On Aug 13, we reaffirmed our Underperform recommendation on
world's largest gold miner
). Our view reflects a weak gold price environment and
uncertainties surrounding the Pascua-Lama mine.
BARRICK GOLD CP (ABX): Free Stock Analysis
AVALON RARE MTL (AVL): Free Stock Analysis
BILLITON ADR (BBL): Free Stock Analysis
DENISON MINES (DNN): Free Stock Analysis
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Barrick slipped to a loss in the second quarter of 2013, reported
on Aug 1, hit by a sizable impairment charge and a double digit
decline in gold price. However, both adjusted earnings and sales
beat Zacks Consensus Estimates. Both gold and copper production
increased year over year in the quarter.
Barrick slashed its quarterly dividend by 75% and maintained its
gold production guidance for 2013. It cut its budgeted capital
spending and costs by around $2 billion for 2013 and also trimmed
its cost guidance for the year.
Uncertainty surrounding the Pascua-Lama project is weighing on
Barrick's stock price. Barrick is investing heavily on the
development of the Pascua-Lama mine which overlaps the border of
Chile and Argentina.
However, Barrick, in April 2013, announced that it is halting
construction work at the Pascua-Lama mine in Chile after a
Chilean court issued a preliminary injunction citing
environmental concerns. The company's shares took a hit following
the announcement of the suspension. Moreover, Barrick was fined
roughly $16 million by a Chilean regulator for environmental
Construction at the Pascua-Lama mine has been delayed and Barrick
now expects first production from the mine by mid-2016 compared
with the earlier expectation of second-half 2014.
The recent downturn in gold prices is also a cause of concern.
Gold price fell sharply to touch a three-year low of $1,180.71
per ounce in Jun 2013. Worries over the Fed's plan to taper its
monetary stimulus led to the massive plunge. While gold prices
recently rebound to a $1,300 plus territory, a rapidly
strengthening dollar continues to serve as a headwind.
Other Stocks to Consider
Other companies in the mining space with favorable Zacks Rank are
Avalon Rare Metals Inc.
BHP Billiton plc
Denison Mines Corp.
). While Avalon Rare Metals maintains a Zacks Rank #1 (Strong
Buy), both BHP Billiton and Denison Mines hold a Zacks Rank #2