Barrick Gold Corporation (USA) (ABX) is a Long Term Gainer

Yamana Gold Inc. (USA) (NYSE:AUY) recently announced that it expects an output of 1.95 million ounces of gold from its mineral resource at Cerro Moro, Argentina, up 44% from its initial estimate. Yamana Gold is currently trading at a forward P/E (1yr) of 12.49, making it slightly more expensive than its peers. It has a healthy PEG of 1.65 and a PEGY of 1.51. Further, it has a mean target price of $22.57 on the sell side, showing an upside potential of almost 49%. Therefore, it’s one of the top buys in the gold industry at this point in time.

Conclusion

The recent $400 million impairment charge at Barrick Gold’s oil and natural gas business in Reko Diq, Pakistan, and $3.8 billion impairment charge at its copper mine in Lumwana, Zambia have weakened company’s balance sheet to some extent. This in turn means that the company won’t be able to produce that much gold in the near future. Further, the company doesn’t have any plans of growing its mines in the short run and has already given a low estimate for its production in 2013. Therefore, we remain neutral on Barrick Gold in the short run.

As the company has plans of selling its short lived mines with high operating costs, it’s bound to have a positive effect on the company’s productivity. Moreover, further investments in Nevada mean that the company would eventually be able to increase its production in the long run. As the company would be adopting the new all-in sustaining cash cost measure in the future, it will ultimately have a significant effect on lowering its cash costs per ounce of gold produced. Having said this, the Pascua-Lama project, having a mine life of 25 years, is expected to produce high quality of gold at a reasonable cost in the future. The bottom line is that we still remain optimistic about Barrick Gold in the long run. In short, we recommend buying Barrick Gold for long term gains.

The article This Giant is a Long Term Gainer originally appeared on Fool.com and is written by Waqar Saif.

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