Why Barrick Gold Is One of the Best Gold Bets

Barrick Gold [stock_market_widget type="inline" template="generic" color="default" assets="ABX.TO" markup="(TSX: {symbol} {currency_symbol}{price} ({change_pct}))" api="yf"] is one of the best senior gold producers you might want to take a look at in light of the favourable gold pricing environment. The stock has shot up more than 20% this year even after its latest pullback, and it could soon resume its journey higher thanks to a combination of further strength in gold pricing and the company’s focus on improving productivity and efficiencies.

Let’s take a closer look at the reasons why you should be considering Barrick Gold stock for your portfolio.

Higher Production in the Cards

Barrick Gold has been taking concrete steps to increase its output and reduce costs at the same time. First, it acquired Randgold Resources, and then, it struck a joint venture with Newmont in Nevada to create higher cost synergies.

The company has now received the green light to acquire African gold mining company Acacia Mining in a deal valued at $1.2 billion. This was the last hurdle that Barrick was facing in the way of completion of the deal.

Barrick was already holding nearly 64% of Acacia, and is now on track to control the complete output of the company. The good news for Barrick shareholders is that Acacia’s production is on the rise. As reported by Mining.com:

The London-listed miner said overall gold production rose 51% to almost 159,000 ounces in the three months to June, up from 105,000, thanks to North Mara mine’s “record breaking performance”.  That operation churned out 119,000 ounces of gold in the quarter and set a monthly production of nearly 48,000 ounces in June.

So it is not surprising to see why Barrick wanted to seal Acacia’s acquisition. However, Barrick will now have to deal with the Tanzania government that has imposed sanctions on the company. Acacia was served with a $190 billion tax bill, which was later reduced to $300 million. Barrick management believes that a merger was the only way through which the Tanzania government would improve its relations with Acacia.

So if Barrick manages to strike a deal with the government in Tanzania, Barrick will be able to give its output a nice boost.

Higher Gold Prices Will Be a Tailwind

The spot price of gold has been holding ground near the $1,500 an ounce mark and it could move higher as analysts project. Citi recently said that the price of gold could hit $2,000 an ounce in the coming months.

Citi’s projection is based on a continuance of the macroeconomic weaknesses and a potential for recession. If the U.S.-China trade war keeps raging on and the growth of major economies across the globe slows down, then gold prices could get close to Citi’s projection. That would be great news for Barrick investors as the company is taking the right steps to take advantage of a potential increase in the price of the yellow metal that could boost its financial performance in the future.

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The opinions provided in this article are those of the author and do not constitute investment advice. Readers should assume that the author and/or employees of Capital 10X hold positions in the company or companies mentioned in the article. For more information, please see our Content Disclaimer.

Harsh Singh Chauhan
Harsh Singh Chauhan has a wealth of experience evaluating publicly-traded companies across several verticals, including technology, oil and gas, retail, and consumer goods. His financial writing has been published across platforms such as The Motley Fool, TheStreet, and Seeking Alpha. Harsh's philosophy is to find great businesses for the long run based on company fundamentals and industry prospects. Address: 682 Indian Road, Toronto, Ontario, M6P 2C9. Phone: 416-721-8257.
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