Is Barrick Gold Positioned Well to Increase Its Production?



Production growth

For miners, production growth is an important variable. Along with realized metal prices, production growth drives a company’s top line. Gold miners aim to increase their production levels at minimal additional costs through productivity and operational enhancements. Barrick Gold (ABX) is well positioned in this respect.

Barrick’s production has been falling since 2011, but a large part of that is due to its asset sales. The company has been divesting its non-core assets to lower its costs and sharpen its portfolio focus.

In 3Q16, ABX’s gold production was ~1.4 million ounces, a fall of 17.0% year-over-year (or YoY). The fall was mainly due to asset sales in 2015 and 1Q16.

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Production guidance upgraded

Barrick Gold’s management has increased its 2016 gold production guidance from 5.0 million–5.5 million ounces to 5.25 million–5.55 million ounces. It maintained its guidance for copper production at 380 million–430 million pounds. Barrick also has organic growth opportunities such as the Turquoise Ridge Expansion, which will allow for higher production output. Goldrush, Lagunas Norte, and Cortez Hills Deep South are some of the other growth opportunities that should support production growth in the long term.

Barrick Gold’s peers

Barrick Gold’s peers (GDX) (GDXJ) are also trying to raise their production levels. Agnico Eagle Mines (AEM), Goldcorp (GG), and Eldorado Gold (EGO) have stable production profiles. However, Kinross Gold (KGC) could have problems replacing its reserves in the long term.

There are various ways to invest in gold including physically purchasing gold, investing directly in gold miners, and investing in gold ETFs. If you’re looking for exposure to gold, you can invest in the SPDR Gold Shares (GLD).

In the next part of this series, we’ll take a look at Barrick Gold’s cost position and outlook.


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