Financial Comparisons with the Competition
Barrick, Kinross Gold Corporation (USA) (NYSE:KGC) and Goldcorp Inc. (USA) (NYSE:GG) have a similar range of operations in various countries around the world. Like Barrick, its two competitors have significant presences in miner-friendly developing countries as well as regulation-happy developed countries.
At just over $20 billion, Barrick Gold Corporation (USA) (NYSE:ABX)’s market capitalization dwarfs Kinross’s $6 billion figure and comes in slightly lower than Goldcorp’s $23.7 valuation. In 2012, the company lost $857 million on revenues of just over $14 billion. By comparison, Kinross lost a jaw-dropping $2.5 billion on gross revenues of $4.5 billion, and Goldcorp earned $1.6 billion on about $5.2 billion in revenues. Barrick’s debt situation is far more dire than that of either of its competitors. The company has nearly $15 billion in debt to offset a cash hoard of less than $3 billion. Although it has a solid operating cash flow of $5.5 billion, this is still troublesome. Kinross and Goldcorp both have roughly even amounts of debt and cash.
The Brighter Side
On the other hand, there may be some cause for optimism. After bottoming out in response to gold’s recent collapse, the company’s stock has been locked in a secular uptrend. More importantly, a long-delayed lease agreement between Barrick and the government of the Dominican Republic may finally have been cleared for approval. If this is truly the case, the company will soon begin to leverage the mine’s expected 25-year lifespan. This could mitigate the impact of Barrick’s Chile troubles and boost its 2014 earnings.
Can Investors Profit?
Now that Barrick Gold Corporation (USA) (NYSE:ABX)’s stock has made a short-term bottom, many investors believe that its fortunes have permanently reversed. While it may be too early for long-term, conservative investors to jump into the stock on a wholesale basis, short-term traders may be able to take advantage of its current momentum. However, Barrick’s persistent long-term debts and the political uncertainty that surrounds some of its key properties are real problems with no easy solutions. Despite its apparent bargain-basement price, Barrick may still be a riskier investment than Goldcorp.
In sum, Barrick Gold Corporation (USA) (NYSE:ABX) may offer some short-term opportunities for commodities-focused traders. If it can resolve the regulatory issues and debt problems that have impeded its growth, it could develop into an even more exciting prospect. However, this is by no means assured. As always, anyone who wishes to invest in this company must conduct their own due diligence before committing funds to the cause.
The article Is It an Oversold Value Pick or an Unsafe Falling Knife? originally appeared on Fool.com and is written by Mike Thiessen.
Mike is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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