ABX : TSX : C$19.82
ABX : NYSE
Barrick is the largest gold producer in the world and has
a portfolio of operating mines and development projects
located in the United States, Canada, Australia, Peru,
Chile, Argentina, and Tanzania. In 2012, the company’s
operating mines produced 7.42 million ounces of gold, at
total cash costs of $584 per ounce.
All amounts in C$ unless otherwise noted.
Metals and Mining — Precious Metals and Minerals
FORECAST 2014 PRODUCTION 11% DOWN, RESERVE LOSSES AT 18%
Our target price has been revised from C$20.50 to C$17.50 to reflect the
recent shift lower in the gold forward curve and to reflect our estimate
of potential reserve and mine plan changes at YE13. This report
provides an analysis of potential YE13 reserve changes on an asset by
asset basis. Based on the implied negative return to target, we have
revised our rating on Barrick from Hold to SELL.
Barrick is developing new mine plans to reflect a lower gold price
environment and maximize cash flow. We estimate 2013 gold
production at 6.36mozs, 11% lower sequentially. Cash operating
costs are expected to be only modestly lower at ~$585/oz.
We estimate that operating reserves (excluding development assets)
will have declined ~18% at year-end. While reserve grades could
potentially increase ~11%, we note that Barrick has been mining
~19% above reserve grade over the past four years.
Our 2013 EPS and CFPS estimates have been revised to $2.30 (from
$2.32) and $3.23 (from $3.07), respectively.
We have revised our target price from C$20.50 to C$17.50, which is
predicated on an above sector average 0.90x multiple to our forward
curve derived operating NAVPS estimate of C$22.34 (from C$25.65) plus
net debt and other assets. Our target multiple fully reflects Barrick’s
numerous positive attributes; we just do not see the value proposition
for Barrick at current metals prices. Barrick is currently trading at a
27% premium to its gold peers on NAV. Near term positive free cash
flow is expected to be largely utilized to finish constructing Pascua.