Barrick has done worse than Goldcorp: Barrick’s revenues rose by a small margin of 2.2% in 2012 (year-over-year) but its operating profit fell to $(747) million in 2012. This number, however, is misleading because it includes a provision of impairment charges of $6.5 billion. Out of this provision nearly $3.8 billion is related to goodwill changes in the company’s copper business. After controlling for this entire provision, the company’s operating profit rise to $5.7 billion which is still an 18.7% drop from 2011. Barrick’s operating profitability also fell from 49% in 2011 to 39%. If the price of gold will continue to decline, it will likely to cut not only these companies’ revenues growth but also their profit margin. For Barrick, 2013 won’t be better than 2012 as the company’s projection for its total gold production is 7,000 to 7,400 thousands of ounces. In 2012, it was 7,421 thousand of ounces – a 3.3% drop compared to 2011. So the company expects to cut its production in 2013.
Even shares of Yamana Gold Inc. (USA) (NYSE:AUY) – another gold company that is expected to augment its gold production in 2013 by nearly 45% compared to its production in 2012 – have tumbled down in 2013 by nearly 12.2%. So even for a gold company that is expected to increase its revenues and production, has suffered from the weakness in the gold market.
The decline in the price of gold might continue in the coming weeks but could change course if the demand for safe haven investments will start to pick up. Moreover, if the U.S economy won’t show signs of growth and the money base will continue to rise, then gold price might rally. In any case, shares of gold companies are likely to further fall as long as gold isn’t rising.
For further reading:
What Could Impede This Gold Company?
Gold and Silver Prices Outlook for February 2013
The author holds no positions in stocks mentioned and does not plan to initiate positions within 120 hours of the posting of this article. This article is to be used for educational, research and informational purposes only and does not constitute investment advice. There are no guarantees, expressed or implied, of future positive returns in regards to the subject matter contained herein. Understand the risks inherent in investing before making the decision to invest or consult an investment professional for more information. Reasonable due diligence has been performed in regards to the information in this article. However, the author expressly disclaims any liability for accidental omissions of information or errors in fact.
The article Will The Gold Market Continue to Cool Down? originally appeared on Fool.com and is written by Lior Cohen.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
