3 Reasons Why Barrick Gold Corp. Is Still Not the Best Way to Bet on Gold

Barrick Gold Corp. (TSX:ABX)(NYSE:ABX) has just made another move to cut costs, but there are still too many issues with this company.

| More on:
The Motley Fool

Once again, Barrick Gold Corp. (TSX: ABX)(NYSE: ABX) is in the news. To give the company some credit, this time it’s for a good reason: The company is eliminating its corporate development team, which was responsible for looking for potential mines to buy. Since Barrick has no intention of acquiring mines at this time, the team is not needed. In fact, such a move was long overdue.

Is this a sign that the company is about to turn around? Is this the best way to bet on the price of gold? Are the shares trading at a bargain?

Not necessarily. Below are three reasons why Barrick should remain out of your portfolio, even if you believe in gold.

1. A corporate culture problem

Wayne Gretzky was a great hockey player because he always skated to where the puck was going, rather than where the puck already was. Barrick seems to have taken the opposite approach. As a result, its actions always seem to be a few years too late.

For example, the company hedged the price of gold when it was fashionable to do so, but before the gold price ran up dramatically. Likewise, the company made acquisitions at the wrong time, cut costs when it was too late, and most recently was selling high-cost mines into a buyer’s market.

It’s easy to see a pattern here. There’s little reason to expect this to change — Barrick seems to have a culture problem, one that always leads to playing catch-up. That’s never a good recipe for a company’s stock price.

2. A short-term focus

It’s fair to say that Barrick is on a short leash, and this comes with a very severe consequence: short-term thinking.

For example, Barrick has been under pressure to sell high-cost mines over the past year, which has helped lower its overall cost figures. As a result, it sold some mines for a bargain price. Similarly, Barrick is under pressure to cut operating costs — this creates an incentive to cut down on the expenditures that are necessary for long-term production growth.

Likewise, Barrick has announced that further cuts at its corporate headquarters are in the works. How is this supposed to make its employees feel? Are they really going to do great work for the company, or are they going to be updating their resumes? These kinds of things do have a significant impact on company performance, even if they are hidden from the view of investors.

3. Better alternatives

Last but not least, there are far better ways to bet on gold. The best option is likely an exchange-traded fund because of its simplicity. Otherwise, there are gold streaming companies like Franco-Nevada Corporation that don’t have to deal with a miner’s operational issues. Finally, you could go with a best-in-class gold miner, such as Goldcorp Inc.

Barrick, on the other hand, has too many issues, and they will take a while to resolve. Your best bet is to avoid that wait.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Benjamin Sinclair has no position in any stocks mentioned.

More on Investing

Solar panels and windmills
Energy Stocks

How Brookfield Renewable Stock Gained 40% in a Month

Brookfield Renewable stock (TSX:BEP.UN) surged in share price from a landmark deal and strong earnings, leading to a 40% jump.

Read more »

money cash dividends
Dividend Stocks

2 Under-$10 Dividend Stocks I’d Buy Right Now

Here's why low-cost dividend stocks such as Decisive Dividend should be part of your shopping list in 2024.

Read more »

Canadian Dollars
Dividend Stocks

5 Stocks You Can Confidently Invest $500 in Right Now

These five stocks are all some of the top businesses in Canada, making them stocks you can buy confidently in…

Read more »

A worker drinks out of a mug in an office.
Dividend Stocks

Worry-Free Dividends: 3 Stocks for Canadian Investors

These three Canadian stocks can help you earn worry-free dividends irrespective of market conditions.

Read more »

movies, theatre, popcorn

Cineplex Stock Looks Like a Steal at $8 and Change

Cineplex (TSX:CGX) stock is starting to look like a great deal as it looks to add to its recent swing…

Read more »

Woman has an idea
Dividend Stocks

The Smartest TSX Dividend Stocks to Buy With $1,000 Right Now

Here's why blue-chip TSX dividend stocks such as BAM and BMO should be a part of your shopping list in…

Read more »


The Top 5 Movers on the TSX in May

If you're looking for the best of the best, these five have been the top performers in May of this…

Read more »

stock data
Dividend Stocks

TFSA Pension: 1 Great Canadian Dividend Stock to Own for Growing Passive Income

This TSX dividend stock is down 35% from the 2022 high. Is it finally oversold?

Read more »