Barrick Gold Is Deleveraging By 'Divesting On Track'; Goldman Says To Buy

In a report published Monday, Goldman Sachs analysts maintained a Buy rating on Barrick Gold Corporation (USA) (NYSE: ABX), with a price target of $17, following news of the sale of the company's Cowal mine in New South Wales, Australia.The company has agreed to sell its Cowal mine to Evolution Mining Ltd (OTCMKTS: CAHPF) for $550mn in cash, following a competitive auction process. The company expects the transaction to close in 3Q15. In the report Goldman Sachs noted, "We believe the sale of Cowal is a positive first step towards achieving its FY15 $3bn debt reduction target. We highlight the sale proceeds of $550mn are c.30% above our NPV estimate of $422mn. Following a sale of Cowal, the company's overall reserves will decline by only c.2%; however costs are likely to improve due in part to ABX closing its corporate office in Perth."Barrick Gold has already initiated the sale of its stake in the Zaldivar (Chile) copper mine and is taking steps to sell its Porgera (PNG) gold asset. Both these would help the company reduce leverage further. Taking into account all three sales, the company's net debt could reduce to $7.5bn. At spot gold prices ($1,200/oz), the company's FCF in FY15 is estimated at about $400mn. "We remain bullish on ABX as dissipating concerns surrounding its debt and its ability to consistently deliver operationally across its asset portfolio should, in our view, drive a re-rating of its shares. Furthermore, ABX looks relatively inexpensive vs. its closest North American gold major peers NEM and GG, trading on a +30% discount on FY16E PER," the analysts added.