project which it had anticipated would attract a strategic partner to help shoulder remaining capex toward a projected 2018 production start-up; news of proposed higher royalties in Zambia will stretch its Lumwana copper mine and could result in further writedowns, the firm says.
Fri, Oct. 31, 11:35 AM
- Precious metals miners are slammed for a third straight session as gold prices plunged to multiyear lows.
- Japan’s surprise stimulus move is supporting the U.S. dollar and driving the ICE U.S. Dollar index to a four-year high, making gold more expensive to overseas buyers; while the prospect for more monetary stimulus usually increases the lure of gold, the threat of global deflation has withered gold’s appeal as a hedge against rising prices, Barron's Chris Dieterich explains.
- Nearly everyone in the sector is hitting 52-week lows (again): ABX -4.5%, NEM -7.7%, GG -0.5%, SLW -3.6%, AGI -5.8%, AEM -4.1%, AUY -10.6%, IAG -4.6%, KGC -16.2%, NGD -6.1%, AU -2%, GOLD -1.6%.
- Also: GFI -7.4%, RGLD -3.8%.
- ETFs: GDX, GDXJ, NUGT, DUST, SIL, JNUG, GLDX, JDST, SLVP, RING, SGDM, PSAU
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