Barrick Gold Corp. (ABX, Financial) goes ex-dividend today, Nov. 29, for a cash quarterly dividend of 3 cents per share as authorized by the board of directors of the company in October.
The Canadian gold producer will pay the dividend on Dec. 17 to shareholders of record Nov. 30.
Though a bit erratic in the entity of the distribution, the Canadian large gold producer has paid dividends since 1987 and is one of the few gold mining companies to do so continuously. The quarterly dividend leads to a forward dividend yield of 0.94% versus an industry average of 3.36 according to the market value at close Wednesday.
The payment will be backed by an improvement in fourth quarter operations compared to the previous quarter. Barrick Gold Corp. is expected to report a nearly 9% increase in gold production to 1.25 million ounces even though copper production and metal prices are going to stay in line with third-quarter levels when the Canadian miner realized $1,213 per ounce of gold sold, $2.76 per pound of copper sold and 106 million pounds of copper produced.
The all-in sustain cost (AISC) per ounce of metal sold should also be on par with the previous trimester for both gold and copper. The company is forecasting to conclude 2018 having produced 4.52 million ounces of gold at an AISC of $765 to $815 per ounce and about 380 million pounds of copper at an AISC of $2.55 to $2.85.
Gold is averaging $1,212.75 per troy ounce on the London bullion market and Copper Futures for March 2019 (HGH9) are averaging $2.764 per pound beginning in the fourth quarter to date.
Gold represents about 82-85% of Barrick Gold Corp.’s total revenues and copper gives about 15-18% to the total.
Barrick Gold Corp. closed at $13.05 per share on Wednesday for a market capitalization of about $15.24 billion. The share price is significantly above the 200-, 100- and 50-day simple moving average lines, meaning that the stock is not so cheap anymore as it was until a couple of weeks ago.
Also, the share price is over the mid-point of the 52-week range of $9.53 to $15.52, lending credence to the recommendation of analysts who suggest a hold on the stock. The market valuation is the result of a 7% decline for the 52 weeks through Nov. 28 as seen in the GuruFocus chart below.
The price-book ratio of 1.76 versus an industry median of 1.74 and the EV-Ebitda ratio of 13.45 compared to an industry median of 9.3 are also suggesting that the share price at close Wednesday is not one of the most compelling in the stock's recent history. The 14-day Relative Strength Indicator of 54.27, within a historical range of 30 to 70, indicates that the stock is neither oversold nor overbought.
The recommendation rating is 2.8 out of 5. The average target price of $13.98 represents a slim 7.12% upside from the market value at close Wednesday. Therefore, you can for sure find better opportunities in the gold mining industry than Barrick Gold Corp., if you want to take advantage of an eventual rally in the gold price through investments in publicly traded gold producers. The rise in the gold price should follow the Federal Reserve’s hike in the interest rate, which will occur before the end of 2018.
Further, there are some short-term catalysts consisting of ongoing improvements in ore grades and throughput at Cortez and Goldstrike mines in Nevada and in the production of copper at the Lumwana mine in Zambia, but they won’t be strong enough to surprise the analyst on the target price with a significant appreciation. Why? Because those operating improvements have already been factored in the guidance range on gold and copper production and costs.
A significant appreciation is one that has a statistically meaningful impact on the market value of Barrick Gold Corp, unless gold surges before the end of the year and the share price falls well underneath the middle of the 52-week range. But the likelihood that the precious metal will rise enough to push its quarterly average price over $1,300 per ounce is very low. Barrick Gold Corp. is expected to report fourth-quarter and full-year 2018 results around mid-February 2019.
For the last trimester and full year of fiscal 2018, analysts are predicting declines of 12.4% and 13.7% in total revenues to $1.95 billion and $7.22 billion. Expected revenues will likely back adjusted earnings of 12 cents per share in the fourth quarter and 42 cents in full-year 2018. Last year, Barrick Gold Corp. closed the fourth quarter with earings per share of 22 cents and the entire year with earnings per share of 75 cents. Therefore, earnings will also decline compared to 2017.
Besides operations in Nevada and Zambia, Barrick Gold Corp. also operates the Golden Sunlight mine in southwestern Montana, the Hemlo mine in Ontario, the Jabal Sayid mine in the Kingdom of Saudi Arabia, the Kalgoorlie mine in Western Australia, the Lagunas Norte in Peru, the Porgera Joint Venture in Papua New Guinea, the Dominican Pueblo Viejo mine in a 60-40% joint venture with Goldcorp Inc. (GG, Financial), the Turquoise Ridge underground mine also located in Nevada, the Argentinian Veladero mine in a 50-50% joint venture with Shandong Gold Mining Co. Ltd. (1787.HK)(600547.SS), and the Chilean ZaldĂ Âvar mine in a 50-50% joint venture with Antofagasta PLC (ANFGF).
GuruFocus has assigned a financial strength rating of 5 out of 10, signaling that Barrick Gold Corp. is moderately prepared in case of a business slowdown and recession.
Disclosure: I have no positions in any securities mentioned.
