With the world’s biggest gold miner Barrick Gold Corporation (NYSE:ABX) reporting a loss for the fourth quarter of $2.85 billion, we take a look at what should current ABX stock holders and potential investors could make of it.
The $2.85 billion reported by Barrick Gold translates to a loss per share of $2.45, compares to a $2.61 per share loss for the same quarter in 2013. Much of these losses have been due to impairments on assets. These write downs have affected many of ABX’s acquired mines due to the commodity boom of old slowing down. In short, Barrick bought when the market was at it’s highest and is suffering now as these assets lose value.
ABX has very high levels of debt with a 0.99 debt to equity ratio. having gone on a mine buying spree in previous years including the $7.65 billion takeover of Equinox minerals in 2011. The company therefore has stated they will look to sell off their assets. This is going to prove a hard task, at least to do so at decent values due to the current market environment with so many other miners trying to do the same and failing to do so.
As such, the above makes Barrick Gold Corporation (NYSE:ABX) look very risky with such high levels of debt left to service and the asset sales unlikely to provide enough cash to fully pay back much of this debt. This means that Barrick Gold is a risky buy and therefore investors should more likely consider them if they believe that the gold price can increase, thereby increasing asset values again and earnings for ABX from current operations.
Barrick Gold Corporation (NYSE:ABX) closed yesterday at $12.33 after moving high 1.66%. Analysts are expecting ABX to turn profitable in the coming year with the stock trading on a forward P/E multiple of 16.87, which is very high compared to industry peers.