Barrick Gold Corp. (ABX, Financial) has been downgraded by BMO Capital Markets – the investment banking subsidiary of Canadian Bank of Montreal – from an Outperform rating to Market Perform.
As shown by the picture below, this has been the second downgrade Barrick Gold got from analysts over the last 10 months. BMO Capital Markets’ downgrade rating follows that one of TD Securities with which the firm lowered the biggest gold producer in the world in its ranking from Buy to Hold Dec. 21.
Source: Yahoo Finance
Over the same span, Barrick Gold got three upgrades. The most recent one is from Berenberg (Sell to Hold) released this year June 29. Shares of Barrick Gold were also upgraded by RBC Capital Mkts. – from Sector Perform to Outperform – March 16 and by Deutsche Bank – from Hold to Buy – Oct. 3, 2016.
Since August 2016 to date, Berenberg and Morgan Stanley initiated covering the shares of the Canadian miner with a sell rating on Sept. 7, 2016, and with an equal-weight rating on Aug. 9, 2016.
As of today, Barrick Gold has a recommendation rating of 2.6 out of 5. The recommendation rating ranges between 1 (Strong Buy) and 5 (Sell).
Source: Yahoo Finance
What’s the trend of analysts’ recommendation on Barrick Gold today? A total of 25 analysts have been surveyed on Barrick Gold and produced a recommendation rating on the shares of this Canadian gold stock. Seven analysts out of 25 (or 28%) suggest buying shares of Barrick Gold while the majority – 13 out of 25 (52%) recommend holding shares of the biggest gold producer in the world.
Source: Yahoo Finance
BMO Capital Markets has set a new target price of $18. This is a 14.3% decrease from the previous target price of $21 per share issued by the Canadian Bank of Montreal’s investment banking and a 13.7% decrease from the average target price of $20.85 per share set as a mean of 22 analysts’ estimate on the Canadian gold stock.
Source: Yahoo Finance
According to Barron’s, on BMO Capital Markets' decision to downgrade Barrick Gold, there is a dispute going on between the Canadian miner and the government of Tanzania. The dispute, writes The Telegraph, is about a ban imposed by the African country on the gold concentrate that is traded abroad and that Barrick Gold – through its 63.9% stake in Acacia Mining PLC (LSE:ACA, Financial) – allegedly has not reported.
The ban on the export of the powdered yellow metal for which Barrick Gold is seeking a removal from the government of Tanzania is costing Acacia Mining about $1 million in missed revenue.
Concerning analysts’ estimates on Barrick Gold’s revenue and earnings for the second quarter, the consensus has produced the following figures.
With the gold price averaging $1,259.353 per troy ounce on the London Bullion Market over the second three months of fiscal 2017 – flat from the second quarter of fiscal 2016 – and copper averaging $2.578 per pound, analysts forecast that Barrick Gold will report revenue coming in at $2.15 billion for the second quarter. This is an average figure calculated from estimates of five analysts who were surveyed on Barrick Gold. Estimates on Barrick Gold’s second-quarter revenue range between a low of $1.96 billion and a high of $2.29 billion.
These estimates for revenue have been produced based on a metal production of 5.3 million to 5.6 million ounces of gold and of 400 million to 450 million pounds of copper forecasted by the mining company for full fiscal 2017. This yearly forecasted figure should lead – Veladero mine’s operating issues permitting – to a second-quarter production for fiscal 2017 of 1.325 million to 1.4 million ounces of gold and of 100 million to 125 million pounds of copper.
The yellow metal is expected to be sold at $780 to $820 per ounce and copper at $1.50 to $1.70 per pound. Gold and copper are expected to have been produced during the quarter in question at an all-in sustaining cost (AISC) of $720 per ounce to $770 per ounce and at an AISC of $2.10 per pound to $2.45 per pound.
Backed on this figure for the second quarter of 2017 revenue, analysts estimate that Barrick Gold will close the reporting period showing an adjusted to one-time charges EPS of 18 cents, which represents a 28.6% upside from the same figure of the comparable quarter in fiscal 2016. The EPS of 18 cents is an average of estimates of 16 analysts who were surveyed on the Canadian miner’s quarterly earnings. Estimates range between a low of 13 cents and a high of 27 cents.
Barrick Gold is trading at $15.66 per share with a market capitalization of $17.33 billion, a price-book (P/B) ratio of 2.13, a price-sales (P/S) ratio of 2.01 and an EV to EBITDA ratio of 4.88.
The EVO metric – Barrick Gold’s enterprise value per ounce of gold reserves held – is $304.24 toward a gold stock industry’s average of approximately $250 at the moment.
The Canadian gold stock lost 2% year to date, underperforming by 4.72% the VanEck Vectors Gold Miners ETF (GDX, Financial) that – on the contrary – gained 2.72%.
Disclosure: I have no position in any securities mentioned in this article.
