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What Makes Barrick (GOLD) an Attractive Investment Option

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Barrick Gold Corporation GOLD looks promising at the moment. The company’s shares have gained around 10% so far this year.

We are positive regarding the company’s prospects and believe that the time is right for investors to add the stock to their portfolios as it looks promising and is poised to maintain the momentum.

Let's see what makes this gold mining giant a compelling investment option at the moment.

An Outperformer

Barrick has significantly outperformed the industry in the past year. The company’s shares have rallied 50.2% compared with 27.5% rise of the industry. The company also outpaced the S&P 500’s decline of 8% for the same period.

Higher Gold Prices

The coronavirus pandemic has led to a surge in gold prices, driven by the demand for safe-haven investments. Further, declining oil prices and geopolitical tensions are triggering demand for gold.

Moreover, the company’s average realized price of gold rose 21.3% year over year in fourth-quarter 2019 and boosted margins. Higher gold prices are expected to continue driving earnings in the near future amid market volatility and economic uncertainties.

Debt Cut & Strong Liquidity

Barrick is gaining from debt reduction. The company reduced its total debt by 3.2% year over year to $5.5 billion at the end of 2019. Also, it has a strong liquidity position and generates healthy cash flows, which positions it well to benefit from development, exploration and acquisition opportunities. At the end of 2019, Barrick’s cash and cash equivalents surged 111% year over year to $3.3 billion.

Key Growth Projects

Barrick is expected to benefit from major exploration programs. The company’s growth projects across Turquoise Ridge, Goldrush and Cortez Deep South in Nevada are currently in execution. Construction of the third shaft at Turquoise Ridge is advancing according to schedule and is expected to deliver additional value. The Deep South project is also expected to contribute to Cortez’s production this year. Also, the combination of Turquoise Ridge and Twin Creeks delivers a tier-one asset with another in the making at Goldrush. Notably, Turquoise Ridge significantly drove performance of the Nevada Gold Mines in fourth-quarter 2019.  

Last month, Barrick also announced that the proposed expansion of the Pueblo Viejo gold mine will boost the mine life and also contribute to the economy of Dominican Republic till 2040 and beyond. The project will require an initial investment of $1.3 billion for expansion of the process plant and the tailings facility. The investment will extend the mine’s life and unlock potential to increase exports by $22 billion. The Pueblo Viejo expansion will also enable the mine to exploit the lower grades in the ore body.

Estimates Moving North

Earnings estimate revisions have the greatest impact on stock prices. Earnings estimates for Barrick for the first quarter and 2020 have moved up in the past two months. Over this period, the Zacks Consensus Estimate for first-quarter earnings moved up 5.6% while 2020 earnings estimates rose 4.3%. Further, the consensus mark for 2020 earnings is currently pegged at 72 cents per share, which suggests year-over-year growth of 41.2%.

Zacks Rank & Other Key Picks

Barrick currently carries a Zacks Rank #2 (Buy).

A few other top-ranked stocks in the basic materials space are Novagold Resources Inc. NG, Franco-Nevada Corporation (FNV - Free Report) and Newmont Corporation (NEM - Free Report) . While Novagold sports a Zacks Rank #1 (Strong Buy), Franco-Nevada and Newmont carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Novagold has an expected earnings growth rate of 11.1% for fiscal 2020. The company’s shares have surged 113.1% in the past year.

Franco-Nevada has an expected earnings growth rate of 17.6% for 2020. Its shares have returned 40.6% in the past year.    

Newmont has an expected earnings growth rate of 83.3% for 2020. The company’s shares have gained 39.4% in the past year.

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