Barrick Gold Corporation (USA) (ABX), Silver Wheaton Corp. (USA) (SLW): The Worst Is Behind for this Gold Miner

Outlook

Barrick Gold Corporation (USA) (NYSE:ABX) continues to cut costs, and the company has slashed its dividend by 75%. This move would free up $600 million per year. If the low gold prices are here to stay, liquidity will be critical, especially for companies with high debt levels like Barrick.

Barrick Gold Corporation (USA) (NYSE:ABX) has reported that its all-in sustaining costs were $919 per ounce in the second quarter. The company has changed its cost outlook for the year, and now expects the costs to be in the $900 — $975 range. The previous guidance was $1000 — $1100. This is a significant improvement.

The resequencing of construction schedule at Pascua-Lama frees more money for Barrick Gold Corporation (USA) (NYSE:ABX). The mine is expected to start production by mid-2016. In another move to save money, capital expenditure for this year was reduced by $1.5 billion.

With the improvements on the cost front, Barrick Gold Corporation (USA) (NYSE:ABX)’s position looks solid. The company has $2.4 billion of cash on hand and $4 billion of undrawn credit facility. The debt schedule is relatively easy, with $1.8 billion of debt due through 2015.

Bottom line

Barrick Gold Corporation (USA) (NYSE:ABX) trades at 6.69 forward P/E. When the price of gold improves, the company is fully positioned to profit from it. The improvements on the cost front would stay with Barrick regardless of the price environment. The impairment of the assets could be temporary. When the prices rise, the company would reevaluate its assets and adjust their value accordingly. In the short term, the stock would be volatile and sensitive to minor changes in the gold market. In the long term, the company is a solid, low-cost gold producer.

Vladimir Zernov has no position in any stocks mentioned. The Motley Fool owns shares of Fluor.

The article The Worst Is Behind for this Gold Miner originally appeared on Fool.com.

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