Why Barrick Gold Is Well Placed To Weather A Downturn In Gold Prices

December 6th, 2016 by Trefis Team

Gold prices have declined over the past couple of months, particularly after the completion of the U.S. presidential elections. Expectations of an interest rate hike by the Fed in December and a boost to economic growth as a result of President-elect Trump’s pro-business policies have dampened the investment demand for gold, negatively impacting prices of the metal. We expect gold prices to decline next year amid improving U.S. economic conditions and an environment of higher interest rates. With gold prices likely to decline next year after recovering in 2016, Barrick Gold is in much better shape to operate in an environment of subdued gold prices as compared to the situation a couple of years ago. Barrick Gold has sold off a number of non-core assets since the middle of 2013 in response to a decline in gold prices from 2013 to 2015, in order to lower its average operating costs. Though this has resulted in a decline in the company’s gold production (as reflected by the lower EBITDA figure for 2016 vis-a-vis 2014), it has helped lower the company’s all-in sustaining costs metric. The company has also made a concerted effort to lower its indebtedness and improve the efficiency of its operations. This has positioned Barrick in a much more comfortable position to weather a decline in gold prices as compared to the situation a couple of years ago, as illustrated by the following tables.

Better Prepared For Lower Gold Prices

Have more questions about Barrick Gold? See the links below.

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Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Barrick Gold

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