Barrick Gold Corp (TSX: ABX) is a mining company principally engaged in the production and sale of gold. The Company holds a geographically diversified asset portfolio and operates 15 gold mines across North America, South America, Australia, and Africa. 

Key Highlights

• Production outlook for 2021: The company is on track to exceed the high end of its year-end target thanks to strong third-quarter output from its Africa and Middle East (AME) and Latin America areas. Additionally, the management has shared its production guidance for 2021, where they expect the total gold production to be in a range of 4.4-4.7 million ozs with AISC of USD 970-1020 per oz. while the copper production would be in a range of 410 – 460 million lbs with AISC of USD 2 – 2.20 per lbs.
• Robust operating cash flows and free cash flows:Through agile management and operational efficiency, the company managed to clock operating cash flow of USD 1,050 million and free cash flow at USD 481 million, both increased on the sequential basis, which is a key positive.
• Industry Beating Margins: The Company's resilient business and prudent management helped them leaping the industry median margins on many fronts in Q3 2021, which is a key positive. The chart below gives a glimpse of this.

Source: REFINITIV, Analysis by Kalkine Group

• Healthy balance sheet: The on-going robust performance of the company’s operations and continuous improvement has strengthened its balance sheet. The company holds USD 0 billion in cash, an undrawn USD 3.0 billion credit facility and no significant debt repayments due until 2033, which provides a sufficient liquidity to execute its strategic goals.
• Dividend distribution:Based on the Company's stable net cash position, robust operating results and higher operating cash flows, the group recently paid a quarter dividend of USD 0.09 per share phare on December 15, 2021. In addition, it distributed the third tranche of USD 250 million (about USD 0.14 per share) as a return of capital from the sale of Kalgoorlie Consolidated Gold Mines.

  Financial overview of Q3 2021

Source: Company Filing

• In Q3 2021, the company posted revenue of USD2,826 million compared to USD 3,540 million in the previous corresponding period. The fall in revenue was mainly due to decrease in sales volume, combined with a decrease in the realized gold price.
• Income before finance cost and income tax for the reported period stood at USD 1,028 million against USD 1,636 million in pcp, on the back of lower revenue.
• Net income stood at USD 612 million against USD 1,271 million in the previous corresponding period.
  

Risks associated with investment

The Company’s financial performance is mostly dependent on the price of gold, which directly affects their profitability and cash flow. Any drawdown in the gold prices would impact the group’s performance. 

Valuation Methodology (Illustrative): Price to Cash Flow based  

Stock recommendation

The company is on track to exceed the high end of its year-end target thanks to strong third-quarter output from its Africa and Middle East (AME) and Latin America areas. At the same time, Nevada Gold Mines (NGM) reported a quarter-over-quarter increase and is on track to close 2021 with an improved quarter, owing to the restoration of its Carlin mill operations, positioning Barrick for a successful finish to the year, which is a key positive.

Furthermore, the company is consistently clocking free cash flow and hold a strong cumulative liquidity of more than USD 8 billion, which we believe is sufficient to execute its strategic goals. The group also displaying its operational efficiency over an industry by clocking higher margins. Therefore, based on the above rationale and valuation, we recommend a “Buy” rating at the closing price of CAD 23.57 as on December 16, 2021. We have considered Agnico Eagle Mines Ltd, Kirkland Lake Gold Ltd, Newmont Corporation etc as the peer group for the comparison.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

Technical Analysis Summary

One-Year Technical Price Chart (as on December 16, 2021). Source: REFINITIV, Analysis by Kalkine Group

*The reference data in this report has been partly sourced from REFINITIV.

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