5 Reasons Why RBC Turned Cautious On Barrick Gold

Canadian mining company Barrick Gold Corp ABX has succeeded in restructuring, decentralizing and strengthening its balance sheet, but now faces five new challenges, according to RBC Capital Markets. 

The Analyst

RBC's Stephen Walker downgraded Barrick Gold from Outperform to Sector Perform with a price target lowered from $16 to $14.

The Thesis

Walker named five reasons why a bullish stance on the stock can no longer be justified. (See the analyst's track record here.)

They are: 

• Ongoing disputes with the government of Tanzania related to its local subsidiary Acacia Mining.
• The second-quarter earnings report made no reference to the previously announced $5-billion debt target, which may imply new investments will be made.
• The company's enhanced strategic cooperation agreement with Shandong implies a potential asset sale or asset swap agreement will be seen.
• Barrick Gold's stock continues to show weakness that could be attributed to the less competitive Canadian dollar, especially in terms of seeking American acquisitions.
• Barrick needs to identify a president or co-president to communicate a new set of strategic priorities.

Price Action

Barrick Gold shares were down 0.62 percent at $11.16 at the time of publication Monday. 

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Photo courtesy of Barrick Gold.