– By Kyle Ferguson

During the third quarter, guru George Soros (Trades, Portfolio) added 1,781,226 shares of Barrick Gold to his portfolio at an average price of $19.94 per share. Since the trade, Barrick Gold’s market price has declined by an estimated 23%.

Barrick Gold Corp. (ABX) is a Canadian mining company that was founded in 1983 by entrepreneur and philanthropist Peter Munk. Barrick Gold has the industry’s largest gold reserves and resources as well as a high-quality project pipeline.


Barrick Gold has a market cap of $17.99 billion, an enterprise value of $25.73 billion, a price-book (P/B) ratio of 2.51, a price-sales (P/S) ratio of 2.17 and a dividend yield of 0.52%.

According to GuruFocus, Barrick Gold has a 4 of 10 financial strength rating with a cash to debt ratio of 0.31. The company also has an equity to asset ratio of 0.29, a Piotroski F-Score of 7 and an Altman Z-score of 0.10. The Beneish M-score of -2.93 indicates the company is not a manipulator of its financial statements. The company also has a 6 of 10 profitability and growth rating. It has an operating margin of -22.74%, a net-margin of -29.38%, a return on equity (ROE) of -31.95%, a retun on assets (ROA) of -9.20% and three-year EPS growth of 113%.

On Nov. 21, the Baron Energy and Resources Fund commented on Barrick Gold:

“Shares of gold mining company Barrick Gold Corp. (ABX) fell during the third quarter in concert with a decline in gold prices. Gold prices surged following the Brexit vote in late June. As equity markets recovered, concerns over Brexit eased, and concerns regarding less accommodative monetary policies rose, gold and gold equities weakened. We believe it is prudent to maintain a modest exposure to gold at this time. We think the shares are attractively valued based on our outlook for gold pricing, Barrick’s growing gold volumes and falling cost structure.”

Despite the recent decline in Barrick Gold’s market price, the company reported multiple positive figures in a conference call shared on the company’s website on Oct. 27.

During the call, President Kelvin Dushnisky of Barrick Gold Corp. provided some key highlights of the company’s results for the year.

  • In the third quarter, Barrick Gold produced almost 1.4 million ounces of gold at all-in sustaing costs of $704 per ounce.
  • Barrick Gold increased its gold production guidance range to 5.25 million to 5.55 million ounces and reduced its all-in sustaining cost guidance for the year to $740 to $775 per ounce. This marks three consecutive quarters of improved cost guidance.
  • Barrick Gold generated nearly $1 billion in operating cash flow and approximately $675 million in free cash flow.
  • The strong cash flow generation enabled the company to repay almost half a billion dollars of its debt during the quarter.
  • Barrick Gold has a debt reduction target goal of $2 billion. The company has repaid $1.4 billion of its goal year to date.
  • Barrick gold now has approximately $8.54 billion in debt, but less than $200 million of this debt is due before 2019. At the end of the third quarter, the company held $2.6 billion in cash along with the company’s unused $4 billion credit facility.
  • Moody’s and S&P have improved their outlook of Barrick Gold’s investment grade and credit rating.

Barrick Gold has many good signs. It has the largest gold reserves and resources in its industry and gold is one of the 92 naturally occurring elements that no known natural substance can destroy. This drastically decreases the risk involved with purchasing gold.

Barrick Gold is trading well below its intrinsic value, according to the Peter Lynch chart below.

Disclosure: Long Barrick Gold.

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This article first appeared on GuruFocus.