Barrick Gold Review: the second gold miner in the world

Обзор Barrick Gold: второй золотодобытчик в мире

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 offices.

North America. The most profitable direction, where in 2021 they plan to extract 2.3-2.45 million ounces of gold. Fixed assets:

  1. Headquartered in Toronto.
  2. Nevada Gold Mines is the largest gold mine in the world, in which Barrick Gold Corporation has a stake 61,5%, and the rest is owned by Newmont Goldcorp. At this deposit in 2021, the total production will amount to almost 3.5 million ounces of gold..
  3. Hemlo is a small Canadian company with a production capacity of 200-220 thousand ounces of gold.
  4. And four more deposits from the USA, of which three objects are under development: Goldrush, Donlin Gold, Fourmile, and the Golden Sunlight mine is completely closed.

Africa and the Middle East. The second most profitable direction, which this year will extract 1.5-1.6 million ounces of gold and 320-360 million pounds of copper. Key objects:

  1. Six gold mining mines: Loulo-Gounkoto in Mali, Kibali in DR Congo, Tongon in Cote d'Ivoire and three assets from Tanzania: North Mara, Bulyanhulu и Buzwagi.
  2. 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:

  1. Eight gold mines, of which two are fully operational: Pueblo Viejo in the Dominican Republic and Veladero in Argentina. Another soon to be launched - Porgera in Papua New Guinea, three in development - Norte Abierto, Easter-Lama, Heights. Lagunas Norte sold and one Pierina closed.
  2. One Chilean copper mine - Zaldivar, in which Barrick Gold Corporation has a share 50%.
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Обзор Barrick Gold: второй золотодобытчик в мире

Обзор Barrick Gold: второй золотодобытчик в мире

Barrick Gold's revenue structure, million dollars

Revenue Share in the total result
Gold mining 2589 90%
Copper 234 8%
Other income 70 2%

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 in the end should 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 deposits around the world with a focus on further 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 second-tier assets 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, takes a local company as a partner, which helps her to reduce political risks. The second factor is innovation and successful years of 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 fixed assets., and increased shareholder income.

In 2021, this strategy, in the opinion of management, will enable Barrick Gold Corporation to show the following results:

  1. The company's production will amount to 4.4-4.7 million ounces of gold and 410-460 million pounds of copper.
  2. Total cash costs (TCC) for the production of one ounce of gold will be at the level of 680-730 $.
  3. AISC indicator, which is calculated by adding additional costs to the TCC - total, commercial, administrative, capital costs to support current operations and other costs, - will be 970-1020 $.
  4. 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
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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

Barrick Gold Corporation's financial performance and dividend payout 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)

This is all happening against the background of, that gold prices are now close to their multi-year highs. And in 2015 the situation was the opposite., because of what the management had to reduce the quarterly dividend.

Обзор Barrick Gold: второй золотодобытчик в мире

Обзор Barrick Gold: второй золотодобытчик в мире

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 in times of market panics and sell-offs, and Barrick Gold Corporation is no exception.

Market conditions. Gold prices are now near their historic highs. This allows all gold mining companies to show record financial results and distribute increased dividend payments to shareholders..

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Financial stability. 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 annually mine about 4.6-4.8 million ounces of gold. While competitors will ramp up production: eg, Polymetal will increase production by 2025 12%, and Polyus will show growth 82% after that, like the Sukhoi Log deposit, which is scheduled to launch in 2027, will reach full capacity.

Strong competitors. Barrick Gold Corporation loses to some companies in its sector in terms of performance. 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 years.

What is the bottom line

Barrick Gold Corporation is an international gold mining company, one of the leaders in his sector. In 2021, the company can return about 5% given that, that the payment at the end of 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 turbulence in financial markets or believe in a rise in gold prices. The company has an inexpensive valuation, low leverage and good dividend yield.

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