Is Barrick Gold Stock Still Undervalued At This Price?
March 29, 2020 - 8:47 PM EDT
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Is Barrick Gold Stock Still Undervalued At This Price?
Barrick Gold Launched New Plan To Become Market’s MVP
Gold stocks could be poised to head higher at the top of the week. Futures reached over $1,670 during the early Sunday evening session. This continues a 3-day move in the price of gold since battling back from initial lows of the month just a hair above $1,450.
The U.S. government’s stimulus plan was firmly put into effect last week and adds another $2 trillion to help soften the blow from COVID-19’s economic shutdown. Meanwhile, the inverse correlation to gold and stocks may be starting to show early signs of reengaging.
As of 7:30PM EST, S&P futures are already pointing to a lower open at as they are trading below 2,500. On Friday, the S&P futures settled out around 2,522. The number of coronavirus cases and deaths remains in an uptrend while investors brace for more economic data in the week ahead.
Gold Futures
Last week’s jobless claims seemed to have been shrugged off by major markets. However, by the end of the week, coronavirus concerns overtook market sentiment with indexes finishing the Friday session lower. So does this officially signal the next big move for gold stocks?
Shares of Barrick Gold (GOLD) (ABX) managed to mount a major comeback since the middle of the month. In a correlative move to the broader markets, Barrick gold stock aggressively pulled back to deep lows. In fact, it hadn’t traded that low since the summer of 2019. Despite this being the case, Barrick gold stock managed to rebound by nearly 60% as of last week’s $20.18 highs.
So does the gold rally continue this week? Based on the current inverse relationship between gold and the broader market, it could be readying for a continuation. That’s simply based on the idea that Barrick gold stock generally moves in tandem with the price of gold. But there could be more to the world’s second-largest gold miner than meets the eye right now.
Barrick Gold & A 10-Year Plan To Dominance
Barrick has been on the warpath to dominate the gold market. That comes after the series of buyouts and joint ventures that ate up small-cap gold companies and top-tier miners alike. The company recently unveiled its 10-year production plan that targets a value play. The main strategy for Barrick is to boost production to roughly 5 million ounces of gold per year.
The bulk of that would come from its North American operations. CEO Mark Bristow said that the recent joint venture with Newmont (NEM) at the “Nevada Gold Mines” would establish the footing for this plan. Bristow cited that this is already the world’s largest gold mining complex and holds “enormous potential” for growth.
How will the reflect on Barrick gold stock? The name of the game: High gold prices, low overhead. Right now, the price of gold moving in the opposite direction of the broader markets is a good sign for the first part. From a look at the price of things like oil and energy in general, this could lend another helping hand for Barrick gold stock and others within the sector.
Both natural gas and oil futures point to a lower open based on the early trend on Sunday night. That could bode well for gold production as lower energy cost could mean less cost per ounce to produce. Something to understand, however, is that even though Barrick’s operations haven’t completely shut down, COVID-19 has likely caused a slowdown in general.
Barrick Gold Building A Global Footprint
For Barrick Gold, North America is just a small piece of the puzzle. Over the last year, the company has focused on its main assets, reporting strong performance across these assets. The company also boosted production at the Kibali Mine, which just beat production guidance of 3 quarters of a million ounces of gold. This was by far its most noticeable “beat” with more than 810,000 ounces produced.
“The work we did in 2019 has equipped us well to take Barrick to the next level. We stand on the strong foundation of our enormous organic growth potential, which will support a positive production profile and a very robust business, capable of generating a substantial cash flow for at least the next decade. There are also opportunities for growth outside our current ambit which we continue to explore.”
Mark Bristow, Barrick Gold CEO
In its 10-year plan, the company looks to showcase a more modern business. According to Barrick, this “modern business” will be capable of “sustainably producing around five million ounces of gold per year and delivering significant free cash flow”. Given the bullish case for gold prices, in general, how do you think Barrick gold stock will perform? Comment below.
