Barrick Gold upgraded by analysts on ‘compelling value’ following underperformance
Barrick Gold Corp. (TSX:ABX, NYSE:GOLD) shares moved higher after the gold producer was upgraded to ‘Buy’ and awarded a $22 price target by analysts at UBS.
The stock added 4.1% at $18.45 on Wednesday afternoon.
The UBS analysts wrote that they remain constructive on gold and believe Barrick Gold offers “compelling value” after material underperformance.
They believe 2025 will be the low for production and they see modest downside to unit costs in the medium term.
“Barrick Gold has a poor record of delivery against guidance for the last four years; it will take time for it to rebuild a track record of hitting guidance and we think proof will be in the delivery,” they wrote.
“But we view expectations as low, and 2025 guidance as likely conservative; guidance over the next two to three years has been re-set lower and a restart in Mali should trigger consensus earnings upgrades.”
They highlighted Barrick Gold’s strong record of operating in challenging jurisdictions.
“We see a trade-off between country risk and returns, and if projects in higher-risk jurisdictions are delivered successfully we think they have more potential to create material shareholder value,” they wrote.
“We analyze the potential risks and returns from the Reko Diq/Lumwana (Pakistan/Zambia) and believe that whilst Reko Diq in particular is high risk, its large scale and internal rate of return of greater than 20% offset higher jurisdictional risk.”
The analysts believe if Barrick Gold successfully completes these two key projects, it can achieve more than 30% growth in gold equivalent ounces by 2030.
“We acknowledge that Reko Diq is unlikely to be de-risked until 2027/28, but Barrick Gold is the only gold major offering material organic growth and after significant underperformance, we think the market ascribes little value for this,” they concluded.
Source: https://www.proactiveinvestors.com/