Barrick Mining (NYSE:B) reports third-quarter results early next month, and its last report left an odd pairing behind. Net earnings for the second quarter rose 50% from a year earlier to $1.22 billion, helped by higher gold and copper prices. Yet attributable free cash flow came in at $141 million, down from $212 million a year before. Barrick Mining is also one of the 10 Best Stocks to Buy with High Return Potential.
That gap is the question hanging over the stock. The company sent $1.50 billion back to shareholders in the quarter, far more than the cash it had left after spending. The profits look solid and the shares are cheap next to their own history. But the payouts depend on gold staying high, so the stock tracks the metal as much as the mines.
The company is the largest gold producer in the United States, and in the second quarter it mined more gold than its own guidance called for.
Gold Prices Drive Barrick’s Profits
Revenue grew about 6.1% a year over the past five years, but about 15.1% a year over the past three. Higher gold and copper prices drove much of that jump, the company says. It estimates that every $100-an-ounce move in gold shifts its attributable EBITDA by $270 million this year. If you’re interested in gold mining stocks, we recently compiled a report on 10 Best Gold Mining Stocks to Buy as Central Banks Buy Bullion.
Scale in Nevada is its other edge. An agreement with Newmont, its partner there, expands the Nevada Gold Mines complex, settles all disputes over the venture and brings Barrick a $1.95 billion cash payment. Newmont also agreed to back an initial public offering of Barrick’s North American gold assets, which the company still expects by year end, subject to market conditions.
Where the Second-Quarter Cash Went
Spending is the main reason cash lagged earnings. Project spending, which pays for new mines and expansions, rose 49% from a year earlier. Barrick is building a bigger copper pit at Lumwana and advancing its Fourmile gold project in Nevada.
Costs climbed too, with all-in sustaining costs for gold up 11% from a year earlier. The company blamed lower grades at some mines, higher fuel prices and higher royalties tied to the stronger gold price. Costs still sit inside its full-year guidance.
Cash on hand fell from the end of March, though Barrick still holds more cash than debt. Its dividend policy aims to pay out about half of attributable free cash flow, with a top-up at year end, and it also bought back shares in the quarter. If you own the stock, that means payouts this quarter came partly out of savings, not fresh cash. For investors looking for reliable dividends, our list of 10 Best Blue Chip Dividend Stocks to Buy Right Now is worth a look.
Payouts Depend on Gold Holding Up
Costs are rising while gold has slipped, and that is what puts the payouts at risk. The metal’s average price was lower in the second quarter than in the first, and Barrick’s earnings follow it closely. If gold falls further while fuel and project spending stay high, free cash flow could stay thin. The year-end dividend top-up, which is tied to that cash flow, would then shrink.
The planned North American listing adds another moving part, since the year-end target depends on market conditions and approvals. None of this erases the profit gains, though it helps explain why the shares trade at a low multiple.
What Investors Pay for Those Earnings
On estimated 2026 earnings, the stock trades at 11.35 times, about 26% below the sector median and about 30% below its own five-year average. The consensus forecast calls for earnings per share to grow about 47% this year. The multiple uses adjusted earnings, which ran higher than reported net earnings in the second quarter.
Paying so little for that much growth only makes sense if investors expect gold to slip or cash flow to stay weak. Investors who want more undervalued growth ideas can see our ranking of 10 Undervalued Growth Stocks to Buy Now.
Cash flow isn’t keeping up with earnings yet, and the report due early next month will show whether that is changing. The number to watch is third-quarter free cash flow. If it climbs back toward earnings, the low multiple will look too cautious. If it stays thin while gold slips, the payouts will start to lean on the balance sheet.
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This article is originally published at Insider Monkey.
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