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Barrick Gold after the Randgold Merger: Upside in 2019?

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Feb. 28 2019, Updated 12:05 p.m. ET

Barrick Gold’s mixed operating results

Barrick Gold (GOLD) reported its fourth-quarter earnings results after the market closed on February 13. The company reported an adjusted EPS of $0.06 in the fourth quarter, which beat the consensus estimate of $0.05. The actual net EPS was -$1.02 and mainly included impairment charges and tax adjustments. Barrick Gold missed the top-line estimates by ~$60 million and reported revenues of $1.9 billion for the fourth quarter. The company released mixed third-quarter results as well.

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Guidance

In the fourth quarter, Barrick Gold produced 1.26 million ounces of gold—up 9.7% sequentially but down 6% YoY (year-over-year). The company expects 18% higher production in 2019 compared to 2018 due to its merger with Randgold.

During 2018, Barrick Gold’s all-in sustaining costs rose 7.5% YoY due to lower grades and recoveries. The company’s high-grade and low-cost operations in Nevada ended in the first quarter, which should drive its unit costs higher in 2019. However, the merger with Randgold should provide a positive tailwind to the costs.

Stock momentum

Barrick Gold stock has fallen 6.9% YTD (year-to-date) until February 25—compared to the VanEck Vectors Gold Miners ETF’s (GDX) gain of 8.0%. Goldcorp (GG), Kinross Gold (KGC), Yamana Gold (AUY), and Agnico Eagle Mines (AEM) have also outperformed Barrick Gold with YTD gains of 12.9%, 9.0%, 13.6%, and 7.0%, respectively.

The initial euphoria around the merger seems to be over. Analysts and investors are waiting for the actual benefits and the execution plan before they turn more positive on the stock. We’ll discuss Barrick Gold’s 2018 earnings and the company’s future.

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