Barrick Gold Corp (ABX) Com Stk (CDI)

Barrick reported full-year revenue growth of 3%, to $11.4bn. Growth was driven by higher gold pricess which offset a drop in production and sales volume. Underlying cash profit (EBITDA) was down 1% at $4.0bn. Total costs of production for gold and copper were up 9% and 1% respectively.

The period ended with net debt of $578mn, from $342mn the prior year. Free cash flow rose 50% to $646mn.

Production costs are expected to rise in the new year for both gold and copper as sustaining capital expenditure increases. Gold production is expected between 3.9 - 4.3mn ounces, compared to the 4.05mn produced in the year just ended.

The board declared a dividend of $0.10 per share.

The shares rose 1.8% in pre-market trading.

Our view

Barrick's top line continues to benefit from buoyant gold prices, and fourth quarter profits were better than expected. That's helping to cover some of the production cracks seen over the year.

Sticky inflation has been a persistent thorn over the year, and Barrick has now missed its original gold cost guidance for two years in a row. A mix of lower production and increased maintenance have also been adding pressure to the cost line. Things are expected to ease from here, with Barrick expecting a small uptick in costs over the new year compared to the 9% jump seen over 2023.

Increased production at existing mines can be a particularly powerful driver for the group - since costs rarely increase in line with output. On that note, the expansion of the low-cost Pueblo Viejo mine and restarting of the Pogera mine are both positive catalysts for production over the medium term.

There's also been positive progression in both Gold and Copper reserve levels, as organic expansion uncovers new deposits. This is key, as it reduces reliance on acquisitions to support future production guidance.

But these projects don't come cheap, nor is the ongoing maintenance cost just to keep mines running. For now, prices are high enough that free cash flow has returned, but the net cash position seen for parts of last year has disappeared. Debt's still low, so there are no immediate liquidity concerns, but it highlights the speed at which things can change.

As it stands, returns above the standard dividend are off the table. There's a new $1bn buyback which management plan to use at their discretion over 2024. But last year saw the same scope and not a single share was repurchased. This shows, as ever, that no returns are guaranteed.

2024 looks set to be another volatile year. Equity markets in the US are looking frothy in places, there's a stream of global elections coming, and conflicts continue to cause turbulence across the globe. The general level of uncertainty should help keep gold prices elevated , though there are no guarantees .The general level of uncertainty should help keep gold prices elevated , though there are no guarantees.

We view Barrick's large, diversified, footprint as one of the better options in the sector and it's in a position to benefit if the gold price stays elevated. But we would remind investors that Barrick doesn't control commodity prices and performance can be volatile. The general level of uncertainty should help keep gold prices elevated, though there are no guarantees.

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