Barrick Gold (ABX) Stock Falling as Gold Prices Slip

NEW YORK (TheStreet) --Shares of Barrick Gold (ABX) are down by 2.85% to $11.94 in mid-morning trading on Tuesday, as the mining sector takes a hit due to the slump in the price of gold, which is below the $1,200 per ounce mark.

The price of the yellow metal is declining due to the rally in the dollar, which is up by 0.81%, according to The Wall Street Journal dollar index.

The dollar is moving higher due to the "more pronounced rise" in the U.S.' core inflation rate for the month of April, which is making it "more probable that the Fed will raise interest rates," Commerzbank said, The Journal reports.

When the dollar rises the price of gold will usually fall as dollar dominated commodities become more expensive to those that hold other currencies.

Additionally, Barrick Gold announced today that it has struck a deal with Chinese mining company Zijin Mining Group, as company Chairman John Thornton fulfills one of his major goals by forming a strategic link with China, Bloomberg reports.

As part of the deal Barrick said Zijin will acquire 50% of its gold mine in Papua New Guinea for $298 million. In the future the two companies will look into the possibility of constructing joint mines.

"Our partnership with Zijin is the first step in a long-term strategic relationship with one of China's leading mining companies-a multi-faceted partnership that will provide significant opportunities to work together on an ongoing basis as we continue to create value for our respective owners," Barrick said in a statement.

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 some concerns, 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 generally high debt management risk, weak operating cash flow, generally disappointing historical performance in the stock itself and unimpressive growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The debt-to-equity ratio of 1.27 is relatively high when compared with the industry average, suggesting a need for better debt level management.
  • Net operating cash flow has decreased to $316.00 million or 45.98% 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 25.87%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 37.50% 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.
  • The change in net income from the same quarter one year ago has exceeded that of the Metals & Mining industry average, but is less than that of the S&P 500. The net income has significantly decreased by 35.2% when compared to the same quarter one year ago, falling from $88.00 million to $57.00 million.
  • 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

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