Barrick Gold (GOLD) Last Update 6/13/22
Related: NEM WPM
% of Stock Price
Revenue
Gross Profits
Free Cash Flow
Barrick Gold
$24.66
Yours
Trefis Price
N/A
$16.74
Market
 
Top Drivers for Period
Key Drivers
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RECENT NEWS AND ANALYSIS

Potential upside & downside to trefis price

Barrick Gold Company

VALUATION HIGHLIGHTS

  1. North American Gold Mines (Barrick Nevada, Pueblo Viejo Mine, Dominican Republic) constitute 70% of the Trefis price estimate for Barrick Gold's stock.
  2. Other Gold Mines constitute 17% of the Trefis price estimate for Barrick Gold's stock.

WHAT HAS CHANGED?

The shares of Barrick Gold Corporation have lost 20% in value since mid-April as gold prices declined from $2,000/ounce in March to $1,800 at present. While other commodities including copper and iron have also reported a decline over concerns of lower demand due to China’s zero-tolerance policy on pandemic, strong U.S. Dollar has been a deterrent to gold futures. The Russia-Ukraine war is causing key changes in geopolitical strategies of many countries – leading to new trade relations and energy security pacts. Thus, Trefis believes that growing uncertainties surrounding this shift is likely to propell gold prices until global macroeconomic stability is attained.

Will demand for precious metals grow in 2022 and 2023?

In 2021, Barrick Gold reported 4.4 million ounces of gold sales at an average price of $1,790/ounce. Uncertainty surrounding macroeconomic recovery coupled with high benchmark oil prices led to a surge in commodity prices - assisting the company’s top and bottom line in recent quarters. After observing a peak of $2,200/ounce in 2020, the precious metal registered a correction in recent months as the U.S. Dollar strengthened. Thus, the company reported a 5% (y-o-y) topline contraction and a 20% (y-o-y) decline in operating cash flow in 2021. Per annual filings, sales of gold, copper, and other metals account for 90%, 8%, and 2% of total revenues, respectively. Per the World Bank’s commodity market outlook, gold prices are projected to decline from $1,880/ounce in 2022 to $1,650/ounce in 2023. Similarly, copper prices are projected to decline from $4.6/lb in 2021 to $4.4/ounce in 2023.

POTENTIAL UPSIDE & DOWNSIDE TO TREFIS PRICE

Below are key drivers of Barrick Gold's value that present opportunities for upside or downside to the Trefis price estimate for the company's stock:

Loulo-Gounkoto and Kibali Mines from Randgold acquisition

  • Other Gold Mine Shipments: The new mines after the acquisition of Randgold Resources are included in the company's other gold mines. We expect shipments from this segment to more than double in 2019, benefiting from the new mines post acquisition, and then to rise at a modest rate to reach 1.55 million ounces by the end of our forecast period. However, if the recovery rates from the mines improve much more than expectations and the output rises at a much faster rate to reach 2 million ounces by the end of our forecast period as opposed to 1.55 million ounces currently projected, it would represent a 5% upside to our price estimate.

Loulo-Gounkoto and Kibali Mines from Randgold acquisition

  • Other Gold Mines EBITDA Margin: The acquisition of Randgold Resources is expected to help Barrick Gold achieve synergies in the form of higher grade ores, lower cost of production, better inventory management, and higher profits. Thus, we expect EBITDA margin to rise modestly to reach 57% by the end of our forecast period. However, if the synergies do not materialize as per expectations and the EBITDA margins grow at a slower pace to reach 40% by the end of the forecast period instead of 57% as projected currently, it would represent a downside of around 10% to our current price estimate.

BUSINESS SUMMARY

Barrick Gold Corporation (NYSE:GOLD) is the world's largest gold mining company and is headquartered in Toronto. The firm operates primarily in four regions - North America, South America, Australia Pacific, and Africa. All four regions produce gold and produce copper in South America and Africa.

The company's total gold and copper reserves stood at 68 million ounces and 13 billion pounds, respectively, at the end of 2020. Barrick produced 4.8 million ounces of gold and 457 million pounds of copper in 2020.

SOURCES OF VALUE

Gold as the primary source of revenue

Gold mining is the most important division for Barrick Gold in terms of revenues and profits. In 2020, the company sold 4.8 million ounces of gold at an average realized price of $1,778 per ounce. It generated around $11.7 billion in revenues from the sale of gold and $0.7 billion from copper sales in 2020.

KEY TRENDS

Rising demand for gold from emerging economies

Demand for gold is expected to be quite robust from major emerging economies. Rapidly growing middle-class populations and rising incomes in these countries, particularly China and India -- the world's largest gold consumers -- are expected to result in a sustained jewelry and investment demand for gold.

Recovery in global demand and prices for copper

The global demand outlook for copper and the prices of the metal have risen significantly in the past one year. China, the world's largest consumer of copper, has witnessed a stable GDP growth of 6.9% in 2017 from 6.7% in 2016. The Chinese government had instituted a fiscal stimulus targeting the infrastructure and manufacturing sectors to boost its economy which has helped foster this growth and boosted the demand outlook for copper from China. Additionally, China's fight for the blue sky has increased its demand for refined copper, substituting the demand for scrap, further supporting prices. A considerably enthusiastic outlook for increased usage of Electric Vehicles (EVs) and President Trump's plans for a $1.5 trillion revamp of U.S. infrastructure has also raised the demand outlook for copper globally and thus created a favorable market environment for copper.