Barrick Gold Corporation (ABX) is a leading gold and copper mining company, located in Canada and operating on 4 continents. It produces “gold bullion sold in the gold spot market; gold and copper concentrate is sold to independent smelting companies, and gold bullion and copper cathode is sold under gold and copper cathode sales contracts between the Company and various third parties” (Google Finance). “On January 20, 2006, Barrick acquired a majority share of Placer Dome. The production of the combined organization moved Barrick to its current position as the largest gold producer, ahead of Newmont Mining Corporation” (Wikipedia).

Barrick operates 27 mines (Barrick.com) and in 2006, “the Company produced 8.64 million ounces of gold at total average cash costs of $282 per ounce, as well, produced 367 million pounds of copper at total cash costs of $0.79 per pound” (Barrick.com). The company reports estimated reserves of 123 million ounces of gold, 6 billion pounds of copper, and 964 million ounces of silver in the gold mines (Barricks.com).

Mining can be an environmental problem, and Barrick uses Cyanide as part of the process to separate the Gold from the rock. Barrick touts a responsible environmental record on their website, stating that they not only understand the issues with Cyanide, but that they have also helped create higher standards with the “International Cyanide Management Code” (Barrick.com). However, the company has had a number of lawsuits over the last few years because of environmental hazards and accidents, including Cyanide and Mercury spills.

“These include the proposed use of cyanide leach tailing dams for its gold mine project at Lake Cowal, and the alleged release of approximately seven tons of mercury during 2004-2005 at the Super Pit gold mine (a 50/50 joint venture with Newmont Mining Corporation) near the city of Kalgoorlie-Boulder, Western Australia” (Wikipedia).

Barrack’s stock price has ranged between $26.94 to $53.38 over the last 52 weeks, and has had a 4 week increase if 30%, to 52.17 (Google Finance). The stock currently has 830 million shares outstanding and a P/E of 49.60, with the current beta is 0.82. When we look at the P/E ratio of 49.60, we can conclude that the company would be considered to have a higher growth potential, thus investors are more inclined to buy the stock because of the growth opportunity. Beta would be a measure of risk, Barrak’s current calculation is 0.82, and as a measure of risk, 1 would be average or equal to the market. Barrack is below 1, indicating that it is less volatile than the market, meaning it will not move with the market, and move independently of general market conditions.

The market for gold has been increasing and the projections for its value are high, setting a new record on Jan 25th, 2008 at $923.40 (Reuters). The president of Barrack Gold Corporation, Peter Monk, thought that the market for gold can continue to climb to the 1980’s highs, which would be $2000 an ounce, adjusted for inflation (Reuters). However Monk also said that costs for mining have risen over the last two years by 20 to 30 percent, because of increased competition, rising wages, higher equipment costs and rising power costs in South Africa (Reuters). With economic uncertainty in the U.S. and with the dollar struggling, the value of gold often increases because it is a safer investment than many other options.

Philip Carlsson, Commodities Analyst and Futures Product manager at the Copenhagen-based Saxo Bank, said: “The historically weak dollar has affected commodity prices and added volatility. When we see a weakened dollar and a volatile equity market, investors seek certainty — and the gold bullion market has traditionally fulfilled that role” (The Peninsula).

Gold bullion will traditionally be a good investment in tough times, although mining companies may parallel bullion, it may not be as strong of an investment as pure gold because of strains on the mining operations, lawsuits due to environmental and health issues, and investors demands.

Barrack Gold Corporation is positioned well in the global market, it is the largest company in the gold mining industry, and it is positioned well to thrive during these changing market conditions. If you currently own stock, it would be a great stock to hold, if you are looking to diversify during this uncertain time in the market, with the dollar struggling and the economy slowing, Barrak would be a safe buy over the next few quarters. Gold bullion is also a good investment during this period, because the dollar has weakened.

Reference
Barrick Gold Corporation Website. Retrieved January 26. 2008. http://www.barrick.com/
Annual Financial Report
Barrick Gold Corporation Annual report, for the fiscal year ended 2006. Retrieved Jan 23, 2007 from http://www.barrick.com/Investors/AnnualQuarterlyReports/default.aspx
Google Finance; Google Finance (January 26, 2008). Retrieved from http://finance.google.com/finance?q=NYSE:ABX
Unknown, (1/25/08). Barrick says record gold price is sustainable. Reuters, London, UK. http://www.reuters.com/article/companyNews/idUSL254599620080125
Unknown, (1/26/08). Commodity prices hit hard by low dollar value. The Peninsula, Dubi.
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