"Blame it on Bitcoin’s growing acceptance as an alternative asset
class or on higher Treasury rates, but gold has lost some of its luster.
The metal has declined 9%, to $1,726 a troy ounce, in 2021, leaving it 16% below its record high of $2,063, reached last August.
With the selloff, gold looks attractive—and so does mining giant
(ticker: GOLD). Shares of Barrick, at about $20, are down by over
a third from their summer peak and look inexpensive, changing hands for
15 times projected 2021 earnings of $1.33 a share and yielding 1.8%.
Barrick and other large gold-mining companies
are trading cheaply, relative to their histories and to gold, even
though they are better run than ever before. Led by South African
geologist and big-game hunter Mark Bristow, Barrick has an impressive
portfolio of mines.
There are 13 top gold mines in the world with projected annual
production of 500,000 ounces for 10 years and with below-average costs,
Bristow tells Barron’s in an interview—and Barrick owns or has
interests in six of them. That includes three in Nevada, two in Africa,
and one in the Dominican Republic.
“We have the industry’s best assets and strongest balance sheet, with no
net debt and the best people,” the CEO says. Barrick projects annual
gold production of 4.5 million to five million ounces over the current
decade, while offering some exposure to the hot copper market.
Larry Pitkowsky, manager of the GoodHaven mutual fund, a Barrick
shareholder, is a believer. “Bristow is our kind of 24/7 manager and has
skin in the game,” he says. Last year, amid the pandemic, Bristow
visited each of the company’s mines three times.
“starting to return more cash to shareholders, and the stock is
attractively priced, relative to free cash flow,” Pitkowsky adds. This
year’s free-cash-flow yield is projected to be close to 10%.
“Gold is an investment to hold in these times of unknowns,” Bristow
says, “and copper is rapidly becoming the most strategic metal in the
world” as the pace of electrification picks up.
Fred Hickey, editor of the High-Tech Strategist newsletter, says that
Democratic control in Washington is bullish for gold. “No limits on
their spending, leading to gigantic deficits (good for gold), more Fed
monetization (debasement good for gold), and inflation (great for
gold),” he tweeted this past week, noting parallels to the 1970s, when
the precious metal went up 20-fold. He sees gold getting back to its
August 2020 peak.
Most investors have little or no exposure to
the metal or to goldmining stocks. Despite Bitcoin’s rise, gold remains
the time-tested alternative investment. To add it to your portfolio
ahead of a revival in its price, there might be no better bet than one
on Barrick and its swashbuckling leader.
a South African miner that generated ample returns for more than
20 years. He then merged it with the larger, Toronto-based Barrick in
early 2019 and became CEO. That same year, he went after archrival
(NEM) with a hostile takeover bid. The offer was withdrawn when
the two companies agreed to merge their valuable mining operations in
Nevada. Barrick is the lead partner, with a 61.5% stake.
Barrick’s stock lagged behind Newmont’s by 25 percentage points in
the past year. Bristow questions Barrick’s lower valuation relative to
Newmont, saying, “We have better-quality assets and are trading at a
Why has Barrick trailed rivals? Newmont, the only gold company in the
index, pays a higher dividend—3.6%—based on a formula that ties its payout to gold prices.
investors are disappointed that Barrick has not come up with a similar
dividend formula. It pays nine cents a share quarterly and plans to
issue a special dividend of about 42 cents a share this year from the
proceeds of asset sales in 2020.
Then there is Bristow’s interest in buying gold or copper companies,
which has unsettled investors who fear that Barrick will overpay.
CEO rebuffs such concerns. “Look at our merger-and-acquisition history
and we haven’t screwed up once—I’m talking about me and my team,” he
says, ticking off deals at Randgold, the Barrick merger, and the Newmont
joint venture. “ I act like an owner because I am a big owner,” he
says, noting that he holds over five million shares.
As a well-run gold-mining company, Barrick can be a hedge against financial turmoil. That’s an alluring find"