Barrick Gold - Final Thoughts
Ticker Symbol: ABX
Final Thoughts
Through mid-February 2009, exposure to gold has proven to be a safe bet hedging against market turmoil. The precious metal rallied quickly to $1,000/troy oz during the week ended February 20th, bringing miners along for the ride.
Barrick beat expectations, ex-items, during the fourth quarter of 2008, but its total cash costs rose to $471/troy oz from $369/troy oz last year. Cash costs are projected to be $450 to $475 per ounce in 2009.
Mining stocks that don't hedge their position, like Goldcorp, will remain closely tied to the price of Comex gold, while hedgers like Ashanti will be see a lesser correlation. Back in 2006, Barrick had a substantive hedge position but over the years has wound down its hedges. The result has been dramatic swings in its stock price over the past several years.
Barrick, like the rest of the gold miners, will remain closely tied to the spot gold future price. If $1,000/troy oz turns out to be resistance, miners will have a difficult time sustaining February?s rally. It seems more likely that systemic risk will persist, keeping the hedge against inflation play alive for the time being.
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