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Barrick's Investment in Pueblo Viejo to Boost Contribution

Zacks Equity Research

Barrick Gold Corporation GOLD announced that the proposed expansion of Pueblo Viejo will more than double the contribution of the mine. The expansion includes increasing the mine’s processing plant and tailings capacity.

Notably, Pueblo Viejo is a tier one gold mine. Barrick is expected to make an initial capital investment of more than $1 billion (100% basis), which will extend the mine’s life into the 2030’s and beyond. Feasibility study for the expansion project is expected to complete during 2020. The mine is managed by Barrick through a joint venture (JV) with Newmont Goldcorp Corporation NEM.

The JV partners have already made an investment of $5.2 billion in the said mine, representing nearly 20% of the total foreign direct investment (FDI) in the Dominican Republic in the past 10 years. Also, direct cash taxes paid by the mine totaled $1.6 billion, representing 57% of the cash distributions.

Since 2013, Pueblo Viejo contributed 30% to the country’s exports. The mine generated a total net added value of $8.5 billion. This represents 2% of the Dominican Republic’s gross domestic product (GDP).

Barrick’s shares have lost 10.4% in the past year against the industry’s 1% rise.

The company reported adjusted earnings per share (EPS) of 11 cents in the first quarter of 2019, which beat the Zacks Consensus Estimate of 10 cents.

Gold production rose roughly 30% year over year to 1.37 million ounces in the quarter. Average realized price of gold fell around 2% year over year to $1,307 per ounce. Cost of sales per ounce went up roughly 8% year over year to $947 million. All-in sustaining costs (AISC) rose 3% to $825 per ounce in the quarter.

Barrick stated that its key growth projects were on track. Also, brownfields and greenfields exploration were boosting reserves and enabling the company to identify new opportunities.

For 2019, the company anticipates gold production in the range of 5.1-5.6 million ounces at AISC of $870-$920 per ounce and cost of sales of $910-$970 per ounce.

Zacks Rank & Key Picks

Barrick currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the basic materials space are Materion Corporation MTRN and AngloGold Ashanti Limited AU, both sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Materion has an expected earnings growth rate of 23.1% for 2019. The company’s shares have gained 18.4% in the past year.

AngloGold has an estimated earnings growth rate of 86.8% for the current year. Its shares have rallied 37.3% in the past year.

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Barrick Gold Corporation (GOLD) : Free Stock Analysis Report
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