With gold prices hitting new all-time highs, Barrick Gold is well-positioned to benefit from the current market conditions.
The gains likely reflect growing belief among investors that easing inflation eliminates the need for any more interest-rate increases. That should push up investor demand for gold as the appeal of interest-bearing investments and the U.S. dollar weakens. Either way, we think top-quality gold stocks, like this one, remain buys because of their prospects for higher production and cash flow. That’s regardless of gold prices or inflation.
The firm is a Power Buy and the stock trades at a reasonable 13.3 times the company’s forward earnings forecast.
BARRICK GOLD CORP. (Symbol ABX on Toronto; www.barrick.com) is the second-largest gold miner in the world after Newmont (symbol NEM on New York, and a recommendation of our Wall Street Stock Forecaster newsletter).
Barrick has announced that its feasibility study for the expansion of its Lumwana mine in Zambia is expected to be completed by the end of this year, with construction slated to commence in 2025.
The expansion is aimed at transforming the mine into a long-life, high-yielding operation, placing it among the top 25 global copper producers.
The expansion includes doubling throughput by twinning the existing process circuit and significantly increasing mining volumes. As a result, plant throughput is expected to grow from 27 million tonnes to 52 million, with annual copper production projected to double.
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Mining Stocks: Production drops but revenue rises and earnings soar at Barrick Gold
Barrick produced 948,000 ounces of gold in the quarter ended June 30, 2024. That was down 6.0% from 1.0 million ounces a year earlier as it shifted into lower-grade ore zones at some mines.
Despite the lower production, revenue rose 7.6%, to $3.16 billion from $2.83 billion. The realized gold price climbed 18.9%, to $2,344 U.S. an ounce from $1,972. Per-share earnings jumped 68.4%, to $0.32 from $0.24.
Meanwhile, the company continues to use its strong cash flow, fueled by rising gold prices, to reward investors. The annual dividend rate of $0.40 U.S. yields 2.0%. In addition to the dividend, Barrick repurchased 2.95 million shares during the second quarter under the $1 billion share buyback program it announced in February 2024.
The company now plans to focus on building new mines—or expanding its existing ones—instead of making acquisitions. In fact, it expects to boost its overall gold and copper output approximately 30% by the end of this decade.
That development plan includes the recently permitted Goldrush mine in Nevada which is ramping up its annual production to a target of over 400,000 ounces by 2028. The adjacent Fourmile project is shaping up as a top mine with potential gold production in excess of 500,000 ounces per annum over more than two decades. In the Dominican Republic, the Pueblo Viejo mine is completing an expansion project designed to increase gold production to more than 800,000 ounces annually beyond 2040.
Barrick is still open to making an acquisition should an appealing opportunity present itself. Specifically, it defines that as a mine that can produce 500,000 ounces of gold annually and be profitable at gold prices of $1,200 an ounce. Meanwhile, the company will deepen its focus on copper and gold, which are often found together geologically.
Although some of Barrick’s assets are located in less stable jurisdictions and come with a higher risk of disruption, it has a large and diversified global portfolio. That cuts risk, as does its big presence in mining-friendly Nevada.
In fact, the company has some of the industry’s lowest production costs. Barrick’s efficiency gains—along with rising output, and the likelihood of higher gold and copper prices—give it strong appeal.
Recommendation in Power Growth Investor: Barrick Gold Corp. is a buy.
