Barrick Gold Corporation

Barrick Gold Corporation (NYSE: GOLD) is a leading gold and copper producer and operates through its mines located across thirteen countries including North and South America, Africa, Papua New Guinea and Saudi Arabia.

Key Highlights:

Source: Company Presentation

 Q1FY21 Income Statement Highlights:

 Q1FY21 Income Statement Highlights (Source: Company Report)

Risks: Shutdown of operations due to the restrictions imposed on account of the COVID 19 pandemic would hamper the exploration and drilling activities and might result in a drop in the overall performance. Moreover, volatility in gold prices would affect the financial performance.

Valuation Methodology (Illustrative): Price to Cash Flow

Stock Recommendation:

In Q1FY21, adjusted EBITDA margin was higher at 61% v/s 54% recorded in Q1FY20. This is a showcase of higher profitability and improved operational efficiency. Moreover, despite the sluggish economic scenario, the company reported a higher dividend of USD 158 million, as compared to USD 122 million in pcp. The company has guided for a stable production We have valued the stock using the P/CF based relative valuation method and have arrived at a double-digit upside (in percentage terms) upside. For the said purposes, we have considered peers like Newmont Corporation, Wesdome Gold Mines Ltd etc. Considering the aforesaid facts, we recommend a ‘Buy’ rating on the stock of GOLD at the closing price of USD 20.53 on June 29, 2021.

One-Year Technical Price Chart (as on June 29, 2021). Analysis by Kalkine Group

Kinross Gold Corporation

Kinross Gold Corporation (NYSE: KGC) is a Canada based gold mining company whose projects are located in the United States, Brazil, Russia, Mauritania, Chile and Ghana. 

Key Highlights

Source: Company

Free Cash Flow Comparison, Source: Company

Financial overview of Q1 2021 (In millions of USD)

Source: Company

Risks associated with investment

As the operations of the company depends on the gold prices, a volatility in gold prices is likely to affect the company’s performance. Moreover, unable to add new mineral exploration would further lower the company’s reserves.

Valuation Methodology (Illustrative): Price to Cash Flow

Stock recommendation

We expect the gold price to remain elevated and believe that despite a bit of pullback, gold, as an asset class, would continue to remain in the limelight as uncertainty over the global economic growth is still prevailing. We believe that average realized gold prices per ounce would continue to expand, which would lead to margin expansions. For FY21, the group estimates its gold equivalent production at 2.4 million ounces, while the production is expected to increase by approximately half a million ounces, or 20%, to 2.9 million Au eq. Oz. in 2023, which is key positive. Furthermore, the expected enhanced production along with controlled cost will also derive strong free cash flow performance. Therefore, based on the above rationale and valuation, we recommend a "Buy" rating on the stock at the closing price of USD 6.28 on June 29, 2021. We have considered B2Gold Corp, Barrick Gold Corp, Alamos Gold Inc etc. as the comparison's peer group.

One-Year Technical Price Chart (as on June 29, 2021). Analysis by Kalkine Group

B2Gold Corp.

B2Gold Corp. (AMEX: BTG) is a gold producer which has operating gold mines in Mali, Namibia and the Philippines and numerous exploration and development projects across several countries, including Mali, Colombia, Burkina Faso, Finland and Uzbekistan. 

Key Updates:

Q1FY21 Financial Highlights:

Q1FY21 Income Statement Highlights (Source: Company Report)

Risks: The company’s income is correlated to the international gold prices, and price volatility in the commodity prices are likely to dampen the company’s income and cash flows.

Valuation Methodology (Illustrative): EV to Sales

Stock Recommendation:

Despite the sluggish macro scenario, the group paid USD 42.072 million of dividends to its shareholders, significantly higher than USD 10.368 million in pcp. The group has guided for stable production and with the elevated gold prices, the financial performance is likely to improve. Moreover, at the last closing price, the stock was offering a dividend yield of ~3.8%, which is decent amid low interest rate environment. We have valued the stock using the EV to Sales based relative valuation method and have arrived at a double-digit upside (in percentage terms) upside. For the said purposes, we have considered peers like Barrick Gold Corp, Agnico Eagle Mines Ltdetc. Considering the aforesaid facts, we recommend a ‘Buy’ rating on the stock at the closing price of USD 4.19 on June 29, 2021.