Barrick Gold Corp.: Is it Too Late to Buy?

Barrick Gold Corp. (TSX:ABX)(NYSE:ABX) is already up 180% in 2016. How much higher could it go?

| More on:
The Motley Fool

Barrick Gold Corp. (TSX:ABX)(NYSE:ABX) is up more than 180% in 2016, and investors who missed the big rally to start the year are wondering if the stock can extend its run.

Let’s take a look at the world’s largest gold producer to see if this is a good time to buy.

A new Barrick

For years Barrick held the view that bigger is better regardless of the costs, and that mentality was toxic for shareholders.

It appears that things have finally changed, and investors are now flooding back into the stock.

Barrick’s current management team is orchestrating a turnaround that few pundits believed would succeed. In just over a year the company has reduced its massive debt load by nearly US$4 billion and has streamline operations to the point where the company’s all-in sustaining costs (AISC) are the lowest among the industry’s big players.

Barrick produced 1.28 million ounces of gold in Q1 at AISC of just US$706 per ounce. The company says AISC for all of 2016 should be US$760-810 per ounce on production of 5-5.5 million ounces.

Over the next three years, AISC is expected to fall below US$700 per ounce.

Barrick has delivered four straight quarters of positive free cash flow, and the trend is set to continue given the strong rise in the price of gold over the past six months.

Gold outlook

Gold has staged an impressive rally this year, and the current outlook suggests more upside could be in the cards.

The party started when investors began to realize that the U.S. Federal Reserve was unlikely to raise rates as fast as initially expected. Most analysts were looking for a total of four moves in 2016. Now the market is pricing in two rate hikes or fewer.

That has put pressure on the U.S dollar, and a falling greenback is generally positive for gold.

Gold is also benefiting from a flight to safety as investors fear the fallout of the Brexit vote. Concerns about a financial meltdown in China are adding fuel to the fire, and that situation is not going away in the near term.

Another factor is the move by Japan and several European countries to a position of negative rates. The big beef against gold is the fact that it doesn’t pay you anything to own it. No return starts to look like a good opportunity when governments begin to charge you to hold your money.

Should you buy now?

An investor has to be a gold bull to step in at this point. If you belong to that camp, Barrick looks like a compelling bet. The stock is highly leveraged to rising gold prices, and Barrick is generating some serious margins with gold at US$1,350 per ounce.

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 Andrew Walker owns shares of Barrick Gold.

More on Metals and Mining Stocks

Gold bars
Metals and Mining Stocks

Why Alamos Gold Jumped 7% on Wednesday

Alamos (TSX:AGI) stock and Argonaut Gold (TSX:AR) surged after the companies announced a friendly acquisition for $325 million.

Read more »

Nuclear power station cooling tower
Metals and Mining Stocks

If You’d Invested $1,000 in Cameco Stock 5 Years Ago, This Is How Much You’d Have Now

Cameco (TSX:CCO) stock still looks undervalued, despite a 258% rally. Can the uranium miner deliver more capital gains to shareholders?

Read more »

Super sized rock trucks take a load of platinum rich rock into the crusher.
Stocks for Beginners

Cameco Stock and More: 3 TSX Commodity Titans to Watch in 2024

Cameco stock and these others will provide you with growth that goes beyond just a year or two, with all…

Read more »

Handwriting text writing Are You Ready For Tomorrow question. Concept meaning Preparation to the future Motivation Stand blackboard with white words behind blurry blue paper lobs woody floor.
Stocks for Beginners

3 Reasons to Buy Lundin Stock Like There’s No Tomorrow

Lundin stock (TSX:LUN) has been killing its production of copper and plans on blowing its records out of the water…

Read more »

Gold bars
Stocks for Beginners

TSX Materials in March 2024: The Best Stock to Buy Right Now

Materials have been quite volatile, though the price of gold has surged to all-time highs. That makes this stock a…

Read more »

Gold bars
Metals and Mining Stocks

Will Gold Stocks Rally in 2024?

Down almost 30% from all-time highs, Franco-Nevada is a gold mining stock trading at a discount to consensus price target…

Read more »

A miner down a mine shaft
Stocks for Beginners

Canadian Mining Stocks: Buy, Sell or Hold?

Canadian mining stocks have seemed like such a strong investment, but with shares down significantly this year, what should we…

Read more »

Gold king in chess game face with the another silver team on black background (Concept for company strategy, business victory or decision)
Stocks for Beginners

Great News for Gold Stock Investors!

Gold has hit an all-time high! Which is good news for some gold stocks, and really good news for others.

Read more »