In the wake of the Brexit and signs of growing global economic instability, gold has rallied quite strongly and is now 27% higher than its six-year low of US$1,056.20 per ounce. This has triggered a massive rally among gold miners, with industry heavyweights including Barrick Gold Corp. (TSX:ABX)(NYSE:ABX), Newmont Mining Corp. and Yamana Gold Inc. all surging to highs not seen since late 2013.

In fact, Barrick has gained a massive 54% for the year to date, and there are signs it could rally further. 

Now what?

Firstly, Barrick is one of the lowest-cost operators in its industry.

One of Barrick’s core strengths has been its ability to reduce expenses to the point where it now has the lowest operating costs among the major gold miners.

For the second quarter 2016 all-in sustaining costs were US$782 per ounce, well below Goldcorp Inc.’s US$1,067 or Newmont Mining Corp.’s US$876. This represents a 13% reduction compared with a year earlier, leaving Barrick well positioned to achieve its targeted 2016 all-in sustaining costs of US$750-790 per ounce.

More impressively, Barrick reduced its direct mining costs by 17% because of a focus on trimming labour, contractor, and consumables costs, as well as implementing further operational efficiencies.

These low costs mean that as gold appreciates, Barrick is able to generate a fatter profit margin than its peers, and this will translate into a healthy bump in its bottom line.

Secondly, Barrick has restored the strength of its balance sheet.

An important move which has been paying dividends for Barrick is its program aimed at divesting itself of non-core and low-quality assets in order to raise funds to reduce debt and strengthen its balance sheet. During 2015 Barrick completed asset sales totaling US$3.2 billion. These proceeds were used to repay debt, reducing its degree of leverage and strengthening its balance sheet.

Importantly, Barrick remains focused on reducing debt by a further US$2 billion over the course of 2016 by drawing on existing cash, improving free cash flow, and making further asset sales.

This target will be easily achieved.

Already this year Barrick has reduced its debt by US$968 million and has placed its 50% stake in Australia’s Kalgoorlie gold mining operation up for sale; some analysts estimate that it could fetch up to US$1 billion.

Finally, Barrick has built a portfolio of high-quality mining assets.

Even after making considerable asset sales, Barrick still has the industry’s largest gold reserves of 92 million ounces, ensuring that its operations have a long production life. Despite this being an important figure, it doesn’t tell the full story. A critical aspect of gold reserves is the quality of the ore with high-grade ore deposits being crucial to operating with lower costs.

You see, lower-quality ore grades make it costly to extract the metal, leading to higher operating costs for the miner.

An important but rarely acknowledged aspect of Barrick’s asset-divestment program is that it has lifted the average ore grade for its reserves to be 34 times higher than what it was in 2013 to now be well above the industry average. This significant increase in overall ore quality will help to sustain lower operating costs and allow Barrick to further reduce its all-in sustaining costs, thereby enhancing profitability.

So what?

It wasn’t so long ago that Barrick was saddled with high levels of debt and a portfolio of poor-quality assets. Since then it has made considerable efforts to reduce debt and costs, while lifting the quality of its core operations. This has significantly boosted profitability, leaving it well positioned to benefit from higher gold prices, and if gold continues to appreciate, it’s bottom line and share price will certainly benefit further.

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Fool contributor Matt Smith has no position in any stocks mentioned.