Has Barrick Gold’s Rally Come to an End?

Nothing has been able to keep a lid on the stocks of gold miners. Barrick Gold (ABX), which is one of the largest gold miners around the globe, is up roughly 150% and it doesn’t look the surge will stop soon. Barrick Gold was in red last year mainly due to the weak precious metal prices. As the commodity downturn began in 2011, the company’s debt surged rapidly which has been bad for investors. This was all because of feeble precious metal prices, but leverage aided as a helping hand.

However, Barrick Gold has performed well mainly due to the recent surge of approximately $200 in gold prices this year.
On the other hand, Barrick Gold has a robust lead over its rivals due to its lowest cost of production in the mining industry. The company claims that its all-in sustaining costs reside in the range of $760 to $810 per ounce.

While Barrick Gold enjoys exciting all-in sustaining costs, there are many higher-cost producers that are still trying hard to achieve less than $1,000 mark. Despite the improved gold prices, many other players are still far behind Barrick Gold in terms of making a profit from gold production. Enhancing internal efficiency and productivity, selling its non-core assets, and efficiently managing its debt were the reasons behind Barrick Gold’s success.

At present stage, the company reduced its debt by $842 million, and is on its way to reduce it by $2 billion by the end of this year. In 1994 Barrick Gold bought Pascua-Lama projected. The company has invested over $5 billion in that project, and it remains committed to progress an optimized project strategy this year for a mine that has latent of 15,384,000 ounces of confirmed and feasible gold reserves.

Moreover, the short-term postponement plan was accepted by the Chilean and Argentinean regulators by the end of 2015 and after that an additional problem concerning Pascua-Lama has been solved with this contract that lastly closed the lawsuit.

This means that Barrick Gold will endure to rely on this project that has the prospective to add a massive percentage to its entire gold production. Escalating gold prices will help the company to make additional profits from this project.

Conclusion

Barrick Gold’s debt reduction and short-term tailwinds, as mentioned above, will help the company sustain its rally. The stock may face some selling pressure due to terrific gains, but these tailwinds can help push the stock to over $20 in the coming weeks.
Published on Jun 8, 2016
By Prudent Investor

Copyrighted 2016. Content published with author's permission.

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