Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Barrick Gold Corporation (USA) (ABX), Goldcorp Inc. (USA) (GG): I Wouldn’t Buy This Gold Miner Just Yet

Gold’s shimmer is losing its luster. And as gold grows more dull, Barrick Gold Corporation (USA) (NYSE:ABX feels more and more pain. Barrick Gold Corporation (USA) (NYSE:ABX)  is running into considerable trouble as gold, its primary commodity, falls down from the stratosphere.

Barrick Gold Corporation (USA) (NYSE:ABX)

In 2012, Barrick Gold Corporation (USA) (NYSE:ABX) , which is the world’s largest gold miner, saw its market cap dip below that of much smaller mining company Goldcorp Inc. (USA) (NYSE:GG). At that time, Barrick Gold Corporation (USA) (NYSE:ABX)’s market cap was $35.30 billion while Goldcorp Inc. (USA) (NYSE:GG)’s cap was $35.32 billion. As both companies continue to fall, the gap is widening. Today, Barrick’s cap is $18.69 billion compared to Goldcorp Inc. (USA) (NYSE:GG)’s $23.91 billion. Respectively, the reductions represent a 47% and 32% decrease in value.

Meanwhile, the gap in net income is also widening. In 2012, Barrick Gold Corporation (USA) (NYSE:ABX)  reported a loss of $0.67 billion, compared to Goldcorp Inc. (USA) (NYSE:GG)’s profit of $1.7 billion. Fastforward to the second quarter of 2013, and things get worse for Barrick. For the second quarter, Barrick Gold Corporation (USA) (NYSE:ABX)  posted a massive loss of $8.56 compared to Goldcorp Inc. (USA) (NYSE:GG)’s loss of just $1.93 billion

Now, is Barrick about to rebound? No. Here are three reasons that this stock isn’t going to hit the jackpot any time soon.

1. Trouble in Chile

In May, the Chilean government fined Barrick $15.8 million for “serious” environmental violations at the large Pascua-Lama mine. Before handing out the fine, Chilean officials forced Barrick to suspend operations until the environmental issues are resolved. According to Barrick, there was a problem with the mine’s water management plan. Today, the mine is still shut down, further delaying an opening originally scheduled for 2014.

Anytime a mine isn’t running, we have a problem. But a mine of this size presents an especially big problem. With production of up to 850,000 ounces of gold per year, the Pascua-Lama mine is to count for 11% of Barrick’s overall gold production. 11%. The project is huge, and the situation isn’t getting better. Barrick says it will submit a new water plan soon, but how soon? Will it pass the environmental board’s standards? There’s just too much uncertainty surrounding this project. I don’t like it.

In addition, as the opening is delayed further, costs are going up. Already the estimated costs rose 34% to $8.5 billion, and more increases are likely. Some have even speculated that Barrick may scrap the project. However, Silver Wheaton Corp. (USA) (NYSE:SLW) – a mining finance company involved in Pascua-Lama – said in a statement that Silver Wheaton Corp. (USA) (NYSE:SLW) remains confident about the project’s future.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.