Canaccord Genuity analyst Tony Lesiak came out today with a research note on Barrick Gold Corporation (USA) (NYSE:ABX), raising the price target to $12.50 (from $12.00), while maintaining a Sell rating on the stock. The increased price target comes in response to the company’s debt reduction pledge, taken in attempt to alleviate its $3 billion net debt.
Lesiak wrote, “Given we do not anticipate free cash flow for ABX in 2015, the debt reduction pledge will need to fully come from asset sales. The sales process for Porgera and Cowal is proceeding although we believe a package deal may be unlikely given the potential environmental liabilities at Porgera. We also expect ABX to sell down a portion (market cannot absorb a full sale in our opinion) of ABX’s 63.9% Acacia stake. As anticipated, to bridge the funding gap, ABX announced a process to divest a stake in its Zaldivar copper mine which is expected to generate approximately 10% of ABX’s CF. We believe a Zaldivar sale could weaken key ROIC and Net Debt to EBITDA metrics. Other partnerships (Pascua) may also be pursued.”
Furthermore, “Further clouding the issue of the $3bn financial improvement targeted for this year is the curious omission of the ‘net’ from the ‘net debt’ reduction pledge in the Q1 financial update. If this is indeed by design, Barrick simply needs to use its existing cash position and pay down $3bn of debt with no change to the financial condition.”
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Tony Lesiak has a total average return of -12.1% and a 45.0% success rate. Lesiak has a 3.7% average return when recommending ABX, and is ranked #3451 out of 3581 analysts.