Barrick Gold: Buys Nevada Property; Argentina Import Restriction Could Hurt

June 6th, 2012 by Trefis Team

Barrick Gold (NYSE:ABX) has recently purchased Mill Canyon gold property situated in Nevada for $24 million from Victoria Gold Corp. [1] Separately, Barrick is expected to start production from its Pascua Lama mine project situated in Argentine-Chile border in 2013.

Our $53 stock price estimate for Barrick Gold is nearly 25% ahead of the current market price.

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See our complete analysis of Barrick Gold

In nearby Mill Canyon, Barrick holds another gold mine – the Cortez gold mine, which is its largest producing gold asset. Mill Canyon would add 7,000 acres of area in that region to Barrick’s existing 230,000 acres around the Cortez gold mine project. The Mill Canyon property also comprises of the Goldrush gold mine project, that is projected to contain 7 million ounces of gold reserves. If these projects can start production soon, it will add a lot of value to the Barrick’s price estimate through increase in North American gold shipments. North American gold operations contribute nearly 45% value to Barrick’s Trefis price estimate.

Barrick’s South American operations are expected to dump the past and move smoothly in future, however, there are issues arising from import restrictions imposed by Argentine Government. Barrick has an important project coming up in South America – Pascua Lama mine project. The construction work at the Pascua Lama mine project is underway and expected to start production in 2013. The average annual production from the mine is projected to be 800,000 ounces of gold and 35 million ounces of silver in the first five years of production. [2] This will help revert the declining trend in the past few years in its South American gold shipments.

On the other hand, Argentine Government post re-election of President Cristina Fernandez, had been trying to strike a balance between imports and exports to boost the trade surplus. As a result, it imposed restrictions on imports of equipment and supplies by mining companies. Mining companies having operation in Argentina will have to get prior approval for imports and submit an import plan 120 days in advance. This may not directly impact any driver for the company, but could definitely cause delay in the operations by lingering the procurement of equipments required for mining. [3]

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Notes:
  1. Barrick Buys Nevada Mill Canyon Gold Property for $24 M, au.ibtimes.com, May 29, 2012 [↩]
  2. Barrick Gold Hopes To Begin Production At Pascua Lama in 2013, hispanicallyspeakingnews.com, May 20, 2012 [↩]
  3. Argentina targets mining firms in import crackdown, uk.reuters.com, May 28, 2012 [↩]