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UPDATE: BMO Capital Markets Downgrades Barrick Gold to Underperform on Multiple Negative Factors

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In a report published Monday, BMO Capital Markets analyst David Haughton downgraded the rating on Barrick Gold Corporation (NYSE: ABX) from Market Perform to Underperform, and lowered the price target from $30.00 to $17.00.

In the report, BMO Capital Markets noted, “Preservation of free cash flow (FCF) is critical for Barrick at prevailing metal prices. Deferral of Pascua Lama is a step in the right direction. BMO Research estimates the Pascua Lama IRR at 7.7% (was 9%) ignoring sunk costs at spot prices. More work is required by Barrick to reduce company-wide capital and operating costs. BMO Research forecasts negative FCF to 2016E at spot in the absence of further cost cutting. Gold reserves were calculated at US$1,500/oz, which is out of touch with spot. Impairments of US$4.5-5.5B have been flagged by Barrick with more possible ahead. The dividend of ~US$800M per year may be at risk in the absence of FCF improvements.”

Barrick Gold Corporation closed on Friday at $15.74.

Latest Ratings for ABX

Sep 2014Credit SuisseMaintainsNeutral
Aug 2014BarclaysMaintainsEqual-weight
Jul 2014UBSMaintainsNeutral

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Posted-In: BMO Capital Markets David HaughtonAnalyst Color Downgrades Analyst Ratings


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