Has Barrick Gold Stock Lost Its Sheen?

-7.70%
Downside
18.52
Market
17.09
Trefis
GOLD: Barrick Gold logo
GOLD
Barrick Gold

The shares of Barrick Gold Corporation (NYSE: GOLD) have skyrocketed to the highs of $25 since early January, assisted by surging commodity prices including gold and copper. The company is the largest producer of gold in the United States and Africa. Notably, gold and copper sales account for 90% and 10% of total revenues, respectively – indicating a huge dependence on commodity cycles. In 2011, copper and gold prices reached all-time highs of $4.50/pound and $2000/ounce, respectively, – similar to the trends observed this year. Given the strength in gold and copper futures contracts expiring in 2023, investors have been optimistic on GOLD stock. Trefis highlights the historical trends in revenues, earnings, and valuation multiples in an interactive dashboard analysis of Barrick Gold valuation.

Barrick Gold’s revenues have trended fairly in-line with gold prices, increasing at an annual rate of 9% from $8.4 billion in 2017 to $11.9 billion in 2021 despite a continuous decline in production from 5.3 Moz in 2017 to 4.4 Moz in 2021. The company is a leading gold and copper producer with operations in 18 countries across multiple continents.  In recent filings, the company reported 17 Moz and 53 Moz of proven and probable reserves, respectively. With the uptick in gold prices, the company’s net margins have observed improvement in recent years and average around the 17-18% range. Moreover, the company has been consistently paying dividends along-with debt repayments in the past three years.

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Trends In Demand For Gold and Copper

In 2020, investments in precious metals increased as central banks reduced interest rates to historic lows in the U.S. and Europe due to a decline in macroeconomic activity. Despite strong investment demand and heightened uncertainty throughout the pandemic, the collective ETF gold holdings declined by 173 tonnes in 2021 as reported by the World Gold Council. However, central banks continued to purchase gold for the twelfth consecutive year which strengthened gold’s position as a valuable reserve asset. Moreover, copper’s diverse use across multiple industries such as construction, electrical, consumer products, industrial machinery, and transportation makes its demand a proxy for world economic growth. The copper futures price for contracts expiring in December 2023, December 2024, and December 2025 stands at $10,000 per ton ($5 per pound) – indicating growing demand in the coming years.

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Returns Apr 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 GOLD Return 2% 31% 56%
 S&P 500 Return 0% -5% 103%
 Trefis MS Portfolio Return 2% -6% 269%

[1] Month-to-date and year-to-date as of 4/4/2022
[2] Cumulative total returns since the end of 2016

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