Investing

Barrick Gold Corp

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  • Feb 26th, 2014 2:46 pm
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May 17, 2013
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Wow. See. I told Mark many times. Counter party risk. If you like gold, then just buy the physical. Don't bother with the mining companies. Gold is counter party to nobody.

Today, XIU dropped 0.72%. Barrick Corp drops close to 10% according to yahoo finance including after trading. His BBD.B from the other thread drops 10%.

I am seeing a pattern here. Whatever Mark likes, you best avoid!
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Feb 15, 2008
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fastlayne wrote: How about now?

Pascua-Lama what a disaster. What a waste of $5B.
Waste of $5B? They still own the asset. The gold in the asset is still subject to appreciation if gold prices go up. If gold prices rise sufficiently, they can accelerate production if need be with cash flow from their other assets. Its much to Barrick's credit that they are putting the brakes on, at least while capital is scarce in the gold mining sector, rather than forging ahead. I think a lot of investors in the fertilizer (ie: Potash) industry wish that certain companies would do the same instead of forging ahead with uneconomic and barely economic projects at top dollar.

Besides, not moving forward full blast teaches the authorities that have been causing problems for the project a lesson, that its not their God-given right for a Canadian company to bring billions of dollars of capital to their local economy if they're going to constantly expose the company to BS.
TodayHello wrote: ...The Banks are smarter than you - they have floors full of people whose job it is to read Mark77 posts...
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Dec 21, 2005
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Issuing shares to pay back debt that had an interest rate of 1.7% & 4.875% :facepalm: :facepalm: :facepalm:
Specifically, Barrick intends to use approximately $1.1 billion of the net proceeds of the Offering to redeem the outstanding $700 million aggregate principal amount of 1.75% notes due 2014 issued by Barrick, together with the $350 million aggregate principal amount of 4.875% notes due 2014 issued by Barrick Gold Finance Corporation and guaranteed by Barrick (collectively the "Redemption Notes").
I thought paying interest helps lower taxes, atleast that's what I thought Apple was claiming when they issued debt to increase its dividend & buybacks

Edit: atleast the bankers will be happy...$3 billion issue becomes $2.9 billion after fees...congrats to RBC, Barclays & GMP
:idea: :) :lol: :razz: :D
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Aug 12, 2004
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Mark77 wrote: Waste of $5B? They still own the asset. The gold in the asset is still subject to appreciation if gold prices go up. If gold prices rise sufficiently, they can accelerate production if need be with cash flow from their other assets. Its much to Barrick's credit that they are putting the brakes on, at least while capital is scarce in the gold mining sector, rather than forging ahead. I think a lot of investors in the fertilizer (ie: Potash) industry wish that certain companies would do the same instead of forging ahead with uneconomic and barely economic projects at top dollar.

Besides, not moving forward full blast teaches the authorities that have been causing problems for the project a lesson, that its not their God-given right for a Canadian company to bring billions of dollars of capital to their local economy if they're going to constantly expose the company to BS.
Barrick just announced a massive equity offering at a 5% discount to the actual stock price. No one wants to buy this turkey, Barrick Gold is in desperate need of cash, and they are willing to sell shares at a huge discount to get that money. Operations at Pascua-Lama are closed. Assets can be seized at any time or frozen by bureaucracy. It will take crazy amounts of money to restart a suspended mine if it ever sees the light of day again. Assets will more then likely be sold for pennies to a dollar. This is the same area that Goldcorp is also dealing with, where they just announced huge cost overruns.
In Goldcorp’s case, the key problem is an unexpected six-month delay to receive a permit for a power transmission line. That has thrown the company off its planned development schedule for the large Cerro Negro mine, which is driving up the capital cost. The company said Thursday that it now expects Cerro Negro to cost between US$1.6-billion and US$1.8-billion, up as much as 33% from the prior target of US$1.35-billion.
http://www.theprovince.com/Goldcorp+rep ... story.html

Yet your price target is apparently 60$ and higher just a few months ago. Worse is the history of constantly pushing gold mining stocks despite them falling by more then 50%, this is from years ago:
Mark77 wrote: I believe there's much better value in buying the miners, than buying the product of mining. That's my belief. Just plot ABX (Barrick) versus GLD (Gold trust ETF) over the past 5 years. The outperformance of GLD is dramatic, and unsustainable. ABX because of its in-ground reserves and high operating leverage, should be outperforming quite dramatically.
At the time of that post Barrick Gold was priced at 51$ a share. Gold was nearing the peak of it's crazy bubble at the time. You called ABX as basically underpeforming

Again, Mark77 continues to be the perfect counter indicator for investing. Gold is gold and will always hold some value one way or another. Gold miners on the other hand have cost overruns, government sanctions and licenses, labour problems, mechanical repair overhead to deal with. Reality is far from the crazy fiction constantly predicted. People need to stop watching shows like Gold Rush expecting that's the way to get rich through investing.
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charliebrown wrote: Issuing shares to pay back debt that had an interest rate of 1.7% & 4.875% :facepalm: :facepalm: :facepalm:



I thought paying interest helps lower taxes, atleast that's what I thought Apple was claiming when they issued debt to increase its dividend & buybacks

Edit: atleast the bankers will be happy...$3 billion issue becomes $2.9 billion after fees...congrats to RBC, Barclays & GMP
Yeah, dumb, dumb. Well 2014 implies that they think there's going to be some sort of crisis in 2014 associated with issuing debt. If they're right, the move looks brilliant. If they're wrong, then the whole business/industry should be doing better (although certainly such an issue is dilutive to the return an investor will receive!).
TodayHello wrote: ...The Banks are smarter than you - they have floors full of people whose job it is to read Mark77 posts...
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Firebot wrote: Barrick just announced a massive equity offering at a 5% discount to the actual stock price. No one wants to buy this turkey, Barrick Gold is in desperate need of cash, and they are willing to sell shares at a huge discount to get that money. Operations are closed. Assets can be seized at any time or frozen by bureaucracy. It will take crazy amounts of money to restart a closed down mine if it ever sees the light of day again. Assets will more then likely be sold for pennies to a dollar. This is the same area that Goldcorp is also dealing with, where they just announced huge cost overruns.
Pascua-Lama was never started up, so its not a matter of restarting a "closed down mine". And there is no indication that they plan to sell Pascua-Lama.

Again, Mark77 continues to be the perfect counter indicator for investing. Gold is gold and will always hold some value one way or another. Gold miners on the other hand have cost overruns, government sanctions and licenses, labour problems, mechanical repair overhead to deal with. Reality is far from the crazy fiction constantly predicted. People need to stop watching shows like Gold Rush expecting that's the way to get rich through investing.
Well if its too difficult for Barrick to accomplish, then its probably too difficult for most companies that have a fraction of the resources. Hence supply suffers. Hence, higher prices are required over the long run. I never promised anyone that gold going up, or the miners producing returns would be in a straight line.

If you want an example of a bad and highly dilutive "bought deal", look at the Sprott acquisition of San Gold shares recently at 12 cents a piece. San Gold used to be almost $4. Crying over a 5% discount in an environment where there's zero credit available to miners (which are still making decent amounts of money, BTW), I don't know what to make of that.
TodayHello wrote: ...The Banks are smarter than you - they have floors full of people whose job it is to read Mark77 posts...
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Mark77 wrote: Pascua-Lama was never started up, so its not a matter of restarting a "closed down mine".
Licenses, permits, labour, equipment, construction. You are an engineer, you should realize if you have delved in any way in project management that these have major costs even if work is not being done or never started.
Well if its too difficult for Barrick to accomplish, then its probably too difficult for most companies that have a fraction of the resources. Hence supply suffers. Hence, higher prices are required over the long run. I never promised anyone that gold going up, or the miners producing returns would be in a straight line.
A mining company losing over 50% of it's value is a straight line, but in the wrong direction. It would take several gold mining companies to fall (and in the process all your investments goes down the toilet), before you see any significant impact to gold prices, as there is simply so much supply already mined. These companies also have in the hundreds of millions of ounces in reserves.

Why would you continue to promote gold miners as a sound investment? Gold mining companies are only a sound investment if they are able to control their costs. Both Barrick Gold and Goldcorp clearly has had issues, and these are some of the biggest players. Those issues are also not disappearing. Gold is not going to 2000$ anytime soon, so hoping that gold will hit back that mark to make money off of gold miners is not a good way to invest. Both while big do not have a monopoly with the ability to make a significant impact to gold prices.

Gold might be a finite ressource, but it's not a consummable. Unlike oil, which is not renewable, gold can be melted back to its element extremely easily and reused infinitely. Oil is a far more finite ressource and is not renewable, yet prices still have not come back up to 2008 levels. Some operations which started back in the oil boom are still 'suspended'.

How long are you planning to wait for gold go back up? Holding on to a couple of cost overrunning turkeys in the fantasy that because they are in the precious metals business, that it must eventually go up, is not a sound investment strategy.
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Firebot wrote: Licenses, permits, labour, equipment, construction. You are an engineer, you should realize if you have delved in any way in project management that these have major costs even if work is not being done or never started.
Of course, that's why they're slowing it down, not stopping it altogether. See Kowalski's comments.
A mining company losing over 50% of it's value is a straight line, but in the wrong direction.
Just to clarify, share price. Not value. And considering the commodity they mine has collapsed from $1900 to $1300, Barrick's actually done slightly better performance than would be predicted by 3:1 leverage. Despite this glaring issue hanging over them which eventually will be resolved in due course.
It would take several gold mining companies to fall (and in the process all your investments goes down the toilet), before you see any significant impact to gold prices, as there is simply so much supply already mined. These companies also have in the hundreds of millions of ounces in reserves.
"Reserves" are works in progress, ie: concentrate that is working its way through the extraction/production chain. Ore on leech pads, etc. The reduction in new investment (almost to zero), and depletion rates at existing mines are a matter of fact. Additionally, at low prices, only the highest quality stuff will be pulled out of the ground in favour of keeping positive margins. Which will definitely reduce supply as high grades are in limited supply.

The issuance of equity means that Barrick isn't forced to burn their higher-quality resources for no economic return. This may very well be more valuable to the shareholders at large than the alternative. Only time will tell.
Why would you continue to promote gold miners as a sound investment? Gold mining companies are only a sound investment if they are able to control their costs. Both Barrick Gold and Goldcorp clearly has had issues, and these are some of the biggest players.
They've all had issues, because the industry has spent the past 30 years in depression with minimal investment. Obviously supply chains need to be rebuilt. Energy has gone up dramatically. Ore grades have gone down across the board.

You need to contrast this with exploding demand for gold itself, and the long term cyclicality of gold and debt monetization. If you believe gold is going to remain at $1300 for the next 10-20 years, then you should sell your gold mining shares and go buy something like Netflix. But if you believe in a higher gold price, for the various reasons why that might happen, then the gold miners are very attractive ways to achieve such exposure on a leveraged basis.

As with any sector, no more than 10%-20% of a portfolio. Global average allocation to gold is less than 1% (historical highs were around 20%), so even a modest 5-10% exposure can provide quite a boost if this sector starts taking off. Barrick is one of a few companies that has diversified exposure to many different mines in many different jurisdictions, particularly in the United States.
Those issues are also not disappearing. Gold is not going to 2000$ anytime soon, so hoping that gold will hit back that mark to make money off of gold miners is not a good way to invest. Both while big do not have a monopoly with the ability to make a significant impact to gold prices.
People like you probably were saying "oh it will never be $1000" when it was $500. Now they can't really produce a new ounce of gold for $1000, and its heavily in demand. But if you're so adamant that gold will not go to $2000 anytime soon, then, by all means, you fortunately have the freedom not to own any.
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Aug 25, 2010
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Dear Scotia iTRADE Customer,

We are pleased to inform you that Scotia iTRADE is now participating in the following issues through our New Issues Centre:

- Barrick Gold Corporation

No thanks. Barrick Gold is still a crap stock.
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JustBob wrote: No thanks. Barrick Gold is still a crap stock.
What's crap about it? Is there any evidence that they're a poorer quality operator than any other gold miner out there? Or is it simply a case of the entire sector doing very poorly?

http://finance.yahoo.com/q/bc?t=5y&s=AB ... M%2C+&ql=1

Sounds like the beefs against Barrick are more so beefs against the entire sector. And not just against Barrick specifically. Barrick has been relatively middle of the pack with the first few miners that come to mind. Despite the obvious disaster at Pascua Lama being a huge impairment.
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The gold sector has been a clear loser of the last decade, but Barrick, as a major player, is one of the biggest losers.

Pascua-Lama will go down as being Barrick's Black Swan Event. The $5B bet in the Andes Mountains will continue to be a drag on share value for several years and is compounded by opportunity costs.

Barrick vs basket
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fastlayne wrote: The gold sector has been a clear loser of the last decade, but Barrick, as a major player, is one of the biggest losers.
And your chart to back this up is??? I've posted a 5-year chart of a few different miners and Barrick wasn't dramatically different than the others.
Pascua-Lama will go down as being Barrick's Black Swan Event. The $5B bet in the Andes Mountains will continue to be a drag on share value for several years and is compounded by opportunity costs.
Except that the gold remains in the ground, and will appreciate/depreciate according to the price of gold. And most of the investment at Pascua Lama will remain owned by Barrick and ready for completion in a more favourable price environment. And quite frankly, another mine won't be built without investors across the industry really incorporating a heavy risk premium.

So in conclusion, yes, Pascua Lama hasn't worked out well for Barrick as of yet. However, the lack of Pascua Lama production is good for the overall gold industry and the price of gold. And despite all this, Barrick hasn't meaningfully underperformed other senior miners.

Careful with that chart, Barrick is one of the few miners that paid a dividend over the same interval. Your chart obviously doesn't incorporate that, and dividends can be meaningful over the span of a decade. XGD is also comprised of many mid-tier miners, not just the seniors.
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charliebrown wrote: Issuing shares to pay back debt that had an interest rate of 1.7% & 4.875% :facepalm: :facepalm: :facepalm:



I thought paying interest helps lower taxes, atleast that's what I thought Apple was claiming when they issued debt to increase its dividend & buybacks

Edit: atleast the bankers will be happy...$3 billion issue becomes $2.9 billion after fees...congrats to RBC, Barclays & GMP
Maybe they were in breach of their debt covenants? And they need this equity infusion to get back onside with their bankers.
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Jun 3, 2009
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fastlayne wrote: The gold sector has been a clear loser of the last decade, but Barrick, as a major player, is one of the biggest losers.

Pascua-Lama will go down as being Barrick's Black Swan Event. The $5B bet in the Andes Mountains will continue to be a drag on share value for several years and is compounded by opportunity costs.

Barrick vs basket
I agree. Goldcorp, on the other hand, is much more financially sound with its rock solid balance sheet. Its cost per once was right under 1k which is mostly why it beat estimates recently.
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May 17, 2013
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Firebot wrote: Again, Mark77 continues to be the perfect counter indicator for investing.
Nobody can be THAT bad right? XIU.TO, gold mining companies, BBD.B, thinks all the tech companies are bad that beat his stocks. Basically all of Mark's picks were down today is what my conclusion was.
Gold is gold and will always hold some value one way or another. Gold miners on the other hand have cost overruns, government sanctions and licenses, labour problems, mechanical repair overhead to deal with. Reality is far from the crazy fiction constantly predicted. People need to stop watching shows like Gold Rush expecting that's the way to get rich through investing.
Mark doesnt listen to that. Even gave him a friendly heads up buying physical gold and silver is better than his paper assets. He doesnt listen. Look what happened to Barrick Corp today. Another -10% including after trading.

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