Could the Cleanup at GOLD Lead to Increased Shareholder Returns?


Jan. 8 2019, Updated 7:31 a.m. ET

Focus on superior assets

The new Barrick (GOLD) is mainly focused on assets with superior costs, long mine lives, and high grades. The company already has five out of the top ten Tier 1 gold assets (GLD) in Cortez, Loulo-Gounkoto, Pueblo Viejo, Kibali, and Goldstrike, which have total cash costs of $426, $578, $623, $649, and $697 per ounce, respectively.

Barrick is planning to sell noncore assets to further improve its cost and grade profile. In addition to the five Tier 1 assets, the company has two other potential Tier 1 assets: Fourmile/Goldrush and Turquoise Ridge.

The company is also in the process of identifying noncore assets to be disposed of, which should allow its management to focus on mines and projects that are delivering the most value to the company and its shareholders.

Shareholder returns will likely be driven by returns on invested capital, internal rates of return, and free cash flow per share growth.

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Increased returns

The management of Barrick and Randgold, which previously significantly increased their dividends in anticipation of growth, have said that they’ll increase dividends (DVY) in connection with the merger. While Randgold increased its dividend for 2018 from $2.00 to $2.69 per share, Barrick increased its dividend for the fourth quarter to $0.07 per share instead of the originally planned $0.05. Barrick declared an even higher quarterly dividend of $0.093 per share on December 17, which will be paid on January 14.

Barrick has attributed the increased dividends to its strong current fundamentals and the strong fundamentals it expects after the completion of the merger, which will mean more cash flow generation, cost savings, and potential asset sale proceeds along with lower interest costs.


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