Barrick Gold Corp. (ABX, Financial) lost more than 50% of its value in the prior two years mainly due to the decline in gold prices.
The company has performed very well this year, though, as its stock price has surged over 80% on the back of improving gold prices. Despite the fluctuating environment, the company shared strong third-quarter results whereas many other companies are still trying hard to continue in the particular market.
In the third quarter, the company reported earnings per share of 24 cents, 4 cents better than the analyst estimates; revenue came in at $2.30 billion, $70 million greater than the estimates. Currently, Barrick Gold is the largest gold mining company in the world, producing more than 5 million ounces yearly from a 91.1 million-ounce resource base.
Due to the extensive scale, the company gains critical cost benefits, and this is why Barrick Gold is known as the lowest cost gold producer. It is clear that Barrick Gold has lowest all-in sustaining costs (AISC); with this the company can produce free cash flow as long as gold's price remains over $1,000 per ounce.
During the first half of the year, the company paid down $968 million in debt, which is almost half of the company’s fiscal 2016 aim of  $2 billion debt reduction. Apart from this, the company is aggressively focusing on enhancing its balance sheet. As a matter of fact, the company is preparing itself to produce free cash flow per share even if the gold price tumbles below $1,000 an ounce.
Furthermore, the company has generated free cash flow in each of the previous five quarters, including the most recent one. Considering that gold prices were at their topmost point throughout the third quarter, stockholders were supposing that Barrick Gold would keep that streak blooming.
The company successfully met stockholders' expectations, reporting $951 million in net cash from operating activities and an outstanding $674 million in free cash flow. Moreover, that figure also represents a surge of $400 million compared to that in the previous quarter.
Summing up
Barrick Gold’s robust third quarter result clearly shows its ability to thrive in the fluctuating environment. The significant free cash flow produced by the company will definitely help the company to repay its debt at a rapid rate. Barrick Gold’s scale together with its cost benefits makes it an exemplary gold stock.
Barrick Gold is a strong buy at its current level.
Disclosure: No position in the stock in this article.
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