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Barrick Gold’s Q3 Earnings Preview: Here’s What to Watch

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Oct. 25 2018, Updated 11:28 a.m. ET

Barrick Gold’s performance YTD

Barrick Gold (ABX) generated returns of -12.1% YTD (year-to-date) on October 17. While ABX stock had significantly underperformed its peers in 2018 until September, its stock performance improved after the announcement of its merger with Randgold Resources (GOLD).

Goldcorp (GG), Newmont Mining (NEM), and Kinross Gold (KGC) have lost 14.7%, 14.4%, and 33.8% of their stock values, respectively, year-to-date. For more about the company’s second-quarter results and outlook, please read No Respite for Barrick Gold after Its Q2 Earnings, Slides Further.

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Prereleasing production

Barrick Gold (ABX) started prereleasing its production results in the third quarter of 2017. For the third quarter, it prereleased its production results on October 10. Its production for the third quarter came in at 1.15 million ounces of gold, which implies a sequential improvement of 8.0%. This is mainly due to improved throughput and grade at Barrick Nevada.

The company maintained its 2018 gold production of 4.5 million–5.0 million ounces for gold and the copper production guidance of 345.0 million–410.0 million pounds. Barrick also guided for an effective tax rate of 48.0%–50.0% in 2018, higher than the previous expectation of 44.0%–46.0%. This is due to lower-than-expected sales from operations in lower-tax jurisdictions. The company plans to release its detailed third-quarter results on October 24 after the market closes.

What to watch in Q3 2018

During the third quarter, Barrick Gold agreed to acquire Randgold Resources (GOLD) in a share-for-share deal. The merger would create an industry-leading gold company (GDX) with the greatest concentration of Tier 1 gold (GLD) assets. The acquisition should provide a much-needed catalyst for ABX stock.

It would be interesting to learn during its third-quarter results how both companies plan to create value for the shareholders and which assets would be identified as non-core, as they discussed during the merger announcement.

Investors are expected to look forward to an update on negotiations between Barrick Gold (on behalf of its subsidiary, Acacia Mining) and the Tanzanian government. This dispute has been ongoing for many months and is one of the reasons for Barrick Gold’s poor stock performance in 2018.

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