Monday, December 7, 2009

Barrick Gold Downgraded, Possible Bankruptcy

ABX, Barrick Gold, was downgraded today to Neutral by credit Suisse. The stock is down 4% on the news.

Note that we track the major and intermediate miners live here. Iamgold is doing even worse today.

Barrick has been all over the news, for being on the wrong side of gold when gold was going up, and now that is has finally unhedged, gold may be headed down. The only worst timing may that of the U.K. when it sells gold.

According to Prof. Antal Fekete, Barrick Gold could go bankrupt on its hedging/unhedging woes.

Credit Suissse mentions these reasons for the downgrade:

• Potential road block at Cortez Hills: additional environmental analysis is required at the company's Cortez Hills project in Nevada.

• Growth in 2010 at risk

• 7.7Mozs in 2010 vs. 7.49Mozs in 2009. ... removed production from Cortez Hills up to H2/2010 and applied a probability discount of 50% to subsequent production. Our production and costs in 2010 have been revised from 7.57Mozs at $456/oz to 7.43Mozs at $470/oz.
• Downgrading to Neutral: NAV has been revised to $31.61 (from $32.30) and we are lowering our Target price to $47 from $50.

• Valuation: target price of $47.00 per share is based on a target P/NAV multiple of 1.5 (revised from 1.6X) times our cash-adjusted NAV of $31.61/share with net cash of $0.03 added at par.

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