What Are The Major Revenue Sources Of Barrick Gold?

by Trefis Team
-20.80%
Downside
14.11
Market
11.17
Trefis
ABX
Barrick Gold
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The largest gold mining company in the world, Barrick Gold (NYSE: ABX), has had a rough performance in 2018 so far, declining by roughly 33% from the year’s start and 40% from its 52-week high, largely because of a lower investment demand for gold. Barrick Gold has rationalized its business in response to the subdued gold pricing environment. Barrick’s total gold output is expected to decline due to the company’s exhausting gold resources and proportionate increase in the availability of lower grade ores. In this note, we will discuss major revenue sources of Barrick Gold.

We currently have a price estimate of $11 per share for the company, which is slightly above the current market price. View our interactive dashboard – Barrick Gold’s Revenue Break-up – and modify the key drivers to visualize the impact on its valuation.

Barrick Gold drives over 70% of its total revenue from its North American operations (including Carribean islands), which consist of two major gold mines – Pueblo Viejo mine in the Dominican Republic and Cortez Gold mine in Nevada. Combined these two mines are expected to contribute $4.22 billion revenue to the company in 2018.

  • Pueblo Viejo Mine (~37%) – Barrick Gold owns 60% of the Pueblo Viejo mine, which is the largest gold mine in the Americas and second largest in the world. Pueblo Viejo mine produced 650,000 ounces of gold in 2017, which is roughly 60% of the company’s total production. According to our estimates, this division is expected to contribute $2.8 billion revenues in 2018.
  • Cortez Gold Mine (~33%) – Barrick’s Nevada Cortez gold mine produced about 2.31 million ounces of gold in 2017. However, the shipments at the mine are expected to decline due to the production of lower grades of gold as the mining moves to deeper levels. This is more likely to be offset by an increased throughput at the company’s oxide mill, increasing grades at Goldstrike’s open pit, and higher grades at Goldstrike underground. The company is currently working on expanding underground mining operations, which are expected to complete by 2021. This could boost the division’s growth in shipments in the coming years.

Apart from North America, Barrick Gold drives about 8% of its revenue from its South American operations that consist of Legudas Norte mine in Peru and Veladero mine in Argentina. We expect, the revenue from these mines to be around $460 million in 2018. The company’s other gold mines include Turquoise Ridge gold mine, and Copper mines, which account for 6% and 4% of the company’s top-line, respectively. We expect this trend to continue in the coming years.

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