Barrick Gold Earnings: Lower on Poor Sales Volumes and Higher Unit Costs

No-moat Barrick Gold’s ABX 2023 second-quarter result was lower than our expectations. Adjusted NPAT of about USD 340 million or USD 0.19 (CAD 0.25) per share was around 20% below the second quarter of 2022 but 36% higher than the previous quarter. Adjusted EBITDA of about USD 1.4 billion fell 10% on last year, driven by lower gold sales and higher unit cash costs, partially offset by higher gold prices. Nevertheless, gold sales improved on the prior quarter, and we think sales likely continue to improve over the remainder of 2023, driven by increased production at Barrick’s 61.5%-owned Nevada Gold Mines, or NGM, and 60%-owned Pueblo Viejo joint ventures with Newmont. Increased sales will, in turn, likely lower unit cash costs and improve margins, in our view. However, we think it unlikely that an improved second half will fully make up for lower-than-expected first-half sales and modestly lower forecast 2023 attributable gold sales to about 4.2 million ounces, down from roughly 4.3 million. Our forecast unit cash costs for 2023 rise accordingly, to about USD 890 per ounce, up from USD 870 previously.

These changes are relatively minor, and we retain our fair value estimate for Barrick of USD 21 per share—its shares trade at a roughly 22% discount to fair value. We think this likely reflects fears global central banks will further raise interest rates, a headwind for gold prices, along with some doubts over production improving. The balance sheet is very strong, with a net debt/adjusted trailing 12 months EBITDA of 0.1. It will pay a quarterly dividend of USD 0.10 (CAD 0.13) in September, half the amount paid in second-quarter 2022 given lower earnings but consistent with its dividend policy. We forecast Barrick to increase attributable gold sales to about 4.6 million ounces in 2027, driven by increased production at NGM and Pueblo Viejo. These operations account for more than 60% of Barrick’s attributable gold sales in 2027.