Tuesday, April 23, 2013

Barrick Gold Corp

I own this stock of Barrick Gold Corp. (TSX-ABX, NYSE-ABX). As I said yesterday, I bought some of this stock recently because its stock price had fallen hard. I believed the market over reacted. I just bought 100 shares as I am living off my portfolio and do not have much to invest.

Although my spreadsheet shows that 5 year low, median and high median Price/Earnings Ratios for this stock to be rather reasonable at 9.46, 10.84 and 12.23, this has not always been the case. Earnings have been quite volatile. I looked at stock prices going back to the early 1990’s and they have been quite high. The stock prices were about as high as they were recently. However, P/E Ratios were quite high at times (the P/E Ratio hit 104.66 in 2001).

The stock prices were relatively low in the 1980 and were quite high in the 1990’s before falling in the late 1990’s and they rising again to peaks in 2008, 2010 and 2011. The dividend yield was below 1% or just over 1% until fairly recently. I bought the stock recently with a dividend yield of around 4.5% and a forward P/E of 4.36

For this company revenue has been climbing as has earnings. There is an earnings loss in 2012 mainly because of a write-of (or impairment charge) on their Lumwana copper mine in Zambia. Cash Flow is also climbing. Book Value per share has done nothing over the past 5 years, but is up by 8.6% over the past 10 years. The real interesting thing is that the stock price has not done much since the 1990’s. It has fluctuated, but really has gone nowhere.

There is a recent article in the Financial Post of recent troubles of Barrick Gold. The price of gold has plunged, a key project is halted and pension fund investors are up in arms about the recent $11.9M signing bonus that Barrick paid to co-chairman John Thornton last year. Here is a G&M article on Pension Fund investors reaction to John Thornton’s signing bonus.

Well, if the stock recovers I will do fine. There is no doubt in my mind that this is a risky choice. The stock has just tanked. The stock chase site shows a lot of recent Don’t Buy comments. Many people like Goldcorp (TSX-G, NYSE-GG) better. Are we in a correction for the stock market? Who know? If we are, it probably has only just begun. The other problem with gold stocks is the price of gold has recently dropped.

If you look at analysts’ recommendations there are Strong Buy, Buy and Hold recommendations, with a toss-up between Buy and Hold (because there a lots of Hold recommendations). The average 12 months consensus target price is $42.00 and this implies capital gains of around 129%. (However, a lot of things can happen in a year.)

The thing is this is a risky stock pick but if things are turned around, there are good profits to be made. Do I want to keep this stock permanently? I do not know yet. I have to see how the present crisis works out. See my spreadsheet at tih.htm.

Barrick Gold Corporation is a gold mining company with a portfolio of operating mines, and advanced exploration and development projects located across five continents. Its web site is here Barrick.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on Twitter or StockTwits.


  1. a Barrick subsidiary, had buried alive as many as fifty gold miners in Tanzania in August 1996.

    Here is the link to one story: http://www.mapcruzin.com/palast-2.htm

  2. To readers who do not read the article and do no research on this, there is a controversy over what happened at the Tanzanian site of Sutton Resources prior to Barrick buying this company.