Barrick Gold Stock: Should You Buy Now?

Barrick Gold looks oversold. Here’s why this might be a good time to add one of the industry’s top gold stocks to your portfolio.

| More on:
Gold bars

Image source: Getty Images

Barrick Gold (TSX:ABX)(NYSE:GOLD) is down 20% in 2021 and off 35% in the past 12 months. The terrible performance of the gold mining sector while the TSX Index hits record highs has some contrarian investor wondering if this is a good time to buy Barrick Gold and other mining stocks.

Earnings results

Barrick Gold reported steady Q2 2021 results, despite a hit due to a mechanical mill failure at its Carlin site that impacted production for the quarter. The company had Q2 2021 gold production of 1.041 million ounces compared to 1.149 million ounces in the same period last year. Nonetheless, Barrick Gold says it remains on track to meet its 2021 guidance.

Adjusted net earnings for the quarter came in at US$513 million, or US$0.29 per share, compared to US$415 million, or US$0.23 per share, in the same period last year. Higher gold prices helped offset the drop in production. The Q2 2021 realized gold price was US$1,820 per ounce in the quarter compared to US$1,725 in Q2 last year and all-in sustaining costs (AISC) were US$1,087 per ounce, slightly above AISC of US$1,031 reported for Q2 2020.

Mining is a machine-intensive business, and sometimes things break. Investors should look beyond the short-term setback when evaluating the stock.

Barrick Gold also has large copper operations that help differentiate the stock from its gold mining peers. The market might not fully appreciate the value of the copper business right now. Copper currently trades for close to US$4.40 per pound. That’s up from US$2 in March 2020.

Opportunity

Barrick Gold continues to invest in exploration and development with a goal of expanding its resource-based 10-year plans to 15 or even 20 years. The gold mining industry as a whole is milking the benefits of higher prices rather than investing to replace high-quality reserves. This means a gold shortage could arise in the coming years, and the companies with the best reserve base should outperform in the long run.

Barrick Gold says the success of its ongoing brownfield explorations in North America and Africa will more than offset reserve depletion in 2021. In addition, greenfield operations are targeting new discoveries in the broader Barrick old asset portfolio, including promising sites in Egypt, Guyana, Japan, Senegal, and Tanzania.

Balance sheet

Barrick Gold finished Q2 2021 US$5 billion in cash. This gives the company good flexibility to make strategic investments for future growth. Barrick Gold is also rewarding shareholders. The board has tripled the dividend over the past three years to an annualized rate of US$0.36 per share. Investors could see another big hike to the payout before the end of the year. In addition, Barrick Gold declared a US$750 million return of capital for shareholders in 2021. That works out to about US$0.42 per share on top of the dividend.

Should you buy Barrick Gold stock today?

Barrick Gold makes good money at current gold prices. The company is investing for the future, and gold could be in the early stages of a long-term rally. Volatility should be expected, but Barrick Gold’s stock looks undervalued right now.

If you are positive on gold over the next five years, this stock should be on your buy list. The price of gold could easily retest US$2,000 per ounce by the end of 2022. Barrick Gold currently trades near $25 per share on the TSX Index. A run back to the 2020 high of $40 by the end of next year wouldn’t be a surprise.

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.

The Motley Fool has no position in any of the stocks mentioned. Fool contributor Andrew Walker has no position in the companies mentioned.

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 »