Time to buy Barrick gold shares?
Written by Andrew Walker at The Motley Fool Canada
Barrick Gold Q1 2022 results
Barrick Gold reported weak first quarter profits compared to the same period last year due to a sharp drop in production. Barrick Gold produced 990,000 ounces of gold in the first three months of the year, compared to 1.1 million ounces in the first quarter of 2021.
All-in sustaining costs also increased to US$1,190 per ounce from US$1,073 per ounce last year. The drop in production was expected and Barrick Gold said it remains on track to meet its 2022 production guidance. Management expects a strong second half.
Rising gold prices helped offset the reduction in production. Barrick Gold reported a realized gold price in the first quarter of 2022 of US$1,876 per ounce, compared to US$1,777 per ounce in the first three months of last year.
Adjusted net earnings per share were US$0.26 versus US$0.29.
Despite the weaker performance, investors should be satisfied. Barrick Gold ended the first quarter with a net cash balance of US$743 million. This means shareholders receive a bonus dividend of $0.10 per share on top of the base dividend of $0.10. Barrick implemented a new dividend policy this year that pays up to an additional US$0.15 per share, based on the net cash position at the end of each quarter.
Gold is trading near US$1,880 per ounce at the time of writing. As long as the yellow metal maintains the current price or rebounds in the coming months, Barrick Gold investors should see regular dividend bonuses through the end of the year.
At the current share price, an annualized dividend of US$0.80 per share would provide a yield of approximately 3.5%.
Gold has fallen around US$200 an ounce from its 2022 high in early March. A surge in the value of the US dollar is a major reason for the pullback. The price of gold is in US currency, so a rising dollar makes the metal more expensive for holders of other currencies. Ongoing geopolitical uncertainty and fears of a possible recession could push the US dollar even higher in the coming months. This could put additional pressure on the price of gold.
Gold is widely considered a good hedge against inflation. Prices are rising all over the world and people are looking for ways to protect their purchasing power. Owning gold is one way investors try to achieve this outcome, especially if their own currencies tend to lose value against the US dollar over time.
Gold is also considered a reasonable safe-haven asset. Market instability can drive more funds into gold as investors look for a place to weather the turbulence.
Another potential tailwind for the price of gold in the coming months could be the transition Bitcoin and other cryptocurrencies. Volatility remains high in the crypto space and the recent drop in the value of Bitcoin could trigger a transfer of funds into gold.
Is Barrick Gold stock a buy?
Barrick Gold is trading near $28 per share on the TSX at the time of writing, compared to the 2022 high of $33.50. The stock was near $40 in 2020 when gold surged to US$2,080 an ounce. Barrick Gold has a strong balance sheet and owns six of the top 10 mines in the world. Exploration success is replacing resource production, and Barrick Gold is building its portfolio of growth opportunities around the world.
Additionally, Barrick Gold is a major copper producer. The copper market is expected to be strong in the coming years, which will help offset some of the volatility in gold mining.
Investors need to be bullish on gold and copper to hold the stock. If you’re in that camp, Barrick Gold looks attractive right now.
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The Motley Fool has positions and recommends Bitcoin. Foolish contributor Andrew Walker has no position on the stocks mentioned.