Barrick Gold (NYSE:ABX), the largest gold producer in the world, has yet to assess the impact of increase in taxes on the gold imports by the Indian government. In addition, the company is awaiting a court ruling on its ownership row with another Canadian gold miner Goldcorp (NYSE:GG) over a copper and gold mine in Chile. Barrick Gold operates mines in the North America, South America, Australia and Africa and has mainly gold and copper in its portfolio. In addition to Goldcorp, it competes with mining companies like Newmont Mining (NYSE:NEM), Freeport McMoran (NYSE:FCX) and others.
Duties hike by India to affect demand?
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In its budget this month, India doubled import tax on gold bars and coins to 4% on value for the second time this year. Further, the Indian government is contemplating an additional tax of 2% on jewelry purchases of approximately more than $4,000.  The company is still determining the impact on its gold shipments to the world’s largest gold importer. We wonder if these taxes will discourage the seemingly insatiable Indian demand for gold investment and jewelry, which is sometimes blamed for the current account deficit for the country. India imported more than 930 tons of gold in 2011. 
Chilean mine ownership battle with Goldcorp could end soon
Mining companies face intense competition to find attractive sources of already limited natural resources and sometimes get entangled in legal battle. One cannot expect the world’s two largest gold producers Barrick Gold and Goldcorp to remain insulated. The companies have locked horns over ownership of a mine in Chile, South America.
Barrick Gold had alleged that Goldcorp illegitimately got ownership of mine through violations of agreements among the mine’s shareholders. The mine’s gold reserves are believed to be more than three times of Goldcorp’s total gold production last year. The case is currently pending with Superior Court of Justice in Toronto and ruling is expected anytime soon. 
Gold constitutes nearly 90% of our price estimate for the company. Accordingly any adverse outcome could impact our estimate of the company’s value.
Our price estimate for Barrick Gold stands at $59, implying a premium of about 35% to the current market price. We are in the process of revising our price estimates.Notes:
- Budget Highlights, Indian Budget, Mar 16 2012 [↩]
- Record investment demand boosts global gold demand to an all time high in 2011, World Gold Council, Feb 16 2012 [↩]
- Barrick and Goldcorp await court ruling on ownership of lucrative Chilean mine , The Globe and Mail, Mar 27 2012 [↩]