Why Barrick Gold Investors Can Expect More Upside

Barrick Gold [stock_market_widget type="inline" template="generic" color="default" assets="ABX.TO" markup="(TSX: {symbol} {currency_symbol}{price} ({change_pct}))" api="yf"] stock has taken off in the past couple of months thanks to the rally in gold prices, and the company is already taking steps to make the most of the positive pricing environment. Barrick Gold will release its quarterly results on Aug, 12, but it has already given us a sneak peek into how its results could look like on the basis of its preliminary results.

But the more important thing to note here is that Barrick Gold stock is on track to deliver more upside in the long run thanks to the company’s efforts to boost production.

A Closer Look at the Preliminary Results

Barrick Gold investors can expect a nice bump in the company’s top and bottom lines this time thanks to its acquisition of Randgold Resources.

Barrick Gold’s preliminary results tell us that the company produced 1.35 million ounces of gold during the second quarter, and sold 1.35 million ounces of the same. The company also highlighted that it clocked an average realized gold price of $1,309 an ounce.

In the year-ago period, Barrick Gold’s production stood at 1.07 million ounces and the average realized price at that time was $1,313 an ounce. So the increase in gold production will allow Barrick to offset the slight decrease in the average realized price this time.

As far as costs are concerned, Barrick management clarified that its costs per ounce of gold in the second quarter will be marginally higher on a sequential basis. In the first quarter of the year, Barrick Gold’s all-in sustaining costs stood at $825 per ounce of gold. This means that the company’s cost profile will remain under control on a year-over-year basis as in the prior-year period, its all-in sustaining cost of gold stood at $856 an ounce.

So, Barrick Gold investors can expect a nice bump in the company’s top and bottom lines this time thanks to its acquisition of Randgold Resources that was completed earlier. However, this is not the only positive takeaway that Barrick has given investors in recent days.

Barrick Is Taking Steps to Boost Production

Barrick is boosting its exploration efforts in order to take advantage of the positive gold market environment. For instance, in Latin America, the company has a number of projects in the pipeline to extend the life of the mine.

The production at the Veladero mine increased by 26,000 ounces in the second quarter, thanks to Barrick’s efforts towards extending the life of the mine and boosting its production potential. According to Barrick CEO Mark Bristow:

We have a new regional exploration strategy that is being implemented by a best-in-class team drawn from the merged Barrick and Randgold. In Argentina alone, we plan to invest more than $30 million in exploration over the next two years.

Given the improvement in gold prices and Barrick’s efforts to improve production while keeping costs under check, it is not surprising to see why analysts expect the company’s earnings to increase at a compound annual growth rate of almost 21% for the next five years. As such, it would be a good idea for investors to stay long Barrick Gold stock as it has the potential for more upside.

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 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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