"We believe there are several risks to ABX's achievement of our $13 target price. ABX is subject to commodity price and foreign exchange risk as fluctuations in the gold, copper, silver and foreign exchange rates will impact profitability," analysts' said.
Analysts cited additional risks including "inflationary pressures particularly for fuel, consumables, equipment and labour, fluctuations in ore grade or recovery rates or changes to the mining sequence [that could] impact production and costs forecasts, and [exposure] to development and permitting risk with respect to its development projects, in particular Pascua Lama."
"ABX is also exposed to political risk with regards to the permitting and tax rates applicable to its current mines and development projects. ABX has about $13 billion in notional debt and is unhedged vs. the gold price. A significant negative fluctuation in the gold price vs. our estimates could require the company to hedge, sell assets or raise equity in the future to meet its debt obligations," they added.
Gold futures for February delivery were down 0.94% to $1,196.40 an ounce at 1:09 p.m. on the COMEX in New York.
Gold futures posted the longest slump in five weeks yesterday on concern that the Federal Reserve is moving closer to raising U.S. interest rates, crimping demand for the precious metal as an alternative investment, according to Bloomberg.
Separately, TheStreet Ratings team rates BARRICK GOLD CORP as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:
"We rate BARRICK GOLD CORP (ABX) a SELL. This is driven by multiple weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, weak operating cash flow, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Metals & Mining industry. The net income has significantly decreased by 27.3% when compared to the same quarter one year ago, falling from $172.00 million to $125.00 million.
- Net operating cash flow has decreased to $852.00 million or 30.78% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, BARRICK GOLD CORP has marginally lower results.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 27.84%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 38.88% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- BARRICK GOLD CORP's earnings per share declined by 38.9% in the most recent quarter compared to the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, BARRICK GOLD CORP reported poor results of -$9.63 versus -$0.35 in the prior year. This year, the market expects an improvement in earnings ($0.68 versus -$9.63).
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Metals & Mining industry and the overall market, BARRICK GOLD CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: ABX Ratings Report