The world's largest gold producer,
Barrick Gold Corporation
), has rung in the changes after a below-par stock performance so
far this year.
Yesterday, the company ousted Aaron Regent from his position as
the CEO and also ended his tenure on the Board, appointing
Executive Vice President and Chief Financial Officer Jamie Sokalsky
in his place. Also, Barrick elevated director John Thornton to the
post of Co-Chairman. The leadership changes announced by the
company became effective right away.
However, Barrick's stock dropped 3.8% post the announcement
(which was made before markets opened), after showing signs of
initial promise when it opened higher than the previous day's
close. Mr. Regent was dismissed for not being able to salvage the
dismal stock price performance.
The company just about met the Zacks Consensus Estimate on
earnings in its recently reported first quarter. Also, Barrick had
failed to meet the Zacks Consensus Estimate on top line in the
quarter, the reason for which can be attributed to lower gold
Although the company has managed to increase its earnings over
the last two quarters and has also hiked its dividend, the optimism
has not rubbed off onto its share price. Barrick's stock is down
10.6% in 2012, underperforming the S&P 500 which has grown
4.57% since New Year's.
Mr. Sokalsky will now face the challenge of boosting up the
company's stock. Hence, he would have to turn his focus towards the
company's growth drivers, which in turn will help Barrick rake in
better revenues and post higher profits over time.
Barrick's prospects are driven by its aggressive expansion of
copper reserves and replacing its gold reserves. The company is
about to commence production at a number of mines such as Pueblo
Viejo and Pascua-Lama in the near future, which will positively
impact its production and cost profile.
Moreover, Barrick is an un-hedged gold producer and the company
stands to benefit from the appreciation in gold prices. The same
applies for its copper business, whose prospects have been further
brightened by the acquisition of Equinox Minerals last year.
Also, the new CEO would have to contend with macroeconomic
concerns as well. Barrick Gold derives its revenues from gold and
copper sales, leaving it prone to any negative fluctuation in the
prices of these metals. In addition, Barrick Gold's financial
health and operations also depend upon prices of other commodities
and foreign exchange rates, thereby creating another factor which
may negatively impact the company.
Moreover, Barrick Gold's rivals,
Newmont Mining Corporation
AngloGold Ashanti Ltd.
), are ramping up their operations and recently announced that they
will be improving their mines and increase exploration
Our long-term Neutral recommendation on Barrick Gold is backed
by a Zacks #3 Rank, which translates into a short-term (1 to 3
months) Hold rating.
BARRICK GOLD CP (ABX): Free Stock Analysis
ANGLOGOLD LTD (AU): Free Stock Analysis Report
NEWMONT MINING (NEM): Free Stock Analysis
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