Barrick Gold (NYSE: GOLD) saw its total revenues decline by $1.32 billion in the last two years, from $8.56 billion in 2016 to $7.24 billion in 2018. Lower revenues were driven by lower gold and copper shipments due to divestments and lower grades. However, the trend is expected to reverse with the company likely to add about $3 billion in revenues as its revenue base is projected to grow to $10.3 billion in 2020. Higher revenues would primarily be led by the impact of the merger with Randgold Resources in January 2019, which would lead to increase in gold and copper production and shipments. Additionally, a sharp rise in gold prices is also expected to contribute to healthy growth in revenue.
To understand the factors driving the company’s revenue and for a detailed analysis of revenue performance of each operating division, view the Trefis interactive dashboard – Barrick Gold Revenues: How Does Barrick Gold Make Money?
Barrick Gold’s Business Model
a) What Does It Offer?
Barrick Gold is one of the largest gold miners in the world. It operates under the following 3 segments:
- Gold: Engaged in gold exploration and production, with most of its operations spread out in the US, Latin America, and Africa.
- Copper: Copper is produced at the Lumwana mine in Zambia and the Zaldivar mine in Chile.
- Other: Includes sale of by-products from gold and copper mines.
Who is Paying?
- Copper: Copper is bought by third-parties for use in construction and the manufacture of electrical appliances and industrial machinery.
- Gold: Gold is mainly sold to jewelry players and certain sensitive electronics industries.
Barrick’s business model faces stiff challenges and competition from offerings by its global competitors such as:
- For Copper: Rio Tinto, BHP Billiton, Codelco, Southern Copper, Freeport-McMoRan, Newmont Goldcorp
- For Gold: Newmont Goldcorp, Anglo Ashanti, and Freeport-McMoRan
Segment-Wise Revenue Performance
- The gold segment has lost $1.3 billion in revenues from 2016 to 2018, due to lower volume sold, which was a result of the divestment of 50% interest in Veladero mine and lower grades and recovery rates.
- However, the segment is expected to add $2.9 billion in revenues over the next 2 years, driven by higher shipments and price realization.
- Gold shipments are expected to increase sharply, benefiting from additional volume due to the Randgold merger.
- Price realization is also expected to improve in line with the rise in global gold prices, driven by rising investment demand in the face of economic slowdown, higher buying by central banks, and lower interest rates.
- Copper revenue saw a decline in 2018 due to lower production rates and operational issues.
- The division is expected to add $108 million in by 2020, led by higher shipments and improved price realization.
- Impact of higher volume is likely to be partially offset by a decrease in copper prices in 2019 on the back of the US-China trade war.
- However, prices are expected to see a turnaround in 2020, as demand from electric vehicles and industries (construction and electronics) is likely to remain strong.
To understand how Barrick Gold’s revenue growth compares with that of its major peers, view our interactive dashboard analysis.
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