Should You Invest in Barrick Gold?

PHOTO CREDIT: Barrick Gold

OVERVIEW

Barrick Gold Corporation is a company that mines metals like gold and copper. It has 16 mining sites all around the world where they mine these metals. The company was founded in 1983.

Why You Should?

  1. The company recently gained a large investment from Warren Buffet. This will improve investor sentiment to the company and others will buy the company’s stock. Warren Buffet previously did not like this industry so the fact that he is investing in Barrick Gold during these tough times shows us that this company is in the best in its business and is a true powerhouse of a company.
  2. Barrick Gold has lowered its operating costs by innovating and making cheaper and more efficient ways to mine these metals. This has seen a rise in margins and more revenue for the company over the past couple of financial years.
  3. Gold prices are currently near their all-time highs. This will benefit the company as they can sell more gold for higher prices. This will boost both its revenues and profit margins. This might only benefit the company in the short term as the price for gold might start to fall and start to rise after that.
  4. The COVID-19 Pandemic has crushed the value of currencies around the world. If the dollar starts to fall, investors might add some gold to their portfolios. This will benefit Barrick Gold as they will see a rise in demand for their products.
  5. Barrick Gold has used high gold prices and lower operating costs to boost its balance sheet. A stronger balance sheet will benefit the company in the long term just in case they need to raise some more money to fund their several projects. Over the past financial years, the company has seen rising revenues. However, in the financial years of 2017 and 2018, the company needed to pay more taxes and pay fines from its projects. This hurt the company’s top and bottom lines. In the financial year of 2019, the company reported revenues at around 9.7 billion and profits at around 4 billion. Both of these metrics are up from the financial year of 2018 when the company reported revenues at around 7.2 billion and a loss of 1.5 billion.
PHOTO CREDIT: Yahoo Finance

Why You Should Not?

  1. Barrick Gold faces tough competition from several other mining companies like Newmont Mining. Other companies directly compete with the products that Barrick offers and this might hurt the company’s future growth.
  2. It is still expensive to mine for metals. For example, the company needs to buy more land and need to be able to support it with a high number of workers as well as expensive machinery. Another factor is the number and cost of fines that the company needs to pay for its projects. These factors will hurt the company’s profit margins. If any of these factors rise in price, Barrick might not see high profits.
  3. The company is reliant on strong commodity prices. Usually, the price of gold and copper is used to hedge against other risky investments. However, in the slight chance that Barrick needs to sell gold and copper for lower prices than expected, it will negatively impact the company’s revenues and profits.

MY OPINION

In my opinion, I think that Barrick Gold is a good long term investment that is safe because of stable gold and copper prices. Strong balance sheets and high gold prices paired with lower operating costs will benefit the company in the future. However, the company is very reliant on high metal prices and has competition from other companies.

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Aaditya Patel is a writer who publishes analysis on companies publicly traded on the NYSE. Follow him @the_investing787 on Instagram for summary posts.

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Aaditya Patel

Aaditya Patel

Aaditya Patel is a writer who publishes analysis on companies publicly traded on the NYSE. Follow him @the_investing787 on Instagram for summary posts.

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