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Analyst Blog

On Mar 19, we issued an updated research report on Barrick Gold (ABX - Analyst Report). The gold miner is exposed to soft metals pricing environment and uncertainties surrounding its Pascua-Lama mine.

Lower metals pricing hurt Barrick’s top and bottom lines in the fourth quarter of 2013, reported on Feb 13. Adjusted earnings missed the Zacks Consensus Estimate. Revenues fell by double digits year over year, but beat expectations. The company expects gold production to decline year over year in 2014.

A volatile gold pricing environment and challenging economic conditions are concerns for Barrick. Moreover, uncertainties surrounding the Pascua-Lama project continue to weigh on the company’s share price.

Barrick, during the fourth quarter, temporarily halted construction activities at the Pascua-Lama mine (which overlaps the border of Chile and Argentina), barring the requisite activities for environmental protection and regulatory compliance.

Barrick, a Zacks Rank #4 (Sell) stock, noted that it will halt work in a manner that will allow efficient and effective re-start when conditions permit. The decision to re-start the project will depend on certain factors including metal prices outlook and reduced uncertainty related to legal and other regulatory requirements. The company expects to spend roughly $300 million on account of ramp-down and other expenses related to the mine in 2014.

Decreasing gold reserve represents another concern. Barrick’s gold reserves fell around 26% year over year in 2013 due to depletion, divestments and lower metals price assumption. The company also has a debt-laden balance sheet with total debt of roughly $13 billion at the end of 2013.
Other Stocks to Consider

Other companies in the gold mining space with favorable Zacks Rank are AngloGold Ashanti Ltd. (AU - Snapshot Report), Golden Star Resources, Ltd. (GSS - Snapshot Report) and NovaGold Resources Inc. (NG - Snapshot Report). While AngloGold Ashanti holds a Zacks Rank #1 (Strong Buy), both Golden Star Resources and NovaGold Resources carry a Zacks Rank #2 (Buy).

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