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Barrick Gold Corporation (USA) (ABX): Will This Gold Producer’s Rally Continue?

Gold hasn’t performed well during the year: The price of gold has fallen by more than 20%. This tumble has also adversely affected gold companies such as Barrick Gold Corporation (USA) (NYSE:ABX). Shares of the company have plummeted more than 50% (year-to-date). But in the past month, the company’s stock has bounced back and rose nearly 10%. This rally coincided with the recovery of the gold market. Will this shift continue? Is this gold company worth reconsidering?

Gold and silver markets are slowly recovering

During July, both gold and silver prices rallied: Gold price rose 8.5%; silver price, by 2%. This rally has also reflected in the rise in leading precious metals’ ETFs: SPDR Gold Trust (ETF) (NYSEARCA:GLD) and iShares Silver Trust (ETF)(NYSEARCA:SLV). During the month, SPDR Gold rose almost 7.5%; Shares of Silver Trust edged up 0.32%.

Despite the recent rally in the price of SPDR Gold Trust (ETF) (NYSEARCA:GLD), the demand for this ETF continues to fall. The current ETF’s gold holdings are 927.35 tonnes, which are nearly 4.35% below the gold holdings at the end of June and 31.35% below the levels at the beginning of 2013. The decline in gold holdings has also reflected in the drop in its asset value: current asset value is $39.46 billion, which is 24.7% lower than the asset value of $52.43 billion at the end of 2012. Therefore, even though gold has rallied from last month’s tumble, the demand for gold ETF hasn’t improved.

Barrick Gold Corporation (USA) (NYSE:ABX)Credit: Barrick Gold Corporation (USA) (NYSE:ABX)

The iShares Silver Trust (ETF)(NYSEARCA:SLV)’s total tonnes of silver is currently at 10,419.02. Moreover, the ETF’s net assets are $6.59 billion, which are nearly 19% below the net assets recorded at the end of 2012. Most of the drop in net assets is due to the sharp fall in silver price during the year. Nonetheless, the current outstanding shares are nearly 3.6% higher than at the end of 2012, which could suggest a slow rise in demand for this ETF. Nonetheless, I think it’s also too soon to determine that gold and silver are making a comeback and this sentiment is reflected in the recent developments in gold and silver ETFs. Let’s turn to examine the upcoming developments of Barrick.

Second-quarter earnings report

In the upcoming financial report for the second quarter of 2013, Barrick Gold Corporation (USA) (NYSE:ABX) isn’t expected to show growth. Based on the company’s expected gold production, and the average price of gold in the second quarter, the company’s revenue from gold will decline nearly 8% (year-over-year). The table below summarizes this data.

As seen in the table below, Barrick Gold Corporation (USA) (NYSE:ABX)’s copper revenue is expected to rise, mostly due to the expected increase in its production.

Looking forward — Is Barrick capable of growing?

In order to determine the progress of Barrick Gold Corporation (USA) (NYSE:ABX), we will need to examine its gold and copper production and the developments in the metals prices. In terms of production, the company still projects its gold production will range between 7 million and 7.4 million ounces with an average of 7.2 million ounces, which represent a 2.7% drop in production compared to 2012. But at the current pace, the company is heading towards its lower bound. The decline in production is likely to negatively affect its revenue.

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