How Would The Potential Indefinite Suspension Of Operations At The Veladero Mine Impact Barrick Gold?
Barrick Gold announced the temporary suspension of mining operations at its Veladero mine in Argentina earlier this month, post the leakage of process solution from a damaged pipe at the mine. [1] Whereas the mine was expected to resume operations within a couple of weeks, it has now emerged that the situation could be more complex than earlier anticipated. The federal government in Argentina has petitioned the San Juan provincial judiciary (the Veladero mine is located in Argentina’s San Juan province) to initiate a criminal investigation into the matter. [2] As per reports in the Argentine media, the provincial judge leading the investigation into the Veladero mine spill has ordered an indefinite suspension of operations at the Veladero mine. [2] While Barrick has not yet confirmed the indefinite suspension of operations at its Veldero mine, we have tried to model the impact of such an eventuality on the company’s stock in a scenario using Trefis technology. We have revised downwards our shipment forecasts for Veladero for 2016 (assuming the suspension of production in September) as well as over the rest of our forecast period.
See our forecast for Veladero mine shipments in case of indefinite suspension of operations
If we factor in the revised shipment forecast for the Veladero mine into our model, our price estimate for Barrick declines by around 9%. Thus, if mining operations at Veladero do not resume in the near future, it could adversely impact the company’s valuation. We will suitably modify our estimates for the Veladero mine in our model for Barrick Gold in that case.
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See our complete analysis for this scenario for Barrick Gold here
Have more questions about Barrick Gold? See the links below.
- What Is Barrick Gold’s Revenue And EBITDA Breakdown?
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- By What Percentage Did Barrick Gold’s Revenue & EBITDA Decline In The Last 2 Years?
- How Has Barrick Gold’s Revenue Composition Changed Over The Last 2 Years?
- How Will Barrick Gold’s Revenue Composition Change by 2020?
- Barrick Gold: A Look Back At The Year 2015
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Notes:
- Temporary Suspension of Operations at Veladero Mine, Barrick Gold News Release [↩]
- Gov’t files complaint against Barrick, Buenos Aires Herald [↩] [↩]