Company Reports

Commodity prices generally fell in the September-ending quarter, except for gold. Concerns about weak China end-user steel demand affected iron ore and other steelmaking commodities, while base metals prices fell on worries over slower economic growth in China and elsewhere.

No-moat Barrick Gold’s 2024 second-quarter attributable sales of about 960,000 ounces were 5% higher than the prior quarter, but 4% lower than a year ago. The decline on last year reflects lower production in line with mine plans. First-half sales volumes of about 1.9 million ounces fell 5% on last year, but were similar to our expectations and guidance, which it reiterates. Sales volumes are likely to increase further through 2024, led by the larger mines. Increased production due to higher grades at its 62%-owned Nevada Gold Mines joint venture, along with a second-half ramp-up at the 60%-owned Pueblo Viejo joint venture and 25%-owned Porgera mine are the main drivers. We continue to forecast 2024 sales of around 4.1 million ounces, similar to 2023.

Barrick Gold is the world’s second-largest gold miner by production, operating mines in 19 countries in the Americas, Africa, the Middle East, and Asia. Its large portfolio is a result of the 2019 acquisition of Randgold and the combination of its crown jewel Nevada assets with Newmont in a joint venture called Nevada Gold Mines that same year. With Barrick the operator and owning 61.5% of the partnership, NGM has been able to reduce costs thanks to the proximity of mines owned by the joint venture.

Shares of most of our global mining coverage fell during the quarter, and the average price/fair value estimate has fallen modestly to 1.05 at July 8, 2024 from 1.07 last quarter. While our coverage is close to fairly valued on average, there is a wide dispersion, with no-moat mineral sands miner Iluka the cheapest, trading 30% below fair value at that date. Mineral sands prices are lower, on reduced demand from China’s property sector. Rising interest rates and slowing housing markets in the West are also a near-term headwind. However, longer-term, maturing mines and a lack of large, high-grade, undeveloped resources are likely to support mineral sands prices. Its proposed rare earths refinery in Eneabba is an option, on elevated rare earths prices and potential Western tariffs on Chinese production.

Base metals prices surged earlier in the June quarter of 2024 before partially reversing due to concerns over China’s economy. Iron ore prices are broadly stable despite China's struggling property market and weak infrastructure spending, leading to questions over China's steel demand. After updating our commodity price assumptions, no-moat Iluka is the cheapest miner we cover, trading 31% below its unchanged fair value estimate of AUD 9.50.

Barrick Gold is the world’s second-largest gold miner by production, operating mines in 19 countries in the Americas, Africa, the Middle East, and Asia. Its large portfolio is a result of the 2019 acquisition of Randgold and the combination of its crown jewel Nevada assets with Newmont in a joint venture called Nevada Gold Mines that same year. With Barrick the operator and owning 61.5% of the partnership, NGM has been able to reduce costs thanks to the proximity of mines owned by the joint venture.

No-moat Barrick Gold’s 2024 first-quarter attributable sales of about 910,000 ounces were down 5% from the same quarter of 2023 and 13% from the prior quarter, driven by seasonal maintenance and mine plan sequencing. However, they were broadly in line with our expectations and guidance, which the company reiterated. We expect sales to increase over the remainder of 2024, assisted by the 60%-owned Pueblo Viejo and 25%-owned Porgera mines ramping up, and continue to forecast 2024 sales of 4.0 million-4.1 million ounces, similar to 2023. While the lower sales drove a 7% increase in unit cash costs, 9% higher gold prices meant adjusted earnings per share rose 36% on last year, to USD 0.19. We forecast 2024 EPS of USD 0.94, about 12% higher than 2023, driven by higher gold prices.

Barrick Gold is the world’s second-largest gold miner by production, operating mines in 19 countries in the Americas, Africa, the Middle East, and Asia. Its large portfolio is a result of the 2019 acquisition of Randgold and the combination of its crown jewel Nevada assets with Newmont in a joint venture called Nevada Gold Mines that same year. With Barrick the operator and owning 61.5% of the partnership, NGM has been able to reduce costs thanks to the proximity of mines owned by the joint venture.

Commodity prices diverged in the quarter. Despite solid China steel production, iron ore and metallurgical coal prices are down, while copper rose on supply issues and hopes of faster global growth. However, prices are elevated compared with history and cost-curve support.

Iron ore prices are lower on concerns over China steel demand due to its struggling property market and weak infrastructure spending. However, gold prices are up on optimism over peak interest rates, driving a 2% rise in our estimate for no-moat Newmont, to USD 51. It remains the cheapest miner we cover, trading 27% below fair value.

Barrick Gold is the world’s second largest gold miner by production, operating mines in 19 countries in the Americas, Africa, the Middle East, and Asia. Its large portfolio of mines is a result of the 2019 acquisition of Randgold and the combination of its crown jewel Nevada assets with Newmont in a joint venture called Nevada Gold Mines, or NGM, that same year. With Barrick the operator and owning 61.5% of the partnership, NGM has been able to reduce costs given the proximity of mines owned by the joint venture.

Demand growth from China has been the main driver of rising commodity prices in the past two decades. More recently, though, most commodity prices have fallen from highs set with Russia’s invasion of Ukraine, the subsequent sanctions on Russia, and the rerouting of supply chains. Prices, nevertheless, are generally elevated versus the 20-year average, as well as relative to cost support.

No-moat Barrick Gold’s 2023 result was in line with our expectations. Despite this, we modestly lower our fair value estimate to USD 21 per share, down from USD 21.50. Barrick guided to lower 2024 gold production as well as increased unit cash costs, driven by lower output at the Nevada Gold Mines and Pueblo Viejo joint ventures with Newmont. We now forecast 2024 gold sales of 4.0 million to 4.1 million ounces, similar to 2023 but down from 4.4 million to 4.5 million previously. We also expect increased unit cash costs of about USD 1,010 per ounce, up from USD 900. We still forecast gold sales rising to around 4.6 million ounces in 2028, driven by increased production at Barrick’s joint ventures with Newmont.

Barrick Gold is the world’s second largest gold miner by production, operating mines in 19 countries in the Americas, Africa, the Middle East, and Asia. Its large portfolio of mines is a result of the 2019 acquisition of Randgold and the combination of its crown jewel Nevada assets with Newmont in a joint venture called Nevada Gold Mines, or NGM, that same year. With Barrick the operator and owning 61.5% of the partnership, NGM has been able to reduce costs given the proximity of mines owned by the joint venture.

Near-term iron ore prices are higher on strong China steel production. Gold prices are up on optimism over peak interest rates, driving a 2% rise in our estimate for no-moat Newmont, to USD 54. It is the cheapest we cover, trading 30% below fair value.

Barrick Gold is the world’s second largest gold miner by production, operating mines in 19 countries in the Americas, Africa, the Middle East, and Asia. Its large portfolio of mines is a result of the 2019 acquisition of Randgold and the combination of its crown jewel Nevada assets with Newmont in a joint venture called Nevada Gold Mines, or NGM, that same year. With Barrick the operator and owning 61.5% of the partnership, NGM has been able to reduce costs given the proximity of mines owned by the joint venture.

Commodity prices diverged in the quarter with strong China steel production driving iron ore and metallurgical coal prices up, while base metals prices dropped on worries of a Western recession. Even so, prices are elevated versus history and cost-curve support.

We retain our fair value estimate of USD 21 per share for no-moat Barrick Gold after its 2023 third-quarter result met our expectations. Adjusted EBITDA of USD 1.46 billion rose 27% on the third quarter of 2022, driven by higher gold prices and sales volumes, partially offset by increased unit cash costs. The balance sheet remains strong, with minimal net debt of about USD 510 million. It will pay a USD 0.10 (CAD 0.137) per share dividend in December, half that paid last year but in line with its dividend policy. We forecast total 2023 dividends of USD 0.40 (CAD 0.548) for a 2.5% forward yield at current share prices. Barrick targets a quarterly base dividend of USD 0.10 per share, with additional dividends potentially payable if it has net cash on the balance sheet. We think this is a reasonable approach. Though as its shares trade at around a 24% discount to fair value, we think share repurchases would be a better use of surplus funds. We think the discount to fair value is likely due to concerns over rising real interest rates, which are a headwind to gold prices.

Strong China steel production is supporting prices for steel inputs despite recession concerns. Otherwise, changes to our commodity price assumptions are mixed, led by higher near-term iron ore prices and lower near-term thermal coal prices. We think thermal coal miner Whitehaven Coal and minerals sands miner Iluka are the cheapest we cover. Both trade at 29% discounts to our AUD 9.50 and AUD 10.50 per share fair value estimates, respectively, with Whitehaven’s down 3% on lower near-term thermal coal prices, partially offset by a weaker Australian dollar. Peer New Hope is also down 3% to AUD 6.10 per share. Iluka’s estimate is unchanged, with a weaker Australian dollar offsetting lower synthetic rutile prices.

Barrick Gold is the world’s second largest gold miner by production, operating mines in 19 countries in the Americas, Africa, the Middle East, and Asia. Its large portfolio of mines is a result of the 2019 acquisition of Randgold and the combination of its crown jewel Nevada assets with Newmont in a joint venture called Nevada Gold Mines, or NGM, that same year. With Barrick the operator and owning 61.5% of the partnership, NGM has been able to reduce costs given the proximity of mines owned by the joint venture.