Barrick Gold Corporation (NYSE: GOLD) is one of the world leaders in the gold mining industry, which works in 13 countries of the world, produces approximately 4.5 million ounces of gold per year and has a total reserve of about 68 million ounces..
About company
The main activity of Barrick Gold Corporation is gold mining, which brings society more 90% income. Besides, there is also a small copper direction. The company segments its business geographically.: into three regional branches.
North America. The most profitable direction, where in 2021 they plan to extract 2.3-2.45 million ounces of gold. Core assets:
- Headquartered in Toronto.
- Nevada Gold Mines is the largest gold mine in the world, in which Barrick Gold Corporation has a stake 61,5%, and the rest belongs to Newmont Goldcorp. At this deposit in 2021, the total production will amount to almost 3.5 million ounces of gold..
- Hemlo is a small Canadian enterprise with a production capacity of 200-220 thousand ounces of gold..
- And four more deposits from the USA, of which three are under development: Goldrush, Donlin Gold, Fourmile, and the Golden Sunlight mine is completely closed.
Africa and Middle East. The second most profitable direction, which this year will produce 1.5-1.6 million ounces of gold and 320-360 million pounds of copper. Key objects:
- Six gold mining mines: Loulo-Gounkoto in Mali, Kibali in DR Congo, Tongon in Ivory Coast and three assets from Tanzania: North Mara, Bulyanhulu and Buzwagi.
- Two copper complexes: Lumwana in Zambia and Jabal Sayid in Saudi Arabia.
Latin America and Asia. Currently the least profitable segment, which in 2021 will show the following result: 0,6-0.66 million ounces of gold and 90-110 million pounds of copper. Major assets:
- Eight gold mines, of which two are fully operational: Pueblo Viejo in the Dominican Republic and Veladero in Argentina. Another one is due to launch soon - Porgera in Papua New Guinea, three are in development - Norte Abierto, Easter-Lama, Heights. Lagunas Norte sold and one Pierina closed.
- One Chilean copper deposit - Zaldivar, in which Barrick Gold Corporation has a stake 50%.
Barrick Gold's revenue structure, million dollars
| Revenue | Share in the overall result | |
|---|---|---|
| Gold mining | 2589 | 90% |
| Copper | 234 | 8% |
| Other income | 70 | 2% |
The production activity of the company in comparison with competitors
The development strategy of Barrick Gold Corporation is aimed at continuous improvement of the company's business processes, which should eventually lead to an increase in profits. According to management, this will happen due to three main advantages of the company.
Asset quality. Barrick Gold Corporation invests in Tier 1 and Tier 2 gold properties around the world with a focus on continued organic growth. Internal rate of return (IRR) companies - 15% for facilities of the first level and 20% for deposits of the second level. Level 1 assets are areas with a service life of at least 10 years and annual production of more than 500 thousand ounces of gold, and the assets of the second level are the same deposits, but with an annual production of 250 thousand to 500 thousand ounces of gold.
High functionality. It is achieved through two factors.. The first is a flexible asset management structure: Barrick Gold Corporation, investing in a new field, partners with a local company, which helps her reduce political risks. The second factor is innovation and many years of successful experience in the industry.: the company has been engaged in this business for about 40 years.
Rational approach. When distributing profits, management tries to ensure the growth of the company's main assets, and increasing shareholder returns.
In 2021, this strategy, in the opinion of management, will enable Barrick Gold Corporation to show the following results:
- The company's production will be 4.4-4.7 million ounces of gold and 410-460 million pounds of copper.
- Total cash costs (TCC) for the production of one ounce of gold will be at the level of 680-730 $.
- AISC indicator, which is calculated by adding to the TCC additional costs - total, commercial, administrative, capital expenditures for maintaining current operations and other costs, - will be 970-1020 $.
- This year, the company's capital expenditures will be $1.8-2.1 billion.
Production capacity of the leaders of the gold mining sector, million ounces of gold
| Newmont Goldcorp | 5,9 |
| Barrick Gold Corporation | 4,8 |
| Anglogold | 3 |
| Pole | 2,8 |
| Kinross | 2,4 |
| Gold Fields | 2,2 |
| Newcrest | 2,1 |
| Agnico Eagle | 1,7 |
| Polymetal | 1,6 |
| Kirkland Lake | 1,4 |
5,9
The reserves of the leaders of the gold mining sector, million ounces of gold
| Pole | 104 |
| Newmont Goldcorp | 94 |
| Barrick Gold Corporation | 68 |
| Newcrest | 49 |
| Gold Fields | 49 |
| Harmony | 35 |
| Kinross | 30 |
| Anglogold | 30 |
| Polymetal | 28 |
| Agnico Eagle | 24 |
104
Production costs of the leaders of the gold mining sector in dollars
| TCC | AISC | |
|---|---|---|
| Pole | 362 | 604 |
| Newcrest | 589 | 795 |
| Polymetal | 638 | 874 |
| Gold Fields | 751 | 886 |
| Barrick Gold Corporation | 671 | 900 |
| Agnico Eagle | 673 | 938 |
| Newmont Goldcorp | 721 | 966 |
| Kinross | 691 | 983 |
| Anglogold | 776 | 998 |
| Harmony | 1023 | 1271 |
Profit distribution and financial results
Financial results and dividend payments of Barrick Gold Corporation are not stable: they are highly dependent on the current market conditions. For example, in 2021, the company demonstrates strong results and returns to shareholders, together with the current dividend, an additional:
0,23 $ = 0,09 $ (quarterly payment) + 0,14 $ (surcharge)
All this is happening against the backdrop of, that gold prices are now close to their multi-year highs. In 2015, the situation was the opposite., because of what the management had to reduce the quarterly dividend.
Financial results for the last 5 years, billion dollars
| Revenue | Adjusted EBITDA | Net profit | net debt | |
|---|---|---|---|---|
| 2016 | 8,558 | 3,827 | 0,655 | 5,542 |
| 2017 | 8,374 | 3,971 | 1,438 | 4,189 |
| 2018 | 7,243 | 3,080 | −1,545 | 4,167 |
| 2019 | 9,717 | 4,833 | 3,969 | 2,222 |
| 2020 | 12,595 | 7,492 | 2,324 | −0,033 |
| 6м2021 | 5,849 | 3,519 | 0,949 | 0,014 |
Comparison with competitors
| EV / EBITDA | P / E | net debt / EBITDA | |
|---|---|---|---|
| Barrick Gold Corporation | 4,10 | 12,81 | 0,01 |
| Newmont Goldcorp | 7,15 | 14,90 | 0,15 |
| Pole | 6,36 | 9,30 | 0,60 |
| Anglogold | 3,35 | 7,67 | 0,36 |
| Polymetal | 5,50 | 7,20 | 1,06 |
| Kinross | 3,52 | 6,67 | 0,28 |
Arguments for
Defensive asset. Gold mining companies, like gold, have always been considered a defensive asset during moments of market panics and sell-offs, and Barrick Gold Corporation is no exception..
Market conditions. Gold prices are now near their all-time highs. This allows all gold mining companies to show record financial results and distribute increased dividend payments to shareholders.
Financial stability. The rapid rise in gold prices, which started in 2019, helped Barrick Gold Corporation to zero its debt burden. Since 2019, the company's net debt has decreased from $3.654 billion to $0.014 billion., and the "Net debt / EBITDA" multiple - from 1,14 to 0,01.
Arguments against
Zero production growth. Barrick Gold Corporation management predicts, that from 2020 to 2030 the company will produce about 4.6-4.8 million ounces of gold annually. While competitors will ramp up production: for example, Polymetal will increase production by 2025 12%, and Polyus will show growth 82% after that, like the Sukhoi Log deposit, scheduled to launch in 2027, come out at full capacity.
Strong competitors. Barrick Gold Corporation loses to some companies from its sector in terms of production indicators. For example, the company ranks fifth in terms of production costs or third in terms of raw material reserves, which should be enough for 14 years of uninterrupted operation while maintaining the current rate of production. For comparison: for Polyus Gold this indicator is 37 a year.
What's the bottom line?
Barrick Gold Corporation is an international gold mining company, one of the leaders in its sector. In 2021, the company can return about 5% given that, that the payment for the second half of the year will be equal to the first half of the year.
Barrick Gold Corporation May Attract Investors, who expect further increase in turbulence in the financial markets or believe in the growth of gold prices. The company has a low valuation, low leverage and good dividend yield.
