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« Gold Prices: After Labor Day! | Main | Agnico-Eagle Mines Limited: A Class Act! »
Tuesday
Aug282007

Barrick Gold Corporation: Why?

Barrick Logo

Some of our readers have suggested that we have an aversion to larger gold miners such as Barrick Gold Corporation. Is this aversion steeped in some psychological need to support the under dog or is all about performance?

We believe that it is all about performance, which can be described as the results of an investment's activity over time. This web site is about investment, which can be described as the use of money for the purpose of making more money. How do we determine which is the best vehicle to use, by comparative analysis which is the evaluation of similarities and differences. There are many more interpretations of these functions however for this exercise we are trying to keep it short and to the point.

Now lets take a look at Barrick, one of the biggest mining companies on the board with a market capitalisation of $28.8 billion, a P/E ratio of 29 with 865 million shares outstanding. Barrick describe themselves as follows:

“Barrick is the world’s largest gold producer, with a portfolio of 27 operating mines, many advanced exploration and development projects located across five continents, and large land positions on the most prolific and prospective mineral trends. The Company also has the largest reserves in the industry, with 123 million ounces of proven and probable gold reserves, 6 billion pounds of copper reserves and 964 million ounces of contained silver within gold reserves as at December 31, 2006”.

So we are looking at the heaviest of the heavy weights in the gold mining sector.

Now lets take a look at the chart for Barrick:

Barrick Chart 28aug07

Over the last three years Barrick has made steady progress from around $20.00 to around $32.00 yesterday, for a gain of 60%, a nice profit, no doubt about it.

Now, how does it compare with investment vehicles of a similar type?

The chart below compares Gold itself, Barrick, Agnico-Eagle and Yamana.

Barrick vs Gold and other stocks 28aug07

The first observation is that Barrick has not kept up with the price of gold so our money would have provided a better return had we invested in the metal. The second observation is that both Agnico-Eagle and Yamana have dramatically outperformed Barrick. Likewise many other gold miners have also outperformed Barrick.

Barrick may appeal to a fund manager who has lots of cash to place and not much in the way of imagination but as individual investors we should be able to generate far better returns on our funds.

If you think that we have the wrong end of the stick then please write in and state the case for the Barrick Gold Corporation, as this will add balance to the investment debate.

Barrick Gold Corporation trades as ABX on the NYSE and the Toronto Stock Exchange.

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Reader Comments (2)

I agree with you 1000%, Barrick is trash and will remain that way for years, mainly because of their hard headed stand on their hedging, the $s they have lost, they deserve to be in the trash bin for a long time. The other reason is their sheer size, how can they grow by 100's% as a small company can. In saying that it is also a much more conservitive company, OK for widows and orphans, but for me "NO". I look for high risk stocks and then lower that risk with some hard research, In the past that has served me well! I was part of the Bre-X scam and learned some serious, valuable lessons from that, in saying that no amount of research would have saved me from that, as many others much more experienced tham me fell right along with me !!!!
Claude

August 29, 2007 | Unregistered CommenterClaude Favron

The stock has pushed up to $40 but it's just not for us. However there are better stock pickers than us out there who favour this stock so dont let us put you off it.

September 22, 2007 | Unregistered CommenterGold Prices

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