Gold better than the miner

Gold has been one of the few winners over the past year, which is why investors were disappointed with Barrick Gold Corp.'s $468-million (U.S.) loss in the fourth quarter. The loss was partly due to non-cash writedowns of various assets – but even when these writedowns are excluded from the results, adjusted net income was still down sharply over the previous year. Richard Gray, an analyst at Blackmont Capital, noted that the gold producer's cash costs were $471 an ounce during the quarter, or well above his estimate of $420 an ounce. Things don't look a whole lot better for 2009, either. The company estimates its costs will fall to a range between $450 and $475 an ounce, that that still compares poorly with Mr. Gray's estimate for an average cost of $429 an ounce for the year. At the same time, estimated production is also slightly below his expectations for 7.77 million ounces. “Overall, Barrick's fourth quarter and 2008 results and company update did little to change our view that the company's growth is limited and that cost improvements and margin expansion will lag its peers,” he said in a note. He maintained a "hold" recommendation on the stock, but lowered his 12-month price target to $46 (Cdn.) from $48, because of the stubbornly high production costs. The shares traded on Friday at $46.08. Barrick's share price has certainly lagged its peers – and gold itself – since the beginning of 2008. Since then, Barrick's shares have risen just 11.6 per cent, after dividends are taken into account. However, Goldcorp Inc. is up 19.2 per cent over the same period and Kinross Gold Corp. is up 30.3 per cent. Plain old gold is up 19.1 per cent.

Receive our
FREE Newsletter

Name:
Email: