Barrick Gold Earnings: As With Newmont, Sales and Margins Likely to Improve

No-moat Barrick ABX reported a soft first quarter of 2023 but one nevertheless in line with our expectations. Adjusted net income was about USD 250 million, or USD 0.14 per share, roughly halving compared with the first quarter of 2022. Adjusted EBITDA of about USD 1.2 billion fell 28% on last year, driven by lower gold sales and higher unit cash costs due to inflation. Total gold sales fell 4%, to roughly 950,000 ounces. Lower production at Barrick’s 62%-owned Nevada Gold Mines, or NGM, and 60%-owned Pueblo Viejo joint ventures with Newmont were the main drivers, due to planned maintenance and the ramp up of the Pueblo Viejo expansion project, respectively. While Barrick’s averaged realised gold price of about USD 1,900 per ounce was similar to last year, lower production and inflation contributed to higher unit cash costs, which rose about 20% to roughly USD 990 per ounce. Barrick’s copper business was also weak, with copper sales of roughly 40,000 metric tons down around 20%. Along with a 10% lower average realised copper price of about USD 9,260 per metric ton, this also contributed to lower margins. However, copper remains a relatively minor contributor, accounting for about 15% of our forecast 2023 EBITDA.

We retain our fair value estimate for no-moat Barrick of USD 21 per share. As with Newmont, we think production will ramp up as 2023 progresses, helping lower unit cash costs and improve margins. Specifically, the NGM and Pueblo Viejo joint ventures account for roughly 60% of our forecast attributable gold production of about 4.3 million ounces in 2023, a modest increase on the 4.1 million produced in 2022. Barrick will pay a USD 0.10 (about CAD 0.14) dividend in June, consistent with its payout policy that varies based on the amount of net cash on its balance sheet. With minimal net debt of about USD 400 million at end-March 2023, Barrick’s balance sheet remains very strong. We forecast total 2023 dividends of USD 0.40 (CAD 0.55) per share, roughly a 2% yield.