Julie Lamb

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Julie graduated with a Bachelor of Arts in English with a focus on creative writing from the University of Louisville.

Berenberg Sees Barrick Gold Corporation (USA) (ABX) as an Overvalued Gold Play

Berenberg analyst Yuriy Vlasov initiates coverage on Barrick Gold Corporation (USA) (NYSE:ABX) on the heels of reported operational issues at Bulyanhulu, where a London-listed gold-mining company called Acacia Mining holds an underground gold mine. This is significant, as Barrick holds 63.9% of Acacia.

For now, these operational issues have resulted in ore mining suspension at Bulyanhulu until the company can confront its stockpiled build-up. As such, Vlasov initiates a Sell rating on ABX and a price target of $15.20, which represents a 12% downside from where the stock is currently trading.

The analyst delves further, explaining, “The stoppage at Bulyanhulu spells more potential downside for Aracia Mining than for Barrick. In H1 2016, Bulyanhulu produced 157 koz of gold, contributing 38% to Acacia Mining’s H1 2016 gold production. Barrick production will be less affected by the operational issue at Bulyanhulu as the mine contributed less than 4% to Barrick’s H1 2016 gold output (on attributable basis).”

However, in regards to technical-based aspects, the analyst acknowledges that while there were additional operational issues stemming from overheating bearing at ball mill, Vlasov does not anticipate this will be “critical” and anticipates complete recovery sometime over the course of two weeks.

Yet, Vlasov still believes ABX ultimately spells trouble, indicating, “This is the second operational issue at Barrick operations within a week,” the analyst comments. Just last week on September 15th, Barrick also revealed temporary suspension is hitting its gold-mining operations at Veladero in Argentina on back of cyanide-based solution spillage, solution needed for heap leaching operations.”

The analyst notes, “Although we do not see Barrick’s 2016 gold production (5.2 moz, Berenberg) to be affected at this stage, we highlight the fact that this is the second production-related issue in a week.”

“We see Barrick as an overvalued gold play,” Vlasov concludes.

TipRanks analytics demonstrate ABX as a Strong Buy. Based on 36 analysts polled in the last 3 months, 31 rate a Buy on AAPL, 4 maintain a Hold, while 1 issues a Sell. The consensus price target stands at $126.86, marking a 10% upside from where the shares last closed.screen-shot-09-19-16-at-08-41-pm

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