Can Barrick Gold Corporation (USA) (ABX) Lead Gold Stocks Higher?

Page 1 of 2

When Barrick Gold Corporation (USA) (NYSE:ABX) announced earnings last week, while the numbers were good, it was the underlying message that should give investors hope. CEO Jamie Sokalsky took ownership of the challenges facing his company, and the industry in general, repeating his message of a quarter ago that the company is ratcheting down its controls to create a more streamlined operation that focuses on maximizing shareholder value.

“Investors are rightfully demanding fundamental change in the gold industry, and Barrick is driving this new paradigm,” Sokalsky said. While the stock rose initially on Thursday, Friday’s price action suggests that the market remains unconvinced; the $4.2 billion after-tax impairment charge was not likely to escape punishment. The company and the industry are getting the message that spending needs to be kept in check, and ultimately, Barrick is positioned to lead gold stock much higher.

Barrick Gold Corporation (USA) (NYSE:ABX)The earnings results
Excluding the impairment, the company earned $1.11 per share, topping analyst estimates of $1.06. With the charge that resulted from a writedown in the company’s copper business, EPS came in at a loss of $3.06. Revenue rose to $4.19 billion for the quarter, representing an 11% increase. Year-ago quarterly earnings were $0.96 per share. The company expects to produce 7 million to 7.4 million ounces of gold in 2013, a decrease from the 7.42 million ounces produced in 2012.

While the numbers are solid, they aren’t the type of results that lead investors to get excited. Sokalsky noted in the earnings release the need for change: “Rising costs, poor capital allocation, and the pursuit of production growth at any cost in the industry have led to declining equity valuations across the sector. The message is clear: The industry must chart a new path forward.” These types of issues have led to some of the problems in the industry over the past few months and explain why Barrick has underperformed gold, as represented by the SPDR Gold Trust (ETF) (NYSEMKT:GLD), by 25% over the past year.

This is not a new message coming from Barrick, but the fact that its CEO is staying the course is encouraging: “Barrick highlighted the need for change last year, and we are increasingly taking strong action and refocusing our business based on the principle that returns will drive production, production will not drive returns.” It is this new spirit of discipline, replacing the mantra of growth at all costs, that has the potential to allow the gold industry to capitalize on both its inherent strength and the global macroeconomic factors that support a move higher.

A new era of accounting
One of the critical flaws in the gold industry has been how companies account for their costs. Under the current standard, certain factors necessary to sustain production are not included in the cost number, thereby making operating results skewed in favor of the company. The company has been actively working with the World Gold Council to define a new, more accurate definition of cost. The new definition of “all-in sustaining cash costs” is expected to be complete by the middle of 2013. Barrick has made clear its intention to abide by this standard as one of many efforts to give investors a clearer picture of the situation within the company.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

10 Marvel Women that Should Get a Movie Right Now

The 20 Best Remixes of Popular Songs that Will Make You Forget the Originals

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

The 5 Most Expensive Cars To Insure in the World

The 10 Most Common Genetically Modified Foods

10 Self-Made Billionaires Who Came From Nothing

The 10 Most Expensive Cities to Live in North America

The 13 Most Expensive Headphones in the World to Represent

The Top 20 Wealthiest Soccer Teams in 2014

4 BuzzWorthy Cannabis Stocks And Some Smoking Derivative Plays

The 10 Healthiest Fast Food Chains in America to Dine At

The 5 Most Expensive Cat Food Brands You Can Spoil Your Kitty With

The 6 Best eCommerce Platforms for Small Businesses

The 10 Worst Mistakes an Entrepreneur Can Make

The 5 Most OP Characters in League of Legends to Carry Games and Crush Foes With

The 5 Best Foods to Eat Before Running that Will Help You Pound the Pavement

10 Glaring Plot Holes in The Walking Dead that a Zombie-Filled Bus Could Drive Through

The 5 Biggest Celebrity Stoners Who Love Their Reefer

The 10 Most Overrated Movies Of All Time by Out-of-Touch Critics

Top 6 Least Expensive Cruise Destinations For 2015 that Will Take You to Paradise

10 States with Lowest Substance Abuse Rates in America

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

Top 6 Cities For The Ultra Rich to Live in Comfort

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

How to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!