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Key Takeaways from Barrick Gold Stock
- Barrick Gold is the world’s 2nd largest gold miner
- Barrick has nearly two decades of gold reserves
- Barrick Gold stock is significantly undervalued
Ruth Saldanha: Barrick Gold (ABX) is the world's second-largest gold miner by production, operating mines in 19 countries across the Americas, Africa, the Middle East and Asia. The reason it is so large is because in 2019 it acquired Randgold and combined its crown jewel Nevada assets with Newmont in a joint venture called Nevada Gold Mines or NGM.
Barrick owns 61.5% of the NGM partnership and operates it as well. This partnership and its Loulo-Gounkoto mine accounted for roughly 60% of the 4.1 million ounces of gold produced in 2022. Barrick also produced about 200,000 metric tons of copper from three mines in 2022. At the end of that year, the company had about two decades of gold reserves along with significant copper reserves as well.
Now, around half of Barrick's production comes from locales with higher sovereign risk. However, the company has a track record of working with local governments to ensure that mines are generally run to Western environmental standards while also returning wealth to local communities via jobs and procurement on top of taxes and royalties. Morningstar analyst, Jon Mills forecasts Barrick will increase gold production to about 4.6 million ounces in 2027, driven by increased production at its Nevada Gold Mines joint venture and its 60% owned mine in the Dominican Republic. It also intends to expand production at its Lumwana copper mine in Zambia.
Barrick Gold Stock is Undervalued – By a Lot!
Other potential developments include its Fourmile deposit, near its existing Nevada operations and its Reko Diq copper and gold project in Pakistan, which, if developed, would likely double copper production to roughly 900 million pounds per year. This might be a chance for investors to add some shine to their portfolio, as Barrick's stock is currently trading at a 23% discount to Mills' fair value estimate.
For Morningstar, I'm Ruth Saldanha.
Barrick Gold Stock Bulls Say
- Barrick's portfolio of mines helps diversify mine-specific and geopolitical risk that all gold miners face.
- Barrick has around two decades of gold reserves at end December 2022 and also the opportunity to materially increase copper production in coming years.
- Gold companies tend not to follow general economic cycles. They can also provide a hedge to inflation risk.
Barrick Gold Stock Bears Say
- Around half of Barrick’s gold production is in locales marked by higher sovereign risk.
- The company sits toward the upper end of the second quartile of the gold cost curve, meaning it is more leveraged to changes in the gold price than its lower-cost competitors.
- Gold is subject to the whims of investors’ sentiment, who can move as a herd and impact the gold price
