Barrick Gold Corporation is a mining company that produces gold and copper with in 13 countries. It is headquartered in Toronto, Ontario, Canada. The Company has attracted a lot of market and media attention as a result of Warren Buffet’s Berkshire Hathaway investing approximately US$ 564 MM in the stock during August 2020. Although the investment represents circa 0.2% of the Berkshire’s investment portfolio, the investment attracted a lot of interest as Warrant Buffet has previously publicly criticized investment in Gold undermining it as an investment opportunity as compared with real estate, farms and businesses.
So the question remains, what fundamental opportunity Barrick Gold presents? We find the answer in the Company’s solid operating performance in H12020. The Company recently issued its H12020 figures whereby at the half way mark in the year 2020, the Company with total production of 2.4 MM ounces was on track to achieve production targets within its 2020 guidance range (circa 4.6 MM to 5.0 MM ounces) despite the impact of the covid-19 pandemic which shows the resilience of its operating capabilities across its key assets including particularly from Nevada Gold Mines in the United States, Loulo-Gounkoto in Mali and Kibali Mines in the Democratic Republic of Congo. The Company’s copper portfolio also continued to perform well.
For H1 June 2020, the Company realized operating free cash flow of US$ 1,920 MM as compared to US$954 MM in H1 2019 registering a YoY growth of 101%. The increase of US$ 966 MM in operating cash flow was primarily due to the higher realized gold price of US$1,657 per ounce in H1 2020 compared to US$1,312 per ounce in H12019, partially offset by lower gold sales volume and higher cash taxes paid. Strong cash generation during 2020 highlights the quality of assets and leverage to gold prices available to the Company. The balance sheet strength is evident from the fact that as of June 2020, net debt of the Company is down almost 25% to US$ 1.4 Bn with no significant maturities until 2033.