Barrick Gold Still Shines Despite Losing Chilean Mine Fight

NEW YORK (Trefis) -- Gold giant Barrick Gold (ABX) recently lost a court fight in Canada against Goldcorp (GG) over ownership of a copper and gold mine in Chile.

The Ontario Superior Court dismissed Barrick's claim that Goldcorp illegitimately got ownership of the El Morro mine and that Barrick should have a 70% stake. The mine's gold reserves are believed to be more than three times Goldcorp's total gold production in 2011.

The ruling came at an inopportune time as mining companies are increasingly facing intense competition to find attractive sources of already limited natural resources.

We maintain our $53 price estimate for Barrick Gold, which is about 40% ahead of the current price. (See the full analysis for Barrick Gold here.)

The ruling won't hurt Barrick Gold directly in the short term as the mine is expected is start production only in 2017. But a favorable ruling would have presented Barrick an opportunity to strengthen its gold reserve in South America.

The mine has reserves of 8.4 million ounces of gold and 6.1 billion pounds of copper. You can understand the impact of gold shipments from South America on the company's stock by making changes to the chart below

We, however, are bullish on the company's prospects with the Pueblo Viejo project starting this year and the highly anticipated Pascua Lama project expected to start production in 2013. We expect these mines to boost Barrick's gold output by 5% to 8% annually over the next five years.

Additionally, Barrick's continued exploration on its newly discovered potential mining regions in Nevada, Redhill and Goldrush, could lend further upside to our estimates.

Global economic instability has gold to new highs as investors look for safe investment options. We expect gold demand to remain buoyant in the near term and remain the main source of revenue growth for Barrick Gold.

Even as production numbers may decline in the immediate term, we believe the company's aggressive move towards developing its planned projects and new discoveries will be highly beneficial in the long-term.

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This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.