Barrick Gold Delivers Steady Q3 Results, Makes Progress on Growth Projects

Barrick Gold Corporation reported its third quarter 2023 financial results on November 2, 2022, providing investors an update on the company's performance amid a turbulent macroeconomic environment. Headquartered in Toronto, Barrick operates gold and copper mining assets located primarily in the Americas and Africa. The company produced 1.04 million ounces of gold and 112 million pounds of copper in Q3 2023.

Financial Highlights

• Barrick generated revenues of $2.86 billion in Q3 2023, a 13% increase over Q3 2022, supported by higher year-over-year realized gold and copper prices.
• Gold revenues rose 14% to $2.59 billion on a 12% increase in realized gold prices to $1,928 per ounce. Copper revenues grew 17% to $209 million on a 17% increase in realized copper prices to $3.78 per pound.
• Net income attributable to shareholders rose 53% year-over-year to $368 million or $0.21 per share. Adjusted net earnings improved to $418 million or $0.24 per share.
• Operating cash flow increased 35% sequentially to $1.13 billion compared to Q2 2023. The company generated a free cash flow of $359 million in Q3.
• The balance sheet improved with net debt down 17% quarter-over-quarter to $514 million, representing near zero net leverage. Total liquidity stands at $8.5 billion including $4.3 billion in cash.
• Barrick maintained a quarterly dividend of $0.10 per share, consistent with its fixed dividend policy announced in February 2022. The company has returned $1.1 billion to shareholders YTD through dividends and share repurchases.

Improved Operational Performance

• Barrick's gold production rose 5% year-over-year to 1.04 million ounces in Q3. The increase was driven by higher output at Cortez, Turquoise Ridge, and Kibali which offset lower production at Pueblo Viejo.
• All-in sustaining costs (AISC) for gold improved to $1,255 per ounce, down 1% versus Q3 2022. Total cash costs declined 2% to $912 per ounce. Costs benefited from higher by-product credits.
• Copper production was 112 million pounds in Q3, down 9% year-over-year but up 5% versus Q2 2023. Barrick remains on track to meet full-year copper guidance.
• AISC for copper rose 3% to $3.23 per pound. But C1 cash costs fell 10% to $2.05 per pound due to higher by-product credits from rising gold prices.

Project Development Update

• At the Reko Diq copper-gold project in Pakistan, Barrick made progress on water supply and continued work on an updated feasibility study slated for completion by the end of 2024.
• The Lumwana copper mine feasibility study for a major expansion to double capacity is progressing with the first production targeted in 2028. This could increase annual copper output to 240,000 tonnes.
• Barrick secured a new special mining lease for the Porgera gold mine in Papua New Guinea, paving the way for a restart of operations by year-end 2022 once local landowner agreements are finalized.
• In Nevada, strong brownfield exploration results are supporting gold reserve replacement. The pipeline of projects aims to increase annual production from Nevada assets.
• The global exploration portfolio was expanded in South America, Central America, and North America to provide longer-term growth options.

ESG and Sustainability Developments

• Barrick set Scope 3 emissions reduction targets for suppliers, demonstrating the execution of its climate change strategy. The company already has Scope 1 and 2 emissions reduction targets.
• The malaria incidence rate at Barrick's operations declined 26% in Q3 2023 versus the comparable period last year, evidencing health and safety improvements.
• Community development projects advanced in Q3 included new schools and health clinics funded by Barrick in Pakistan and Zambia.
• At the Loulo-Gounkoto complex in Mali, Barrick highlighted its contributions over 25+ years including $10 billion to the economy and thousands of local jobs created.

2023 Outlook Largely Unchanged

• Barrick maintained its 2023 gold production guidance of 4.2 to 4.6 million ounces, Though the range was trimmed to 50,000 ounces from the low end. A slower ramp-up at Pueblo Viejo led to the guidance reduction.
• The company noted gold production is forecast 102% complete for 2023, signaling confidence in achieving the guidance despite crosses.
• Full-year AISC guidance for gold was unchanged at $1,170-$1,250 per ounce. Copper AISC guidance also remained at $2.95-$3.25 per pound.
• Capital expenditure guidance stayed at $2.2-$2.6 billion for 2023. Approximately 60% is allocated towards mine site sustaining capital.

Financial Analysis and Valuation

• Barrick posted solid Q3 results amid inflationary pressures, demonstrating the defensive appeal of its gold production. The company maintains upside exposure to higher gold prices.
• Q3 free cash flow of $359 million translates to a free cash flow yield of 4.2% on Barrick's current market capitalization of around $17 billion.
• The company screens attractively relative to gold mining peers, trading at fwd P/E of 15x and EV/EBITDA of 4x compared to averages of 19x and 6x for its peer group.
• Consensus estimates call for Barrick's EPS to grow 22% in 2023 and 14% in 2024, suggesting the stock may still be undervalued if gold prices rise.
• Barrick's dividend yields over 4% and the payout ratio of 50% is sustainable at current gold prices. The balance sheet supports further dividend increases.

Conclusion and Investment Thesis

In summary, Barrick Gold's Q3 results underscored the company's solid operating performance and financial health amid volatile market conditions. Key highlights for investors include:

• Exposure to gold provides a safe haven asset and inflation hedge. Barrick offers upside operating leverage to higher gold prices.
• Growing copper business adds scarcity value and industrial metal diversification. the to drive copper expansion.
• Organic growth pipeline can increase gold equivalent production by 30% by 2030 without dependence on risky acquisitions.
• A fortress balance sheet with near-zero net debt enables financial flexibility to fund growth.
• Free cash flow generation and compelling shareholder returns remain intact.
• Progress on community relations, climate strategy, and safety initiatives helps mitigate ESG risks.
• Attractive valuation relative to peers, both on earnings and free cash flow multiples.

For investors seeking precious metals exposure plus a compelling growth story, Barrick checks many boxes. The company looks primed to deliver expanding low-cost gold and copper production amid rising metals demand, providing earnings upside if prices continue to rally from here.