Up 14% in October, Is Barrick Gold Stock a Buy Today?

Barrick Gold stock is rising on improving production economics and strong gold prices. The future is even more interesting.

| More on:

Positive momentum has returned to Canadian gold stocks during the fourth quarter of 2023. Barrick Gold (TSX: ABX) stock has rallied 15.4% from this month’s lows and retains a 13.6% gain so far in October. Good news has been piling up in favour of the world’s second-largest gold producer. Notably, resurgent market fever in the face of stubborn inflation supports a flight to gold as a safe haven investment.

Why is Barrick Gold stock rising in October?

Barrick Gold has been a source of encouraging news to gold stock’s investors lately. The $37.6 billion gold and copper mining giant received a new mining lease on its mothballed Porgera project in Papua New Guinea this month. The licence greenlights a production restart on a key gold project that has been in care and maintenance for three long years. More ounces of gold will show up in Barrick’s annual production figures soon.

Further, Barrick’s productivity increased during the past quarter. The company recently reported 3% sequential growth in gold and copper production for the third quarter of 2023. Preliminary production results show that Barrick Gold produced 1 million ounces of gold and 112 million pounds of copper during the past three months.

Most noteworthy, preliminary third-quarter results depict a rosy picture of improving production economics. Third-quarter all-in sustaining costs (AISC) per ounce of gold sequentially dropped by between 6% to 8%, and cash costs per pound of copper declined by 9% to 11% sequentially.

Meanwhile, Barrick Gold is intensifying its investments in the African copper belt region covering Zambia and the Democratic Republic of Congo. The company plans to invest nearly US$2 billion (C$2.7 billion) in a major mine expansion project to increase copper production at Lumwana mine in Zambia. The investment will create a “super pit” that extends mine life to 2060 and transforms the mine into a profitable project. Growing and expanding productivity add more value to the precious metals stock.

Recent news made Barrick Gold stock more valuable than it appeared at the end of September. Barrick Gold’s annual production rates could improve in the near term, as planned investments enhance its proven resource base and firmer gold prices increase the net present value of its future cash flows.

Is the gold stock a buy today?

Barrick Gold stock rebounded in October, and shares could see a strong close to the year if recent production growth momentum continues into the fourth quarter, and if gold prices cooperate. The company is vastly experienced in navigating through some “not-so-friendly” mining jurisdictions, and planned expansions in Africa may not really increase Barrick Gold’s risk profile. Encouragingly, growing productivity and free cash flow may support growing windfalls to long-term investors.

I like Barrick Gold’s updated dividend policy, in particular. Although it won’t rank among top dividend stocks yet, the company recently adopted a promising performance-based dividend policy. Beginning in 2022, Barrick Gold will pay a “base dividend” of US$0.10 per share every quarter (which yields 2.5% annually), and management may add variable quarterly raises depending on liquidity. The gold miner’s new dividend policy may significantly enhance total returns to shareholders through dividend bumps during periods of strong liquidity and firmer gold prices.

That said, Barrick Gold stock appears somewhat fairly priced today compared to other metals and mining stocks. Its next 12 months’ total enterprise value-to-revenue (NTM EV/Revenue) multiple of 3.1 is higher than Newmont Corporation’s comparable multiple of 2.3 and Freeport-McMoRan’s 2.8 but remains lower than Agnico Eagle Mines’ comparable multiple of 3.9.

Fool contributor Brian Paradza has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

More on Dividend Stocks

crisis concept, falling stairs
Dividend Stocks

This Canadian Dividend Stock is Down 15%: Should You Buy the Dip?

This company has increased its dividend annually for the past 26 years.

Read more »

Hourglass and stock price chart
Dividend Stocks

The Most Boring Stock on the TSX Might Be One of Its Smartest Buys

CNR stock does not offer explosive growth or a massive dividend yield. However, its stability and track record can make…

Read more »

A close up color image of a small green plant sprouting out of a pile of Canadian dollar coins "loonies."
Dividend Stocks

3 Canadian Dividend Giants I’d Buy With Rates on Hold

Focusing on dividend giants while interest rates are on hold is a prudent strategy for income investors.

Read more »

Retirees sip their morning coffee outside.
Dividend Stocks

These 3 Canadian Dividend Stocks Are Great for Retirees

Given their strong financials, consistent dividend payouts, and healthy growth prospects, these three Canadian stocks are ideal for retirees.

Read more »

rising arrow with flames
Dividend Stocks

The Market’s On Fire — But Should You Be Buying Right Now?

Despite the hot market, investors could still invest selectively in quality businesses. Diversify and dollar-cost average over time to mitigate…

Read more »

man with shovel stands by a hole
Dividend Stocks

TD Just Put $150 Billion Behind Canada’s Next Investment Boom. Should You Buy the Stock?

Instead of betting on which mega-project wins, consider a picks-and-shovels play on the bank that earns interest and fees on…

Read more »

telecom towers concept for wireless technology
Dividend Stocks

Bell Just Made a $52.5 Billion Bet on AI. So Is BCE Stock Finally a Buy?

BCE’s ambitious AI hub plan could reinvent the telecom’s growth story, but it first requires years of heavy spending.

Read more »

A train passes Morant's curve in Banff National Park in the Canadian Rockies.
Dividend Stocks

Canada Just Cut the Tax on New Investment Nearly in Half: This TSX Stock Could Win

Canada’s new tax write-off could quietly drive more investment than any single mega-project announcement.

Read more »