Canaccord Genuity analyst Tony Lesiak was out today with some bearish comments on Barrick Gold Corporation (NYSE:ABX), reiterating a Sell rating and reducing the price target to C$13.50 (from C$14.00), given a significant decline in Canaccord’s forecast net asset value (NAV) largely due to significantly higher implied capital costs in 2015 and longer term. The new price target suggests an 18% downside from where the stock is currently trading.
Lesiak said, “Barrick is trying very hard to re-create the magic of its youth (“Back to the Future” analogy used). Unfortunately the DeLorean may not fly as planned with some of the parts being sold off for scrap and the car somewhat heavier, burdened by a massive debt load. The fuel source is also suspect with the flux capacitors forced to run on very minimal free cash flow (at spot) and given the larger-than-expected sustaining capital. In order to meet ABX’s $3B net debt reduction plan in 2015 other fuel sources may be required – new equity, dividend cut, and the monetization of its Acacia stake.”
Furthermore, “A JV or partnership at Pascua is unlikely in the next 12 months, while the sale of Porgera, and its environmental liabilities is very doubtful. Overall, we applaud management’s new vigor and alignment, unfortunately the magic of youth is unlikely to return. ABX is losing the weight it needs but it remains mature with a rapidly declining production profile that will need to be addressed. The value destruction from asset fire sales needs to stop. We believe ABX should use its current strong NAV multiple for M&A.”
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 -11.5% and a 43.8% success rate. Lesiak has a 5.0% average return when recommending ABX, and is ranked #3287 out of 3479 analysts.