Barrick Says Becoming Debt-Free Within a Decade Is in Reach
Comment of the Day

July 08 2016

Commentary by Eoin Treacy

Barrick Says Becoming Debt-Free Within a Decade Is in Reach

This article by Danielle Bochove and Scott Deveau for Bloomberg may be of interest to subscribers. Here is a section: 

Barrick Gold Corp., the largest miner of the metal, could be free of debt within a decade on bullion-price gains, cost cuts and asset sales, President Kelvin Dushnisky said.

The Toronto-based miner had about $9 billion in debt in the first quarter, down from a peak of $15.8 billion in the second quarter of 2013. Dushnisky said debt could fall to $5 billion in three years and zero within 10 years.

“That’s not unreasonable,” Dushnisky said in an interview on Bloomberg TV Canada. "Yet again, it’s gold-price dependent.

We’ve been very clear, Barrick was the only company with an A- rated balance sheet for the longest time. Our intent is to be strong investment grade, and we’d like to be in the position where we have no corporate debt.”

Barrick has set a target of paying down $2 billion in debt this year after exceeding its $3 billion debt-reduction goal in 2015. Dushnisky said the company had already achieved 40 percent of that goal by the end of the first quarter and, if the tailwinds continue, it may exceed those targets.
"We certainly could. We’re staying with our $2-billion target for now," he said during a separate interview in Toronto.

Eoin Treacy's view

Gold miners have found religion. Most have given up their profligate ways, stopped carousing with M&A advocates, shed administrative and marketing staff and now espouse a more upright business model of only indulging in spending when it can be afforded and justified by the geology and cost structure. The result has been transformative for shares prices many of which have doubled this year; offering a high beta play on the gold price.  

The NYSE Arca Gold Bugs Index continues to extend its uptrend. It broke out of its short-term range late last week and a sustained move below the trend mean would be required to question medium-term recovery potential. 

Barrick (Est P/E 36.64, DY 0.36%) shares a similar pattern. 

Newmont (Est P/E 30.33, DY 0.24%) also shares this pattern. 

Franco Nevada (Est P/E 98.75, DY1.11%) one of the leading income streamers broke out of a three-year range in January and continues to extend the uptrend. 

Sibanye Gold (Est P/E 8.12, DY 3%) is distinct from the above shares in having a reasonable P/E and solid dividend. The share found support three weeks ago in the region of the trend mean and has rebounded impressively to test the recovery peak.

Back to top

You need to be logged in to comment.

New members registration