Unlike the summer, during which time the stock -- soaring more than 15% -- glittered, shares of Barrick Gold (NYSE: ABX) sank 11% in September according to S&P Global Market Intelligence. Besides the falling price of gold, investors were shaken by the tumultuous weather in the Caribbean and unfavorable news coming out of Africa.
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Gold's decline in September -- approximately 2.8% -- likely stemmed from investors' diminishing concerns regarding the tension between the U.S. and North Korea which escalated over the summer. Since the stock movements of gold miners are closely correlated with the price of gold, it's no surprise that shares of Barrick also followed a downward trend. The SPDR Gold Trust ETF (NYSEMKT: GLD), for example, fell more than 3.5% through the month.
Hurricane Irma represented another factor adversely affecting the stock. Due to the devastation wrought by the storm, Barrick partially suspended mining operations at its Pueblo Viejo mine in the Dominican Republic. In a statement issued to BNamericas before the storm arrived, Andy Lloyd, a spokesman for Barrick, said that "[o]pen pit mining and other outdoor activities have been temporarily halted until the storm passes, while activities related to water and tailings management carry on to ensure the safety of the operation."
A joint venture with Goldcorp (NYSE: GG), Pueblo Viejo is one of Barrick's core mines -- and one of its most profitable. Of Barrick's core assets, Pueblo Viejo had the highest margin in fiscal 2016, reporting all-in sustaining costs (AISC) of $490 per gold ounce. Management forecasts Pueblo Viejo to report AISC per gold ounce between $540 and $570 in fiscal 2017; however, there has been no indication from management what impact -- if any -- Irma has had on the mine.
Lastly, Acacia Mining, in which Barrick retains 64% ownership, announced a plan to reduce operations at Bulyanhulu in response to a concentrate ban imposed by the Tanzanian government in early March. According to its press release, Acacia expects to return to positive cash flow generation in early 2018. Through the first eight months of 2017, Acacia has reported a cash outflow of about $210 million.
Granted, an 11% drop in a position is far from desirable, but Barrick's investors can take solace in the fact that the stock's poor performance in September doesn't reflect a red flag in the company's fundamentals. For one, dips in the price of gold -- and concurrent drops in the price of the stock -- are table stakes for investing in a gold miner. Regarding Hurricane Irma, I believe management would have already communicated news of any adverse effects at Pueblo Viejo; however, investors can look for management to confirm its forecast for the mine's performance in fiscal 2017 when the company reports Q3 earnings on Oct. 25. Moreover, the challenges facing Acacia Mining are worth noting, but they should not compromise any confidence in the company's long-term prospects.
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