Barrick Gold – A STRONG BUY after a 71% decline?

Barrick Gold – A STRONG BUY after a 71% decline?

today we’re going to look at baric gold to see whether it’s a buy or not the gold price has run way up at the same time the stock price has done basically nothing so maybe maybe this is a good time to get in because the market hasn’t recognized the potential of baric yet we’re going to dig into that today and before the end of this video I’m going to give you my outlook for the company my Target price and what I think the risk level is for this investment as always don’t take any of this as investment advice and always do lots and lots of your own research before investing any of your hard-earned money Beric gold trades on the New York Stock Exchange under the ticker G and to start out I want to tell you some things I like about the company to start baric has the best pipeline by far the best pipeline of any of the major gold producers the company is going to be growing a lot in the coming years and the counterargument to this would probably be like well if you look over the past years the production has actually been declining and that’s true true however since Mark Bristo took over as CEO in the merger of baric ranold well he’s been investing for the long-term and those long-term Investments are going to start paying off within the next few years something else I potentially like about baric as an investment today is that the financials and the results for quarter 1 of 2024 were pretty ugly and baric got punished for that however throughout 2024 we should see production going up each quarter and cost coming down each quarter so this should be a nice Tailwind in the stock price this year something else I like about a baric investment right now is what’s going on with their big Dominican Republic mine that mine is called PUO Vio and they have a conveyor belt there that was down and that was down all of the first quarter but it got up and running just two weeks into the second quarter so because that conveyor belt is now running and has been running most of the quarter that should help improve Q2 numbers a lot because this PUO Vine is very very important to Beric so Q2 numbers should be a lot better than q1 numbers and then Q3 numbers should be even better than Q2 numbers something else that should be a really strong Tailwind when it comes to baric having great numbers in Quarter Two relative to quarter 1 is the change in the gold price Beric isn’t getting credited for the change in the gold price at all in the market and in quarter 1 the average price that baric sold gold for was $2,070 an ounce however in Quarter Two the average gold price should be at least 2300 so that is going to make an enormous difference in the bottom line and it’s also worth mentioning that the copper price is way up from quarter 1 to Quarter Two and baric produces quite a bit of copper as well another thing that will be helping Barrack’s numbers in the coming quarters is P’s ramp up so if you don’t remember back in 2020 beric’s porra mine didn’t get their permit renewed by the papa new guine government so they had to go back to the negotiating table and they’ve been negotiating with the government to get this mine back into production and it’s finally back in production and the ramp up is happening right now as we speak so each quarter going forward this mine should contribute more and more to Barrack’s production this isn’t going to make a huge difference especially in quarter 2 but every little bit helps something else I like about baric is since Mark Bristo took over in 2019 they’ve realized 140% replacement of mined reserves so their gold reserves have been steadily increasing despite mining about 4 million ounces of gold each year something that the market has punished baric stock price for are their decreasing grades like for example if you go and read the most recent quarterly report in almost every single mine that baric has they show a pretty significant decrease in grades relative to last quarter and relative to last year however when you’re looking at the long-term production profile and what the grades might look like in the future you got to look at the grades of the reserves and while they’ve been growing their reserves they’re ALS Al maintaining their grade so even though the grade of the gold that they’re mining has been going down recently their Reserve grades have been staying the same something else I really like about baric is they have huge gold reserves 77 million ounces after taking into account the company’s recovery rate that’s about 17 years of gold reserves and they have many many more years of gold resources in the measured and indicated category if you include those so they have a long pipeline ahead of them to mine gold for many years to come something else I really like about a potential investment in Beric gold today is that as I mentioned earlier they were really punished for their quarter one results however Barrack’s quarter 1 is always their worst quarter because that’s when they plan most of their maintenance and that’s when they plan most of their mind shutdowns to do their maintenance so quarter 1 is practically always their lowest produ quarter and also when you have lower production your fixed costs are spread out amongst fewer ounces so you have higher cost as well so because their plan maintenance and plan shutdowns are over with in quarters 2 three and four of this year we should see better numbers and therefore a higher stock price something baric gets punished for in the market is their jurisdictional risk profile however something I like about the company is that even though they do have a lot of jurisdictional risk it’s spread out across many different jurisdictions they have 13 different mining complexes around the world so there’s not one single risky jurisdiction that makes up a significant portion of their production I mentioned that baric has 13 mining complexes around the world well something else I really like is they have excellent assets I think they have the best asset portfolio of any gold producer six of those 13 are tier one mines and baric defines a tier one mine as one that has 5 million ounces of reserves or more but importantly at $1,300 gold so assuming the gold price was just $1,300 that they could put 5 million ounces into reserves which would sustain production of at least 500,000 ounces a year for at least 10 years in the bottom half of the industry cost curve that is a very rare beast and baric has six of them I mentioned earlier that baric is replacing more reserves than their mining but importantly they’re doing that with no Acquisitions You could argue that their big competitors are also more than replacing reserves but their competitors like anniko eagle and numont are doing that through acquisition and yes their reserves have grown a lot but because of their those Acquisitions so have their share counts but over that period of time over the Last 5 Years baric share count has actually gone down a little bit and they’ve done no Acquisitions and have been replacing reserves despite those things and the reason they’re able to do that replacing reserves without acquisition is because they have such good assets with enormous geologic potential I mentioned earlier that Barrack’s production profile has been declining over the past number of years however that ends today that ends in 2024 going forward Barrack’s production should be flat or increasing every year for the foreseeable future something else we have to look forward to in Beric is their growth profile right now in terms of gold equivalent ounces or GEOS baric is producing about 4.9 million ounces a year but by 2028 that number should grow to seven million gold equivalent ounces right now it’s about 4 million ounces of gold and the rest is copper and most of this growth here is coming from copper so you have to be a copper bull to want to own baric and I am I’m very very bullish on copper but because I like both gold and copper I like baric a lot and when it comes to choosing between the major gold producers baric has the best Insider ownership by far Mark Bristo the CEO owns about 10 times his annual salary plus bonuses in shares now that’s really rare in fact most of the time the CEO owns less than one time their annual salary plus bonuses but Bristo owns about 10 times and as a matter of fact Beric management is required to own at least five times their base salary in shares so because of this of the major gold producers baric is the one that’s most aligned with shareholders something else I like is that Barrack’s dividend is likely to increase soon so they have a dividend policy where they pay a base dividend of 10 cents USD per share per quarter or 40 cents per year and then on top of that they have a performance dividend based on the net cash balance at the end of each quarter so if the net cash balance is positive that’s where the performance divid starts to kick in and I suspect that we will likely see that performance dividend kick in in Quarter Two And if not in Quarter Two almost certainly in quarter three and when the performance dividend kicks in we’re looking at at least a 50% increase in the dividend something else that’s good for us who are considering an investment in baric is that despite the huge runup in the gold price baric stock price basically basically hasn’t moved at all and because there’s going to be things that are going to be helping the financials in the future quarters and the future years I think soon is when we see the stock price start to move something else I like about Beric is that when institutional money starts to come into the sector in a big way these sizable institutions only have a handful of options of gold companies that can handle their amount of purchases because the company has to be extremely liquid and it has to have a big market cap otherwise the company can’t handle those big orders that these institutions need to be able to place to make any type of difference in their fund so when it comes to Gold companies I think Beric gold will be one of the top choices for institutional investors okay so that was a whole lot of things that I love about baric however it’s not all good things there are some things that I don’t like number one is that they my grades have been coming down if you’re reading their quarterly reports if you’re following their annual reports you’ll see that at most their minds it’s saying hey the grade at this mine decreased from this to this the grade at this mine decreased from this to this and it’s almost all across the board however as I mentioned earlier the reserve grades are staying flat so that portends well to their future production because they have about 17 years of reserves left at pretty good grades so perhaps it’s just the fact that right now they happen to be in low grade parts of the mines and then they’re going to go to higher grade Parts later on but that’s how mins work like there’s high grade parts of the deposit and there’s low grade parts of the deposit so if you’re mining in an open pit for example you’ll hit some high grade areas and then you’ll hit some low grade areas and then you maybe go back to high grade areas so the fact that there’s that variability it can make the Mind grades go up or down from quarter to quarter or from year to year and at the same time that grades have been going down quite a bit costs have been going up but grades and costs are related because as you have lower grades you have to move more tonnage of rock to produce the same amount of gold and moving tonnage cost money because there’s labor cost and Equipment cost and energy cost so grades make a big difference in costs but also costs are up for other reasons they’re up because of General inflation now at the same time baric has been in investing a lot of money to try to keep cost down for example in the most recent quarter they just completed two massive solar projects one in Nevada and one in Africa and those solar projects are going to help keep cost down for two reasons number one is a lower electricity cost because now they’re running part of their M or all their M off of solar energy instead of diesel or gas and then also in addition to that they were spending a lot of money to build those solar plants and now that spend is done so that’s one example of things that should help with cost in the coming quarters something else I don’t like is that baric has consistently missed production guidance for the last few years now if you ask Mark Bristo why they keep missing guidance he’ll say it’s because he’s an optimist and he gives optimistic guidance because that’s what he thinks the company will be able to do now arguably maybe you need to be an optimist to be in the gold mining sector but even if you’re an optimist I think you can still give more conservative official guidance so you’re not disappointing investors quarter after quarter so the consistently missing guidance is one thing that I don’t like and this makes me think that I might not be able to trust their guidance going forward now maybe you could argue that their misguidance is because of some bad luck they’ve had and while that’s true this is the mining industry there’s a lot of stuff that can and does go wrong so I think it’s reasonable to account for some things going wrong when you give your official guidance we touched on this a little bit earlier but something else that’s bad about the company is that in recent years they’ve had a declining production profile however as I mentioned earlier in 2024 I think that changes and from now on it’s either flat or up and another thing that’s bad about the company is it’s a jurisdictional risk and baric operates in a lot of very risky jurisdictions but because of that they trade at a pretty good discount relative to some of their competitors personally I’d rather get a big discount and have a very Diversified portfolio of assets and risky jurisdictions then pay a big premium for assets and safe jurisdictions now they’re not all in Risky jurisdictions like they have their Hemel mine in Canada they have their Nevada Gold Mine complex in the US and those mines account for substantial portion of their production however they have a mine in Congo they have a mine in Tanzania they have a mine in Papa New Guinea they operate in a lot of risky jurisdictions and they’re expanding into other risky jurisdictions for example they’re just about to build a gigantic mine in Pakistan they do get punished for their jurisdictional risk but in my personal opinion I think they get punished too much for it because they have such great diversification across those risky jurisdictions and something else I don’t love about baric is their Molly risk of all their jurisdictions that they operate in right now I think Molly is the worst so there was a coup a couple years back that overthrew the government and now Molly is being run by the military and I think they’re looking at the gold miners as their cash cows to continue funding the government and to continue putting lots of money into the rulers Pockets it seems like they’re trying to squeeze the gold miners there’s been rumors going around that Molly plans to nationalize Barrack’s big mind there however the Molly government has said to baric in writing that they don’t that they plan to work with baric as a partner to continue operating that mine personally I think those Molly risks are overblown however it’s not a good place and it has caused a substantial decline in baric share price but I think this is potentially an opport to help us get in at a good price so there are some bad things about the company however I think the good things about baric far outweigh these bad things and another really good thing that I forgot to mention earlier is I think baric has some of the best Management in the business I think Mark Bristo is one of the best CEOs in the business yes he has missed guidance for a few years and yes there have been some problems and yes the share price hasn’t performed well but remember that he’s investing for the longterm both in terms of intellectual capital and actual Capital he’s been negotiating with the Papa New Guinea government to get that portra mine back into production and now it is back into production he’s been negotiating with the Pakistani government to get that Rico de project into production and now that project’s advancing he success ful negotiated with numont something that previous CEOs had been unable to do to combine their assets into Nevada gold mines and realize a bunch of synergies and a bunch of cost savings there that’s something that should have happened many years ago but it didn’t until Mark Bristo took over yes it’s true we haven’t seen the benefits yet we haven’t seen an increasing production profile yet we haven’t seen decreasing costs yet we haven’t seen an increas in share price yet and he gets a lot of flack for that and baric gets punished by investors for that but looking into the long term looking into the coming years I think these numbers that we see Beric putting out are going to get a whole heck of a lot better maybe I’m wrong but that’s how I see the situation unfolding now let’s look at the company’s valuation baric is giving guidance for 2024 of gold and copper so gold is between 3.9 million ounces and 4.3 million oun at an all in sustaining cost per ounce of between $1,320 and, 1420 and then copper we’re looking at $180,000 tons to 210,000 tons at between 310 and 340 per pound all in sustaining cost so with that information let’s look at what their cash from operations might be going forward using today’s gold price of $ 2333 and today’s copper price of $448 per pound we’re looking at C cash from operations annualized of $3.99 billion if we come in at the low end of guidance and if we come in at the midpoint of guidance we’re looking at about $4.5 billion I’m not even bothering with the high end of guidance here because baric in recent history keeps missing their midpoint of guidance so they’re usually coming in at this number or lower we’re going to save these numbers for later but now let’s look at what the cash from operations might look like a few years from now after their big expansion projects get built and they’re producing at a much higher level than they are today in the coming years Barrack’s gold production should grow modestly to about 4.6 million ounces a year and their copper production is really going to grow a lot almost doubling to about 690 million pounds a year and for gold they say that their all and sustaining costs companywide are going to be slightly over $1,000 an ounce I’m going to make this more conservative and say that it’s going to be $1,200 an ounce and they’re all in sustaining cost for copper companywide they say is going to be around $2.50 per pound but again I’m making this more conservative and putting that at $3 per pound so using that let’s look at what the cash from operations might look like in 2028 using a gold price of $22,000 an ounce today’s gold price and a gold price of $2500 an ounce and then a adjusting the copper price a little bit up or down accordingly and by the way the growth in their gold production is going to be because of their gold rush underground project their Four Mile project and their Pueblo vijo expansion and then copper is coming from their lumana super pit project as well as the RICO deck project so all this growth here is coming from five different projects so in 2028 assuming this production level at these costs at this low-end price Assumption of $2,000 gold we’re looking at about $ 4.37 billion of cash from operations annually at today’s gold and copper prices 6.23 billion and at the high end of $2,500 gold and $5 copper it’s 7.36 billion and by the way I would be very surprised if in 2028 copper is only selling for $5 a pound but when looking at these high-end assumptions especially for the copper price 4 years from now I would be shocked if the copper price wasn’t higher than $5 per pound because we can clearly see that the demand for copper is increasing every single year for many years and also we can see what new copper production can come online within the next few years because it takes a very very long time to find and develop and build these big copper mines so it’s pretty clear that there’s going to be a huge copper shortage in the coming years so I think $5 is pretty darn conservative here if we assume that in 2028 the gold price will be where it’s at today at $2,333 an ounce and the copper price instead of being $5 or $450 will be $7 we’re looking at cash from operations of $7.97 billion annually so that’s using $7 copper and today’s gold price and just for fun let’s calculate a very bullish scenario in which baric actually hits their price targets they’re all in sustaining cost targets for gold of about ,000 per ounce and copper of about $2.50 per pound and let’s calculate this bullish case scenario using a gold price slightly above where it’s at now at $2,500 an ounce and a copper price price of $7 per pound which I think is pretty reasonable four years from now considering what the supply and demand picture is going to look like and this would result in an annual cash from operations of exactly $10 billion so using these 2024 numbers let’s look at what beric’s share price looks like today whether it’s undervalued or fairly valued and using these numbers let’s look at what the baric share price could be in 2028 to see what our potential upside is and now we’re coming to a pretty subjective part of the valuation process and that is assigning some sort of cash flow multiplier to baric now when I’m doing this I’m usually comparing it to what I’ve given other companies and whether I think baric is a better or worse company than somebody else so when it comes to things like that I’m thinking okay baric has great management they have very long life assets they have very high quality assets and also they’ve been able to replace reserves actually more than replace reserves every year and it looks like they’re going to be able to continue doing that and remember their Reserve grade is staying stable so even though the grades or mining have been declining the reserve grades are staying stable so that’s very important to the Future valuation of the company and the company is well-run they get punished for having political risk however they get a boost because they have a huge growth profile with all of those pros and cons that I was talking about earlier taken into consideration I’m going to give baric a 10times cash flow multiplier this is going to be our formula to find a fair market value for the share price both today in 2024 and in the future in 2028 so that’s going to be cash from operations which is going to be either this number or one of these numbers minus other operating expenses so this is $181 million was the most recent number of the trailing 12 months from the income statement minus net interest expense again this is from the trailing 12 months so that can be found on the income statement as well and then we’re going to take that number and subtract the net debt of 724 million so that’s the company’s debt minus the company’s cash and cash equivalence and then we’re going to take that whole number and divide it by the shares outstanding which is 1.75 five billion shares there’s been a couple comments in previous videos of people saying hey you’re double counting the debt here in your formula and that isn’t right but you know what this is just my formula that I use and if you think it’s more fair to change this up some way that’s very reasonable because I came up with this this isn’t I didn’t pull this from anybody else this is just the way that I like to value companies and I don’t feel like I’m double counting the debt here for this reason so if you have debt you eventually have to pay off the principal balance of that debt and until you do you’re paying the interest expense every year so I think it’s fair to subtract the interest expense before you apply the cash flow multiplier and then also from that to subtract the net debt from the total because it has to be paid back eventually does that make sense anyway there’s some people who like to do this differently but this is the way that I like to do it and you might notice that I excluded General and administrative expenses here and that’s because the GNA expenses are already included in Barracks all in sustaining cost and now we’re going to look at what the fair share price might be in 2024 and also what it might look like in 2028 assuming bar can deliver with what they say they’re going to deliver but if you want me working for you full-time well mining stocks is all I do so if you like my work you might want to check out my newsletter because that’s where you get access to my very best research and you get to learn what I’m buying or selling with my own money before I make a trade so if you’re interested in that go to Mining stock monkey.com products slvp or click the link right up here I’ll also link to it down below and the price of my newsletter is increasing on July 1st but if you get signed up before then you lock in that price as long as you stay subscribed so if you’re interested in that Mining stock monkey.com products slvp and I’ll see you over there today baric is trading at a share price of $162 and based on my calculations if baric hits their lowend of guidance a Fair Share value is $19.39 at today’s golden copper price which is an upside potential of 21% or if Barry hits their midpoint of guidance we’re looking at a share price of $22.19 or 38% upside from here so considering it’s a major and they’re very well Diversified and well run and they have a great growth profile this looks like a pretty good buy here but importantly I want to look at what baric share price might look like in 2028 after we see their upcoming growth before I get to the potential 2028 share price numbers let’s talk about what I think about this investment first the risk level this is one being the least risky 10 being the most risky so this is a gold producer and this is a risky business to begin with so the lowest rating or the safest rating I will give a gold producer is a five Beric has quite a bit of political risk but it is Diversified political risk and there’s also going to be a risk involved in building these new projects and building these expansion projects however the company is very very well run and a big part of the risk score is at what price you’re buying the stock so because we’re buying the stock at a pretty good price today I’m going to give this my lowest score of a five if it wasn’t trading at a nice discount maybe this risk score would be a six or a seven instead of a five and then my time Horizon my time Horizon is holding this stock through 2028 until we see the full year Financial which should be in February of 2029 or so so let’s just call our time Horizon 5 years this isn’t trading at as big a discount as some of the smaller companies that I’ve gone over on this channel however for a major this is trading at one of the better prices I’ve ever seen so I’m going to give this a strong buy and my target share price that I’m going to go over in a moment here is going to be approximately $42 so although this gets a strong buy it doesn’t have as much upside potential as some of the other companies I’ve covered on this channel however it also has less downside risk because they’re very Diversified and they have very good assets and they’re really well run and they have a nice growth profile and there’s a lot of positives going for the company so when it comes to the verdict whether that’s a sell hold buy or strong buy I’m looking at the overall risk reward and I see the risk reward of baric today being very good and I think that when institutional money really flows into this sector we’re going to see baric take off at some point and recently the stock price has been depressed it hasn’t kept up with a lot of its peers but I think that’s going to change because Beric has been investing a lot into their future and we haven’t seen the fruits of those Investments yet okay and now moving on to what the share price could look like in 2028 after we’ve seen their growth and after we start seeing that bearing fruits at the lowend here so this is at $2,000 gold and at $4 copper we’re looking at a share price of $ 2156 using this formula that I showed you earlier so that’s a potential gain of 35% but keep in mind that’s with the gold price going down quite a bit and the copper price going down quite a bit at today’s gold price and today’s copper price we’re looking at a share price target of $326 which is a potential gain of 100% at $2500 gold and $5 copper we’re looking at a share price of $386 and this next one is my Target price for baric and that is $7 copper and today’s gold price and I think $7 copper is very realistic as a matter of fact I think it’s unrealistic to use $450 copper or $5 copper in 2028 just because of what the supply and demand forecast looks like going forward it looks like we’re going to have major shortages of copper in a few years and I think we’ll see the copper price run way up so that puts a share price at $427 or a potential gain of 163% and then finally I’m using a more optimistic Target which I did here which came out to cash from operations of $10 billion and that is using er’s ideal Allin sustaining cost which was like $22.50 copper and $1,000 gold and then taking a $7 copper price and gold a little bit higher at $2,500 per ounce and that equals a Target share price of $536 4 but I don’t think it’s realistic to assume those all in sustaining costs and I think it’s much more realistic to assume the Allin sustaining cost that I mentioned earlier in this video but you know what something that this doesn’t take into account is it doesn’t take into account baric having more debt and they probably will have to take on some more debt to build that lumana super pit and to build the RICO dick project so maybe they have to take on another two or2 and5 billion dollars of debt in which case we have to lower our Target price by about $2 or lower any one of these prices by about $2 if you like my work and want to get access to my very best research sign up for my newsletter right here before the price goes up on July 1st and next check out one of these videos you can see my analysis on ago Eagle mines or Alamos gold

Since 2011, the stock price of Barrick Gold is down more than 70%. Is this a good time to buy? In this video we’re going to try to find out.
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In this video we’re going to do a deep dive into Barrick Gold (GOLD) to figure out what its strengths are as well as find out where it falls shorts.

Since Mark Bristow took over the CEO role in 2019, the company has gone through some significant changes. During that period of time, Bristow has been investing for the long term and that hasn’t satisfied investors who want short term results.

However, as the years have passed, the payoff of these long-term investments get closer and closer. In this video we’re going to try to figure out if this might be a good time to invest in Barrick.

Gold mining is a risky business and there’s a lot of things can go wrong so it’s important to weigh the potential upsides against possible pitfalls.

Never make any investment decisions based on my videos. This sector is very risky and this should not be considered investment advice. Always do a lot of your own research before investing your hard earned money.

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