The company is the world’s largest gold producer, and if its timing couldn’t be any worse, Barrick Gold Corporation (USA) (NYSE:ABX) is currently in production of two “mega-projects” in the Dominican Republic and another on the border between Argentina and Chile (construction is currently suspended at this site).
So it doesn’t come as much of a shock to see the stock price of Barrick Gold Corporation (USA) (NYSE:ABX) tumble 40% since only the beginning of April, hitting a 4-½ year low of $17.51, translating into a 66% drop in the company’s market value. The company recently reported Q1 earnings, and the news hasn’t been good. Not surprisingly, profits fell 18% and revenue was down 6% due to lower gold prices and low sales volumes. Earnings of $0.85 are down from $1.04 a year ago. Adding salt to the wound is the recent wave of downgrades, including one from Deutsche Bank. Deutsche Bank lowered their Buy rating to Hold and dropped the price target almost in half to $22.50. On the plus side, if the price of gold begins to recover, Barrick Gold Corporation (USA) (NYSE:ABX) is going to look very cheap at $17-$19 a share.
The final two
At number four is Vista Gold Corp. (NYSE:VGZ), also in the gold-mining business, and also down double-digits since the beginning of April at a 2-½ year low of $1.54. Fortunately, the company recently got some good news, compliments of the Northern Territory Government of Australia, which designated Vista Gold Corp. (NYSE:VGZ)’s Mt. Todd gold mine Major Project Status signifying the Northern Territory Government’s support for the timely and responsible development of the Mt. Todd gold project. Vista Gold Corp. (NYSE:VGZ) acquired 100% of Mt. Todd in 2006.
Finally, at number five is AngloGold Ashanti Limited (ADR) (NYSE:AU) another gold mining company with interests also in uranium, silver and sulfuric acid. Because of this diversification, the decline in AngloGold Ashanti Limited (ADR) (NYSE:AU) has been slightly more muted than those recorded for Barrick and Vista, but still significant enough to question the ability of this stock to trade back to the $28.31 high from 10 months ago. And because Anglogold mines most of its gold in Africa, the company has very high production costs that could continue to weigh on growth and cash flows. Currently, AngloGold Ashanti Limited (ADR) (NYSE:AU) has a trailing P/E ration of only 7x versus the industry average of 81x. However, the company also carries a very heavy debt burden coupled with rising production costs that have diminished the company’s bottom line by 50%.
Final thoughts
Any investor that’s been long on these types of stocks most likely faces some very serious challenges for the remainder of 2013, owing entirely to the sudden and significant drop in the price of precious metals, led by gold. Still, as we mentioned above, each of these equities is now rather cheap, for those bullish on a rebound in the near-term. It appears that Barrick Gold Corporation (USA) (NYSE:ABX) is one of the cheapest of the bunch, though a basket of these five stocks wouldn’t be a bad idea for anybody looking to go contrarian at the moment. For a longer look at how your peers have been generating solid market outperformance over the past few months, continue reading here.
Disclosure: none
