One of the world’s biggest gold producers, Barrick Mining Corporation (ABX:TSE), also known as Barrick Gold, has seen its share price rise 21% this year, but we believe there is a great deal more upside to come.
The gold price has doubled since late 2022, yet gold mining stocks have barely budged, despite the fact they offer leveraged exposure to prices and they pay dividends while physical bullion generates no income.
With gold trading at roughly $3,350 per ounce at the time of writing, there is a huge disconnect, and with some analysts raising their 2025 year-end forecasts to $4,000 per ounce and beyond, it is only a matter of time before this gap closes.
WHAT DOES BARRICK DO?
Toronto-listed Barrick is the world’s second largest gold producer by volume, with mines in 19 countries including six so-called Tier One mines.
In 2019, it bought Randgold Resources, an Africa-focused gold mining and exploration company, for $18.3 billion, and in the same year it combined its Nevada mines in a joint venture with Colorado-based competitor Newmont (NEM:NYSE).
Last year, Barrick produced 3.9 million attributable ounces of gold as well as 430 million pounds of copper, which has also been rising in price due to a global push towards electrification and increased infrastructure spending.
Most of its gold came from the US (46%), while 37% came from Africa and the Middle East and the remaining 17% came from Latin America and Asia.
Net earnings were up 69% on 2023 and free cash flow doubled, while the company has little debt and has been using its cash flow to invest in new facilities as well as buy back its undervalued shares.
STRONG FIRST QUARTER
Net earnings and free cash flow rose 59% apiece in the first three months of this year, while gold production was at the top end of guidance at 758,000 ounces with an average realised gold price of $2,898 per ounce, up 40% on the previous year.
Cash costs of around $1,100 per ounce and all-in sustaining costs of around $1,500 per ounce are expected to trend down during the course of the year, so if the underlying gold price continues to climb margins are going to improve further.
In the meantime, expansion work at Pueblo Viejo in the Dominican Republic and maintenance at Nevada Gold Mines will position both sites for a stronger output next quarter and the rest of this year, while new growth projects are ‘significantly advanced’ according to chief executive Mark Bristow.
The Reko Diq project in Pakistan and Lumwana copper mine in Zambia will ‘materially grow Barrick’s copper and gold production and support our goal to organically grow our gold-equivalent ounces by 30% by the end of the decade,’ says Bristow.
The firm also delivered value in the first quarter with the sale of a 50% interest in the Donlin gold project in Alaska - home to one of the largest undeveloped gold deposits in the world - for $1 billion and bought back another $143 million of its shares.
SHARES PRICE COULD DOUBLE
Among the fifteen Wall Street analysts covering Barrick, the average price target for the shares is $24 but the highest is $38 and Shares believes they could go as high as $50 if the gap with the gold price closes.
Gold has historically been a good hedge against economic uncertainty, and never has that been truer than it is today.
So far the big buyers of gold have been central banks, especially those in emerging markets where bullion is a small percentage of total reserves, but institutions have yet to step up in a meaningful way.
The gold market is tiny by comparison with other asset classes – global gold ETF holdings represent just 1% of outstanding US Treasuries and only 0.5% of the market cap of the S&P 500 – so even a small shift out of bonds or equities into gold could have a massive impact on the gold price, argues Niels Jensen of Absolute Return Partners.
‘Given the high operating leverage in many gold mining companies, one could argue that with a gold price at about $3,350/oz, miners could quite possibly significantly outperform bullion over the next couple of years,’ says Jensen.
POTENTIAL RISKS
No investment is without risks, and we wouldn’t expect Barrick shares to go up in a straight line.
The government in Mali, West Africa, has been trying to seize the day-to-day operations of the Tier One Loulo-Gounkoto gold complex, for example, where Barrick holds an 80% stake.
Operations at the site were suspended in January 2025 due to a dispute over taxes and ownership, and a Malian court is due to rule shortly on whether to put the mine under provisional administration.
Similarly, the group’s exposure to copper means sentiment may turn negative if the global economic outlook worsens or Chinese manufacturing data causes a wobble in commodity markets.
However, we believe the current valuation offers an exceptionally attractive risk-adjusted return for investors willing to ride out any adverse newsflow.
These articles are provided by Shares magazine which is published by AJ Bell Media, a part of AJ Bell. Shares is not written by AJ Bell.
Shares is provided for your general information and use and is not a personal recommendation to invest. It is not intended to be relied upon by you in making or not making any investment decisions. The investments referred to in these articles will not be suitable for all investors. If in doubt please seek appropriate independent financial advice.
Investors acting on the information in these articles do so at their own risk and AJ Bell Media and its staff do not accept liability for losses suffered by investors as a result of their investment decisions.
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