On Dec 19, we reaffirmed our Neutral rating on world's largest
). While we take into account uncertainties surrounding its
Pascua-Lama mine and a weak metal pricing environment, we are
impressed by its cost management initiatives.
Lower metal pricing coupled with higher tax and interest expenses
dragged down Barrick's profit in third-quarter 2013, reported on
Oct 31. However, adjusted earnings beat the Zacks Consensus
Estimate. Revenues fell year over year, but beat expectations.
The company saw higher gold and copper productions in the
quarter. While Barrick lowered its gold production guidance for
2013, it raised its copper production outlook.
Barrick, a Zacks Rank #3 (Hold) stock, has a sound liquidity
position and generates healthy cash flows, which positions it
well to take advantage of attractive development, exploration and
acquisition opportunities. The company continues to make high
return investments in its businesses.
Barrick is also making significant progress with its cost and
efficiency improvement programs. Both all-in and all-in
sustaining costs fell in the third quarter. The company is on
track to meet its all-in sustaining costs target for 2013 which
it reduced in second-quarter 2013. Barrick is targeting roughly
$500 million in annual cost savings through its cost reduction
and other company-wide initiatives including overhead expenses
and headcount reductions.
However, a weak gold pricing environment and challenging economic
conditions are concerns for Barrick. Moreover, the recent move to
temporarily suspend the Pascua-Lama project represents a setback
for the company.
Barrick, in its third quarter call, said that it has temporarily
halted construction activities at the Pascua-Lama mine (which
overlaps the border of Chile and Argentina), barring the
requisite activities for environmental protection and regulatory
Barrick noted that it will halt work in a manner that will allow
efficient and effective re-start when conditions permit. The
decision to re-start the project will depend on certain factors
including metal prices outlook and reduced uncertainty related to
legal and other regulatory requirements. As such, uncertainty
surrounding the Pascua-Lama project may weigh on Barrick's stock
Other Stocks to Consider
Other companies in the gold mining space with favorable Zacks
Golden Star Resources, Ltd.
Pretium Resources Inc.
AngloGold Ashanti Ltd.
). While Golden Star Resources holds a Zacks Rank #1 (Strong
Buy), both Pretium Resources and AngloGold Ashanti carry a Zacks
Rank #2 (Buy).
BARRICK GOLD CP (ABX): Free Stock Analysis
ANGLOGOLD LTD (AU): Free Stock Analysis
GOLDEN STAR RES (GSS): Free Stock Analysis
PRETIUM RES INC (PVG): Free Stock Analysis
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