Barrick Gold Raises Its Dividend 40 Percent

Strengths

• The best performing metal this week was palladium, up 4.91 percent as hedge funds cut their bullish positions to a 17-month low. January’s 22 percent slump in China’s car sales could dampen demand short-term. Federal Reserve Chairman Jerome Powell testified before Congress this week and commented that “low rates are not really a choice anymore, they are a fact of reality.” Powell suggested large-scale asset purchases may be the tool of choice to address an aggressive downturn. Gold advanced on Thursday after the announcement of a surge in the number of coronavirus cases in China. ETFs increased holdings for the 17th straight day on Friday with total gold held by ETFs up 2.3 percent this year already, according to Bloomberg data.
• Turkey’s gold reserves rose $778 million from the previous week to now total $28.3 billion as of February 7, according to data from the central bank. South Africa’s gold output rose the most in four years in December, according to Statistics South Africa data. Production unexpectedly rose by 24.9 percent from a year earlier, compared with 4.5 percent in November. Harmony Gold Mining bought AngloGold Ashanti’s last gold mine in South Africa for $300 million. This will make Harmony the largest South African gold miner and cements AngloGold’s withdrawal from the country.
• Gold Fields raised $252 million in a share sale to fund the initial construction of a new mine in Chile, reports Bloomberg. CEO Nick Holland says the company believes it has a fully funded project. Paramount Gold Nevada announced that Rachel Goldman has been appointed chief executive and director of the company.

Weaknesses

• The worst performing metal this week was platinum, down just 0.21 percent in a muted week of trading. Agnico Eagle Mines fell sharply on Friday after reducing its guidance for 2020 gold output due to slower-than-expected ramp up at new mines in northern Canada, reports Bloomberg. Production guidance was lowered to 1.88 million ounces, down from previous projections of 1.9 to 2 million ounces with the share price off 15.63 percent by the close. Agnico has been a sector favorite for a management team that could effectively execute and create value.

• Pretium Resources announced a big shakeup in company leadership this week with lowering of guidance. The board of directors is looking for a new president and CEO. Additionally, the vice president of geology and chief geologist resigned to pursue another opportunity. Pretium’s share price fell 24.39 percent for the week. New Gold reported revenue for the fourth quarter that missed even the lowest forecasts, reports Bloomberg. The company reported revenue of $139 million, down 12 percent year-over-year, and below the lowest estimate of $140 million.
• Barrick Gold CEO Mark Bristow said in an interview this week that the company has proposed a $200 million upfront tax payment to Papua New Guinea as a way to help secure a new contract for long-term mining rights in the country. Renault’s acting CEO Clotilde Delbos said during an earnings presentation this week that the company’s main concern is palladium’s skyrocketing price. Citigroup said in January that automakers have a big incentive to find a substitution for palladium in catalysts as the metal’s rally continues.

Opportunities

• Barrick Gold had a slate of good news this week. The company reported earnings per share that beat the highest estimate coming in at 17 cents per share. Barrick boosted its dividend by 40 percent to 7 cents per share. CEO Mark Bristow said that the company will exceed its two-year goal of selling $1.5 billion in assets by the end of 2020, reports Bloomberg. Due to asset sales, the world’s second-largest gold miner has the potential to reach zero net debt by the end of the year.

• The Russian government is looking at giving $1 billion in funding from the National Well-Being Fund to help develop the Arctic Palladium project in Siberia, reports Interfax. The project is a joint venture of Norilsk Nickel and Russia Platinum. This is part of Russia’s plan to be the world’s top platinum metals producer, reports Bloomberg. Russia’s biggest gold miner, Polyus PJSC, is focusing on smaller projects and cutting its debt ratio before starting work on Siberia’s Sukhoi Log deposit, which accounts for more than a quarter of Russian gold reserves.
• Sixth Wave Innovations, which developed disruptive molecular imprinted nanotechnology used for gold extraction, announced an agreement with Sumitomo Corporation that will greatly expand the company’s global distribution network, according to a press release. Metal Tiger is set to invest A$3.3 million into Southern Gold, an Australian and South Korean-focused gold explorer. Silver Viper announced strong drill results from its La Virginia Gold-Silver project in Mexico. High grade results provided in the press release include 196 grams per ton of gold and 984 grams per ton of silver over 0.5 meters.

Threats

• Due to severe power cuts, production by South African manufacturers fell the most in over five years in December. Statistics South Africa data shows that manufacturing output fell 5.9 percent from a year earlier. The country’s power cuts continue to hurt the economy with unemployment remaining at the highest level in at least 11 years. Harmony Gold fell after the gold producer reported first half results where production profit was 16 percent below the market estimate.
• The spread of the coronavirus continues to hit Chinese demand for jewelry. The death toll from the outbreak is now above 1,100 people and shoppers continue to stay at home as much as possible to avoid the virus. The economic impact from the global health emergency could very well send Chinese jewelry sales plummeting for the year.

Citigroup said that it no longer has a price target for Petra Diamonds as the range of valuation outcomes for the company are too wide, reports Bloomberg. The bank downgraded the shares to neutral from buy and noted a 70 percent share price decline over 12 months.

*********