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Barrick Gold Falls 12% From Its 52-Week High: Should You Buy the Dip?
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Barrick Gold Corporation’s (GOLD - Free Report) shares are trading roughly 12% below its 52-week high of $21.35, reached on Oct. 21, 2024, closing at $18.88 yesterday. GOLD’s stock has lost some luster after the recent gains on surging gold prices, partly reflecting the weaker-than-expected preliminary gold production for the third quarter reported last month. The preliminary gold production of 943,000 ounces was lower than the previous quarter’s level. The gold-mining giant’s shares have also been down around 5% over the past month.
Technical indicators show that GOLD has been incessantly trading above the 200-day simple moving average (SMA) since June 18, 2024. However, the stock is currently trading below the 50-day SMA. Nevertheless, the 50-day SMA continues to read higher than the 200-day moving average since the golden crossover on April 29, 2024, indicating a bullish trend.
GOLD Trades Below 50-Day SMA
Image Source: Zacks Investment Research
Is the time right to buy GOLD’s shares for potential upside? Let’s take a look at the stock’s fundamentals.
Key Projects to Drive Production Upside for Barrick
Barrick is well-placed to benefit from the progress in key growth projects that should significantly contribute to its production. Its major gold and copper growth projects, including Goldrush, the Pueblo Viejo plant expansion and mine life extension, Donlin Gold, Fourmile, Lumwana Super Pit and Reko Diq, are currently being executed.
These projects are advancing on schedule and within budget, underpinning the next generation of profitable production. The restart of the Porgera mine would offer a further upside, supporting the company’s planned production ramp-up through 2024.
The recently commissioned Goldrush mine is ramping up to a targeted 400,000 ounces of production per annum by 2028. Bordering Goldrush is the 100% Barrick-owned Fourmile, which is yielding grades double those of Goldrush and is anticipated to become another Tier One mine. The Reko Diq copper-gold project in Pakistan is designed to produce 400,000 tons of copper and 500,000 ounces of gold annually in its second development phase.
Last month, Barrick announced the official commencement of the development of a Super Pit at its Lumwana copper mine in Zambia. The Super Pit Expansion feasibility study is anticipated to be completed by the end of the year, with construction beginning in 2025. The expansion entails doubling the present process circuit's throughput and substantially boosting mining volumes. Upon completion, the $2 billion project has the potential to transform Lumwana into a long-term, high-yielding, top-25 copper producer and Tier One copper mine.
Rallying Gold Prices to Drive GOLD’s Margins and Cash Flow
Rallying gold prices should translate into strong profit margins and free cash flow generation. Gold prices are hitting record highs this year, and the yellow metal has been among the best-performing assets. Gold has rallied roughly 33% this year, driven by strong demand from central banks, a dovish Fed interest rate outlook, global uncertainties and a surge in safe-haven demand thanks to geopolitical tensions. The recent rally in gold prices has been supported by the 50-basis-point cut in interest rates by the U.S. Federal Reserve, growing expectations of another rate reduction in November, uncertainties over the U.S. presidential election, and increased tensions in the Middle East, which fueled safe-haven demand.
GOLD’s Strong Liquidity & Attractive Dividend Bode Well
Barrick has a robust liquidity position and generates healthy cash flows, which position it well to take advantage of attractive development, exploration and acquisition opportunities, as well as drive shareholder value and reduce debt. At the end of the second quarter of 2024, Barrick’s cash and cash equivalents were around $4 billion. It also generated an operating cash flow of $1.16 billion and a free cash flow of $340 million.
GOLD offers a healthy dividend yield of 2.1% at the current stock price. Its payout ratio is 39% (a ratio below 60% is a good indicator that the dividend will be sustainable), with a five-year annualized dividend growth rate of 11.5%.
Valuation Looks Attractive for GOLD Stock
GOLD’s attractive valuation should lure investors seeking value. The stock is currently trading at a forward 12-month earnings multiple of 10.45X, lower than its five-year median. This represents a roughly 23% discount when stacked up with the industry average of 13.57X.
Image Source: Zacks Investment Research
GOLD’s Rising Earnings Estimates Instil Optimism
Earnings estimates for Barrick have been going up over the past 60 days, reflecting analysts’ optimism. The Zacks Consensus Estimate for 2024 and 2025 have been revised upward over the same time frame.
The Zacks Consensus Estimate for earnings for 2024 is currently pegged at $1.29, suggesting year-over-year growth of 53.6%. Earnings are also expected to register 47.2% growth in 2025.
Image Source: Zacks Investment Research
GOLD Stock Underperforms Industry and S&P 500
Barrick’s price performance has been lackluster this year despite the rally in gold prices. GOLD’s shares have gained 4.3% year to date, underperforming the Zacks Mining – Gold industry’s 29.8% increase and the S&P 500’s rise of 20.1%. Its peers, Newmont Corporation (NEM - Free Report) , Kinross Gold Corporation (KGC - Free Report) and Agnico Eagle Mines Limited (AEM - Free Report) , have racked up gains of 11.1%, 68.6% and 56.4%, respectively, over the same period.
GOLD’s YTD Price Performance
Image Source: Zacks Investment Research
How Should Investors Play the GOLD Stock?
GOLD presents a compelling investment case with a strong pipeline of growth projects, solid financials, rallying gold prices and a healthy growth trajectory. Its cheap valuation also offers an attractive entry point. Investors seeking exposure to the gold mining sector, particularly in a market environment that favors gold as a safe-haven asset, may find this Zacks Rank #2 (Buy) stock a worthwhile addition as it has upbeat growth prospects.
Image: Bigstock
Barrick Gold Falls 12% From Its 52-Week High: Should You Buy the Dip?
Barrick Gold Corporation’s (GOLD - Free Report) shares are trading roughly 12% below its 52-week high of $21.35, reached on Oct. 21, 2024, closing at $18.88 yesterday. GOLD’s stock has lost some luster after the recent gains on surging gold prices, partly reflecting the weaker-than-expected preliminary gold production for the third quarter reported last month. The preliminary gold production of 943,000 ounces was lower than the previous quarter’s level. The gold-mining giant’s shares have also been down around 5% over the past month.
Technical indicators show that GOLD has been incessantly trading above the 200-day simple moving average (SMA) since June 18, 2024. However, the stock is currently trading below the 50-day SMA. Nevertheless, the 50-day SMA continues to read higher than the 200-day moving average since the golden crossover on April 29, 2024, indicating a bullish trend.
GOLD Trades Below 50-Day SMA
Is the time right to buy GOLD’s shares for potential upside? Let’s take a look at the stock’s fundamentals.
Key Projects to Drive Production Upside for Barrick
Barrick is well-placed to benefit from the progress in key growth projects that should significantly contribute to its production. Its major gold and copper growth projects, including Goldrush, the Pueblo Viejo plant expansion and mine life extension, Donlin Gold, Fourmile, Lumwana Super Pit and Reko Diq, are currently being executed.
These projects are advancing on schedule and within budget, underpinning the next generation of profitable production. The restart of the Porgera mine would offer a further upside, supporting the company’s planned production ramp-up through 2024.
The recently commissioned Goldrush mine is ramping up to a targeted 400,000 ounces of production per annum by 2028. Bordering Goldrush is the 100% Barrick-owned Fourmile, which is yielding grades double those of Goldrush and is anticipated to become another Tier One mine. The Reko Diq copper-gold project in Pakistan is designed to produce 400,000 tons of copper and 500,000 ounces of gold annually in its second development phase.
Last month, Barrick announced the official commencement of the development of a Super Pit at its Lumwana copper mine in Zambia. The Super Pit Expansion feasibility study is anticipated to be completed by the end of the year, with construction beginning in 2025. The expansion entails doubling the present process circuit's throughput and substantially boosting mining volumes. Upon completion, the $2 billion project has the potential to transform Lumwana into a long-term, high-yielding, top-25 copper producer and Tier One copper mine.
Rallying Gold Prices to Drive GOLD’s Margins and Cash Flow
Rallying gold prices should translate into strong profit margins and free cash flow generation. Gold prices are hitting record highs this year, and the yellow metal has been among the best-performing assets. Gold has rallied roughly 33% this year, driven by strong demand from central banks, a dovish Fed interest rate outlook, global uncertainties and a surge in safe-haven demand thanks to geopolitical tensions. The recent rally in gold prices has been supported by the 50-basis-point cut in interest rates by the U.S. Federal Reserve, growing expectations of another rate reduction in November, uncertainties over the U.S. presidential election, and increased tensions in the Middle East, which fueled safe-haven demand.
GOLD’s Strong Liquidity & Attractive Dividend Bode Well
Barrick has a robust liquidity position and generates healthy cash flows, which position it well to take advantage of attractive development, exploration and acquisition opportunities, as well as drive shareholder value and reduce debt. At the end of the second quarter of 2024, Barrick’s cash and cash equivalents were around $4 billion. It also generated an operating cash flow of $1.16 billion and a free cash flow of $340 million.
GOLD offers a healthy dividend yield of 2.1% at the current stock price. Its payout ratio is 39% (a ratio below 60% is a good indicator that the dividend will be sustainable), with a five-year annualized dividend growth rate of 11.5%.
Valuation Looks Attractive for GOLD Stock
GOLD’s attractive valuation should lure investors seeking value. The stock is currently trading at a forward 12-month earnings multiple of 10.45X, lower than its five-year median. This represents a roughly 23% discount when stacked up with the industry average of 13.57X.
GOLD’s Rising Earnings Estimates Instil Optimism
Earnings estimates for Barrick have been going up over the past 60 days, reflecting analysts’ optimism. The Zacks Consensus Estimate for 2024 and 2025 have been revised upward over the same time frame.
The Zacks Consensus Estimate for earnings for 2024 is currently pegged at $1.29, suggesting year-over-year growth of 53.6%. Earnings are also expected to register 47.2% growth in 2025.
GOLD Stock Underperforms Industry and S&P 500
Barrick’s price performance has been lackluster this year despite the rally in gold prices. GOLD’s shares have gained 4.3% year to date, underperforming the Zacks Mining – Gold industry’s 29.8% increase and the S&P 500’s rise of 20.1%. Its peers, Newmont Corporation (NEM - Free Report) , Kinross Gold Corporation (KGC - Free Report) and Agnico Eagle Mines Limited (AEM - Free Report) , have racked up gains of 11.1%, 68.6% and 56.4%, respectively, over the same period.
GOLD’s YTD Price Performance
How Should Investors Play the GOLD Stock?
GOLD presents a compelling investment case with a strong pipeline of growth projects, solid financials, rallying gold prices and a healthy growth trajectory. Its cheap valuation also offers an attractive entry point. Investors seeking exposure to the gold mining sector, particularly in a market environment that favors gold as a safe-haven asset, may find this Zacks Rank #2 (Buy) stock a worthwhile addition as it has upbeat growth prospects.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.