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.
