On Wednesday, UBS analyst downgraded Barrick Gold (LON:0R22) Corp. (NYSE: NYSE:GOLD) stock from "Buy" to "Neutral" and adjusted the price target to $22.00 from the previous $23.00. The downgrade comes as a preemptive move ahead of the company's third-quarter 2024 results, which are set to be released on November 7, 2024, and its investor day scheduled for November 22, 2024.
Barrick Gold's second-quarter 2024 production results were reportedly weaker than anticipated, with a quarter-over-quarter decrease in gold production. Despite this, the company has maintained its full-year 2024 production guidance of 3.9 to 4.3 million ounces of gold, suggesting a significant increase in gold production in the fourth quarter.
However, Barrick Gold did not reaffirm its total cash cost (TCC) and all-in sustaining cost (AISC) guidance for the fiscal year, leading UBS to project that the TCC/AISC could exceed the upper limit of the company's guidance by $20-30 per tonne.
The analyst expressed concerns over the combination of anticipated lower production in 2024, at the lower end of the guidance range, and ongoing cost pressures. These factors are believed to pose a downside risk to Barrick's previous 2025 production guidance, with UBS estimates being approximately 5% below the company's own projections. Additionally, there is an anticipated upside risk to costs, with UBS estimating the AISC to be roughly 10% higher than Barrick's guidance, a discrepancy not currently reflected in the consensus.
The analyst's commentary highlights the positive momentum in gold prices and the expectation for further upward revisions to consensus gold prices. Nonetheless, the potential downside risks to volume and cost assumptions have prompted the downgrade to a "Neutral" stance as the market awaits Barrick Gold's upcoming financial disclosures and strategic updates.
In other recent news, Barrick Gold Corporation reported steady third-quarter output, maintaining its 2024 guidance. The company produced 943 thousand ounces of gold and 48 thousand tonnes of copper, with sales of 967 thousand ounces of gold and 42 thousand tonnes of copper. These figures align with the company's expectations for a strong fourth quarter. Operational highlights include a 23% output increase at Pueblo Viejo, higher grades at North Mara, and improved performance at Turquoise Ridge.
Simultaneously, Barrick Gold reached an agreement with the Mali government to settle disputes about the Loulo and Gounkoto gold mines. This settlement secures the long-term operation of these mines, which are key contributors to Mali's economy. Analysts from Scotiabank and Argus have expressed confidence in the company's trajectory, with Scotiabank reaffirming its Sector Outperform rating and Argus upgrading Barrick Gold's stock rating to Buy.
Barrick Gold also announced a share buyback program to address the perceived undervaluation of its shares. This development, along with others such as the expansion of the Pueblo Viejo plant and the operational status of the Porgera mine, underscores the company's strategic growth and value orientation. These are recent developments that investors should note.
InvestingPro Insights
As Barrick Gold Corp. (NYSE: GOLD) faces a downgrade from UBS, InvestingPro data provides additional context to the company's financial position. Despite the analyst's concerns about production and costs, Barrick Gold maintains a solid market capitalization of $35.47 billion, reflecting its significant presence in the gold mining industry.
InvestingPro Tips highlight that Barrick Gold has maintained dividend payments for 38 consecutive years, demonstrating a commitment to shareholder returns even in challenging market conditions. This long-standing dividend policy could provide some reassurance to investors amid the current uncertainties.
Additionally, the company's financial health appears stable, with InvestingPro data showing that liquid assets exceed short-term obligations, and the company operates with a moderate level of debt. These factors may help Barrick navigate potential cost pressures and production challenges mentioned in the UBS analysis.
It's worth noting that Barrick Gold is trading near its 52-week high, with a price that is 94.99% of its 52-week peak. This performance, coupled with a one-year price total return of 28.87%, suggests that the market has been optimistic about the company's prospects, despite the recent analyst downgrade.
For investors seeking a more comprehensive analysis, InvestingPro offers 7 additional tips for Barrick Gold, providing deeper insights into the company's financial health and market position.
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